The board helps an organisation to engage effectively with stakeholders.
Who are stakeholders?
A person, group or organisation that has interest or concern in your NFP. Stakeholders can affect, or be affected by, the NFP’s actions, objectives and policies.
Some examples of key stakeholders are the people and/or groups served by the NFP, donors, creditors, directors, employees, volunteers, government (and its agencies), members, other related institutions, suppliers, volunteers, unions and the broader community.
What is stakeholder engagement?
The interactions that an NFP has with its stakeholders, including the communication by stakeholders of their views to the board and by the board of its perspectives to stakeholders.
What is effective stakeholder engagement?
Successful stakeholder engagement requires a commitment to engage actively with stakeholders; listen to them, talk to them about why your organisation exists, what it does and build a relationship with them in a mutually beneficial way. Engagement is not an end in itself, but a means to help build better understanding and relationships with the individuals, groups, departments or other entities with whom the NFP intersects.
Why does it matter?
Better stakeholder engagement has the potential to provide useful information to the board (e.g. how the NFP and its purpose are perceived, possible funding risks or opportunities, strengths and weaknesses, potential strategies), improve the NFP’s relationships with its stakeholders (e.g. build goodwill, address potential issues), and increase the likelihood that the NFP is able to deliver on its purpose. Accordingly, if they have any impact on achieving your objectives, it is important to work out who your stakeholders are, understand what matters to them and why, then connect with them effectively.
Engagement with key stakeholders can be particularly important when setting or considering changes to the purpose of the organisation. In short, it is important for organisations to respect the rights of members (who may control and vote on key NFP matters) and engage and communicate effectively with all other relevant stakeholders.
Good two-way communication to and from the board, which is transparent and provides clarity, is often key to effective stakeholder engagement.
By definition, NFPs basically start with a good reputation: whatever their vision and purpose, they are acting in the interests and for the benefit of others. This is true whether discussing a small community sporting organisation or a large national icon seeking to combat a widespread disease or condition.
Reputation can be described as the sum of perceptions about an organisation (and its people and actions) held by the people with whom the organisation intersects in the areas where the organisation operates i.e. their stakeholders.
While an NFP may be performing very well and working solidly to achieve its purpose, perceptions regarding its efforts may not reflect that truth, and it may not enjoy the reputation it deserves. It can be as simple as influential people being unaware of the good works or having an uninformed perception. Practically, this may mean a potential contributor, benefactor or relevant government body is not in a position to assist or offer advice purely because they are not sufficiently acquainted with what is going on.
At a minimum, good practice would usually include the annual report setting out the extent to which the organisation has achieved its stated objectives in a way that people with an interest in the NFP should be able to understand. Obviously there are more potential opportunities for the NFP to connect with stakeholders through many other channels.
For larger NFPs, a formal communication strategy or more detailed stakeholder analysis and engagement program may be formulated. In this context, there may be opportunities for directors to be effective advocates on behalf of the NFP, subject to what the board endorses, and relevant codes of conduct etc. An example of where the board might think this type of engagement approach has merit is where an NFP has some reliance on a particular government policy or agency and the potential consequences of any changes and environmental shifts have not necessarily been understood. Directors’ participation in a simple briefing may prove to be an effective way to promote clarity and better understanding. Similarly, directors’ participation in community meetings, for example, may promote confidence and accelerate the achievement of goodwill not easily achieved by the best written communication.
For smaller NFPs, an example of this form of stakeholder engagement may be as simple as a director keeping an open dialogue with the relevant governing body of a federated association with which the NFP is affiliated. This would enable that director to report back to the board on any relevant matters.
Questions for consideration
- Has the NFP identified its key stakeholders and current relationships?
- Has the board considered and articulated its approach to stakeholder engagement?
- Has the board developed policies and practices for the organisation to:
- Effectively engage with members and stakeholders?
- Transparently communicate with members and stakeholders?
- Facilitate the exercise by members of their member rights?
- Encourage member participation and voting at member meetings?
- Is there a periodic assessment by the board as to how the NFP engages with key stakeholders?
Download the full Good Governance Principals and Guidelines for Not-for-Profit Organisations as a PDF.