Stakeholder Analysis: Towards Practical Content & Supply Chain Sustainability in Nigeria

By Feso Bright

This article is based on a presentation I made at the CWC Practical Nigerian Content forum as a member of The Lagos Oil Club. The practical Nigerian content forum assembled a broad international spectrum of stakeholders in the Oil and Gas industry to learn and share ideas on the Nigerian Oil and Gas Industry Content Development Act (NOGICDA 2010). In order to give a sense of the participation at the event I will give some names of the speakers and their themes at the forum.

State Governors: RT Hon Rotimi Amaechi (Executive Governor of Rivers State), RT Hon Timipre Sylva (Executive Governor of Bayelsa State) and RT Hon Dr. Emmanuel Eweta Uguaghan (Executive Governor of Delta State) spoke about their commitment to the Nigerian Content Agenda, its role as a catalyst for sustainable development in the Niger Delta, Strategies for economic diversification and social development, Eng Ernest C Nwapa (Executive Secretary Nigerian Content Development & Monitoring Board (NCDMB) spoke about achievements and future strategies for the board. For the private sector, Dr.  Alex Otti (Group Managing Director Diamond Bank), Dr Kingsley Ojoh (Executive Director Total E & P Nigeria Ltd), Raymond Wilcox (GM- Nigerian Content Development, Chevron Nigeria Ltd), Dotun Adegbite (Head, Public Sector Advisory BGL Plc), Austin Azoka (Head of Nigerian Content Development, Shell Nigeria Exploration & Production Company) all focused on developing capacity to stimulate the regional economy.

 Elder Peter Godsday Orubebe (Honourable Minister, Ministry of Niger Delta Affairs), Dr Ernest Azudialu (Presidnet/ CEO Nestoil Group), Simone Volpi (Ag Managing Director (Intels Nigeria Limited), Clement Iloba (Public Affairs Co-ordinator, Julius Berger), Dr Levi Ajuonuma (Group General Manager Group Public Affairs, Nigerian National Petroleum Corporation) spoke on a variety of issues bordering on compliance and efficiency in operations. On the third day, the focus was stakeholder management and supply chains. Speakers were: Ina U Obasi (Director Alcon Nigeria Ltd), RT Hon Tam Brisibe (CEO Tandice-B Solutions Ltd), Ann Oden (Country Director, CDC Development Solutions), Shaun Doherty (Supply Chain Development Practice Leader- Africa, CDC Development Solutions), Deidre White (CEO, CDC Development Solutions) and last but not the least myself- Feso Bright (Project Director- Membership, The Lagos Oil Club).

If you had a problem with going through the listing of all those “stakeholders”, I dare say that this article is tailored especially to address individuals like yourself. Stakeholder analysis often requires a lot of painstaking work in identifying the many parties to a process or an outcome; however many decision makers tend to pay little attention to this most important step towards sustainability in strategic outcomes and, for the purpose of this article, practical Nigerian (content supply) chain sustainability.

Why Stakeholder Analysis?

My answer is short: Outcomes and processes matter (Whittington ’91) and these days pluralistic, socially embedded outcomes matter a lot more. Today’s companies largely struggle between the fashion or regulatory requirements to report outcomes that demonstrate compliance to a minimum level of social responsibility and only the discerning few realize the strategic imperative of pursuing socially embedded outcomes. A typical example is the contrast between outcomes in Norway and Nigeria. Corporate outcomes from oil and gas activity in Norway result in an overall improvement in the quality of life and significant stakeholder alignment. In contrast, for Nigeria, over the years corporate outcomes suggest varied levels of progress in achieving stakeholder alignment. In actual fact, the consensus position will probably hold that corporate oil and gas activity has led to significant gaps between stakeholder requirements and corporate social responsibility. Many companies opt to turn profits subject to the “constraint” of meeting other stakeholder requirements rather than as a result of a deeply embedded corporate value and belief system that makes it possible for stakeholder requirements to be embedded in the strategic fabric of the organizations. The fact is that corporate “speak” is different from corporate “action”. Let us go back to one of my favourite tools for analysing theories of action- the Whittington matrix. The matrix classifies any room-full of companies into four (4) separate categories based on the processes and outcomes that their corporate actions (not corporate speak) reveal.

Box A companies believe that they should pursue the outcome of profit maximization to the highest height; they adopt a rational planning process to ensuring that they achieve their desired outcome and the shareholder is “the stakeholder” which must be satisfied at all costs. Corporate speak may attempt to portray that other stakeholders are important but corporate action reveals that the other stakeholders may largely be treated as a constraint factor. Box B companies prefer to focus on the outcome of profit maximization but do not believe in long term planning as survival is perceived to be short-term and market-determined. Efficiency is the watch-word and though corporate speak may attempt to portray that stakeholders are important the company’s focus is on short-term survival and profits. 

Stakeholder relationships are not considered significant for this group of companies; evidence of this is the apparent lack of commitment to a “process” of any sort of engagement whatsoever. Box D companies believe in some form of stakeholder engagement but this is largely limited to internal stakeholders within the organization. The focus is on pluralistic outcomes aimed at satisficing and based on internal bargaining. However, there is no belief in a deliberate process as there is the conception of bounded rationality. External stakeholders are not highly regarded but internal resources are given a high premium. Corporate speak my attempt to portray that all stakeholders are engaged but the actions show that internal stakeholders are the primary focus of all action. Finally, we have the Box C companies which focus on pluralistic outcomes as well. These outcomes such as length of service, community development and other actions which take into cognisance the social embedded nature of business aim to attain stakeholder alignment. Corporate speak is also in tandem with corporate actions as these two positions feed into corporate strategy and ensure improved quality of life for the community. This ultimately leads to supply chains with a greater chance of success than those riddled with unsatisfied stakeholders with enough interest and power to hinder the long sustainability of business operations. My position is not to lay a claim to re-inventing the wheel on stakeholder engagement but to cause a re-think of corporate strategy and a renewed commitment to a “structured approach” to achieving stakeholder alignment through corporate actions and outcomes pursued. In order to do this we have to analyse the concept of stakeholder a little more closely.

The concept of Stakeholder:

The concept of stakeholder deals with two powerful questions which every business operation must consider:  “who has the power to influence” and “who is interested” in your activities?”

David Needle (2009) will tell you that every business has an environmental context. But the power-interest matrix by Gardner et al actually alerts us to the fact that not only do our businesses have the internal/ external contexts but there are actors (called stakeholders) who have some certain levels of interest in our business activities and some who have the power to influence those activities. The power-interest matrix allows us to understand how to treat the various stakeholders by classifying them according to their different combinations of power and interest. The stakeholders with low power and low interest require minimal effort by a business; this outlook allows the company to apportion its resources such that waste is not created in trying to engage certain stakeholders who do not require as much resources as those with more power or interest. The Stakeholders with low power and high interest must be kept informed about the operations of a business. Processes and outcomes of the business matter to this set of stakeholders even though they may not have high levels of power to influence the company’s operations.

The stakeholders with high power and low interest must be kept satisfied otherwise they become a problem while the high power- high interest stakeholders should be treated as key players and involved in outcomes and processes of the business. Some might ask: how practical is this? Look at the supply chain - Why is Nigeria’s oil and gas supply chain riddled with so much anomaly? I reckon that most companies that have contributed to this situation have adopted the position that a structured approach to stakeholder alignment is unrealistic and impractical. How do you factor-in “forced payments” to rogues in government agencies, the Navy, Armed forces, rogue-leaders and members in the host communities and deal with daily security and infrastructure challenges? How do you balance your yearly budgetary constraints with the need to achieve “alignment”. Let us face the facts; businesses in Norway have achieved socially embedded outcomes that have improved the general quality of life in their host communities through a consistent commitment to structured processes and strong levels of stakeholder alignment relative to those in Nigeria. This is not to say that the commitment to profit-making by businesses is any less important; but sustainable profits are obtained on the back of a thorough sense of responsibility to all stakeholders involved. But first a business must dimension its stakeholder space appropriately; this process is known as stakeholder mapping.

The model above represents an adaptation of the power-interest matrix and a needs assessment of sorts. What this entails is the careful listing of as many significant stakeholders as can be determined by a business. The next step is a careful detailing of the requirements of the stakeholders and the contributions expected of the stakeholders. This gives off a notion of give and take- establishing a form of relationship between the parties. For example, if a Host Community is a beneficiary of a local community content programme or a party to a GMOU (global memorandum of understanding) with an oil company, there is some level of give and take from both parties. I think that two most significant lessons we can learn from this model are:

(1)  Stakeholder engagement goes beyond the “Oil Company – Host Community” relationship

(2)  Stakeholder engagement can be understood, measured and accountability can be apportioned

Many corporate teams assume that stakeholder engagement begins and ends with the host communities; but what about the government agencies, regulators, trade associations et al? Is there an integrated strategy with a holistic, proactive approach to the subject or do we find ourselves in the administrative or reactive side of the decision-making isles? Yes, it is possible to engage the government and regulators in order to achieve real stakeholder alignment. Certain corporate unofficial, off-the-record actions may postpone a disruption to supply chain but they will not give a lasting solution. Once we are able to measure the level of stakeholder engagement of a business we can then determine what the current level of corporate social responsibility is.

  

The ultimate objective of stakeholder engagement is stakeholder alignment. Stakeholder alignment is a situation in which the quality of life as a result of business activities is greatly enhanced; stakeholder alignment allows for a win-win situation, advantageous compromise, competitive advantage, business sustainability, supply chain sustainability and much more. In today’s Nigeria, local content is embedded as one of the pluralistic, socially embedded outcomes which every oil and gas corporate must strive to promote and this goes down the whole value chain. More importantly the supply chain must attain a level of sustainability with this new perspective. As such many corporates have resorted to the “speak” about corporate social responsibility while the results portray profit-seeking “actions”.  Carrol’s (1996) pyramid of corporate social responsibility gives us a good opportunity to dimension the different classes of responsibility. In spite of corporate speak about improving the lives of the community (and by community we mean all stakeholders) we find that some companies portray only economic responsibilities; all they care about is the “bottomline”, profits and nothing else matters; these are level one companies. Other companies want to play by the rules of the game and obey the law; they keep to their legal responsibilities and also treat stakeholder engagement within the framework of trying to meet the barest legal requirement. 

Do we find companies struggling to meet the “requirements” of the Nigerian Content Monitoring & Development (NCDMB) as a legal requirement? Perhaps yes. These are the level two companies. Do we have companies that meet these requirements as a result of a deep-seated corporate system? Perhaps yes. The third set of companies are those that believe in the principle of avoiding harm; doing just enough to be right and fair within the context of the country where they operate. They may not improve the quality of life of their stakeholders as long as they are able to meet the ethical responsibilities benchmark; these are the level three companies.  The level four companies are in the most favourable position. These companies are able to meet their philanthropic responsibilities not just in terms of speak but action as well; these companies are able to improve the quality of life of the community and offer substantial resources. This would mean that a level four company is able to reach out to all its stakeholders and offer tangible value for their partnership. This way supply chains have the highest chance of sustainability due to the attainment of stakeholder alignment.

NUTSHELL:

In the final analysis, for a company to achieve practical Nigerian content and supply chain sustainability, it must attain stakeholder alignment by initially separating its corporate speak from its corporate actions, then such a company must dimension its actions via outcomes pursued, processes embarked upon in order to determine its current strategic imperatives in the drive for practical local content; the next step is for the company to appropriately map out its stakeholder space with a view to understanding, measuring and determining accountability. Once this is done, a process of feedbacks kicks-in allowing for continuous benchmarking of the corporate actions and outcomes against the four levels of corporate social responsibility. Attainment of level 4 is the precursor to stakeholder alignment and without stakeholder alignment practical content and supply chain sustainability may always be nothing more than wishful thinking.