The Best Directors Are Recognized by Successful Relationships with Stakeholders

Written by: Tomislav Brezinščak, McKinsey

Entrepreneurial life often resembles juggling multiple balls at once. It simultaneously determines the direction of the company, guides the board of directors, aligns the company, conveys values to the top executive leadership team and, with their help, to all other employees, manages time and energy to be as effective as possible, and constantly builds and maintains relationships with relevant stakeholders.

It is precisely this last aspect that distinguishes the best directors from the rest, as the true job of a director is not only to lead the company but also to constantly balance the needs of shareholders, team members, employees, customers, and governments. Our research has shown that many experienced leaders acknowledge how important yet demanding this task is.

One study revealed that 58 percent of directors consider relationships with external stakeholders to be one of their priorities, but only 12 percent believe they are successful in collaborating with governments, regulators, and the broader community. These relationships, however, critically impact business results—almost a third of corporate profits depend on how the company positions itself with regulators.

Our research titled ‘The State of Companies in 2023: Ten Changes Reshaping Business Organizations’ showed that the situation within companies is not better—only 25 percent of employees stated that their leaders inspire them.

EDGE Approach

The experience of McKinsey consultants with global business and public leaders shows that successful stakeholder relationships have four characteristics, summarized in an approach we call EDGE. This involves an expanded (expanded) role of the director as a bridge to the outside world, a distinctive (distinctive) narrative in which they become the company’s chief storyteller, a growth-oriented (growth-oriented) leadership style that creates a network of ambassadors both within and outside the company, and an engaged (engaged) approach that nurtures relationships with stakeholders in both stable and crisis times, as in stable times these relationships create value, while in crises they save companies.

Comparing the director to a bridge between the internal and external worlds means that as a director, you are no longer just the company’s leader but also a public figure whose words are weighed and scrutinized. You are expected to have opinions on all topics, from geopolitics to social issues, while shaping and maintaining a consistent narrative. Our research titled ‘Deciding to Grow: A Blueprint for Leaders’ shows that 80 percent of growth-oriented leaders are more likely to consistently present successes, both within the organization and externally.

Also, do not shy away from repeating your messages, but tailor them to different audiences. Regarding the growth-oriented leadership style, our research concluded that companies that frequently successfully influence relevant public discussions and build their brand reputations are almost five times more likely to systematically train their managers to collaborate with external stakeholders.

Questions to Consider

Today, directors communicate with more stakeholders than ever before, but with demanding schedules and constant decision-making pressure. The most successful among them have learned one thing: it is not about talking to everyone, but connecting with those who truly matter. Excellent directors always ask themselves: Why are we important to each of our stakeholders? Why are certain topics important to them? Understanding the motives of other parties is not just a matter of empathy but also a strategic advantage. Where interests meet, trust is born, and that is the currency of modern leadership.