Navigating the Complexities of Stakeholder Engagement in International Markets
Trust, reputation, and cultural understanding are critical in the globalised environment in which we live and work. Where there is a lack of trust, there is a lack of innovation and growth, and, sadly, recent data from both the World Economic Forum 2024 Risk Report and Edelman’s own Trust 2024 Barometer confirm that the level of trust that people in politics and business is low.
Yet, for some reason, not enough is being done to raise the level of trust, which is impacting the level of opportunities. Investing, not just financially but through the process and culture, in developing trust and reputation appears to be lacking.
As companies and investors work across international markets, the complexities of engaging with diverse stakeholder groups become increasingly pronounced for them. This complexity is particularly evident in sectors like technology and investment, where rapid change and high stakes are the norms and where there is a difference in regulatory and cultural norms.
So, how can governments, businesses and investors better leverage perception and reputation to support innovation and growth?
The Importance of Stakeholder Engagement
The dual pillars of trust and reputation management are at the heart of not just successful stakeholder engagement but also innovation and growth.
Trust forms the foundation of all business relationships for every organisation, influencing decisions and shaping business outcomes internally and externally.
The fact is that CEOs agree that trust is essential, even critical, in helping deliver growth is positive. In PwC’s 2023 Trust Survey, ‘91% of business executives agree that their ability to earn and maintain trust improves the bottom line. Conversely, a lack of trust can erode brand value, hurt financial performance and limit a company’s ability to attract and retain talent.’
Yet, while there is an understanding of the importance and value of trust within the C-Suite, the work needed to develop trust still appears to be done tactically rather than strategically.
Financial metrics take control of decision-making, which is understandable. But trust and reputation influence how business is done and how the other party in the relationship feels about any transaction, even in the design of products or services, and especially in the digital and technology sectors.
In this Deloitte CFO article, the firm discusses the importance of trust and how measuring trust across different operating domains can help leaders identify their organisation’s potential sources of a trust breakdown or areas where building trust proactively can help create a competitive advantage.
Building and maintaining trust and reputation must become a strategic imperative in the volatile domains of technology and investment, where the pace of change is fast, and the environment is inherently uncertain, especially in the hyper-connected world where opinions are shared, and people can influence buyers and investors.
Understanding Cultural Nuance
One of the key challenges in international markets is identifying and engaging with stakeholders and navigating the cultural nuances that influence their expectations and behaviours. For instance, what influences trust varies depending on the international market in which you are trying to do business.
This is why communications and engagement strategies need to be adapted to take into account local culture, sensibilities, norms and customs.
This article from Harvard Law School’s Program On Negotiation presents some strategies that need to be considered when engaging and negotiating.
Do homework on your international partner’s culture
Through reading and conversations with those who know the country concerned, you can certainly learn a lot. Don’t overlook your in-market partners as sources of information about their culture. They will usually welcome your interest and help the research process.
Show respect for cultural differences
Inexperienced negotiators tend to belittle unfamiliar cultural practices. It is far better to seek to understand the value system at work and to construct a problem-solving conversation about any difficulties that unfamiliar customs pose.
Respect for cultural differences will get you a lot further than ignorance, so it’s important to do your research when entering into negotiations with unfamiliar counterparts.
Be aware of how others may perceive your culture
You are as influenced by your culture as your counterpart is by his. Try to see how your behaviour, attitudes, norms, and values appear to your foreign supplier.
When you enter into negotiations, it helps to know how they see you from a cultural standpoint. You can adjust your approach during negotiations to get a better outcome if any of these perspectives are negative.
Find ways to bridge the culture gap
It is possible that cultural differences can create a divide between you and your suppliers. Constantly search for ways to bridge that culture gap.
The first step in bridge building requires you and your suppliers to find something in common, such as a shared experience, interest, or goal.
Culture is not what separates people but what makes them unique. Respect that and show interest and areas of commonality.
Reputation Management: A Cornerstone of Engagement
In reputation management, the stakes are high. Remember, managing your reputation is not a tactical activity but a strategic operation. How you are perceived matters.
A misstep can erode years of goodwill, particularly in the digital age, where information spreads rapidly through social channels.
The investment sector provides a stark example: according to research by AON, a British-American professional services and management consultancy, ‘Reputation crises offer financial markets an opportunity to re-evaluate their estimation of future cash flow and, thus, to adjust their valuation of a given company. The market receives new information about the company and its management at times of crisis and forms a consensus view as to whether the impact on long-term future cash flows will be positive (the Winners) or negative (the Losers).’
Based on our [AON] reputation research of 340 events over the last 40 years, the average impact on shareholder value has been 7 per cent over the post-event year [2023], equivalent to a total loss of USD 830 billion over and above the market.’
For venture capitalists and investors, this highlights the imperative of maintaining a solid reputation, not just for their own venturing arm but for the companies they invest in.
Due diligence needs to also focus on perception and reputational issues.
Adopting a Strategic Approach
To navigate these issues, companies must adopt a strategic approach to reputation management and stakeholder engagement.
Understanding Stakeholder Perceptions
It’s important to regularly check stakeholder perceptions and expectations through surveys and feedback mechanisms, sharing the data and insight gained from a strategic point of view with the C-suite and the Board. Stakeholders are also not just external people but also internal.
Polling, or user research, is an important source of insight for governments and opposition parties on where and what their policies should on. This post from Gallup shares six key reasons why measuring public opinion on an ongoing basis is critical.
Communication and Transparency
Maintaining open lines of communication and being transparent about business practices, especially in areas prone to public scrutiny, like data privacy and ethical investment, is critical.
Tailored Engagement Strategies
Developing engagement strategies tailored to each market's cultural and regional specifics is essential.
Building Long-term Relationships
Focusing on long-term relationship building rather than short-term gains, especially in sectors like technology and investment.
Risk Management
Proactively managing risks that can impact reputation, including operational, financial, and ethical risks.
Navigating the complexities of stakeholder engagement in international markets requires a nuanced understanding of trust and reputation management.
By learning from the successes and failures in sectors like technology and investment, companies can develop strategies that resonate with diverse stakeholder groups. In doing so, they safeguard their reputation and lay the foundation for sustainable, long-term growth.
Perception and reputation matters and boards and their C-suite need to think about this as a strategic value-add.
