McKinsey & Co – ‘Beyond Corporate Responsibility: Integrated External Engagement’

Authors John Browne, former CEO of BP, is a partner of Riverstone Holdings; Robin Nuttall is a principal in McKinsey’s London Office. Published for McKinsey March 2013

Aims:

The ambition is to integrate external engagement into every level of decision-making within an organisation. 

How:

Companies must deeply integrate external engagement into their strategy and operations, in 4 key ways :

  1. Define what you contribute. This does not mean changing purpose; it means being explicit about how that purpose benefits society.  It also doesn’t mean abandoning a focus on shareholder value; it means recognising that you generate long-term value to shareholders only by delivering value to society as well.

  2. Know your stakeholders. This means understanding your stakeholders as rigorously as you understand your customers. There is a strong correlation between in-depth profiling of stakeholders and success at engaging with them.

  3. Apply world-class management. Companies that succeed in integrating external engagement manage it like any other business function, using the three core tools of creating capabilities, establishing processes and measuring outcomes.

  4. Engage radically. Guard against 3 main errors. a) engage too late b)treat stakeholder engagement as a propaganda issue – it should be a negotiation c) do not aim to please everybody – sometimes a mutually advantageous outcome is impossible.

Key messages:

Traditional CSR is failing to deliver for both companies and society, and we need a new approach.  CSR in reality has been a CSR team, some high-profile but relatively cheap initiatives, and an annual publication. While this had delivered some progress, it has failed to build stronger relationships with the external world. Most companies struggle to raise their performance a few % points above their competitors, yet effective external engagement can set you far above your rivals. Recommendations include:

  • A CEO’s vision for a company has a powerful practical impact.

  • Leaders must promote their vision repeatedly with unremitting energy, both internally and externally.

  • Leaders must support a rigorous and exhaustive process to understand stakeholders.

  • CEOs must ensure their teams are as capable at external engagement as at internal management.

Read more on the McKinsey website.