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Managing stakeholder relationships

by Corinne Colbert

December 2005

Ask some incubator managers about their program’s stakeholders, and they’ll tell you that their funders, partners and communities are supportive and helpful. They’ll proudly list their stakeholders and talk about the many ways they work together to make the incubation program efficient and effective.

But ask around enough, and you’ll hear some grumbling. These are the stories that begin, “Please don’t tell anyone I told you this.” Some are personal experiences; others are secondhand accounts of notorious stakeholder issues. Some are just plain nightmares.

Like the manager who was expected to work for free when his program lost funding (he quit). Or the university incubator manager whose carefully built rainy-day fund was appropriated by a dean for a different department. And the successful programs shut down by politicians who either didn’t understand business incubation or preferred to spend economic development dollars chasing smokestacks.

Of course, those are worst-case scenarios; most stakeholder issues are more mundane, and good relationships far outnumber the bad. Still, maintaining relationships with your stakeholders takes work even in the best circumstances.

“They have invested time or money and expect a return,” says Marie Longserre, president and CEO of the Santa Fe (N.M.) Business Incubator. Demonstrating their return on investment requires reporting – either formally or informally – about the incubator’s progress and impact. Some stakeholders may want to become closely involved with the program as advisors or mentors, which means supervision. And maintaining their interest and support may take not only reports, but even active pursuit on your part.

All of that adds up in time and resources – time and resources you’re not spending with clients.

“Sometimes it’s overwhelming and I feel like I should be spending more time with the clients,” says Debbie King, director of the business incubator at the Andrew M. Scibelli Enterprise Center in Springfield, Mass. “Other times I am fully aware of the value of the [stakeholder] relationships.”

It’s the value of those relationships that makes the effort worthwhile, says Bill Chaudoir, executive director of the Door County Business Development Center in Sturgeon Bay, Wis. “We couldn’t operate without the financial and technical assistance our stakeholders provide us,” he says. “They’re an invaluable part of our program.”

Remember, your stakeholders aren’t just the people who give you money. Stakeholders are anybody (other than staff) who has a vested interest in the success of an incubation program. By this definition, your stakeholders might include sponsors, service providers, board members, successful entrepreneurs, community leaders, and even the public at large that benefits from a strong local economy.

Although stakeholders’ interests vary widely, there are several common issues in managing your relationships with them. Read on to learn about them – and maybe pick up some tips for making your stakeholder relationships all they can be.

Challenge: Keeping them informed

Perhaps the biggest challenge in dealing with stakeholders is simply reporting to them. Managers interviewed for this story reported spending as much as 30 percent of their working hours on stakeholder relations.

“As in any nonprofit, our resources and time are limited, and we have a lot of needs to satisfy,” says Longserre. “Many times those needs can all come at once.”

To make the most of stakeholder communications, savvy managers employ a bevy of time-management techniques. Members of your board of directors or advisors can be especially helpful. Giles McDaniel, executive director of the Northeast Alabama Entrepreneurial System in Anniston, Ala., will dispatch members of his board to visit stakeholders with whom they have a good relationship. “Especially if funding is concerned,” he says. “Their influence can be greater than mine.”

Likewise, King has been known to call on board members to handle some tasks. For example, when a member of her board of advisors wanted feedback from clients about the incubator’s performance, King asked another board member with experience in surveys to prepare and implement a client satisfaction survey. “Delegating and sometimes saying, ‘No,’ are crucial to getting the work done,” she says.

Your staff can make a difference, too, says Joel Wiggins, president and CEO of the Enterprise Center of Johnson County in Lenexa, Kan. “Make sure every communication with your stakeholders from everyone in your organization is a quality interaction,” he says. “If you can trust others in your organization to handle stakeholder interactions well, you can reduce the number of interactions you must have with them.”

How you communicate can be a factor as well. Wiggins suggests learning different stakeholders’ contact preferences – e-mail, phone, in person – and communicating with them in their preferred medium. That way, you don’t waste an e-mail on someone who doesn’t read it or try calling someone who hates to use the phone.

Not every contact has to be a formal meeting, either. McDaniel says he does his best stakeholder contact informally and in person. “It keeps the skids moving along,” McDaniel says. “They don’t want to just see you when you need something.”

No matter how you get in touch, though, you can have the most impact by concentrating your efforts on the most influential stakeholders. Wiggins uses the Pareto Principle, also known as the 80/20 Rule. The principle originally meant that 20 percent of the population owned 80 percent of the wealth. But it can be applied to stakeholders as well, Wiggins says. For example, “80 percent of the value [of stakeholder support] comes from 20 percent of the stakeholders,” he says. “Figure out which ones those are and spend time with them.”

Case study: Great expectations

Until last spring, Wiggins was director of the Austin Technology Incubator, a program of the IC2 Institute at The University of Texas at Austin. He loved the job. “It was a great place with great people,” Wiggins says.

The incubator had “a rich history,” Wiggins says – a history that sometimes could seem as much a burden as a blessing. “I had a lot to live up to,” he says. “You don’t want to be the one who let things go downhill.”

So when the IC2 board (which also served as the incubator’s board) began to expand the incubator’s mission beyond helping tech start-ups, Wiggins was game. The incubator picked up a series of contracts for incubator training and development, several of them international in scope. Wiggins enjoyed the new responsibilities, but still had the old ones to deal with, too.

“I was being pulled in a lot of directions – all of them good – but I wasn’t able to fully commit to any of them,” he says. “I was doing a lot outside [the incubator], but still responsible to do a lot of stuff inside. I got a little bit unfocused.”

He asked for guidance in priorities, but admits that it can be hard for any incubator manager to appear unable to handle multiple responsibilities. “You don’t want to look like you can’t figure your way out of a paper bag,” he says. “And you don’t want to whine.”

But Wiggins says he didn’t feel taken advantage of. “I enjoyed doing all those things, and there weren’t other people to do them,” he says. “The last thing I wanted was to stand in the way.”

So he finally decided to simply step aside. In June, he became president and CEO of the Enterprise Center of Johnson County in Lenexa, Kan., where he can concentrate more on assisting start-ups.

The problem in Austin, Wiggins says, wasn’t that stakeholders’ expectations weren’t clear; there were just too many of them. The solution is to have a frank, private conversation about priorities with a single chief stakeholder, such as the chair of the board of directors. Then you can decide to either suck it up – or move on.

Challenge: Maintaining interest

Incubation is not a quick economic fix, and you need to make sure your stakeholders understand that lest they forget about you. “They need to understand that incubation isn’t a cure-all; it’s a part of the overall economic development picture,” McDaniel says.

Demonstrating incubation’s value can be especially difficult in states where manufacturing still reigns. Alabama is a growing center for the automotive industry; by 2008, the state will produce a quarter-million cars a year, says McDaniel. Each new plant brings lots of media attention as government officials announce the new factory and the thousands of jobs it brings.

“That’s huge, to say you have 3,000 jobs coming in,” McDaniel says. “Then you look at us, and we’re going to produce maybe 300 jobs in five years.”

If stakeholders know from the beginning that they need to be patient, they’re more likely to give your program time to show an impact.

Keep stakeholders’ interest piqued with progress reports, annual reports and other economic impact data. “You have to keep them informed and show positive outcomes,” McDaniel says. For example, he issues press releases whenever a client graduates, and makes sure that copies go to politicians in the area where the graduate sets up shop.

To compete with the big numbers put up by factories, add up your successes over time. “When you aggregate the numbers over five years and show the impact, that gets their attention,” McDaniel says. “I can show a $100 million impact in the seven years we’ve been in operation.” (To see how he does that, visit the incubator’s Web site at www.neaes.org/economicimpact.html.)

By continually communicating and demonstrating your program’s effectiveness, you can hold stakeholders’ interest. “We’ve built a reputation for being very successful, so our stakeholders like to be associated with us,” Longserre says.

Case study: A change of heart

The only thing more disheartening than losing a stakeholder who loves your program is gaining a stakeholder who’s lukewarm (or worse) about incubation. Wendy Baumann, now president of the Wisconsin Women’s Business Initiative Corp. in Milwaukee, experienced both in a former job as director of the Milwaukee Enterprise Center, which was operated by Milwaukee Area Technical College.

Previously, Baumann had been executive director of the city’s Hispanic Chamber of Commerce, which partnered with the college to open a second MEC incubator in a building the chamber owned on Milwaukee’s south side. The deal was brokered by the college’s dean at the time, who had been instrumental in starting and supporting the incubation programs.

“He had a very pivotal role” in balancing the agendas of the college and the chamber, Baumann says. “He knew how to leverage wealth and expertise.”

But that dean moved to another state. Without an incubation champion in command, the college let the incubation programs slide as a funding priority. As a result, what had been incubators with robust service offerings became “real-estate, incubator-ish programs,” Baumann says.

“It appeared that the college was looking more at dollars and cents and questioning if funds were really needed for business assistance,” she says of the college.

Baumann’s story underscores the importance of not putting all of your eggs in one basket. One champion at a university, among city government or within the local business community is simply not enough.

Challenge: Handling complaints

Some organizations and individuals may perceive an incubator as a threat – a source of new competition either for customers, workers or real estate. When facing complaints, emphasizing cooperation can pay off.

“Our principal challenge is that in our tight labor market, there’s the perception [among existing businesses] that by helping new businesses get started, we’re causing competition for the workforce,” says Chaudoir.

Chaudoir counters those perceptions by pointing out that incubated businesses don’t usually require huge labor pools. “Our businesses are growing gradually,” he says. “We’re not introducing a new company that needs 100 people right now.”

Likewise, Longserre defused complaints from a Santa Fe real estate developer who objected to the incubator’s government backing on the grounds that the incubator was keeping businesses from renting his spaces. “I took the view that we would ultimately help him lease his commercial real estate,” Longserre says. She met with him to explain incubation, invited him to incubator events, and otherwise engaged the developer in the program. “He hasn’t complained since,” she says.

Case study: Stakeholder turned competitor

Back in 1997, the Lennox Enterprise Center became the first resident of the Rochester Institute of Technology’s Business and Technology Park in New York. That made sense, given that RIT was one of three founders (with the Rochester Business Alliance and the University of Rochester) of High Tech Rochester, the economic development initiative that launched the incubator.

Things got a little sticky four years later, though, when RIT withdrew from the HTR partnership and opened its own incubator. “It was the single biggest challenge we ran into,” says HTR President Paul Wetenhall.

Part of the challenge is financial. While RIT had contributed only about 1 percent of HTR’s overall budget, its incubator became instant competition for clients. “With 15,000 students, RIT is the largest academic institution in the region and, of course, many local business people are alumni,” says Wetenhall.

Another challenge stemmed from names. HTR’s incubator remains in RIT’s research park, only a mile and a half from RIT (it’s six miles from the University of Rochester, which remains a primary sponsor). And initially, RIT’s incubator was called the RIT High Technology Incubator – pretty close to High Tech Rochester.

“It created confusion in the community,” Wetenhall says.

But through communication and cooperation, the two programs are finding that they can actually support each other by defining their own respective niche markets. “RIT works with students and highly experimental, small-scale businesses that would not be admitted to HTR’s incubator,” says Wetenhall.

For example, RIT is focusing on entrepreneurial opportunities for students and in developing “orphan technologies” – viable innovations from university research that hasn’t been licensed. “Many of these companies, in their initial phase of development, might not be good candidates for a community incubator,” says Mick Stadler, incubator director at RIT. “We see the Lennox incubator as a partner, not a competitor.” In fact, he says, RIT views Lennox as a good home for its graduate companies and as the home for most start-ups formed as a result of the orphan technologies program.

Wetenhall agrees that with its extensive set of business assistance programs and staff, HTR’s Lennox incubator could be an ideal landing place for companies that RIT gets off the ground. To further differentiate itself in the market, HTR has developed an acceleration program with services targeted at more mature companies with around $1 million in revenues that want to grow to $5 million in revenues. “The intent is to help accelerate their growth and to expand our target market,” Wetenhall says.

And the name problem? Not a problem anymore: RIT’s incubator is now RIT Venture Creation.

Challenge: Letting them get involved

Another way to keep the balance is to get stakeholders involved, King says. Because her incubator is sponsored by Springfield Technical Community College, her stakeholders include a bevy of college personnel, as well as organizations such as SCORE and the U.S. Small Business Administration, which maintain offices in the facility.

King sometimes calls on her stakeholders to provide support services to her clients – within reason, of course. “They don’t participate in day-to-day operations,” she says. “That’s our job.”

Instead, she gives stakeholders very specific tasks, such as providing seminars in an area of their expertise or guiding clients on targeted topics. She warns, though, that stakeholders who interact with clients must be chosen carefully. “Working with [clients] can be difficult at times and young entrepreneurs aren’t always ready to hear what they really need to hear,” she says. “It’s important to deliver the message in a way that will not be offensive or critical. Choosing stakeholders who understand this is something that we are very conscious about.”

King starts with a formal advisory board member selection process, which helps her choose advisors who represent a broad range of stakeholders and whose personalities are suited to the task of guiding the incubator and its clients. That allows her to offer her clients valuable assistance – and give her stakeholders an up-close look at the incubator’s operation. For example, one of her advisory board members is the associate dean of the School of Law and Business at Western New England College, one of the incubator’s partners. He supervises law students and MBA candidates who advise incubator clients on topics such as employee benefits, partnership agreements and intellectual property protection.

“His students get real-life clinical experience and my [clients] get free legal and business consulting services,” she says. “We can do together what we could never accomplish alone.”

And that, ultimately, is the hallmark of good stakeholder relationships. “The stakeholders have the same goals we do,” Longserre says. “We’re all trying to accomplish the same thing, and that makes the job a little easier.”

Top tips for managing stakeholder relations

Set the rules early. It’s helpful if everyone is on the same page from the incubator’s start. “The incubator’s founding team must ensure that the feasibility study, launch plan and operating plan define appropriate expectations for stakeholders,” says Mark Rice, Murata Dean of the F.W. Olin Graduate School of Business at Babson College in Wellesley, Mass., and former director of the Rensselaer Polytechnic Institute’s incubator.

Choose wisely. It’s better to have a small pool of committed supporters than a big group of half-hearted ones. “Everybody talks about partnership, but who really are your partners?” says Wendy Baumann, president of the Wisconsin Women’s Business Initiative Corp. in Milwaukee. “At the end of the day, your true partners are the ones who are able to put the goal of the project in the middle of the table and make a decision that’s best for the whole group.”

Communicate. From printed reports to one-on-one meetings, let stakeholders know what’s going on. “If you’re not keeping in touch with the people who support you, you can find yourself in a very lonely boat,” says Marie Longserre, executive director of the Santa Fe (N.M.) Business Incubator. To maximize your resources, include key stakeholders on the mailing list for press releases and set up an e-mail group of VIPs you need to reach regularly.

Show them you care. Make sure you’re supporting those who support you and your clients. “I’m quite active in the community,” says Bill Chaudoir, executive director of the Door County Business Development Center in Sturgeon Bay, Wis., who sits on the boards of the local bank, chamber of commerce, and convention and visitors bureau. Such public participation speaks volumes about your commitment to your community. “It’s like building a brand,” says Giles McDaniel, executive director of the Northeast Alabama Entrepreneurial System in Anniston, Ala. “You want to build a reputation for the incubator in the community that will go farther than any report.”

Resources for educating stakeholders

University presidents and deans move on. Elections yield a fresh crop of mayors, city councilors and county commissioners. A new corporation comes to town. One way or another, eventually you have a change in stakeholders who need to learn what business incubation is and what it can – and can’t – do. Luckily, NBIA offers resources to help you educate your stakeholders.

The NBIA Web site has a host of information about incubation, including an explanation of business incubation; tips for developers and entrepreneurs; principles and best practices; and incubation success stories.

The Web site also includes a list of Frequently Asked Questions, which inspired a new PowerPoint presentation now available from NBIA. The presentation gives basic information about the incubation concept and the industry, illustrated with examples of working incubators and notable graduates. Any NBIA member can request a copy by calling (740) 593-4331.

Arm yourself with more incubation facts from these publications available from the NBIA Bookstore:

  • In A Brief History of Business Incubation in the United States, NBIA President & CEO Dinah Adkins recounts the development of the incubation industry from her own 20-plus years in the field. Buyers of multiple copies enjoy a 25 percent discount per book and reduced shipping charges.
  • Business Incubation Works provides the only available industry-wide data on the effectiveness of incubation, demonstrating the value and impact of incubation on communities’ economic development.
  • If you need to show how your program compares with others, consult the 2002 State of the Business Incubation Industry, the most recent of NBIA’s periodic reports on industry practices. Through statistics and anecdotal information, the report provides a snapshot of the industry as a whole and by criteria such as program type, start-up date, square footage, services offered, and more.

Keywords: professional development -- general, advocacy, effective communication, marketing and promotion, partnerships -- organizational/corporate, sponsor, stakeholder development, stakeholder relationship management

Contact NBIA

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