Difficulties in Responsible Stakeholder Management
“The biggest corporation, like the humblest citizen, must be held to strict compliance with the will of the people.”
–Theodore Roosevelt
Save your time - order a paper!
Get your paper written from scratch within the tight deadline. Our service is a reliable solution to all your troubles. Place an order on any task and we will take care of it. You won’t have to worry about the quality and deadlines
Order Paper Now
“A business that makes nothing but money is a poor kind of business.”
Henry Ford, founder of Ford Motor Company
Managing and Prioritizing Stakeholders
Organizational Issues
All organizations are faced with challenges or issues.
An issue is any event, trend, controversy, or public policy development that might affect the corporation.
An issue can also be understood as a gap between stakeholder expectations and the actual performance of a business.
Some important contemporary issues: domestic partner benefits, environmental performance, genetically modified food, affirmative action….the list can go on and on.
Stakeholders
Stakeholder theory argues that organizations need to identify and resolve issues in light of all their various stakeholders.
Stakeholder: Any group that has a vested interest in the operations of the firm
Include: employees, suppliers, stockholders, customers, the government, local communities, and society as a whole
Why Partner with Stakeholders?
Instrumental Perspective (“Do it because it will pay off in the end”)
Enhanced ability to predict/control the external environment .
Higher percentage of successful new product/service introductions Higher levels of operating efficiency .
Fewer incidents of damaging moves by stakeholders (i.e., boycotts, strikes, bad press).
Less conflict with stakeholders resulting in fewer legal suits.
More favorable legislation/regulation .
More reasonable contracts .
Higher entry barriers leading to more favorable competitive environment Higher levels of trust.
Higher levels of profitability?
Greater organizational flexibility.
Normative Perspective (“Do it because it is the right thing to do”)
Moral and philosophical basis for recognition of stakeholder interests.
Moral Manager
Defines a managers response to stakeholders – three approaches.
Immoral
Not only does not care how his/her decisions impact the stakeholders, but the actions are actively counter to what is the right and ethical thing to do.
Focus only on the goals of the of the company.
Considers laws as constants or barriers that are ignored in the company.
Amoral
Manager who is considered ethically neutral.
Ethical considerations are not contemplated in the decision making process.
Moral
Those managers who understand the relevance of considering ethical issues when they are making decisions.
What moral responsibilities – economic, legal, ethical, and philanthropic – does our firm have to its stakeholders?
Philanthropic Responsibilities Be a good corporate citizen.
Ethical Responsibilities Be ethical.
Legal Responsibilities Obey the law.
Economic Responsibilities Be profitable.
Copyright 2001 Harcourt, Inc.
Performing a Stakeholder Analysis:
1. Map your stakeholder relationships.
2. Assess the nature of each stakeholder’s interest.
supporter/opportunity, opposition/threat, uncommitted?
3. Assess the nature of each stakeholder’s power.
voting, political, economic?
4. Assess the nature of each stakeholder’s moral responsibility.
economic, legal, ethical, discretionary?
5. Create a diagnostic typology of your stakeholders.
6. Develop specific strategies and actions.
Issue Management
Step 1: Identify stakeholder issues.
Step 2: Analyze and prioritize the issues.
Step 3: Plan response to the issue.
Step 4: Evaluate and monitor results.
What strategies or actions should our firm take to best manage stakeholder challenges and opportunities?
Should we deal directly or indirectly with stakeholders?
Should we collaborate, involve, defend, or monitor?
Should we employ a combination of the above strategies or pursue a singular course of action?
Identifying Stakeholder Accountability
Power: the extent to which the organization can influence or impose its will on the stakeholder group.
Legitimacy: the assumption that the actions of the corporation are desirable, proper or appropriate within the limits of the corporation.
Urgency: the degree to which the issues raised by the stakeholder must be dealt with in a time sensitive manner.
Stakeholder Impact on Organization
Stakeholders establish expectations (explicit or implicit) about corporate performance.
Stakeholders experience the effects of corporate behaviors.
Stakeholders evaluate the effects of corporate behaviors on their interests or reconcile the effects of those behaviors with their expectations.
Stakeholders act upon their interests, expectations, experiences, and evaluations.
Strategic Response to Social Issues
Varies from firm to firm.
Constant debate about who the corporation should be responsible to and what the corporation is responsible for.
Challenge is determining what extent of responsibility should be to each of stakeholder groups.
Feelings of trust and confidence must be established with stakeholder groups.
Ten Commandments of Socially Responsible Stakeholder Management
Thou shalt be proactive in taking action to correct problems before they impact the company.
Thou shalt seek input from all impacted stakeholders in any problem that needs to be addressed.
Thou shalt use industry standards as a benchmark and voluntarily internally regulate our corporate behavior.
Thou shalt admit to the public when mistakes have taken place.
Thou shalt be active in supporting community social programs.
Ten Commandments of Socially Responsible Stakeholder Management (con’t)
Thou shalt be active in ensuring environmental sustainability in the actions of the company.
Thou shalt be aware of any changes that occur in the corporate social environment.
Thou shalt establish and maintain a formal corporate code of conduct.
Thou shalt be committed to publicly supporting social causes.
Thou shalt be profitable to financially support the company’s social responsibility agenda.
Copyright 2009. Pearson Education, Inc.
Potential Benefits of Stakeholder Management
Better risk and crisis management.
Good relations with stakeholders and interested communities.
Increased worker commitment.
Increased productivity.
Reduced operating costs.
Enhanced brand value and reputation.
Long term sustainability for the company and society.
Difficulties in Responsible Stakeholder Management…
How to monetize/quantify socially responsible issues?
Does responsible stakeholder management mean
sacrificing profits?
How do you know if you’re doing enough?
How do you prioritize among your stakeholders?
Do you include all potential stakeholders in your analysis? (all primary stakeholders? all secondary stakeholders?)
Some Pitfalls of Socially Responsible Stakeholder Management…
Where do you draw the line?
Media will watch you for signs of hypocrisy.
Employee expectations can be hard to meet.
Employees hold different ideals and values.
The “nice guy” image is tough to maintain.
Pay off can take a long time.
Lessons to be Learned from Stakeholder Theory
Corporations are facing increasing pressures to respond to their stakeholders.
Corporations have a legal basis for responding to a wide range of stakeholders.
Some corporations are being led by executives no longer guided by the principles of their professions.
Corporations respond to powerful stakeholders with legitimate, urgent claims.
Corporations can improve the bottom line by responding to stakeholder concerns.
Conclusion
Stakeholder management has its weaknesses, but, given the power and influence of contemporary corporations combined with the increasingly complex needs of 21st century society, it is clear that a fundamental ascription to the profit motive is too limited and short-sighted. The stakeholder theory holds significant potential for reducing the ecological and social impacts of business.
