stakeholder management approach

STAKEHOLDER STAKEHOLDER MANAGEMENT APPROACHMANAGEMENT APPROACH

DEFINITIONDEFINITION Stakeholder Approach: provides a Stakeholder Approach: provides a

framework that enables users to map, framework that enables users to map, and ideally, manage the corporation’s and ideally, manage the corporation’s relationships (present and potential) relationships (present and potential) with groups to reach ‘win-win’ with groups to reach ‘win-win’ collaborative outcomes. collaborative outcomes.

Here, ‘win-win’ means making moral Here, ‘win-win’ means making moral decisions that benefit everyone in decisions that benefit everyone in terms of justice, fairness & economic terms of justice, fairness & economic interests.interests.

STAKEHOLDERSSTAKEHOLDERS A stakeholder is any individual or group who A stakeholder is any individual or group who

can affect or is affected by the actions, can affect or is affected by the actions, decisions, policies, practices or goals of the decisions, policies, practices or goals of the organization.organization.

Focal stakeholder is the company or group Focal stakeholder is the company or group that is the center and focus of our analysis. that is the center and focus of our analysis. Primary stakeholders include the owners, Primary stakeholders include the owners, customers, employees and suppliers of a firm.customers, employees and suppliers of a firm.

Secondary stakeholders include other Secondary stakeholders include other interested groups like the media, consumers, interested groups like the media, consumers, courts, govt., competitors, public & society.courts, govt., competitors, public & society.

STAKESTAKE Stake is any interest, share or claim Stake is any interest, share or claim

that a group or individual has in the that a group or individual has in the outcome of a corporation’s policies, outcome of a corporation’s policies, procedures, or actions towards others.procedures, or actions towards others.

Stakes can be present, past or future Stakes can be present, past or future oriented.oriented.

STAKEHOLDER ANALYSISSTAKEHOLDER ANALYSIS Mapping stakeholder relationshipsMapping stakeholder relationships Mapping stakeholder coalitionsMapping stakeholder coalitions Assessing the nature of each stakeholder’s Assessing the nature of each stakeholder’s

interestinterest Assessing the nature of each stakeholder’s Assessing the nature of each stakeholder’s

powerpower Constructing a matrix of stakeholder moral Constructing a matrix of stakeholder moral

responsibilitiesresponsibilities Developing specific strategies and tacticsDeveloping specific strategies and tactics Monitoring shifting coalitionsMonitoring shifting coalitions

MAPPING STAKEHOLDER MAPPING STAKEHOLDER RELATIONSHIPSRELATIONSHIPS

POLITICALGROUPS

GOVT.

SUPPLIERS

COMPETITORS EMPLOYEES

UNIONS

CUSTOMERS

ACTIVIST GROUPS

OWNERS

FIRM

CUSTOMERS/CONSUMERSCUSTOMERS/CONSUMERS

Safe productsSafe products Reliable serviceReliable service Honest informationHonest information Fair treatmentFair treatment Protection from product/service harmProtection from product/service harm

SUPPLIERS & DISTRIBUTORSSUPPLIERS & DISTRIBUTORS

FairnessFairness Truthfulness in transactions & Truthfulness in transactions &

contractscontracts Mutual respectMutual respect Honest information sharingHonest information sharing Timely paymentTimely payment

COMPETITORSCOMPETITORS

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

transactionstransactions

ENVIRONMENTENVIRONMENT

Protect and respect environmentProtect and respect environment Improve and sustain natureImprove and sustain nature Prevent wastePrevent waste

COMMUNITIES/SOCIETYCOMMUNITIES/SOCIETY

Respect laws, rightsRespect laws, rights Respect values and cultureRespect values and culture Support and promote economic, Support and promote economic,

social, health and human social, health and human developmentdevelopment

Be a good corporate citizenBe a good corporate citizen

GOVERNMENTGOVERNMENT

Law abidingLaw abiding Follow fair standards and proceduresFollow fair standards and procedures Promote societal and community Promote societal and community

safety and healthsafety and health

MAPPING STAKEHOLDER MAPPING STAKEHOLDER COALITIONSCOALITIONS

Determine and map any coalitions that Determine and map any coalitions that have formed between stakeholders.have formed between stakeholders.

Coalitions generally form around issues Coalitions generally form around issues & stakes they have in common (Eg. & stakes they have in common (Eg. Competitors may join forces if they see Competitors may join forces if they see an advantage in numbers).an advantage in numbers).

ASSESSING NATURE OF EACH ASSESSING NATURE OF EACH STAKEHOLDER’S INTERESTSTAKEHOLDER’S INTEREST

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

ASSESSING NATURE OF EACH ASSESSING NATURE OF EACH STAKEHOLDER’S POWERSTAKEHOLDER’S POWER

What’s in it for each stakeholder?What’s in it for each stakeholder? Who stands to win, lose?Who stands to win, lose? Power stakeholders can be those withPower stakeholders can be those with

Voting powerVoting power Political powerPolitical power Economic powerEconomic power

IDENTIFYING STAKEHOLDER IDENTIFYING STAKEHOLDER ETHICS & MORAL ETHICS & MORAL RESPONSIBILITIESRESPONSIBILITIES

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

DEVELOPING SPECIFIC DEVELOPING SPECIFIC STRATEGIES & TACTICSSTRATEGIES & TACTICS

Consider whether to approach each Consider whether to approach each stakeholder directly or indirectly.stakeholder directly or indirectly.

Decide whether to do nothing, monitor or Decide whether to do nothing, monitor or take an offensive or defensive position with take an offensive or defensive position with certain stakeholders.certain stakeholders.

Determine whether to accommodate, Determine whether to accommodate, negotiate, manipulate, resist, avoid, or ‘wait negotiate, manipulate, resist, avoid, or ‘wait and see’ with specific stakeholders.and see’ with specific stakeholders.

Decide what combination of strategies to Decide what combination of strategies to employ with each stakeholder.employ with each stakeholder.


TYPE 1 – Supportive Stakeholders (Low TYPE 1 – Supportive Stakeholders (Low potential for threat and high potential potential for threat and high potential for cooperation)for cooperation)

Eg. Employees, suppliers, trade Eg. Employees, suppliers, trade associations, board members, parent associations, board members, parent company, vendors.company, vendors.

Strategy: Involve the supportive Strategy: Involve the supportive stakeholderstakeholder


TYPE 2 – Marginal Stakeholder (low TYPE 2 – Marginal Stakeholder (low potential for both threat and potential for both threat and cooperation) – may not be interested in cooperation) – may not be interested in issues of concern.issues of concern.

Eg. OEMs, Media.Eg. OEMs, Media. Strategy: Monitor the stakeholder (wait Strategy: Monitor the stakeholder (wait

& see), and minimize expenditure of & see), and minimize expenditure of resources until there is a change in the resources until there is a change in the position of the stakeholder.position of the stakeholder.


TYPE 3 – Non-supportive Stakeholder TYPE 3 – Non-supportive Stakeholder (high potential for threat and low (high potential for threat and low potential for cooperation) – may not be potential for cooperation) – may not be interested in issues of concern.interested in issues of concern.

Eg. Government (Central & State), Eg. Government (Central & State), supplierssuppliers

Strategy: Defend the interests of your Strategy: Defend the interests of your organization and reduce dependence on organization and reduce dependence on stakeholder.stakeholder.


TYPE 4 – Mixed blessing Stakeholder TYPE 4 – Mixed blessing Stakeholder (high potential for both threat and (high potential for both threat and cooperation) – may not be interested in cooperation) – may not be interested in issues of concern.issues of concern.

Eg. Many customers, employeesEg. Many customers, employees Strategy: Collaborative strategy where Strategy: Collaborative strategy where

you attempt to move the stakeholder to you attempt to move the stakeholder to the focal company’s interests in the goalthe focal company’s interests in the goal


Keep the following points in mind while Keep the following points in mind while developing strategies:developing strategies: Your goal is to create win-win outcomes if possibleYour goal is to create win-win outcomes if possible Ask – what is our business, who are our customers, Ask – what is our business, who are our customers,

what are our responsibilities to the stakeholders, what are our responsibilities to the stakeholders, public and firm?public and firm?

Consider the probable consequences of your Consider the probable consequences of your actions – for who, at what costs, over what period?actions – for who, at what costs, over what period?

Keep in mind that the means you use are as Keep in mind that the means you use are as important as the ends you seek.important as the ends you seek.

MONITORING SHIFTING MONITORING SHIFTING COALITIONSCOALITIONS

Need to constantly monitor the Need to constantly monitor the evolution of issues and actions of the evolution of issues and actions of the stakeholders since time and events can stakeholders since time and events can change the stakes and stakeholders.change the stakes and stakeholders.

Tracking trends and events can help Tracking trends and events can help the CEO take the right decisions.the CEO take the right decisions.

FOUR PRINCIPLES OF FOUR PRINCIPLES OF ETHICALLY EFFECTIVE ETHICALLY EFFECTIVE

ORGANIZATIONSORGANIZATIONS High ethics firms are at ease interacting with High ethics firms are at ease interacting with

diverse internal and external stakeholder diverse internal and external stakeholder groups.groups.

Obsessed with fairness – person’s interests Obsessed with fairness – person’s interests count as much as their own.count as much as their own.

Responsibility is individual rather than collective Responsibility is individual rather than collective (each individual is responsible for himself).(each individual is responsible for himself).

Have a purpose, a way of operating which are Have a purpose, a way of operating which are valued by the members. The purpose connect valued by the members. The purpose connect the firm to the environment.the firm to the environment.

MANAGING EXTERNAL MANAGING EXTERNAL STAKEHOLDERSSTAKEHOLDERS

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

by workplace monitoring, employee testing etc.by workplace monitoring, employee testing etc. Equity: Productivity goes up while wages & benefits Equity: Productivity goes up while wages & benefits

do not move up proportionatelydo not move up proportionately Safety: People are threatened by unsafe products.Safety: People are threatened by unsafe products. Responsibility: Child labour & environmental laws, Responsibility: Child labour & environmental laws,

global warming, damage to the environment etc.global warming, damage to the environment etc.


Social responsibilitySocial responsibility Businesses have the social role of ‘trustee for Businesses have the social role of ‘trustee for

society’s resources’. Since society entrusts society’s resources’. Since society entrusts businesses with its resources, businesses must businesses with its resources, businesses must wisely serve the interests of all their stakeholders.wisely serve the interests of all their stakeholders.

Open two way system – use resources, disclose Open two way system – use resources, disclose operationsoperations

Social costs vs. benefits of an activity, product or Social costs vs. benefits of an activity, product or service be considered before doing businessservice be considered before doing business

Fairness in costingFairness in costing Involvement in society where major social needs Involvement in society where major social needs

existexist


Corporate philanthropy: Be good citizens to Corporate philanthropy: Be good citizens to promote health and education in society.promote health and education in society.

Pragmatic principles: Acting justly, avoiding and Pragmatic principles: Acting justly, avoiding and preventing harm. Companies ought to do what preventing harm. Companies ought to do what they can do, and at a minimum, they should they can do, and at a minimum, they should design, manufacture, distribute and sell safe design, manufacture, distribute and sell safe products that will sell while following this products that will sell while following this standard.standard.

Convenantal Ethic: Focuses on the importance Convenantal Ethic: Focuses on the importance of social & economic relationships among of social & economic relationships among businesses, customers & stakeholders.businesses, customers & stakeholders.

MANAGING ETHICS IN THE MANAGING ETHICS IN THE MARKET PLACEMARKET PLACE

Transparency & proactivenessTransparency & proactiveness: Eg: : Eg: Problem with Johnson when cyanide was Problem with Johnson when cyanide was found in ‘Tylenol’ tablet. All the tablets found in ‘Tylenol’ tablet. All the tablets were pulled out of the shelf and tamper were pulled out of the shelf and tamper proof, sealed packaging was developed.proof, sealed packaging was developed.

HonestyHonesty: Eg. Mitsubhisi settled 300 : Eg. Mitsubhisi settled 300 sexual harassment cases and paid $ 34 sexual harassment cases and paid $ 34 million, one of the biggest settlements in million, one of the biggest settlements in history for sexual harassment.history for sexual harassment.


Fair TreatmentFair Treatment: Eg: American Home : Eg: American Home Products manufactured Fen-Phen diet Products manufactured Fen-Phen diet drug which proved harmful. The company drug which proved harmful. The company paid $ 2.35 million to settle lawsuits and paid $ 2.35 million to settle lawsuits and set aside $ 1 billion for further medical set aside $ 1 billion for further medical treatment of affected people.treatment of affected people.

Quick ResponseQuick Response: Eg. P&G’s tampon was : Eg. P&G’s tampon was pulled out from the market because 25 pulled out from the market because 25 deaths were reported due to toxic shock.deaths were reported due to toxic shock.


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

MANAGING ETHICS WITH MANAGING ETHICS WITH CONSUMERSCONSUMERS

To inform consumers truthfully and fully about To inform consumers truthfully and fully about the product or service’s content, purpose & use.the product or service’s content, purpose & use.

Not to misrepresent or withhold any information Not to misrepresent or withhold any information that would hinder consumers’ freedom of choice.that would hinder consumers’ freedom of choice.

Not to force or take undue advantage of Not to force or take undue advantage of consumer buying by causing fear or stress, or by consumer buying by causing fear or stress, or by other means that constrain rational choice.other means that constrain rational choice.

Take due care to prevent injuries or mishaps due Take due care to prevent injuries or mishaps due to design or use.to design or use.

stakeholder management approach

Documents

managing external

managing ethics

high potential

social contract

low potential

assessing

market place

supportive