STAKEHOLDER MANAGEMENT APPROACH

DEFINITION

Stakeholder Approach: provides a framework that enables users to map, and ideally, manage the corporations relationships (present and potential) with groups to reach win-win collaborative outcomes. Here, win-win means making moral decisions that benefit everyone in terms of justice, fairness & economic interests.

STAKEHOLDERS

A stakeholder is any individual or group who can affect or is affected by the actions, decisions, policies, practices or goals of the organization. Focal stakeholder is the company or group that is the center and focus of our analysis. Primary stakeholders include the owners, customers, employees and suppliers of a firm. Secondary stakeholders include other interested groups like the media, consumers, courts, govt., competitors, public & society.

STAKE

Stake is any interest, share or claim that a group or individual has in the outcome of a corporations policies, procedures, or actions towards others. Stakes can be present, past or future oriented.

STAKEHOLDER ANALYSIS

Mapping stakeholder relationships Mapping stakeholder coalitions Assessing the nature of each stakeholders interest Assessing the nature of each stakeholders power Constructing a matrix of stakeholder moral responsibilities Developing specific strategies and tactics Monitoring shifting coalitions

MAPPING STAKEHOLDER RELATIONSHIPS

OWNERS POLITICAL GROUPS ACTIVIST GROUPS

GOVT. FIRM

CUSTOMERS

SUPPLIERS

UNIONS

COMPETITORS

EMPLOYEES

CUSTOMERS/CONSUMERS

Safe products Reliable service Honest information Fair treatment Protection from product/service harm

SUPPLIERS & DISTRIBUTORS

Fairness Truthfulness in transactions & contracts Mutual respect Honest information sharing Timely payment

COMPETITORS

Promote open markets Follow laws and rights Act ethically in all business transactions

ENVIRONMENT

Protect and respect environment Improve and sustain nature Prevent waste

COMMUNITIES/SOCIETY

Respect laws, rights Respect values and culture Support and promote economic, social, health and human development Be a good corporate citizen

GOVERNMENT

Law abiding Follow fair standards and procedures Promote societal and community safety and health

Determine and map any coalitions that have formed between stakeholders. Coalitions generally form around issues & stakes they have in common (Eg. Competitors may join forces if they see an advantage in numbers).

MAPPING STAKEHOLDER COALITIONS

ASSESSING NATURE OF EACH STAKEHOLDERS INTEREST

Identify the supporters (active & non-active, or uncommitted), and the active opposition.

ASSESSING NATURE OF EACH STAKEHOLDERS POWER

Whats in it for each stakeholder? Who stands to win, lose? Power stakeholders can be those with

Voting power Political power Economic power

IDENTIFYING STAKEHOLDER ETHICS & MORAL RESPONSIBILITIES

Determine the ethics, responsibilities and moral obligations your company has to each stakeholder (eg. Owners, customers, employees, public etc.)

Legal Economic Ethical Voluntary

DEVELOPING SPECIFIC STRATEGIES & TACTICS

Consider whether to approach each stakeholder directly or indirectly. Decide whether to do nothing, monitor or take an offensive or defensive position with certain stakeholders. Determine whether to accommodate, negotiate, manipulate, resist, avoid, or wait and see with specific stakeholders. Decide what combination of strategies to employ with each stakeholder.

DEVELOPING SPECIFIC STRATEGIES & TACTICS

TYPE 1 Supportive Stakeholders (Low potential for threat and high potential for cooperation) Eg. Employees, suppliers, trade associations, board members, parent company, vendors. Strategy: Involve the supportive stakeholder

DEVELOPING SPECIFIC STRATEGIES & TACTICS

TYPE 2 Marginal Stakeholder (low potential for both threat and cooperation) may not be interested in issues of concern. Eg. OEMs, Media. Strategy: Monitor the stakeholder (wait & see), and minimize expenditure of resources until there is a change in the position of the stakeholder.

DEVELOPING SPECIFIC STRATEGIES & TACTICS

TYPE 3 Non-supportive Stakeholder (high potential for threat and low potential for cooperation) may not be interested in issues of concern. Eg. Government (Central & State), suppliers Strategy: Defend the interests of your organization and reduce dependence on stakeholder.

DEVELOPING SPECIFIC STRATEGIES & TACTICS

TYPE 4 Mixed blessing Stakeholder (high potential for both threat and cooperation) may not be interested in issues of concern. Eg. Many customers, employees Strategy: Collaborative strategy where you attempt to move the stakeholder to the focal companys interests in the goal

DEVELOPING SPECIFIC STRATEGIES & TACTICS

Keep the following points in mind while developing strategies:

Your goal is to create win-win outcomes if possible Ask what is our business, who are our customers, what are our responsibilities to the stakeholders, public and firm? Consider the probable consequences of your actions for who, at what costs, over what period? Keep in mind that the means you use are as important as the ends you seek.

MONITORING SHIFTING COALITIONS

Need to constantly monitor the evolution of issues and actions of the stakeholders since time and events can change the stakes and stakeholders.
Tracking trends and events can help the CEO take the right decisions.

FOUR PRINCIPLES OF ETHICALLY EFFECTIVE ORGANIZATIONS

High ethics firms are at ease interacting with diverse internal and external stakeholder groups. Obsessed with fairness persons interests count as much as their own. Responsibility is individual rather than collective (each individual is responsible for himself). Have a purpose, a way of operating which are valued by the members. The purpose connect the firm to the environment.

Social Contract: Corporations have a social contract with consumers and the public, which is based on mutual trust and understanding that companies have the interest of consumers in mind. Primary issues are:

MANAGING EXTERNAL STAKEHOLDERS

Propriety: corporate invasiveness into private lives by workplace monitoring, employee testing etc. Equity: Productivity goes up while wages & benefits do not move up proportionately Safety: People are threatened by unsafe products. Responsibility: Child labour & environmental laws, global warming, damage to the environment etc.

Social responsibility

MANAGING EXTERNAL STAKEHOLDERS

Businesses have the social role of trustee for societys resources. Since society entrusts businesses with its resources, businesses must wisely serve the interests of all their stakeholders. Open two way system use resources, disclose operations Social costs vs. benefits of an activity, product or service be considered before doing business Fairness in costing Involvement in society where major social needs exist

Corporate philanthropy: Be good citizens to promote health and education in society. Pragmatic principles: Acting justly, avoiding and preventing harm. Companies ought to do what they can do, and at a minimum, they should design, manufacture, distribute and sell safe products that will sell while following this standard. Convenantal Ethic: Focuses on the importance of social & economic relationships among businesses, customers & stakeholders.

MANAGING EXTERNAL STAKEHOLDERS

Transparency & proactiveness: Eg: Problem with Johnson when cyanide was found in Tylenol tablet. All the tablets were pulled out of the shelf and tamper proof, sealed packaging was developed. Honesty: Eg. Mitsubhisi settled 300 sexual harassment cases and paid $ 34 million, one of the biggest settlements in history for sexual harassment.

MANAGING ETHICS IN THE MARKET PLACE

Fair Treatment: Eg: American Home Products manufactured Fen-Phen diet drug which proved harmful. The company paid $ 2.35 million to settle lawsuits and set aside $ 1 billion for further medical treatment of affected people. Quick Response: Eg. P&Gs tampon was pulled out from the market because 25 deaths were reported due to toxic shock.

MANAGING ETHICS IN THE MARKET PLACE

Taking responsibility: Eg: Dow Cornings breast silicon gel implant burst open causing health problems. $ 7.3 million were paid to a woman, and $ 4.5 billion were spent by the company on reorganize plan and to pay creditors.

MANAGING ETHICS IN THE MARKET PLACE

To inform consumers truthfully and fully about the product or services content, purpose & use. Not to misrepresent or withhold any information that would hinder consumers freedom of choice. Not to force or take undue advantage of consumer buying by causing fear or stress, or by other means that constrain rational choice. Take due care to prevent injuries or mishaps due to design or use.

MANAGING ETHICS WITH CONSUMERS