GOVERNING THE ENTREPRENEURIAL VENTURE:

STAKEHOLDER MAPPING

JEAN CLARKE

LEEDS UNIVERSITY BUSINESS SCHOOL

AIMS OF THE LECTURE To understand the meaning of stakeholder Understand the importance of accounting for

a range of stakeholders in the entrepreneurial venture

Examine different types of stakeholders Introduce the concept of stakeholder mapping Understand the importance of mapping

stakeholders

STAKEHOLDER DEFINITION “Any group or individual that can affect, or is affected

by, the performance of the organisation” (Freeman 1987)

“Individuals or groups who depend on the organisation to fulfil their own goals and on whom, in turn, the organisation depends” (Johnson & Scholes 1999)

“The firm is a system of stakeholders operating within the larger system of the host society that provides the necessary legal and market infrastructure for the firms activities” (Clarkson, 1994)

Organisational purposes•Mission•Objectives

Corporate governance•Whom should the organisation serve?•How should purposes be determined?

Business ethicsWhich purposes shouldbe prioritised? Why?

Cultural contextWhich purposes are prioritised? Why?

ShareholdersWhom does the organisation serve?

EXPECTATIONS AND PURPOSES

WHY CONSIDER STAKEHOLDERS? Failure to account for stakeholders often leads to poor

performance, failure or even disaster…. Nutt (2002) analysis of 400 strategic decisions - half “failed”

because didn’t attend to interests and information held by key stakeholders.

Increased globalization, interconnected nature of the world (Bryson and Bromiley, 1993)

Increasing tendency to make organisations more visibly accountable to shareholders and also the wider community.

Emphasis on markets, participation, flexibility, and deregulation (Peters 1996).

“To manage is to govern.” (Feldman and Khademian, 2002) As entrepreneurial ventures grow they are likely to have increasing

numbers of stakeholders who can impact performance

DIFFERENT TYPES OF STAKEHOLDER GROUPS Primary: a firm cannot exist without their continuing

participation Primary stakeholders include: shareholders & investors,

employees, contractors, customers & suppliers Secondary: those who influence or affect or are

influenced/affected by, the corporation, but they are not engaged in transactions with the corporation or essential for its survival

Secondary stakeholders include: media, action groups, government agencies, trade unions, regulatory authorities

Secondary social

stakeholders

Primary non-social stakeholders Secondary non-social stakeholders

Primary

socia

l

stakeh

olders

Local

comm

unities

Suppliers

CustomersInvestorsEmployees Stakeholder

Corporation

Natural Environment

Non-human species

Futu

re G

ener

ation

s

Competitors

Environmental Pressure Groups

Anim

al welfare

Pressure Groups

Trade Associations

Gov

ernm

ent

Social p

ressure

groups, unions

Media & Commentators

DIFFERENT TYPES OF STAKEHOLDERS

Entrepreneurship and Stakeholders: Opportunity Recognition Typical personality characteristics – locus of control, need for

independence and need for achievement - suggests that entrepreneur will tend to take a central position in their stakeholder environments

Cognitive approaches focus on the individual entrepreneur’s search for and the analysis of information and, as a consequence constrain the identification of opportunities.

Fail to adapt to the complexity of stakeholder relationships in their entrepreneurial activity.

This approach is too narrow – entrepreneurs should use the complexity of stakeholder relationships in order to go beyond their cognitive limitations and thus facilitate the discovery of new opportunities. (Vandekerckhove and Dentchev, 2005)

Entrepreneurship and Stakeholders: Ethics and Social Responsibility While entrepreneurship and innovation are widely seen as key

sources of economic growth and welfare increases they have also meant losses and hardships for some members of society.

It is destructive of some stakeholder’s wellbeing even as it creates new wellbeing among other stakeholders

Both the positive benefits and negative externalities of innovation are problematic because entrepreneurs initiate new ventures before their private profitability and/or social costs can be fully recognised. (Dew and Sarasvathy, 2007)

The small business context can sometimes impose constraints on the firm‘s corporate social responsibility e.g. lack of awareness, size, resources, time etc (Lepoutre and Heene, 2006)

Burgeoning area of academic interest

STAKEHOLDER THEORY (Donaldson and Preston, 1995) Takes account of the various needs of the different

interested parties Stakeholder power is key Stakeholders get traded off against each other Stakeholder interests are not always consistent Stakeholders are rewarded in different ways Stakeholders are not affected in the same way by

every strategic decision

ACTIONS FOR THE ENTREPRENEUR/MANAGER Identify the stakeholders & identify key individuals Identify the orientation of different stakeholders Establish political priorities and trends in the political environment Assess the strength of the stakeholder influence on the company

behaviour Evaluate stakeholder attitudes towards the business mission,

strategies, activities Identify potential strategies to influence the perceptions of

individual stakeholders Win over antagonistic stakeholders

STAKEHOLDER MAPPING I To assist entrepreneurs/managers to

understand the socio/economic/political context

To identify potential strategies To identify the orientation of different

stakeholders To establish socio/economic and

political priorities and trends

STAKEHOLDER MAPPING II Used in relation to a particular strategic

development e.g. launch/withdrawal of a product/service

Identifies the relationship that needs to be established with the various groups of stakeholders

Identifies key blockers & facilitators of change Underlines the importance of ethical issues for

managers Relates power and interest

STAKEHOLDER MAPPING – THE MATRIX

Level of interest

Power

Low High

Low

High

A

Minimal effort

B

Keep informed

D

Key players

C

Keep satisfied

GROUP TASK: AN EXAMPLE OF STAKEHOLDER MAPPING

Divide into groups of five individuals Launch of a New Product/Service

Step 1: Plot stakeholders in terms of their level and nature of interest and power

Step 2: How you would need them to line up to be successful?

Step 3: Any mismatches? Political priorities? Step 4: Maintain stakeholders in their current

positioning?

THE DEFINITION OF POWER

“The extent to which individuals or groups are able to persuade, induce or coerce others into following certain courses of action” (Johnson & Scholes 1999)

SOURCES AND INDICATORS OF POWER

Within organisations hierarchy (formal p.) influence (informal p.) control of strategic resources possession of knowledge & skills control of the environment involvement in strategy

implementation

Within organisations status claim on resources representation symbols

For external stakeholders control of strategic resources involvement in strategy

implementation possession of knowledge (skills) internal links

For external stakeholders status resource dependence negotiation arrangements symbols

Indicators of power

Sources of power

ASSESSING STAKEHOLDER POWER If I were to pursue this strategy with disregard to the views

of this particular stakeholder, could/would they stop me? Analysis relates to particular strategy Implementation of some strategies may be within the

approved discretion of a certain stakeholder group Some stakeholders may not want to exercise their power

This requires: sharp political instinct as well as objective assessment of power

ASSESSING STAKEHOLDER INTEREST To assess likely actions of stakeholders

Use a variety of sources of information on stakeholder interest formal informal

Categorise interest as + (for) and - (against) or neutral (0) in relation to strategy

Level of interest may be dependent on one person Test question: How high is this strategy on their

priorities? Active support/opposition?

MANAGING STAKEHOLDER RELATIONSHIPS

Different styles for different stakeholder groups Participation: key players, need for education/communication Intervention: low interest & high power: - change agent

drives & controls the strategy,but threshold requirements are met

Education/communication: high interest/low power (proponents), but Direction for opponents

Direction: low power/low interest Styles depend on the position they should be in

NINE TYPICAL MAPS (Ambrosini et al 1998)

The political battle ground

The lone champion

The worthy case

+ + +- - -

+

+ + ++ + +

+ + ++ + +

- - -- - -

-

The dream ticket The dogged opponent

The political timebomb

Interest

Power

NINE TYPICAL MAPS

The potential lost cause

The political trap

The autocrat’s dream- - -- - -

? ? ?? ? ?

? ? ?? ? ?

THE POLITICAL BATTLEGROUND Many key players divided in support and opposition Danger: Limbo Strategy:

facilitate the dominance of supporters overcome the resistance of opponents by

communication or reduce their interests create a stalemate

+ + +- - -

THE LONE CHAMPION One powerful key player Potential loss of the champion

due to decline in interest loss of power

Alternatives: broaden base of support build power-base of supporters (box B)

+

THE WORTHY CAUSE

High levels of interest from

stakeholders with little power,

no key player Cinderella strategy: find a

champion (key player - box B and C) Empower stakeholders through

assistance in forming alliances provision of info to lobby stakeholders in box C

+ + ++ + +

THE DREAM TICKET Occurs infrequently Several powerful and

interested supporters and no opponents

Danger of complacency Keep stakeholders informed and satisfied Key: alliance building and maintenance

+ + ++ + +

THE DOGGED OPPONENT One powerful opponent

Change direction by reducing

resistance Or reduce their interest, reduce

power Associate strategy with an elite or a more

powerful champion

-

THE POLITICAL TIMEBOMB Several opponents with little

power Danger to disregard them May lead to alliances or

adverse lobbying of stakeholders

(box C) Political priorities: maintain stakeholders in

box B

- - -- - -

THE POTENTIAL LOST CAUSE

Several powerful opponents May lead strategy to be abandoned

or modified May create political difficulties

wider than particular strategy Priority: change the orientation of

at least some stakeholders Involve respected outsider

- - -- - -

THE POLITICAL TRAP

Low interest among all powerful stakeholders May tempt managers to proceed with strategy Dangerous as powerful stakeholder

may block strategy later in implementation Maintain stakeholders in current position Alternatively: Seek a champion

? ? ?? ? ?

THE AUTOCRAT’S DREAM No powerful or interested

stakeholders

Danger: complacency

Style: direction, monitor stakeholder activities

? ? ?? ? ?

Advantages of Stakeholder Analysis Stakeholder analysis can help entrepreneurs implement their

venture through securing support from powerful stakeholders Allow them to understand the impact they are making on

society. Help entrepreneurs to distinguish among competing voices

and various groups of stakeholders Mitchell (2002) Stakeholder identification and analysis techniques can help

entrepreneurs meet their mandates, fulfill their missions and create public value.

The use of stakeholder analyses can help frame issues that are solvable in ways that are technically feasible and politically acceptable and that advance the common good.

GROUP TASK Get into groups of five individuals Discuss how different stakeholders could be

moved to different positions on the typical maps as outlined above

Present results to other groups