Stakeholder theory

Stakeholder management and

strategic planning

Two broad stakeholder theories

• Friedman

• Freeman

Theory one

• Milton Friedman – focus on the shareholders as they only stakeholders who matter. The business of business is making a profit and building shareholder value the prime purpose.

Theory two

* The quickest way to destroy shareholder value is to ignore stakeholders

Where did it start?

• R. Edward Freeman (1984)

• Stakeholder theory is about identifying the groups who are stakeholders in a corporation and need to be managed

Why are stakeholders important?

• Corporations and organisations operate with the consent of the community.

• Communities comprise groups of stakeholders

• Winning the consent of these stakeholders provides a licence to operate

Who are stakeholders?

• The directly involved:

- investors

- employees

- suppliers

- customers

Other stakeholders

• Government

• Political parties

• Trade unions

• Community groups

• NGOs

• Plant neighbours

A key question for you

• Is the media a stakeholder?

Why pay attention to stakeholders?

• Moral or philosophical reasons – corporate social responsibility

• Practical reasons – licence to operate

• Strategic planning reasons – identifying opportunities and threats

Some key management questions

• Why should specific companies pay attention to stakeholders?

• Who are the organisation’s stakeholders? How do we identify them?

• What is the basis for their interest/legitimacy?

• What do they want?

Some key management questions

• Which stakeholders are most important? How do we set priorities?

• Do we need separate strategies for different stakeholder groups?

• Can we reach all stakeholder groups?

• How do we balance stakeholder interests?

Managing stakeholders – a strategic context

• The quality of relationships with stakeholders are the key determinant of corporate reputation

• Stakeholder management is the core of public affairs management

• Symmetric and asymmetric communication theory is relevant to stakeholder management

Managing stakeholders – an communications approach

• Identify the stakeholders

• Identify the relationship you want with them

• Identify the urgency/timing need for communicating with them

• Identify their information needs

• Identify the best communication channel

Some practical examples

• Employees – face to face as frequently as possible

• Investors – as laid down by ASX/ASIC regulations

• Governments – building up goodwill for the future

• The media – when and where appropriate

Managing stakeholders – a PA and issues management approach

• Craig Fleisher’s emerging PA model:

• Managing PA and issues management on a year round process

• Cultivating and maintaining enduring stakeholder relationships

• Influencing stakeholders using refined information

• Managing the grassroots

Fleisher model

• Communicating in an integrated manner

• Continually aligning values and strategies with the public’s interests

• Improving external relationships using contemporary management practices

Using PA planning techniques

Identify stakeholder management needs as an integral part of:

• Issues monitoring and environmental scanning

• Analysing threats and being sceptical

• Using standard analytical tools: SWOT, PEST, Porter model

Planning techniques

• Undertaking scenario planning: What ifs?

• Constantly testing internal perception against external realities

• Creating risk, opportunity and issues profile

• Producing issues maps and stakeholder matrices

Setting priorities

Categorise stakeholders by:

• Stakeholders directly interested in your success

• Allies and potential allies

• Entrenched opponents

• Independent monitors and opinion formers

• Uninvolved

Management strategies

• Directly interested – recruit as advocates

• Allies – encourage

• Opponents – neutralise

• Independents – maintain dialogue

• Uninvolved – monitor and anticipate

Some conclusions

• Two theories – empirically one wrong and one right

• Focus on identifying stakeholders and why they are important

• Integrate stakeholder management into strategic planning

• Set stakeholder priorities