The 4th Stakeholder Framework

Article 16

A 4th Stakeholder prioritization metric matrix

3-4 minute read

CAPSULE SUMMARY – The correct prioritization matrix for 4th Stakeholder efforts needs to take the form of a matrix, not a metric. And it needs to capture two critical dimensions: Impact and Responsibility. Although Feasibility often drives broader business prioritization, we cannot apply it to our 4th Stakeholder responsibilities.

16.1 So how does a business define where it will spend its finite energy relative to social impact if financial ROI can’t be used as the prioritization metric? To answer this question, let’s start by looking at the problem of business prioritization more broadly.

16.2 Over my career I have seen a hundred different attempts at creating prioritization frameworks to more effectively marshal and hone a team’s finite energy. Some of them stack-rank options based on the metric the business is trying to solve for (e.g. “Let’s list all of the tactics by their financial ROI and tackle the biggest first”). Others add more elements to capture the additional complexity that invariably wraps all planning (What resources does the company have available? What are the timing considerations? How does this project conflict with other projects?).

16.3 Unfortunately most prioritization approaches tend to grow into overly-complex, unwieldy spreadsheets filled with layers of assumptions and false precision. If you find yourself staring at a prioritization spreadsheet that includes a hundred possible items and countless columns, you have fallen into that trap.
 

16.4 The most useful prioritization model I have used (and have applied effectively for the last 15 years) is a simple Impact X Feasibility Matrix—one grid that forces you to map the overall impact of the projects you are considering against the feasibility that you can actually do the work. You then simply attack highest impact, highest feasibility items first and work down the matrix. You can read about this approach in full detail here and I have included a simple example below of how this looks in practice.

16.5 Although it’s tempting to apply an Impact X Feasibility matrix to 4th stakeholder prioritization, this is not the correct model for a critical reason: including feasibility as a filter for 4th stakeholder prioritization shifts the hardest-to-solve issues off the table. With all other stakeholders, you have the luxury of offsetting ‘difficult’ tactics with easier-to-implement alternatives. So for instance, if you are considering a project that you believe will improve employee engagement in your company but it falls in the ‘low feasibility’ quadrant, you can punt that tactic and instead lift employee engagement through other, more feasible means.

16.6 However, if you’re causing human fatalities (we’ll take an extreme social harm example) you can’t punt that away with the excuse of: “Ah, we actually can’t tackle that one because it’s too hard to solve, and we don’t think we’re completely responsible for it (second-order impact). But we’ll do a bunch of positive social things over here in this other area”.

16.7 In order to truly optimize social impact, we can’t use a singular metric (Article 14) and we can’t use a shareholder metric in disguise (Article 15). A company, just like a good citizen, needs to ‘own up’ to its full suite of behaviors, both where it is wholly responsible (1st order impacts) and where it’s only partially contributing (2nd order impacts).

16.8 So how do we get all of this complexity into a single prioritization frame? Although it sounds complex, it turns out to be quite simple and intuitive. The best way to prioritize the biggest swings is to use a prioritization matrix based upon Impact X Responsibility.

• Impact is simply a ranking of the overall social impact of the benefit you’re delivering or the harm you’re eliminating. Impact stems from a combination of scale (are we talking about affecting a million people, a thousand, five?) and the intensity of the benefit or harm (are we talking about saving lives or making people slightly happier?)

  
  

• Responsibility captures the critical dimension of first order vs. second-order impacts. It’s a scale that goes from low contribution (your behavior only contributes a tiny bit to the impact) to 100% (your behaviors completely cause the impact).

16.9 By mapping all possible 4th-stakeholder actions your business can take onto this simple matrix, you will avoid all of the pitfalls we’ve discussed. You will be looking at both sides of the impact coin (both doing good and reducing harm), you will have created a complete map of all 1st and 2nd order dynamics, and you will not be artificially eliminating hard-to-achieve or expensive-to-solve problems.

16.10 In the next article we’ll walk through very specific examples of what an Impact X Responsibility matrix looks like when you deploy it operationally. Because if it’s not patently clear, the ‘big swings’ that your company needs to take will show up clearly on this matrix--maybe for the first time if you use it correctly.

*Special thanks to Rob Rhee and Tom Luu for introducing me to this elegant yet powerful prioritization matrix.