{"id":652,"date":"2022-09-21T05:30:52","date_gmt":"2022-09-21T03:30:52","guid":{"rendered":"https:\/\/blog.iese.edu\/family-business\/?p=652"},"modified":"2023-01-09T10:07:14","modified_gmt":"2023-01-09T09:07:14","slug":"external-stakeholders-3-ways-to-boost-engagement","status":"publish","type":"post","link":"https:\/\/blog.iese.edu\/family-business\/2022\/external-stakeholders-3-ways-to-boost-engagement\/","title":{"rendered":"External stakeholders: 3 ways to boost engagement"},"content":{"rendered":"

Guest contributor: Sumeet Malik<\/span>
\n<\/strong><\/h2>\n

Assistant Professor \u00b7 University of Amsterdam \/ Entrepreneurship & Innovation Section
\n<\/strong>2021-2022 Post-Doctoral Fellow \u00b7 IESE Chair of Family-Owned Business<\/strong><\/p>\n

\n

From investors and regulators to customers, external stakeholders are critical <\/strong>to the long-term success of family firms. They buy their products, regulate their operations, and provide their means of operation by supplying vital resources and raw materials.<\/p>\n

Positive stakeholder relationships are paramount for all organizations, but especially for family-owned firms, which are invariably held to a higher standard<\/strong>.<\/p>\n

Far from faceless entities, family-business owners are easily identifiable<\/strong> and assumed to play a direct role in the company\u2019s management. External stakeholders also worry about family owners acting in a self-serving way.<\/p>\n

Family firms stand out in another key aspect: the non-financial wealth reference point \u2013 also known as socioemotional wealth<\/strong> (SEW) \u2013 embedded in their decision-making process.<\/p>\n

As defined by Gomez-Mejia et al. (2007), SEW entails the \u201cnon-financial aspects of the firm that meet the family\u2019s affective needs, such as identity, the ability to exercise family influence, and the perpetuation of the family dynasty.\u201d <\/strong><\/em><\/p>\n

For family firms, the path to creating SEW rests on enhanced stakeholder engagement. By way of example, family firms are less likely to pollute<\/strong> than their non-family counterparts in industries required to report their toxic emissions.<\/p>\n

Going a step further, pioneering research<\/strong><\/a> by Prof. Pascual Berrone suggests that the relatively superior environmental performance of family firms may be a self-interested way to augment their SEW.<\/p>\n

Below are three ways in which family firms can optimize stakeholder relations<\/strong>, and reap the strategic benefits that come with it:<\/p>\n

(1) Embrace sustainability<\/strong><\/span><\/h2>\n

Family firms should strive for sustainability<\/strong> in their operations, particularly if their activity is geographically concentrated. Having local roots exposes them to community sanctions and even personal shame in case of environmental transgressions.<\/p>\n

A robust environmental commitment also helps build legitimacy among regulators and activists<\/strong>, while acting as \u201cinsurance\u201d if accidents do occur since stakeholders are more apt to give them the benefit of doubt.<\/p>\n

(2) Forge solid relationships with customers and suppliers<\/strong><\/span><\/h2>\n

As noted in a previous post<\/strong><\/a>,<\/strong> family firms take a longer-term view<\/strong>, which offers unique opportunities for building stable relationships with suppliers over repeated interactions.<\/p>\n

Family firms are also generally more accessible and informal in their public dealings, enabling them to forge closer personal relationships<\/strong> with customers.<\/p>\n

Long-term relationships with suppliers and customers wield numerous benefits, such as network-based advantages in their innovation processes<\/strong>.<\/p>\n

Meanwhile, a loyal customer base can be an outstanding marketing channel<\/strong> as early adopters of new products, as well as a frontline source of information to anticipate evolving market needs and changes.<\/p>\n

(3) Aim for transparency<\/span> \u00a0<\/strong><\/h2>\n

External stakeholders view family firms with suspicion, assuming owners are more prone to acting opportunistically<\/strong> or leading in a self-serving manner in light of the considerable control they exert over their businesses.<\/p>\n

Investors and analysts worry that information provided by family firms might be incomplete<\/strong>, putting them or their clients at risk.<\/p>\n

To calm these fears, family firms need to be transparent and proactive in their disclosures<\/strong>, which bolsters legitimacy while mitigating the risks of litigation.<\/p>\n

It also helps family-controlled firms to stay ahead of the curve, since the voluntary best practices of today may likely become the legal requirements of tomorrow<\/strong>.<\/p>\n

 <\/p>\n

Homepage image: <\/em>Chris Linnett<\/em><\/a> on <\/em>Unsplash<\/em><\/a>.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Guest contributor: Sumeet Malik Assistant Professor \u00b7 University of Amsterdam \/ Entrepreneurship & Innovation Section 2021-2022 Post-Doctoral Fellow \u00b7 IESE Chair of Family-Owned Business From investors and regulators to customers, external stakeholders are critical to the long-term success of family firms. They buy their products, regulate their operations, and provide their means of operation by […]<\/p>\n","protected":false},"author":2313,"featured_media":654,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[352],"tags":[117525,117574],"class_list":["post-652","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-external-stakeholders","tag-stakeholder-management","megacategoria-mc-family-business"],"acf":[],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t