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Effective Practices: A Stakeholder Management Audit for M&A Due Diligence

This article demonstrates how to use stakeholder management analytics to quickly identify strengths and weaknesses in the management of employees, customers, and potentially other stakeholders when conducting due diligence on an acquisition or merger or when analyzing any type of stakeholder management investment.
 
By Bruce Bolger and Darwin Hanson

Stakeholder Metrics Used for Preliminary Analysis
Results of This Analysis
 
By correlating and further analyzing key data that well-run companies already use to manage their operations and stakeholder relationships, investors can identify strengths, weaknesses, and opportunities in mergers and acquisitions or specific people investments. This Stakeholder Management Audit uses the Enterprise Engagement Alliance’s People Value Impact Calculator, powered by TM Evolution, to analyze the fictional IMC Corporation created to demonstrate the features of PVIC, which is available to any organization through the EEA. PVIC is designed to support all the stakeholder metrics required of the coming European Union Corporate Sustainability Reporting Directive and corresponding ISO stakeholder management metrics, enabling organizations to correlate almost any investments with outcomes.
 
Here is a link to a slide presentation of the IMC Corporation stakeholder management analysis.
 
As explained in this recent article and webinar, PVIC uses data supplied by companies in an Excel spreadsheet uploaded to create reports correlating any information fields desired, usually up to no more than five for more effective analysis.
 
These reports come with an important caveat: correlations are not causation. The correlations identified in this report signal areas for further investigation and do not in and of themselves confirm that one factor is caused by another. 
 

Stakeholder Metrics Used for Preliminary Analysis

 
Click here to view the slides with the results and preliminary recommendations based on these reports generated for IMC. Note that correlations are not necessarily causations; the purpose of this analysis is to identify correlations worthy of greater study due to their impact.
 
  • Executive pay versus share price
  • Customer engagement versus revenues and profits
  • Total customer/marketing costs versus revenues per customer
  • Customer/marketing costs versus revenues and net income
  • Customer satisfaction versus revenues and net income
  • Number of customer referrals by revenue
  • Employee costs versus revenue and net income
  • Employee engagement versus revenues
  • Employee engagement vs. referrals and turnover
  • Total employee cost versus revenues
  • Number of employee referrals by net income
  • Employee engagement vs employee cost ROI
  • Training programs versus employee ROI
  • Executive gender and ethnicity
  • Employee ethnicity and gender
Other metrics could include: safety and wellness, further DEI analysis, distribution partner or supply chain analysis; more granular analysis of specific marketing, human resources, or other initiatives.
 

Results of This Analysis

 
As detailed in these slides, the above reports generated the following insights and questions clearly material to the performance of the organization both in terms of sales and profits but also in customer and employee satisfaction. Better understanding of cause and effects of correlations in this report could potentially yield better ways to stakeholder management in the future. 
 
  • IMC appears to have better than average stakeholder relationships but it is clear the company experienced a shock to employee and customer engagement that appears to have had a direct impact on financial results. On the other hand, efforts to address the problem appear to have had positive impact, so what did those efforts consist of?
  • Employee cost ROI went down when headcount and payroll costs went down when it should have improved. Why didn’t it? Why did employee cost ROI only go up when payroll costs rose?
  • There is a clear correlation between customer and employee engagement survey scores and revenue. What about this business makes this connection important?
  • Is the recent decline in customer and employee referrals evident in this report a harbinger of potential revenue declines going forward based on the past pattern?
  • There’s a strong correlation between training expenditures and employee cost ROI? What was the nature of that training program? What other programs could have affected the improvement in employee cost ROI?
  • The company remains skewed toward White Males in both its executive staff and employees but has made some improvements. 
  • Equally, the company remains skewed toward White males in its customer base. Could having more diverse employees and management yield more diverse customers?

ESM Is Published by The EEA: Your Source for Effective Stakeholder Management, Engagement, and Reporting


Through education, media, business development, advisory services, and outreach, the Enterprise Engagement Alliance supports professionals, educators, organizations, asset managers, investors, and engagement solution providers seeking a competitive advantage by profiting from a strategic and systematic approach to stakeholder engagement across the enterprise. Click here for details on all EEA and ESM media services.
 

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