Stakeholder relations

No organisation exists solely for its own sake.

In the commercial world the concept of company ownership is easily and well understood. It is those people whose money facilitates the company doing business. These would be public shareholders of a listed company, or family members in a family-owned business (who will also be shareholders). Shareholders have a legal entitlement to a small or large portion of ownership of the company in which they hold shares.

Ownership

In the not-for-profit sector the concept of ‘ownership’ is not as commonly used. There are, however, people who are the equivalent of shareholders who might be thought of as ‘legal owners’. They are entitled to attend the AGM with voting rights. They can change the constitution, place board members on and off the board and, ultimately, wind up the legal entity. In this context the term ‘legal’ only carries limited weight. The legal owners will be the members of an incorporated society or the trustees of a charitable trust.

In most instances these so called ‘legal owners’ are not the people for whom the organisation has been established. Most not-for-profit organisations, including sports organisations, are established to serve the interests of individuals and groups in the community who are not, or need not be, members of the organisation. Constitutions of not-for-profit organisations, when defining membership, often show this is restricted to a small number of individuals and/or groups. The ‘owners’ of a charitable trust are the trustees. There might be as few as six or eight of these, yet the trust might serve the interests of hundreds if not thousands of individuals. Take, for example, Sport Northland, which sees every Northlander as being within its ambit of influence.

The point of this is to make clear that, when planning, the board and management need to look beyond their ‘members’ to all the people they serve and ensure their wider interests are accounted for in the plan.

In the case of a sports trust, the organisation probably exists for the community as a whole. While some sports organisations exist only for their members, e.g. a golf club or a squash club, many exist for all participants, present and future, who participate in that sport, whether a member or not.

Both members and participants of a sport have stakeholder interests in the organisation.

Thinking about the stakeholders

Important questions for any board relate to identifying the most important stakeholders: “What do we do for them?” and “What do they expect/need from us?” being two examples. Good governance demands that stakeholder interests are identified and appropriate relationships are established. Those to whom the board considers it is primarily accountable should attract the most attention. Boards should involve stakeholders when planning direction and priorities.

A board needs to develop a stakeholder relationship plan because the interests and expectations of key stakeholders sometimes conflict and trade-offs have to be made. Some stakeholder expectations may conflict with what’s in the best interests of the organisation. Similarly, boards may need to do what they know is right, even when it goes against the wishes of stakeholders.

Complex stakeholder environments are the norm for many sports and recreation organisations.

Few boards employ processes to manage the challenges posed by different stakeholders. Very few develop a clear sense of the relative significance of each stakeholder category and of the type of relationship the board should expect to see developed. More often, stakeholder relations receive reactive attention, usually when they’re negative.

It follows that strategic direction setting should involve key stakeholders. While stakeholders should neither determine the board’s overall strategy nor drive its decision making, the board has a moral responsibility to consult with stakeholders about their expectations and requirements.

Tools for analysing stakeholder interests are included in the online resources.