Active Stakeholder Management

Founders in our network who successfully scaled their companies unanimously agreed they underestimated the time and energy it takes to manage critical stakeholders such as the board, potential investors, key customers, regulators, and peer networks. They also acknowledged it is easy to underestimate the importance of doing so—until something goes wrong.

One of the most-critical stakeholders to manage is the board. Early-stage boards are mostly composed of investors. Initially, investors are optimists, yet as the company goes through growth challenges, investor optimism turns into pessimism, and it takes strong communication and relationship skills to manage their confidence. Then, as venture partners enter, board composition shifts, and stakeholder management becomes more sophisticated as the founder needs to manage the disparate investment agendas. This requires clear thinking and a nuanced understanding of how to manage multiple agendas. It also requires the internal fortitude to know when to take feedback and pivot versus when to stay the course. Finally, as the company hits the growth stage, the founder must evolve their board-management skills once again. In this pre-exit stage, independent directors are added, which also requires time, attention, and a strong partnership between the founder and lead director.

The board is only one critical stakeholder. Similar relationship-management skills are required to maintain confidence with government regulators and key customers. As the company grows, the founder will need to allocate more time to reputation and relationship management. The upside is that doing this well brings the benefits of reputational equity. When investors, regulators, and key customers talk positively about you in the market, your company gains lift and momentum. The positive momentum turns key stakeholders into advocates and gives you a cushion in tough times.

Conversely, when a founder loses the trust and confidence of key stakeholders, it becomes nearly impossible to recover. In this scenario, the founder will be held to exacting standards that become harder to manage. Regular pitfalls are coded as “another” indicator that this founder or company may not make it. What was once easy is now an uphill battle and places your company at existential risk.

Managing stakeholders is often not the natural preference of passionate, innovative entrepreneurs. But those who commit to building and maintaining relationships and reputational equity will find themselves with allies in the dark times that are an inevitable part of building a company.

Active stakeholder management is just one of the seven navigation challenges for founder-CEOs. To learn more about the seven navigation challenges you can download the full framework below.