TMTYB S01E07 Stakeholder Engagement TRANSCRIPT

TMTYB S01E07 (Stakeholder Engagement) This is Take Me To Your Board from the Tasmanian Council of Social Service. This show's about governance, and it's not just for aspiring or current board members. It's for anyone who wants to hear from some of the country's top leaders about how a good board really should work. Each episode's based on one of the 10 principles of not-for-profit governance as laid out by the Australian Institute of Company Directors, hosted by Bridget Delaney and Cameron Allen. This is episode seven; stakeholder engagement.

Bridget Delaney: Hello everyone. And welcome to another episode of Take Me To Your Board, my name is Bridget, and here with me as always, is Cameron.

Cameron Allen: Great to be with you, Bridget.

Bridget Delaney: What is an organisation without people who are interested, concerned, or invested in it? The short answer is probably not a very successful one. Stakeholders come in many and varied forms from members, suppliers, clients, and their families to volunteers and donors, funders, neighbours, staff, government, carers, to the general public and media.

Bridget Delaney: And that brings us to principle number eight, stakeholder engagement. As outlined by the AICD stakeholder engagement and its relationship to the board can be expressed in three ways.

First, who are our stakeholders? Second, what is their relationship to our organisation? And third, what responsibility does the organisation have to them? In thinking about those statements, you immediately get the sense that it isn't going to be a blanket answer across all different stakeholders.

In fact, the obligations to each can vary in terms of obligations from nominal engagement to legally binding requirements. Now, what is the role of the board? While the AICD clearly stipulates that the directors owe their duties to the members of the organisation, not to its other stakeholders.

They also make it clear that a thorough understanding of each stakeholder’s interests, opinions and objectives can lead to better and more balanced decisions in pursuing the organisation's purpose.

Cameron Allen: So, if a board was to neglect their duties to their members, and failed to understand the interest of stakeholders, what happens?

Bridget Delaney: Well, let's pop over to the United Kingdom to find out. Now this story, like all the others we have explored on this show has multiple failures, facets, and intricacies. So we'll keep it short and sweet. Let's talk about the UK Passport Authority in 1999 and their attempt to upgrade their passport issuing software.

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I must say I glossed over this initially, as it all seemed like it would just be internal failings and maybe better placed in topic like risk management. But then, I saw the sentence 16,000 pounds on umbrellas, and I was intrigued. How do we get from the UK Passport Authority to mass buying umbrellas?

Well, this is one example where stakeholders could have either been blissfully unaware or, and as it turned out, ungraciously and infuriatingly involved. In 1998, the UK Passport Authority went to update its internal software to meet the demand of the passport issuing. They had a project plan in place and had the training and rollout schedule ready to meet the summer of 1999 passport issuing demands.

To start, the software is rolled out on two sites and the staff are used as pilots. This is where we see hiccup number one. The training and change processes for this staff changed so quickly they couldn't adapt quick enough and were unable to efficiently use the software.

The second identifiable hiccup was the unexpected high demand of children's passports that were sought after due to new regulations. Processing delays became apparent and were disclosed by the media in May and June 1999.

Once the public knew of the issues, anxiety and fear grew amongst the public. This snowballed into huge backlogs in processing passports from their target of 10 business days to 50, with over 565,000 passport applications waiting to be processed. People wanted to find out how far along their passport was, would have to wait on hold. Their staff were redistributed from the call centres to processing to bring down the application waiting time. The situation was so bad that the Home Office was forced to introduce emergency measures, to ease the pressure.

Cameron Allen: This is all very fascinating. So, where are the stakeholders in all of this?

Bridget Delaney: Everywhere. Firstly, we have the staff who were not given adequate time to adapt in the new system of working. Second, we have the customers who were not communicated to or notified that there was an issue with the passport issuing system. Third, we have the media who got hold of a great story, and as a result of poor stakeholder management, resulted in increased anxiety and fear amongst public. Finally, we have the software company who didn't hold up their end of the contract and contributed to this dismal performance. We can clearly say that the reputation of the UK Passport Authority would have been a casualty in all this. But why this is such a great example of stakeholder engagement in practice?

Well, because we have a clear monetary implication of doing it so badly.

Firstly, because of the media storm around the passport fiasco, 500,000 pounds were spent on a campaign aimed at calming the public. Second, because of the software's company's failures, they were fined 69,000 pounds for its performance. While the agency waived a further 275,000 pounds due to contractual failures. Third, because of the staffing failures, 6 million pounds was paid in overtime and additional staffing costs to fix the issue. And finally, the most important stakeholder is the beneficiaries; the ones for whom the passport agency exists for. They spent 161,000 pounds in compensation. 500 people missed out on their holiday plans, 16,000 pounds on umbrellas and 5,000 pounds on lunch vouchers for the public who camped out in the rain to access the passport offices in Liverpool, London, and Glasgow. That is a total of 7,000,026 pounds equivalent to 12.3 million Australian dollars because of poor stakeholder engagement.

Cameron Allen:

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I was wondering where the umbrellas came in. There's a great example of how important stakeholder engagement is and how a misstep can escalate from a minor internal miscalculation to a public fiasco, if not managed appropriately.

This week's special guest is Caroline Wells. Caroline has held the role of CEO with Diabetes Tasmania since 2005. Prior to this, she was the director of nursing at Hobart Private Hospital. Caroline gained an MBA from Deakin University in 2006 and is a graduate of the AICD. She's also a Diabetes Australia national lead for type two diabetes. Caroline has a strong interest in preventative health, particularly relating to chronic disease, and as a member of the Premier’s Health and Wellbeing Advisory Council.

She is also a director and deputy chair of the Royal Flying Doctors Tasmania and chair of the Clinical Quality and Safety Advisory Committee. And to top it all off, she's a member of the Governance and Nominations Committee. Welcome, Caroline.

Caroline Wells: Thanks very much, Cam. Bridget Delaney: Look, it's great to have you on. Firstly, I'd love to hear your take with regard to the actions of the UK Passport Authority. What could they have done differently with regard to stakeholder management if they had their time again, and I'm sure there's plenty to unpack there, and where did all go wrong?

Caroline Wells: I mean, when you look at that debacle really, I don't think you could call it anything other than that. It certainly highlighted the importance of a stakeholder management and there were so many other things that went wrong as well. I think you could probably pull that out for some of the other podcasts as well, because it had so many things going wrong, but I think in regard to stakeholder management, I think they generally really lost sight of who their customers and or their beneficiaries were. And that is that all those poor people out there in the UK that wanted a passport. And I think this is a really good example of how a shiny new toy, like let's get a new computerised system everything's going to be fantastic, can only be as good as the engagement around it.

So, there were, there were multiple failures around that. Firstly, I mean, they didn't consider the needs of any of their key stakeholders in the process. And that's what I'm saying about, I think they got caught up with let's put a shiny new toy in. I think they failed to assess the time by staff to become familiar with the new processes and things like that, and staff can be absolutely such an important stakeholder. As I say, it's not just your beneficiaries, but your staff are there and you need to support them. They failed to understand the implications for the beneficiaries. So the implications was that they have these thousands of people that didn't get a passport, thousands of people that didn't get a holiday. And, that caused obviously then, the flow on effects with media, et cetera, and bad publicity, et cetera. They certainly failed to communicate effectively with the public and get that message out. At no time did they appear that they were on the front foot with the media.

Cameron Allen: No, they were responsive to, as you said, the negative press that was at the time.

Caroline Wells:

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Certainly from a stakeholder management perspective, when you're putting in a change process like this, you really need to take account of all the people that could be involved in the process. And media, you want them on your side. And as I said, they certainly weren't on the front foot about that one at all.

And then that just exacerbated the whole thing. And then the relationship with the customer kept going completely down the gurgler then. And then there was the failure to consider the reputational damage and then ultimately seven million pounds, which is just ridiculous.

Cameron Allen: Yeah, it really broke the back of them. Well, generally speaking, who are the key stakeholders in an organisation? And there may well be a shopping list here, but I'm willing to hear it.

Caroline Wells: Yeah, yeah. Look, there's always a shopping list and there should be a shopping list. I think that's important. I think it's important that, obviously, the key stakeholders are who you're there for. So, whether it's your members of an organisation. Who you are representing or supporting or that sort of thing. So, I mean, all organisations have different stakeholders, but you look at it, then you brought it out and then there'll be, as we just mentioned in the UK passport issue, media staff, key stakeholders, government, depending what sort of organisation you're in funders, you've got to have good relationships.

Cameron Allen: That’s very important, especially in a not-for-profit sense as well.

Caroline Wells: Oh, absolutely. And I think the key word here is relationships. It’s not actually about ticking a box. It’s actually about understanding who you’re engaging with, why you’re engaging with them. And it becomes a bit of a partnership as well.

Cameron Allen: Digging a little bit deeper, how are the needs of stakeholders considered by the organisation? I guess in particular, I'm interested in how this is considered at a board level. So drawing on some of your experience, how much weight should be given to stakeholder relationships?

Caroline Wells: Well, going back to that UK passport issue, a lot of weight. And look, I believe it's fundamental. I'm quite passionate about, the involvement of our stakeholder and taking into consideration their needs. And there can be an enormous consequences if you don't do that. And I think, boards and management need to be careful. It's very easy for all the right reasons to fall into the trap that you think you know what your stakeholders need and that we're running the organisation for you. So therefore we know this now that is not sometimes the case. And that's why it's really important with you talking about the people that you're there to represent is that you ask them and you're engaged with them. And there are many different ways that you can do that. I was listening to Angela Drivers' podcast about strategy, and it's really important that we don't prepare your strategy in isolation. And part of that is around engaging with the consumers, beneficiaries and other stakeholders.

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Is it about creating those touch points, I guess, across the organisation?

Caroline Wells: Yes, and you might have different people having different roles and different relationships around that.

But fundamentally, if we're talking about how the board operates, it all needs to come up to the board in however format each organisation decides to do it. But the board needs to be across who their stakeholders are and what the board's role is in regard to stakeholder management. There are some key issues that boards need to be across and all over in regard to things like vulnerable people and where they're sitting in regard to legal obligations, workplace health and safety.

Again, that's actually looking after your stakeholders. So, as I said, the board has got to be all over that, but then there are the ways that the board may engage with stakeholders can be different. It might be that for example, a board member may go to see a key donor for example, or something. And it's about that engagement. And again, they might be involved with maybe the CEO or something around a government negotiation. I think you've got to be careful sometimes about making sure that the boundaries between governance and management don't overlap, but it's actually about recognising the importance of stakeholders and, and that we're all in this together and et cetera.

Cameron Allen: Fantastic, because the AICD principle talks about creating mutually beneficial relationships, as you said, between stakeholder and the organisation. And that's a really underlying aspect of what makes them good governance practices. What is the impact of how stakeholders perceive an organisation's performance?

Caroline Wells: Oh, look, I think it's huge. As we saw again, in that the case study of the UK Passport Authority. It's about reputation and that monetary implication, but I think, it's about how the beneficiaries, the stakeholders, all of them feel about that organisation. And, it lines up with the reputation, it lines up with how that organisation is viewed, by the community, et cetera. And, I suppose it's all about credibility and, those sorts of things as well. So it's really important that you take into account your stakeholders needs.

Cameron Allen: Stakeholders would have expectations, I assume, of the organisation to live up to certain things.

Caroline Wells: Yeah, absolutely. And I suppose it's different organisations will have be at different stages of journeys of engagement. And so I think it's actually thinking about, as a board, where are you in that journey about engagement? So are you at the beginning where it's just about informing, do you move through being consultative, collaborating finally getting up to empowering.

So you've got basically your beneficiaries or your consumers, which are feeding back into you. They're going, "well, we've just got a website, back sheets or whatever you might have." But actually what are those things that we can do that are going to help you? And as I say, different boards will do that in different ways. They may choose to have advisory councils or that sort of thing. But again, it comes back to, I think you've got to be careful that you just don't pay lip service to engagement. Like it's okay, tick, like we've ticked the consumer box, so it's actually making it meaningful. So I think that can be a

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struggle, I think for boards at times what, the token consumer, and that's not, the way to go about things.

Cameron Allen: In your experience is a lot of consideration being given to these matters?

Caroline Wells: Oh, yeah. And it is difficult. It is difficult because you do have a lot of different stakeholder groups and when you break it down, so you've got different needs for different people, even if they are all beneficiaries or your consumers. So it's actually working out depending what as an organisation you're delivering. What does that look like for different stakeholder groups?

Cameron Allen: Especially when they conflict, which there are times they do.

Caroline Wells: Yeah, absolutely. So it's an important topic for boards to spend time on. I think at times it probably can be challenging, but it can be very rewarding. And that's the important thing. Yeah.

Cameron Allen: How does the board, and we’ve looked a little bit UK Passport Authority which is a really significant example, access and respond to feedback from its stakeholders?

Caroline Wells: Yeah, really important. Again, this is about not acting in isolation and it's about being really genuine about wanting feedback. So certainly, and I mean, when we think about feedback, people automatically go, “oh gosh, complaints and everything." A robust complaint management system is critical. I think whatever size organisation you are, it's not difficult. But it's so important, but you also need to make sure that you are capturing the positive feedback as well. And this is a bit of a process thing I think that it's making sure that you have the processes in place. So, how you address complaints, the timeliness of it all. And it's actually then how you feed back that into your quality processes, because, you might see some trends and it's like, well, "oh, okay, jeepers. We really need to look at this. We've got a bit of a hole here." Or they might be, just random things. And these are things that need to be consolidated, however, they're done at a management level and reported up to the board. So the board can actually have a clear understanding about what the stakeholders are feeling, because that then influences, your strategic direction.

Cameron Allen: That's something I'd imagine in an ideal scenario, it'd be quite timely too, in terms of the board receiving that feedback. So it can be acted upon and stamped out if needed.

Caroline Wells: Yeah. Look, I mean, I would think, six monthly is probably to have a consolidated, look at feedback depending on what the organisation is. But I think, as I say, I mean, this is actually about looking at things like complaints a and the positive things. It's about quality improvement. It's actually about seeing

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these things as opportunities. And it's actually‌ I mean, nobody out of their way to deliver bad service or whatever. It's not the person, 90% of time it's the system that's causing these things. So, I mean the board needs to be aware.

They've got a management team and staff and whatever that can deal with that operationally, but they need to understand, as I say, what the consumers are saying and what other stakeholders are saying. I mean, they may choose to suggest that that maybe there's some sort of survey or something of stakeholders, what are you, how do you think we're going and that sort of thing, and it might be different target groups. And because there can be so many different stakeholders. And I think you've got to be careful. You can't be everything to everybody. So, you need to prioritise where you're at.

Cameron Allen: Striving for continuous improvement.

Caroline Wells: Absolutely. Oh, look, and that's what it's all about. Isn't it? I mean, every day you can see opportunities, whether you can act on them, is different, but it's actually like looking to think, "gosh, how can we do things better?" And that's, again, coming back to why you're here, who you're here for.

Cameron Allen: Great sentiment. When is a clear, well thought out stakeholder engagement, strategy, most important, to an organisation?

Caroline Wells: Well, look, I think it's all the time, but look certainly in times of change. And then having said that though, I think if you look at the environment that we operate in, it is changing. You've only just got to see the last few months and it was just a period of enormous change for everybody. And again, through this COVID period, stakeholder engagement has been paramount because you've got people operating in different ways. Our way of working and our way of communicating has changed. And we need to make sure that all our stakeholders are engaged in appropriate ways and et cetera. So, clear answer to that one is I think all the time and special emphasis when you've got going through times of change, Cameron Allen: COVID has presented a number of challenges. Have you found it as a board member?

Caroline Wells: Oh, look, it is challenging, I think, but look, certainly I've seen, COVID present opportunities as well. And I think it's from that perspective, it's about from a board's perspective, it's grasping those opportunities as well. I think the world is not going to go back to how it was and things about how we engage and things will be different. You know, in some ways, we've had to cope with the serious impact of the lockdowns, but it has, in some ways, opened us up to how we can communicate and engage. Say with our staff that are spread out, probably gave us the push and things like if I put my day job hat on things like telehealth and that sort of thing have made access to services, so much better and, meeting those needs of the stakeholders then in such a timely way that, they're not waiting for a face-to-face appointment, and you can meet people's needs really quickly, which is really important when you're talking from a health perspective.

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Cameron Allen: How are the valuable people protected by the organisation? Now valuable people, obviously it's quite a broad term, but we're talking about some of those key stakeholders that may need a little bit of extra attention from time to time.

Caroline Wells: Yeah. Look, I suppose the first thing is that as an organisation, you need to identify who those people are. And you've got to be clear about that and all be on the same page. Really it comes back to what we were talking about earlier. It's about those relationships. So, relationships develop over time. You have to invest in them. And so I think, it depends, it might be, as I sort of said, if we're talking about say donors or something, it's, well, how are we going to nurture our donors? How are we going to keep ourselves sort of in the eye of government? What are or our funders, for example, they're all valuable in different ways. So, and you would have different mechanisms for doing that.

So it's identifying that. It's who's going to be doing it, is it something that from the board's perspective, they're happy that management do? Or is it a joint thing between management and maybe the chair or deputy chair or whatever, or is it something that the board does? And again, it comes back to just being careful about not having that messed up bit about governance, intruding on operations, things and things. But as I say, really important to identify those valuable people find out what's important to them, how are you going to deliver it and keep it up? There's no point in just going in and, just saying hi, and then dropping the ball, so to speak.

Cameron Allen: Yeah. So there's quite, I guess, a process you work through with each stakeholder in terms of identifying priorities or how you'd go about engaging or approaching certain stakeholders and whose responsibility that is?

Caroline Wells: Yeah, I think so. And look some of this stuff, you just know, it depending on the size of your organisation and what type of business you're in, and you would see a lot of this, developed by management and things to then present to the board around, this is from the perspective of day-to-day operations about, this is what we're doing to implement the strategic direction. And these are the key stakeholders we've identified and then take it forward from there.

Cameron Allen: Finally, Caroline, as we love to do on this show. Is there any tips and tricks you'd like to share with some aspiring board members perhaps?

Caroline Wells: Yeah. Well, look, I mean, we've spent so much time talking about the importance of stakeholders. So I think that's the thing is I can't overemphasize how important that that is about, looking after them and the relationship and understanding them. I think if you interested in coming on a board or something.

Do a bit of homework, find out who the stakeholders are learn about doing that. I think one of the other things is don't be afraid of feedback. That's, really important because it's how we all grow. And it's not a matter of battening down the hatches and saying, "we don't want to know." So, take the time. But, I think, if you do that, you're going to have a much greater understanding of where the organisation's at

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and importantly where it needs to go because your stakeholders are so critical. And they're, as I say, the important part of the organisation.

Cameron Allen: Great note to finish on there. Thanks so much for coming on the show Caroline and offering your insights. Really well-rounded look at stakeholder engagement which really underpins how important it is to good governance of an organisation. Thank you.

Caroline Wells: Great, thanks. Pleasure being here.

Bridget Delaney: Thank you, Caroline, for your time today, that was a really practical interview and I don't know about anyone else, but again, all of the notes. One of the key takeaways for me was that new developments are only as good as the engagement around it. I think the UK Passport Authority showed that pretty clearly. And Caroline has just gone through all the reasons that we need to make sure our stakeholders are fully engaged with the organisations we're working with. Some of the more practical frameworks, I guess, that Caroline went through that we can go away and really think about as a board is what stage is our engagement with our stakeholders? Are we at the informing stage at the consultative stage collaboration or are we empowering our stakeholders to be fully involved in the decisions that we're making on behalf of them, for the organisation?

Once we look at all of those ways of engaging with our stakeholders is making sure that we're not acting in isolation and being genuine about wanting feedback from our stakeholders to make sure we're doing the best we can for them. Caroline then walked us through the important aspects of receiving feedback.

I'm making sure that that process looks genuine and is taken on board by all of our board members. So in wrapping up, take the time as a board to understand the landscape of your stakeholders and how, and when to engage them. Stakeholder engagement is ongoing and progressive figure out who your stakeholders are, understand them and build those relationships.

Thank you once again for listening to Cam and I. Thank you, Cam. Cameron Allen: Always a pleasure.

Bridget Delaney: I look forward to returning to your board next time, Take Me To Your Board is produced by Ikin Media for the Tasmanian Council of Social Service, is presented by Bridget Delaney and Cameron Allen. Music from Tide Electric with special thanks to Caroline Wells. Thanks for listening to Take Me To Your Board. Please subscribe or follow wherever you get your podcasts. And remember to tell a friend.

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