"Teamwork makes the dream work!" is an old adage many of us associate with internal collaborations within our organizations. Yet, did you know this principle stretches far beyond the organizational walls and includes important collaborations with customers, vendors, suppliers, or so-called external stakeholders?
In this short guide article, we unbox the world of external stakeholders, answering those questions and more to help you achieve the dream of effective teamwork and collaboration with the outside world.
What are external stakeholders?
For an organization, such as a company, government agency, or nonprofit/NGO, stakeholders represent a wide-ranging group of individuals or entities interested in or affected by an organization's decisions and activities.
There are two main kinds of stakeholders:
Internal stakeholders: These are individuals or groups that are woven into the organization’s structure. Internal stakeholders are more than employees and managers; they are consultants, freelancers, shareholders, and board members. The organization confers trust to internal stakeholders by default.
External stakeholders: Operating outside an organization’s immediate sphere, these external parties include customers, suppliers, regulatory bodies, or investors. These counterparties often interact with the organization from a variety of different standpoints. Trust must be established as a prerequisite to collaboration.
It’s worth emphasizing that the level of trust is one of the key differences between the two types of stakeholders. As we wrote above, with internal stakeholders, trust is assumed; with external stakeholders, trust must be established prior to collaboration. And there’s a reason, in the business or company context, the internal stakeholders ‘operate’ the business, while external stakeholders represent those that the organization ‘does business with.’
What are some concrete examples of external stakeholders?
External stakeholders, or external parties, are individuals or entities who often represent those that the organization ‘does business with.’ They're not part of an organization’s internal structure but significantly influence or are influenced by its actions, objectives, and policies.
Customers: These are your buyers. They choose your products or services. Their choices guide what you sell and how you sell it.
Suppliers and vendors: These folks supply the materials or services you need to keep the business running. Good relations mean smooth operations.
Investors: These are your financial backers. They typically use equity instruments. They support you financially and expect growth in return. The organization’s plans, strategies, and performance are of paramount interest.
Creditors: These are financial backers. They typically use debt instruments. They have a financial stake in your business and want to understand how you’ll manage debt payments.
Government: They set the rules of the game. Your business needs to play by them to stay in the clear.
Service Providers: Service providers offer essential services that keep your business up and running. Their reliability and quality are paramount to ensuring continuous, smooth operations across all areas of your business.
Partners: Other businesses or groups you team up with for mutual wins. Together, you can go far.
Each set of external stakeholders has unique expectations, influences, and interactions with the organization. Managing these relationships requires careful consideration of their individual needs, influences, and touchpoints with the organization. That uniqueness across external stakeholders is one reason why many organizations have dedicated teams that focus on collaborations with these external stakeholders.
Marketing, Sales, and Customer Success Teams focus on the needs of prospects and customers.
Procurement Teams work with suppliers, vendors, and service providers to ensure the quality and consistency of materials and services supplied.
Investor Relations and Finance Teams collaborate with investors, creditors, and financial intermediaries/institutions to meet their requirements.
Compliance, Regulatory, and Legal Teams engage with governments and regulators to ensure regulatory frameworks are adhered to properly.
Business Development and Partner Teams forge mutually beneficial alliances with partners.
The work these internal teams perform with external stakeholders can be classified as external collaborations or external stakeholder collaborations. While the topics and focus of these external parties are very different (e.g., customers vs. suppliers vs. investors vs. regulators), the techniques, tools, approaches, and best practices for effective collaboration are surprisingly similar.
What are external stakeholder collaborations?
Collaborations with external stakeholders are known by many names: external stakeholder collaborations, counterparty collaborations, or external collaborations. But irrespective of the name used, they refer to the structured interactions that organizations have with individuals or entities outside their internal structure. The aim of these interactions, or collaborations, is to establish mutually beneficial relationships and achieve a goal that is mutually beneficial to both parties.
It’s worth reiterating that for an external stakeholder collaboration to be successful, both the organization and external entity, or counterparty, must derive value from the collaborative effort. What makes these kinds of collaborations more complex vis-a-vis internal stakeholder collaborations is each party must build trust with the other and then find alignment between the common purpose that drove the collaborative initiative and their own organization’s objectives. And, because these collaborations are, by definition, inter-organizational or collaborations with the outside world, it’s challenging for one party to force the other party to adopt a specific protocol, course of action or tool without risk of damaging trust.
For your consideration, we’ve identified additional noteworthy characteristics of external collaborations that should be reviewed when preparing to collaborate with external stakeholders:
Power dynamics
What is it: The inherent discrepancies in influence and decision-making capacities between collaborating parties
Comment: Recognizing and equitably navigating the power differentials between your organization and external stakeholders is pivotal. It’s a crucial step to make sure collaborations yield mutually advantageous outcomes.
Advice: Ensure equal footing by using neutral collaborative platforms to foster an environment of equality and collective ownership and eschew perceptions of domination by either party.
Interplay of interests
What is it: The alignment of your organization’s and the external stakeholder’s interests towards a common objective.
Comment: Recognize that your organization and your external party start the collaboration with your own issues and interests. How these interests intersect must be understood and mediated to ensure that both parties derive value from the collaboration.
Advice: Mitigate miscommunication and errors by centralizing all collaborative communications, documents, and files in a commonly accessible location. Opting for a platform that's transparent and accessible to both entities not only fosters trust and transparency but also simplifies the communication chain, thereby minimizing the potential for misinterpretations or loss of critical data.
Nurturing Relationships
What is it: The constructive process of building and sustaining trust, as well as maintaining respectful relations with external stakeholders, underpinning the success of external collaborations.
Comment: Remember that these collaborations with outside parties are not intended to be merely transactions. Establish trust by nurturing relationships, understanding stakeholder needs, and ensuring that their expectations are met, if not exceeded.
Advice: Use a mixture of synchronous and asynchronous collaboration technologies (ideally in the same platform) to foster and maintain open communications between the two parties. Use these technologies to ask and respond to questions and provide clarifying comments. Ideally, an audit trail or history is maintained to help ensure transparency.
Internal strategic alignment
What is it: Ensuring the interests and objectives of internal stakeholders are aligned with the goals of the external collaboration.
Comment: Achieving agreement with internal stakeholders is crucial, especially in pivotal and business-critical collaborations that span internal stakeholder domains. It’s important to keep these internal stakeholders informed and up-to-date and assimilate feedback through external stakeholder collaboration.
Advice: Provide a method for the main internal stakeholders or interested parties to monitor (most common) or participate (less common) in the collaboration as part of a unified team. Remember, transparency with your internal stakeholders is a key to building and maintaining trust with them, just as it is for your external parties.
Security and confidentiality
What is it: Safeguarding sensitive information and ensuring restricted access throughout the collaboration.
Comment: It should be obvious that these collaborations should always adhere to best practices around security, privacy, and confidentiality. This is because, most of the time nature of the collaborations is confidential. That said, there needs to be a balance between security and accessibility.
Advice: While most organizations have the basics covered with strong internal security practices, external collaborations have additional requirements, such as strategies to limit accidental data disclosures and provide access to only key participants from each party. Moreover, because the other party is external, the security measures cannot be too onerous.
Understanding the concept of Arm’s length collaboration Most collaborations with external stakeholders follow the principle of “arm’s length collaboration”. Arm's length means that both parties pursue shared objectives while protecting their interests. It is different from collaboration with internal stakeholders, which is more “arm-in-arm”.When working with an external stakeholder, you need to be aware that it is an independent party and that the way you work needs to be structured and transparent.
What are real-life examples of external stakeholder collaboration
If we focus only on professional and business use cases, there are a wide range of external stakeholder collaborations. Here are a few:
Sales
Example: Enterprise-Level Sales Collaboration
Definition: Engaging with large corporations or enterprises to facilitate the sale of extensive license agreements, necessitating interactions and approvals from various departments, such as IT, legal, and procurement, from both the selling and buying organizations.
Real-life Example: When Salesforce aims to sell an enterprise license for their CRM software to a large corporation like IBM, it involves multifaceted interactions, including product demonstrations, legal discussions, and negotiations, ensuring that the solutions align with the client's technical and business requirements.
See how TakeTurns helps accelerate Sales proposals towards close.
Procurement
Example: Request for Proposal (RFP) Process
Definition: The RFP process in procurement involves soliciting proposals from vendors through a structured format that outlines the organization’s needs, requirements, and evaluation criteria, aiming to select a vendor that can provide a product or service in the most effective and economical manner.
Real-life Example: The New York City Department of Education (NYCDOE) issued an RFP seeking vendors to provide special education services to students. The RFP detailed specific services, qualifications, and compliance requirements. Vendors submitted proposals detailing their service offerings, costs, and relevant experience.
Example: Securing Investment Through Venture Capital Funding
Definition: This involves a business seeking financial investment from a venture capital firm, negotiating terms, and solidifying agreements, often via the exchanging and negotiating of term sheets. The term sheets lay out the principal terms and conditions of a financial investment.
Real-life Example: Back in 1995, Amazon, then a fledgling online bookstore, sought investment to expand and enhance its operations. Jeff Bezos, the founder, engaged in financial collaborations with potential investors to secure necessary funding for expansion. One of these investors was Kleiner Perkins, a venture capital firm. The firm agreed to invest $8 million in Amazon after detailed negotiations and a review of the term sheets, which outlined the investment amount, valuation, and other relevant conditions.
See how TakeTurns helps Investment Professionals collaborate with external stakeholders on due dilligence or deal prep
Compliance & Regulatory
Example: A financial institution working on adhering to Know Your Customer (KYC) and Customer Identification Program (CIP) regulations across various jurisdictions.
Definition: KYC and CIP regulations necessitate institutions to verify the identity of their customers, ensuring that they are genuine and safeguarding against various financial crimes like money laundering or fraud.
Real-Life Example: A fintech company operating in multiple countries collaborates with local and international regulatory bodies and uses third-party verification services to ensure that its customer identification processes (CIP) and KYC protocols are compliant with each jurisdiction's specific regulatory guidelines and international norms.
Example: Legal Negotiations in Commercial Real Estate
Definition: Engaging in a commercial real estate transaction involves thorough legal collaboration to negotiate, review, and finalize all legal documentation and agreements, ensuring all parties comply with the relevant laws and regulations.
Real-life Example: In 2004, a real estate investment group, Metropolis Investment Holdings Inc., purchased the tower for a sum of $841 million. Legal teams from both the buyer and seller engaged in intricate collaborations to navigate through various aspects of the transaction, including verifying the legitimacy of the property details, ensuring compliance with local and federal laws, negotiating terms, and finalizing financial agreements.
In each of these scenarios, understanding, defining, and managing collaborative efforts are pivotal in ensuring that organizational objectives are met while maintaining healthy relationships with external stakeholders.
Best practices for collaborating with external stakeholders:
Collaborating with external stakeholders involves careful coordination and communication. Establishing clear practices can facilitate smoother collaborations and ensure that objectives are met effectively. Here are ten best practices for ensuring smooth collaboration with external stakeholders:
1. Establish Clear Objectives
Align on Goals: Ensure all parties have a shared understanding of the collaboration's objectives.
Define Roles: Clarify each party's responsibilities and contributions. It’s important to make sure that each participant’s roles and responsibilities are clearly identified and carried over into your platforms and tools (if used).
2. Foster Open Communication
Transparent Interactions: Adopt transparent and honest communication to build trust.
Multimode: Ensure you have both real-time (e.g., chat) and asynchronous (e.g., email) styles of communication supported.
Internal stakeholders: Don’t neglect to communicate with internal stakeholders and other interested parties.
Regular Check-Ins: Schedule regular meetings and updates to ensure alignment and address issues promptly. It can be valuable to produce status updates and reports that illustrate, on a timeline, what has happened thus far in the collaboration.
3. Leverage Collaboration Tools
Unified Platforms: Employ collaboration platforms that cater to the communication, document sharing, and project management needs of all stakeholders.
Accessibility: Ensure that all collaborative tools are accessible and user-friendly for all parties involved.
4. Develop a Structured Plan and Cadence
Project Management Plans: Establish a clear and detailed plan that outlines milestones, timelines, and deliverables (i.e., almost a project management plan).
Execution style: For the collaboration process, define how the parties will execute, for example, how will the parties exchange control over the course of the collaboration (e.g., will you take turns? Will one party control the flow?)
Flexibility: Be prepared to adjust plans as needed, ensuring adaptability to changing circumstances.
5. Ensure Data Security and Compliance
Secure Communications: Adopt secure channels for communication and data exchange.
Be aware of pitfalls: Irrespective of the level of operational security required, make sure the channel prevents leaks outside the assigned participants and prevents inadvertent data disclosures.
Regulatory Adherence: Ensure all collaborative activities and shared data comply with relevant regulations and laws.
6. Respect Cultural and Organizational Differences
Adapt Communication Styles: Be mindful and respectful of differing communication and work styles.
Inclusive Decision-Making: Ensure that decisions consider the perspectives and limitations of all stakeholders.
7. Manage Power Dynamics
Equal Partnership: Encourage an environment where all parties feel their contributions are valued.
Neutral Ground: Create settings (physical or virtual) where all stakeholders can interact without any party dominating.
8. Evaluate and Provide Feedback
Continuous Evaluation: Regularly assess the progress and outcomes of the collaboration.
Constructive Feedback: Provide and encourage feedback from all stakeholders to improve the collaboration process.
9. Legal and Ethical Considerations
Clear Agreements: Have clearly outlined and legally binding collaboration agreements.
Ethical Practices: Ensure all interactions and transactions are ethical and transparent.
10. Acknowledge and Celebrate Success
Recognition: Acknowledge the contributions and successes of all stakeholders.
Celebrate Milestones: Celebrate achievements, big or small, to build morale and strengthen relationships.
And one more for good luck ...
11. Wrap up properly
Comprehensive Documentation: Compile records of all communications, decisions, and changes throughout the collaboration.
Archive contents: Retain the collaboration content in an archive with security controls to prevent unauthorized access or data breaches.
Audit Trails: Keep a clear audit trail that documents the decision-making processes, justifications, and any alternative options considered.
Conflict Resolution Support: In the event of disputes or disagreements, utilize the archived information to validate actions and decisions, providing a basis for resolution discussions.
By adhering to these best practices, organizations can navigate the complexities of external stakeholder collaborations more effectively, ensuring mutually beneficial outcomes and sustainable relationships.
What to look for in a tool to support your external stakeholder collaborations?
While many organizations manage collaborations with email and spreadsheets, it’s hardly effective or efficient. Investing in tools and technologies is a great way to improve and scale your organization's ability to collaborate with external stakeholders. Looking at real-life examples of collaborations reveals several critical features that you should consider when looking for a collaboration platform:
File Sharing
Purpose: Enable seamless distribution and exchange of files between all parties.
Essentials: Select tools that cater to both one-way (distribution-focused) and two-way (interactive and revision-oriented) file sharing.
Purpose: Establish a unified workspace for document sharing, editing, and revision.
Essentials: Focus on tools that support asynchronous collaboration, featuring robust version control to systematically track exchanged revisions and approvals. In most external collaborations, the parties do not engage in synchronous document collaboration where the document is co-edited in real time.
Purpose: Streamline the acquisition and management of crucial documents and files, e.g., legal documents in vendor onboarding.
Essentials: Opt for a system that enables effortless requesting, tracking, and secure storage of essential documents.
Project Management:
Purpose: Ensure orderly coordination and task management throughout the collaboration.
Essentials: Leverage project management tools that provide clarity on roles and timelines without enforcing overly rigid process flows. After all, most collaborations with external stakeholders will have varying numbers of review cycles (or turns).
Communications (Asynchronous and Synchronous):
Purpose: Keep everyone on the same page and maintain transparency between the parties.
Essentials: Implement tools that support both instantaneous (e.g., chat) and asynchronous (e.g., email) communications, with historical tracking for accountability and reference.
eSignature:
Purpose: Formalize agreements and ensure a verifiable record of consensus among stakeholders.
Essentials: Employ electronic signing tools adaptable to varied signature formats (eSignatures, digitally signed documents, scanned wet signatures), affirming agreement validation.
Understanding and strategically implementing these facets can exponentially enhance the productivity and success of external stakeholder collaborations.
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