The best time to build a local fire station is before your house catches fire.
In the past month three leaders – education, faith, healthcare – have confided, “I need to say or do something to address the state of conflict that we (board, executive team, work group) face.” Stakeholder conflict over issues like abortion, race, guns, Covid protocols, gender identity and equality, immigration, fossil fuels, political contributions, work from home, just keeps marching into business and non-profit organizations planting disruptive landmines along the way. Too ‘woke’ or not enough. National debates quickly show up locally as risky, divisive issues that can split board, employee, customer, and local community groups.
Corporate and non-profit CEOs, C-suite executives and boards are scrambling these days – as are members of the stakeholder groups they lead. Leaders are increasingly confronted with the question: What is leaderships’ stance and what are we doing to address stakeholder conflicts that now are entangled with our mission, values and way of doing business.
Adding to the challenge, is just how rapidly the battlefield is changing. In the corporate world, the relatively new term Stakeholder Capitalism, has itself now become a point of division. For the longest time, it was clear that shareholders were king. Then the Business Roundtable announced that organizations and leadership must be more responsive to other key stakeholders, not just shareholders – thus the term, Stakeholder Capitalism. Part of the debate has been: should large corporations become more progressive regarding DEI (Diversity, Equity, Inclusion) and climate. Sustainability and specifically ESG (organizations committed to environment, social, governance issues) investing skyrocketed.
Now there is push-back. High-profile hedge fund manager Bill Ackman – on record as a supporter of ESG — and Peter Thiel, former President Trump ally, recently announced they are backing a startup investment firm that plans to go head-to-head against large money managers that promote stakeholder capitalism and “political agendas” like mega-investment firm BlackRock. Accordingly, BlackRock CEO Larry Fink stakeholder has pushed back on criticism that his leadership that gone too far saying: “Stakeholder capitalism is not politics…It is not a social or ideological agenda. It is not ‘woke.’” Similarly, JPMorgan CEO and Chair of the Business Roundtable, Jamie Dimon stated: “I’m not woke. And I think people are mistaking the stakeholder capitalism thing for being woke,” adding that winning in the marketplace, happy/best employees and repeat customers is what matter most. And separately, the SEC is cracking down on companies accused of overstating (called greenwashing) their social benefit in order to qualify for this mammoth $3T ESG market. Sure enough, flows into ESG funds globally slumped 36% in the first quarter of 2022.
This past week, former Vice President and likely 2024 presidential candidate Mike Pence made a frontal assault on ESG in an opinion piece for the Wall Street Journal:
Rather, the shift is entirely manufactured by a handful of very large and powerful Wall Street financiers promoting left-wing environmental, social and governance goals (ESG), and ignoring the interests of businesses and their employees.
ESG empowers an unelected cabal of bureaucrats, regulators and activist investors to rate companies based on their adherence to left-wing values. Like the social credit scores issued by the Chinese Communist Party, a low ESG score can be devastating, making it virtually impossible for a company to raise capital—and that is exactly the point.
Many non-profit leaders are caught in a similar cross fire. Elise Westhoff, President and CEO of Philanthropy Roundtable in her article, “How Philanthropy is Fueling American Division,” lays out the growing chasm between conservatives and progressives within and across major foundations like the Ford Foundation. Those differences have always existed, but the growing level of activism and intolerance for the other side now greatly increases the ‘conflict’ risk for these organizations.
Stakeholders across the spectrum – executives, managers, investors, donors, employees, customers, regulators – are now increasingly drawn into the conflict and the chaos. Yet, they are still accountable for getting work done and delivering results.
The question now is how are organizations and their leaders to respond to this new hyper-conflict risk?
Conflict Resilience for the Journey: A Holy Give-and-Take
“wisdom isn’t about sticking to a set of rules or hitting some imaginary bull’s-eye representing “God’s will.” Wisdom is a way of life, a journey of humility and faithfulness we take together, one step at a time…a holy-give-and-take.” The late Rachel Held Evans, Inspired
Regardless of your faith beliefs or lack, these disruptive times call for wisdom to guide this uncharted politically-charged journey ahead. Divided and increasingly activist stakeholders focused on holding leaders and organizations accountable is part of the new leadership-normal. While we all seek the “right answer” for any moment in time, there is a greater need for wisdom in defining a way of going forward – a process – that enables a give-and-take that leads to the most “right” answer we can garner. And, one that can then be adjusted as the fog of war lifts from time to time.
We might call this cultivating Conflict Resilience – an organization’s ability to rebound or recover from conflict – in order to stay the course and flourish in this new disruptive reality. I would suggest these four priorities for leaders and their stakeholders seeking to build greater Conflict Resilience.
1. Identify stakeholder conflict as a strategic risk. While it is virtually impossible to not see and feel the pressure of today’s stakeholder division, leaders must now address this new reality by identifying and naming stakeholder conflict as a strategic risk they are accountable for managing. Whether a CEO, the head of a department or work group, stakeholder conflict can undermine the group’s strategic priorities and deliver consequential blows: loss of donors, split boards, disruptive shareholders, gridlock, mission creep, customer defections, brand erosion, disaffected employees. These unmanaged risks, some easily measured and some not, cost money, leadership influence and strategic control.
It is crucial to identify – or re-identify – which stakeholder groups represent your greatest relationship risks and which ones have the greatest potential impact on the organization. Where do you have “known” risks and where do you have suspicions but with little information or insight? Which risks are most impactful: revenue, costs, strategic direction, reputation, and brand? Whether you conduct this assessment on the back-of-an-envelope, in a brain-storming session with your leadership team, with groups of stakeholders or through a meticulous analysis – this is a list that you must have at your finger-tips and must constantly monitor and update.
2. Engage your team in a purposeful ‘togetherness vision’ to head-off stakeholder conflict. Leadership today calls for a new level of intention in creating and sustaining a ‘togetherness vision’ because myriad forces – social media, organizational distrust, intolerance – are feeding a powerfully divisive ‘apart’ vision that increasingly dominates. Thus, leadership must be unrelenting in words and deeds that reinforce your agreed upon mantra for teamwork – that supersedes differences.
Invariably, division and conflict occur as we are distracted and diverted from the larger story of shared purpose to a smaller story about me, my job, my department, my priorities, preferences and fear. We call it ‘division’ because it is about becoming smaller. As Evans summed up about churches: “The church is not a group of people who believe all the same things; the church is a group of people caught up in the same story, with Jesus at the center.” The vision is not about who and what you are against – dividing into parts; rather, who and what you are for – unifying the synergistic whole.
This is why it is not enough for leaders to respond to division by simply attempting to keep all sides placated – just trying to keep everyone happy. It is too small and comfortable. “Staying out of politics or conflict” is not a vision. Rather leadership requires proactively promoting and even challenging on behalf of something higher than the conflict.
It reminds me of the attorney brought into a tough negotiation to get a business deal done. As he enters the room another attorney asks: Whose side are you representing. His blunt answer: I am on the side of the deal. Purpose must be bigger and higher than sides. Today’s leadership must contend with sides but its job is to advocate for purpose that is higher and more important than sides. Sides are part of the story but they cannot become the story. Leaders implore the sides to embrace the bigger story.
The good news is most organizations have deep roots tied to larger purpose, mission, and values that have inspired and connected key stakeholders. This larger purpose is too big to be done alone, thus compelling us to band together across differences. These differences are truly gifts that have the potential for yielding better and more innovative solutions. The work of leadership is to mine these differences for their potential while not letting them hijack the mission. In today’s “judgmental” generation, where opinions are strong and tolerance of differences limited, leadership’s job of pulling stakeholders into this ‘togetherness’ vision has become significantly more challenging and more important.
Highly disruptive conflict comes not so much from our differences as by how we come to treat each other regarding those differences. When I see disruptive stakeholder conflict, my first question is there a ‘purpose’ problem: not big enough, not a priority, “me focus” over “we” focus, hijacked by smaller priorities. Purpose must be big, meaningful and shared enough to build commitment and promote listening to and submitting to each other in deference to this purpose. Think divorcing parents putting their kids interests above their own individual slings and arrows.
In engaging your team to develop or revisit a vision of togetherness it is paramount to embrace a set of relational values – for times of conflict. It means operationalizing concepts like: respecting the other side, listening it out, confronting the conflict – no matter what, arguing to agree vs. win, finding ‘a way’ vs. my way. This values work can be done in a staff meeting, a retreat or even by selecting a diverse committee to develop, report back and engage the group. Recently one leader concerned about potential clashes between incoming Millennial and Baby-Boomer board members, prepared a working session to review the Boards ‘togetherness vision’ and its relational values as a way of launching the new board year.
3. Incorporate stakeholder cohesion into your strategic processes and plan: With stakeholder risk identified and the team engaged in a ‘togetherness vision,’ the next step is to incorporate stakeholder risk strategies into your strategic planning? Most strategic plans are developed with an assumption of stakeholder support across customers, employees, shareholders/donors and strategic partners. In today’s world that assumption is increasingly in question. For large sophisticated organizations it may mean revisiting the strategic plan to fill missing gaps. For smaller, less formal organizations it might mean adding two to four key strategic initiatives to proactively address the risk.
The issues to be addressed are highly variable depending on the organization and its stakeholder issues. One client CEO dedicated a school board meeting to laying out a board cohesion process that included ground rules for how they would hear, process and resolve conflicts from parents. A leader in a large hospital system met with his team to develop a transparent, collaborative and timely process to deal with potential changes in abortion laws that might create team conflict regarding medical practices. Another organization brought in a specialist on corporate governance to provide specific guidance on how the CEO, board chair and board members could work more collaboratively within their defined roles.
One of the keys to effective strategy is to get ahead of the problem. Once tensions are high, trust eroded and groups polarized, it is much more difficult to gain compromise and agreement going forward. If you have a process perhaps including an impartial/diverse committee in place for hearing from and responding to all sides of an issue – not just upset stakeholders – odds increase that polarized groups will not dominate and more moderate groups will also have a say in things.
4. Establish a Stakeholder Relationship Risk Scorecard to focus effort and track results. Just as we set goals for other strategic aims like revenue, cost, launching new products/services, a stakeholder relationship scorecard provides a way to target and track how we are doing with our stakeholder efforts. Admittedly stakeholder relationships can be soft and difficult to measure but simply establishing key stakeholder relationship group goals is a key first step in navigating on-going and newly arising conflict risk.
The good news is that we already have a number of key measures of relationship strength: satisfaction, defection and net promoter scores for boards, customer, employees, partners and others. Yet, these measures have not been designed for dealing with shocks like George Floyd, Covid, or changing abortion laws. Stakeholders can be quite happy one moment and within hours protesting, walking-out, starting twitter campaigns, and fomenting movements another.
Two questions are key: What metrics provide pre-emptive insight and guidance to deal with identified conflict risks? And, what metrics need to be developed on the fly as crises feed new potential conflicts? Today’s leaders are accountable for these relationships. Goals supported by metrics help us assess and then prioritize the strength and resilience of key relationships and possible strategies to aid in heading off disaster. If it is valuable to know in politics by voter segment and consumer products by customer segment, the status of relationships, it makes sense in these times of peril to target and track other key stakeholder relationships.
Now is the time to build the fire station before your house catches fire.
Robert’s latest book, “This Land of Strangers: The Relationship Crisis That Imperils Home, Work, Politics and Faith,” is now in paperback. A “recovering CEO,” he has authored 200 published articles and his work has appeared in The New York Times, Forbes, The Huffington Post, The CEO Magazine. His website: www.robertehall.com