Meeting the Needs of Stakeholders

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Who are Stakeholders?Stakeholders are groups of people who have an interest in a business organisationThey can be seen as being either external to the organisation, or internalBut some may be both!

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STAKEHOLDER DEFINITIONAny 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)

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Organisational purposesMissionObjectives

Corporate GovernanceWhom 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?

EXPECTATION AND PURPOSES

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STAKEHOLDER MAPPING ITo assist entrepreneurs/managers to understand the socio/economic/political contextTo identify potential strategies To identify the orientation of different stakeholdersTo establish socio/economic and political priorities and trends

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STAKEHOLDER MAPPING II

Used in relation to a particular strategic developmente.g. launch/withdrawal of a product/serviceIdentifies the relationship that needs to be established with the various groups of stakeholdersIdentifies key blockers & facilitators of changeUnderlines the importance of ethical issues for managersRelates power and interest

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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)

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WHY CONSIDER STAKEHOLDERS?

Failure to account for stakeholders often leads to poor performance, failure or even disasterNutt (2002) analysis of 400 strategic decisions - half failed because didnt 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

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DIFFERENT TYPES OF STAKEHOLDER GROUPSPrimary: a firm cannot exist without their continuing participationPrimary stakeholders include: shareholders & investors, employees, contractors, customers & suppliersSecondary: 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 survivalSecondary stakeholders include: media, action groups, government agencies, trade unions, regulatory authorities

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Secondary social stakeholdersPrimary non-social stakeholdersSecondary non-social stakeholdersPrimary social stakeholders

Local communitiesSuppliersCustomersInvestorsEmployees Stakeholder Corporation

Natural Environment

Non-human species Future Generations Competitors Environmental Pressure Groups Animal welfare Pressure Groups Trade Associations GovernmentSocial pressure groups, unions Media & Commentators

DIFFERENT TYPES OF STAKEHOLDERS

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STAKEHOLDER THEORY (Donaldson and Preston, 1995)Takes account of the various needs of the different interested parties Stakeholder power is keyStakeholder interests are not always consistentStakeholders are rewarded in different waysStakeholders are not affected in the same way by every strategic decision

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ACTIONS FOR THE ENTREPRENEUR/MANAGER

Identify the stakeholders & identify key individuals Identify the orientation of different stakeholdersEstablish political priorities and trends in the political environment Assess the strength of the stakeholder influence on the company behaviourEvaluate stakeholder attitudes towards the business mission, strategies, activitiesIdentify potential strategies to influence the perceptions of individual stakeholdersWin over antagonistic stakeholders

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Types of StakeholderOwners (I)Shareholders (I)Managers (I)Staff or employees (I)Customers (E)Suppliers (E)Community (E)Government (E)

I = Internal

E = External

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Internal and External StakeholdersInternal stakeholders are those who are members of the business organization

Owners and shareholdersManagersStaff and employeesExternal stakeholders are not part of the firm

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Characteristics of Stakeholders1. Owners and Shareholders

The number of owners and the roles they carry out differ according to the size of the firmIn small businesses there may be only one owner (sole trader) or perhaps a small number of partners (partnership)In large firms there are often thousands of shareholders, who each own a small part of the business

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2. Managers:

organizemake decisionsplancontrolare accountable to the owner(s)

Characteristics of Stakeholders

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Characteristics of Stakeholders3. Employees or Staff:

A business needs staff or employees to carry out its activitiesEmployees agree to work a certain number of hours in return for a wage or salaryPay levels vary with skills, qualifications, age, location, types of work and industry and other factors

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Characteristics of Stakeholders4. Customers:

Customers buy the goods or services produced by firmsThey may be individuals or other businessesFirms must understand and meet the needs of their customers, otherwise they will fail to make a profit or, indeed, survive

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5. Suppliers:

Firms get the resources they need to produce goods and services from suppliersBusinesses should have effective relationships with their suppliers in order to get quality resources at reasonable pricesThis is a two-way process, as suppliers depend on the firms they supply

Characteristics of Stakeholders

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6. Community:

Firms and the communities they exist in are also in a two-way relationshipThe local community may often provide many of the firms staff and customersThe business often supplies goods and services vital to the local areaBut at times the community can feel aggrieved by some aspects of what a firm does

Characteristics of Stakeholders

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7. Government:

Economic policies affect firms costs (through taxation and interest rates)Legislation regulates what business can do in areas such as the environment and occupational safety and healthSuccessful firms are good for governments as they create wealth and employment

Characteristics of Stakeholders

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7. Government:

Economic policies affect firms costs (through taxation and interest rates)Legislation regulates what business can do in areas such as the environment and occupational safety and healthSuccessful firms are good for governments as they create wealth and employment

Characteristics of Stakeholders

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