Strategic Stakes

In addition to financial capital, all businesses require human capital: the knowledge, skills, and experience of people. And like any business, an adjusting firm needs to manage its human capital and its stakeholders effectively. The first step is to analyze current strengths and opportunities.

Stakeholders are individuals and groups that are affected by a firm’s performance or that have a claim – a stake – in its performance. Some stakeholders can affect a firm’s access to resources; others can shape the structure of the industry; and still others influence the overall environment in which the firm operates.

Stakeholders can be relatively remote (government, society as a whole) or immediate (customers, competitors). Some are suppliers of capital (shareholders, banks), some exercise oversight (regulators), some are part of the firm’s market (insurers, suppliers, alliance partners), and some are organizational stakeholders (employees at all levels).

Staking out the stakeholders

A key challenge of stakeholder analysis is to assess whether each stakeholder poses a threat or represents an opportunity; and a key challenge of stakeholder management is to decide how to balance the conflicting interests of different stakeholders. Here’s an exercise that can help you get started.

1. Brainstorm a list of your firm’s stakeholders – all the companies or groups that affect or are affected by the activities of your firm.

2. Use a grid to sort your stakeholders in terms of how much interest they have in your firm’s activities and how much power they have to affect your firm. Draw a grid with four squares, labeled as in the diagram below.

Note each stakeholder firm or group in the appropriate box. Those in the upper right quadrant (high power, high interest) should be your firm’s highest overall priorities; those in the lower left quadrant (low power, low interest) should be the lowest priorities.

3. Mark up the grid to indicate the stakeholders whose interests in your firm are aligned with each other and the stakeholders whose interests conflict. Brainstorm a list of actions that could help your firm to minimize or manage conflicts between stakeholders.

4. Identify which stakeholders you have a personal connection to, and any connections you know of between stakeholders and others in your firm. Are there “structural holes” in the network that need to be bridged to create value? If so, prioritize the gaps that need to be filled and brainstorm a list of actions that could help fill these gaps.

On the basis of this analysis, think about the key challenges in managing your firm’s stakeholders. Review your lists and identify the actions your firm could most easily undertake in the short term, given your resources and strategic priorities.

Social strengths

In any industry, the interests of a firm’s various stakeholders sometimes conflict. The stronger a firm’s social networks – the personal or business relationships that connect people – the more information will be available to help the firm balance competing interests, and the more goodwill the firm will enjoy as it does so.

Whether they’re mediated through new technologies or conducted through more traditional approaches, social networks can provide access to a wealth of resources such as knowledge, ideas, skills, leads, opportunities and influence. By capturing information from a variety of sources, networks can increase the range and depth of information available in a firm, as well as the points of access to it. They can be a key tool for scanning the external environment for threats, opportunities and trends.

Social networks and social capital are particularly important in the property and casualty sector, where there is often a web of firms providing overlapping services, sometimes to the same client. Over the course of a single policy, a customer may deal with a broker when purchasing the policy, the insurer when submitting a claim, and an independent adjuster who investigates the claim. These firms need to maintain relationships with one another as well as with the insured customer. Social networks can help an adjusting firm develop a better understanding of its business partners.

Network knowledge

The value of any network of relationships lies in its size, diversity and quality. Networks can develop through proximity (people who work near each other), similarity (people who have things in common), shared activities (such as working on the same project) or some combination. The most valuable network relationships often evolve naturally when people make contributions to a network out of a genuine desire to build relationships and further the group’s aims.

Consider the depth and breadth of your own work-related social network:

1. Sketch your network, differentiating between your direct and indirect connections, and between your strong and weak direct connections. Where do your strongest connections lie? Do you have direct or indirect connections to key stakeholders? Where could you benefit from strengthening or adding connections?

2. Do you have connections both within and beyond your functional area? In your own organization and at others? New connections as well as long-established ones? How could you make your network more effective?

3. How have your strongest connections developed? What activities led you to the people in your networks? How can you enhance your contribution to your key relationships and to the networks you belong to? How can you expand your web of connections or become part of new networks?

4. Thinking about your firm or business unit as a whole, which networks seem to be important sources of knowledge transfer, leads or other resources? Which people play the key roles in these networks? Could the firm’s network be strengthened by enhancing those roles?

Investing in your network can yield benefits both for you and for your firm. Networks can facilitate knowledge transfer and problem-solving within the organization. Effective networks of relationships can also allow a firm to involve stakeholders in defining problems and generating potential solutions.

Firms that are able to do this well can turn stakeholder management into a strategic competency, leveraging their human and social capital to create value and achieve their strategic objectives. 

This article is based on material used in the Insurance Institute’s FCIP program, the pinnacle of learning in Canada’s p&c industry. Focusing on strategic leadership and advanced management principles, the program blends academic business theory with practical insurance application.