Measuring the

1
Measuring the Business Value of Stakeholder
Relationships
Toronto, Vancouver, Calgary June, 2001
2
Topics

• Overview of Research Project
• Definitions and Assumptions
• Key Benefits
• Proposed Stakeholder Model

3
Research Partners

• Canadian Institute of Chartered Accountants
• Haub Program in Business and Sustainability, York
  University
• Centre for Innovation in Management, Simon Fraser
  University

4
Research Program

• Phase One - review existing research, develop
  model and measures
• Phase Two - case study research with 6 Canadian
  companies
• Completion by March 2002

5
Research Questions

• How do stakeholder relationships create business
  value?
• What organizational attributes help to create
  positive stakeholder relationships?
• What measures are most useful in
  assessing the quality of stakeholder
  relationships?

6
Defining Stakeholders

• Individuals or groups who can affect, or who are
  affected by, a firms actions
• Primary stakeholders - shareholders, employees,
  customers, suppliers, communities

7
Defining Relationships

• Relationships are mutually defined and negotiated
• strong relationships add to the stability,
  adaptability and coherence of the
  larger unit
• strong relationships provide access to
  information and resources
• strong relationships have high levels of
  social capital

8
What is Social Capital?

• the stock of active connections among people
  the trust, mutual understanding and shared values
  and behaviors that bind the members of human
  networks and communities and make cooperative
  action possible.
• Cohen and Prusak, 2000

9
Dimensions of Social Capital

• 1. Network (structural dimension)
• 2. Trust, norms and reciprocity (relational
  dimension)
• 3. Shared language and mutual
  understanding (cognitive
  dimension)
• Nahapiet and Ghoshal, 1998

10
Network
11
Trust, Norms Reciprocity

• Individuals and organizations draw on their
  social capital with others in their network who
  they trust
• Trust integrity, competence and benevolence
• Shared norms and reciprocity builds trust

12
Mutual Understanding

• Shared language, mental models/ paradigms
• For collaboration, extends to shared goals and
  aligned values

13
Benefits

• Shareholder risk reduction
• Innovation
• Employee recruitment and retention
• New markets and opportunities
• Enhanced reputation and brand value
• Social license to operate
• Sustained business partnerships

14
Shareholder Risk

• Lower costs (time and money) of
  monitoring internal practises and contracts
• Lower advertising spending
• Avoidance of excessive compensation claims
• Avoidance of physical damage to property

15
Innovation

• It doesnt matter how good the market research
  is, how bright the management team is, it is the
  quality of relationships among all people
  in the organization that has an enormous bearing
  on the quality of decisions and their
  execution.
• Jeff Mooney, Chairman and CEO,
• A W Food Services

16
Innovation (cont.)

• Ability to access to new ideas and information
  ability of employees to work collaboratively to
  create value
• Supply chain, partners, universities,
  associations
• Access to technical info, new ideas, competitive
  intelligence

17
Recruitment and Retention

• Ability to recruit and retain high quality
  employees
• Low turnover rates, reduced severance costs,
  hiring and training expenses, retention of
  valuable organizational knowledge

18
New Market Opportunities

• Ability to identify and take advantage of new
  markets
• Supply chain partners in distant locations, cross
  boundary networks with non-traditional groups
• Access to global market intelligence, referrals
  to local contractors and resources

19
Reputation and Brand Value

• Ability to establish strong emotional connection
  with customers
• Customers, suppliers, investors, opinion leaders
• Positive widespread mention, word of mouth,
  commentary

20
Social License to Operate

• Ability to manage social risk and make valuable
  contribution to community
• Local government, community leaders, NGOs,
  regulators
• Faster permitting, grace period during crisis,
  favorable interpretation of regulation

21
Partnerships and Alliances

• Ability to understand and respond quickly to
  changing partner requirements
• Supplies and services obtained at lower cost and
  more quickly
• Crises handled more effectively

22
Stakeholder Model