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Guest Opinion: Disclosures Are Important, Best Practices Even More So

HeikoThis guest contributor, Dr. Heiko Mauterer, is Board Member and Senior Partner for 4C GROUP, a Munich-based management consultancy serving EU organizations. He is on the working group that created and manages the ISO 30414 human capital standards and serves as an independent advisor to the new International Center for Enterprise Engagement advisory firm in Brainerd, MN.
 
By Dr. Heiko Mauterer

The Evolving Role of Standards
The Current State of Stakeholder Engagement
The Path Forward

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Disclosures are important, but let’s not overlook the even more important focus on designing strategies and processes that drive organizational success. Do sustainability leaders risk focusing so much on disclosures that they take their eyes off the true opportunity: enhanced value creation and better stakeholder experiences through effective practices to better harmonize the interests of our stakeholders toward the purpose, goals, objectives and values of our organizations, including a healthy environment.
 
Tangible value creation through people is an important focus of the 4C GROUP and explains why I am serving as an Independent Advisor to the International Center for Enterprise Engagement, Brainerd, MN. It is the first advisory firm I know of that focuses specifically on helping organizations apply the proven practices of human capital management and total quality management (TQM) to stakeholder engagement. ICEE focuses specifically on helping organizations assess the true impact and effectiveness of their investments in traditional engagement processes, including engagement surveys, incentives, recognition, motivational events, training or any effort to engage any stakeholders, and to help develop and implement TQM-based solutions.

Strong evidence suggests that the European Union once again is falling into the bureaucratic trap of focusing on disclosures when the true emphasis should be on enhancing organizational outcomes and stakeholder experiences and rewards."
 

The Evolving Role of Standards

 
I orginally helped found ICEE to assist organizations with certifications in ISO 30414 human capital and ISO 10018 people engagement, which have produced valuable standards for any organization seeking to enhance organizational management. Today, ICEE is using the framework and the metrics in those standards to help organizations evaluate the effectiveness and impacts of their stakeholder engagement efforts. While our company has successfully implemented ISO 30414 standards for several leading German companies, including Infineon and Deutsche Bank, the standards have not yet generated significant demand in the West for formal certifications, especially because of the demands of the EU Corporate Sustainability Reporting Directive. Therefore, ICEE has turned its focus on using standards as part of a strategy and systematic approach to stakeholder engagement akin to the implementation of total quality management.
 
With the enactment of the CSRD, the European Union has established invaluable new legal standards for transparency in businesses subject to the law with regards to practices for the management of all stakeholders and the environment, including the important concept of double-materiality. This involves understanding how organizations create risks and opportunities for their stakeholders and the environment, and the reverse: the risks and opportunities created by stakeholders and the environment for organizations. Even though the EU government is in the process of undergoing a simplification process, the standards’ scope and complexity risk distracting organizations from the true objective: the enhancement of performance and stakeholder experiences by focusing on value creation, continuous improvement, and transparency.
 

The Current State of Stakeholder Engagement

 
Whatever organizations are doing in the European Union as a practical matter to enhance performance through people is not apparent at any level, because disclosures focus more on metrics than specific stakeholder engagement practices. The state of stakeholder engagement today is characterized by:
 
Low stakeholder engagement. The world of capitalism, not just in Europe, is suffering from a general malaise.  According to data from multiple sources, employee engagement and customer satisfaction in the European Union are not much better than the low rates reported in the US by Gallup and the American Customer Satisfaction Index.
 
Lack of impact measurement. Over 50% of the typical organization’s fixed costs involve people, with 80% of the average balance sheet unaccounted for under the category of goodwill. This suggests that most organizations have little meaningful information on the effectiveness of actual impacts of these expenses.  It is not surprising that few organizations views these as investments.
 
Low awareness of the potential for performance improvement through people. Business leadership is remarkably unaware of extensive empirical research establishing the link between having highly engaged stakeholders and enhanced financial performance and even a potential alpha in future equity value creation for public companies.  
 
An ad hoc rather than systematic approach. Today, many organizations continue to throw tactics such as benefits, recognition, incentives, loyalty and or gainsharing, training, professional development at employees and other stakeholders with little actual measurement of the impact. In the world of total quality management widely practiced in Europe and around the world, there’s a clear focus on the customer, both external and internal, and a strategic and systematic approach to harmonizing and supporting the interests of all people involved with value creation. It took years for manufacturing operations in the last century to move from a reactive, ad hoc approach to a proactive, strategic approach. These processes have become the norm in many manufacturing facilities in Europe and around the world. So why not in our offices?
 

The Path Forward

 
There is no need to experiment when a proven framework exists. Total quality management provides the path forward for more effective people management. Everything about its processes apply to people: a strategic approach focused on long-term external and internal customer satisfaction involving all stakeholders, from leadership to frontline employees—in the continuous improvement of processes, products, services, and culture, etc. The International Organization for Standardization’s 9001 quality standards even created a version for service firms, ISO 10018 people engagement standards.
 
Click here for an article outlining the application of TQM principles to cutting costs while enhancing customer service.
 
Stakeholder engagement is about aligning and integrating traditional communications, learning, rewards and recognition, and other engagement tactics frequently siloed in many organizations. Today, enterprise engagement technologies make it possible to easily align these processes and accurately measure, correlate and determine the impact of the purpose, goals, objectives, and values, often on an almost real-time basis. When the same technology platform is used, it becomes possible to correlate the impact of sales and non-sales employee, customer, channel and distribution partner engagement, not to mention other stakeholders.
 
By drawing upon the wisdom of ISO and other standards, and total quality management processes proven daily in factories around the world, our focus at 4C GROUP and in our affiliation with the ICEE is to bring this wisdom to stakeholder engagement across the enterprise.
 


Enterprise Engagement Alliance Services
 
Enterprise Engagement for CEOsCelebrating our 15th year, the Enterprise Engagement Alliance helps organizations enhance performance through:
 
1. Information and marketing opportunities on stakeholder management and total rewards:
2. Learning: Purpose Leadership and StakeholderEnterprise Engagement: The Roadmap Management Academy to enhance future equity value for your organization.
 
3. Books on implementation: Enterprise Engagement for CEOs and Enterprise Engagement: The Roadmap.
 
4. Advisory services and researchStrategic guidance, learning and certification on stakeholder management, measurement, metrics, and corporate sustainability reporting.
 
5Permission-based targeted business development to identify and build relationships with the people most likely to buy.
 
Contact: Bruce Bolger at TheICEE.org; 914-591-7600, ext. 230. 
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