Improving the Effectiveness of Stakeholder Management

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Cooperatives face unique governance challenges. Because of their special nature they must confront and reconcile the interests of many stakeholders and do so while serving their members and maintaining transparency. This calls for an effective stakeholder management plan.

This ScottMadden insight is the last in a series on “Five Strategic Priorities for Generation and Transmission Cooperatives.” The report summary can be found here: http://www.scottmadden.com/insight/516/five-strategic-priorities-for-generation-and-transmission-cooperatives.html.

To learn more, please visit www.scottmadden.com.

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Improving the Effectiveness of Stakeholder Management

  1. 1. Copyright © 2013 by ScottMadden. All rights reserved. Improving the Effectiveness of Stakeholder Management A Generation and Transmission Cooperative Strategic Priority February 2013 Contact: Amita Gurbani (amitagurbani@scottmadden.com) Brad Kitchens (sbkitchens@scottmadden.com) Marc Miller (mdmiller@scottmadden.com)
  2. 2. Copyright © 2013 by ScottMadden. All rights reserved. This ScottMadden insight is the last in a series on “Five Strategic Priorities for Generation and Transmission Cooperatives.” Contents  Overview  A Key Enabler for the Other Strategic Priorities  Effective Stakeholder Management  Thinking Strategically  Contact Us Introduction 1 Gaining Access to Capital Markets Fostering Economic Development Managing Generation Assets Ensuring Grid Security and Reliability Gaining Access to Capital Markets Improving the Effectiveness of Stakeholder Management
  3. 3. Copyright © 2013 by ScottMadden. All rights reserved. Overview Cooperatives face unique governance challenges: because of their special nature they must confront and reconcile the interests of many stakeholders and do so while serving their members and maintaining transparency. This calls for an effective stakeholder management plan. 2 Cooperatives Face a Balancing Act …  Promotes transparency and collaboration among stakeholders and the utility  Incorporates stakeholder input into strategic planning decisions  Fosters stakeholder understanding of planning constraints and viewpoints  Establishes stakeholder “buy-in” and support of the planning process  Increases support from policy and rate-making authorities …That Calls for an Effective Stakeholder Management Plan  Conflicting stakeholder expectations and financial and strategic constraints combine to form a challenging landscape Expectations Constraints Higher material and labor costs Decreases in demand Aging infrastructure and regulatory uncertainty Volatile commodity prices Investment in renewable energy Environmental improvements Sustained earnings growth Low rates and reliable power Clean Energy Advocates Environmental Advocates Academia Members Customers Generation Partners Governments at All Levels Financial Analysts Stakeholder Engagement Chambers of Commerce Misc. Business Interests
  4. 4. Copyright © 2013 by ScottMadden. All rights reserved. A Key Enabler for the Other Strategic Priorities 3 Effective stakeholder management is essential to managing generation assets and gaining access to capital markets. Fostering Economic Development Managing Generation Assets Ensuring Grid Security and Reliability Gaining Access to Capital Markets Improving the Effectiveness of Stakeholder Management Managing Generation Assets  Constructive relationships with FERC and EPA are essential for involvement in decision making and adaptability to impending orders/regulations  Demand-side strategies have become increasingly important as the cost of traditional power sources increases due to stringent new environmental regulations. This requires active engagement with numerous stakeholders serving diverse and complex interests  Proactive engagement with customers and customer advocacy groups helps create buy-in and market penetration for demand-side strategies Gaining Access to Capital Markets  Credit rating agencies consider stakeholder management capabilities when rating G&T cooperatives  S&P, Moody’s, and Fitch evaluate a G&T cooperative’s health based on regulatory relationships, rate-making flexibility, and relationship of management with board of directors, among other factors  Good credit ratings are key to securing low-cost funding from capital markets that are required by G&T cooperatives to meet rising property, plant, and equipment/capital expenditure, often including significant environmental upgrades
  5. 5. Copyright © 2013 by ScottMadden. All rights reserved. A Key Enabler for the Other Strategic Priorities (Cont’d) 4 Effective stakeholder management is essential to ensuring grid security and reliability and fostering economic development. Fostering Economic Development Managing Generation Assets Ensuring Grid Security and Reliability Gaining Access to Capital Markets Improving the Effectiveness of Stakeholder Management Ensuring Grid Security and Reliability  Active regulatory relationships are vital to an effective compliance model  Open communication with NERC and regional reliability councils provides flexibility to adapt to evolving rulemaking and enforcement  Organizational compliance programs need to monitor changing standards, update procedures, and train personnel on an ongoing basis  Smart grid technologies, microgrids, and distributed generation are adding stakeholders to the security and reliability puzzle Fostering Economic Development  Community involvement is key to understanding shifting priorities and aligning efforts with the objectives of local government entities and priorities of members and citizens  Many cooperatives feel a special obligation to better their communities, thereby benefitting their members  Opportunities to collaborate with communities and customers should be explored and maximized. Examples include fundraising for economic development, development grants, incentives for energy conservation, partnership with local educational institutions, providing professional services for local planning and development management, etc.
  6. 6. Copyright © 2013 by ScottMadden. All rights reserved. Effective Stakeholder Management A structured process for engaging key cooperative stakeholders is critical to success in planning efforts and executing complex projects. 5 An effective stakeholder management plan builds stakeholder confidence by providing an integrated framework for decision making. Stakeholder Management Plan  Effective stakeholder management is based on the ability to: — Identify and prioritize stakeholders — Understand stakeholder expectations — Manage expectations through tailored communications and engagement strategies  Stakeholders can be categorized based on interest and power to influence Plan Engage Collaborate Execute Report Refine Constant Stakeholder Communication Effective Stakeholder Communication Strategy  When executing complex projects, G&T cooperatives should rely on a structured, planned communication strategy that engages numerous stakeholders  The first step in an effective communication strategy is identifying communication objectives that align with goals and objectives set by the organization  A G&T cooperative should decide and document how and when different stakeholders need to be involved — Providing plenty of opportunity for public and internal input from key constituents during the planning process ensures effective and efficient vetting of issues  An effective communication strategy involves an iterative process of planning, collaboration, and transparent communication
  7. 7. Copyright © 2013 by ScottMadden. All rights reserved. In today’s dynamic and challenging environment, it is more important than ever to ask the right questions and truly understand the implications of the answers.  Have we identified our stakeholders and their expectations?  How engaged are our stakeholders in the organization’s major undertakings?  Do we have a pre-planned, structured approach for addressing stakeholder expectations?  Have we developed a documented framework for information gathering and decision-making that is tailored for each identified constituent/audience?  Do we schedule and hold regular “touch points” with constituents appropriate to their interests and power?  Do we have a formal, structured process for soliciting and processing feedback?  Are we involved in the community?  Build a structured stakeholder management plan that has a documented communication strategy tailored for each identified stakeholder group  Maintain constructive relationships with federal regulatory agencies such as FERC, EPA, NERC and regional reliability councils  Structure compliance programs that continuously evolve as a result of changing standards  Proactively manage and influence the perception of credit rating agencies regarding the organization’s stakeholder management capabilities  Build a formal community involvement program that monitors shifting priorities of local government entities, members, and citizens and enhances visibility of the organization by identifying collaborative opportunities best suited to meet the long-term goals and objectives of the organization  Adopt performance measures that quantify progress against pre-determined goals  Include stakeholder management in the enterprise governance structure for large projects Thinking Strategically 6 Possible Goals for Organization Practical Questions for Management
  8. 8. Copyright © 2013 by ScottMadden. All rights reserved. Contact Us For more information on improving the effectiveness of stakeholder management, please contact us. 7 Brad Kitchens President and CEO ScottMadden, Inc. 3495 Piedmont Rd, Bldg 10 Suite 805 Atlanta, GA 30305 Phone: 404-814-0020 sbkitchens@scottmadden.com Amita Gurbani Senior Associate ScottMadden, Inc. 2626 Glenwood Ave Suite 480 Raleigh, NC 27608 Phone: 919-781-4191 amitagurbani@scottmadden.com Marc Miller Director ScottMadden, Inc. 3495 Piedmont Rd, Bldg 10 Suite 805 Atlanta, GA 30305 Phone: 404-814-0020 mdmiller@scottmadden.com
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