How can CEOs engage stakeholders effectively? In the fourth episode of the CEO Insights series, partner Blair Epstein shares what she has learned from top-performing CEOs. Speaking with Laurel Moglen, McKinsey’s managing producer, Blair describes how the best CEOs develop their communications road map and prepare for weathering a crisis.
CEO Insights, which features short, sharp perspectives on the evolving role of the CEO, is produced by The McKinsey Podcast in partnership with the CEO Special Initiative.
This transcript has been edited for clarity and length. To catch the full episode, click here.
Plotting out the CEO communication plan
Laurel Moglen: There are many competing priorities for CEOs. Based on your experience with clients, what percentage of time do great CEOs spend on interactions with their stakeholders?
Blair Epstein: There isn’t a universal answer. It really will vary across CEOs. Now that said, we do know from our research that, on average, CEOs spend about 30 percent of their time with their external stakeholders.
But let me bring that variation to life. Brad Smith, when he was the CEO of Intuit, talked about how he spent 20 percent of his time with those external stakeholders. What that meant was if someone wanted to be a part of that 20 percent, they had to prove why they were a better use of his time than something else.
And now, I’ll contrast this with Peter Voser, the former CEO of Shell International. He spent about 50 percent of his time with external stakeholders because he felt it was critical for him to be the primary ambassador for the organization to the outside world.
The amount of time CEOs should spend on stakeholder engagement depends on their priorities, where they are in their tenure, and what’s going on. However, 30 percent is a good average number to keep in mind.
Laurel Moglen: Whether CEOs are investing 20 percent or 50 percent of their time in stakeholders, what approaches to that time have you seen work?
Blair Epstein: First, they’re disciplined about planning for the year ahead. They’ll have a 12-month view of what they’ll do and when—investor calls, customer visits, and conferences. Of course, it’s dynamic. It will change. But that helps set the priority for the year and define some of the anchor points of their stakeholder engagement.
The second thing they’ll do is that they’ll align stakeholder interactions with their strategic agenda, and they’ll make the most of every opportunity. CEOs, especially today, are on the move quite a bit. When they visit a given place, they’re going to fit in community events, interactions with government regulators and stakeholders, and employee town halls. They’re making the most of every moment so that engaging the right stakeholders isn’t a trade-off. It becomes an “and” with other things on their agenda.
As I mentioned earlier, they’re going to set a limit. Typically, we find that they set those boundaries based on a few questions: Does the stakeholder help reinforce or augment our strategy? Are there opportunities to cocreate strategy and infuse new thinking by engaging the stakeholder? Are there long-term or short-term risks in engaging or failing to engage the stakeholder and in doing it now?
Laurel Moglen: CEOs must always be prepared to manage crisis. How does that fit into a CEO’s communication approach?
Blair Epstein: It’s a great question because the reality is, from 2010 to 2017, headlines that carried the word “crisis” alongside the names of the 100 largest companies on the Forbes Global 2000 appeared 80 percent more often than they did during the previous decade. We can attribute that to a few things.
One is that there’s heightened demand for business leaders in this era of stakeholder capitalism. And we’re in an increasingly complex geopolitical landscape. There’s a saying: good news travels fast; bad news travels faster. I think we could say that false news travels fastest.
These factors can come together to create a perfect storm, with the CEO at the center.
Laurel Moglen: Would you say it’s not a good idea to avoid the storms?
Blair Epstein: I don’t think it’s even an option. This is something that comes up often in our conversations with new CEOs, who may not have found themselves engaging with stakeholders in this way prior to stepping into the role. You don’t have a choice. The storm will find you. The crisis will find you. The only question is, how prepared are you for it?
Laurel Moglen: What do the best CEOs do to prepare for such storms in this risk-heavy environment?
Blair Epstein: There are four things that we see CEOs consistently doing. The first is that they’re going to regularly stress test the company. They’re looking five, ten years out to assess what challenges they may face, what scenarios they may encounter. And then they work backward from that to adjust plans and build in more resilience for the organization today.
Second, they’re going to have a built-in command center. We’re in an always-on world, and that means that there must be capabilities embedded across the organization to quickly monitor, manage, and disseminate relevant information not only across the organization but to those key external stakeholders when the storm starts brewing. This is typically a cross-functional team, including comms, legal, risk, and executive employees, all of whom have a clear sense of direction on how to manage short- or long-term risks before and during the storm.
The third piece is that CEOs have to keep a long-term perspective. They have to have an ability to be in the moment, to manage what’s happening now, while also thinking about what’s around the corner, the potential opportunities that could arise out of a crisis.
And lastly, and not to be underestimated, the CEOs are personally resilient. They’re able to lead by example, to be a steady, a guiding force, the calm captain at the helm, so that they can mobilize teams and stakeholders to navigate the roughest waters.
Laurel Moglen: Is there one of these four that CEOs more commonly overlook or ignore?
Blair Epstein: One of the pain points I see is when people think about crisis management as a communications exercise, it’s easy to miss that opportunity to have done the scenario testing. To have gotten yourself ready in advance so that your strategy may evolve puts you in a better position to navigate any eventual storms.