Organizational Effectiveness and Stakeholder Management Models

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Organizational Effectiveness and Stakeholder
Management Models

• MBA 540

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Definitions of Organizations

• Social entity, goal directed, deliberately
  structured, identifiable boundaries (Daft)
• Response to and means of creating value that
  satisfies human needs. Embodies collective
  knowledge, values, and vision (Jones)
• Integration of specialized knowledge bases into a
  common task (Drucker)

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Organizations

• Human creations whose operations and products are
  results of the ways we govern them and of the
  social, institutional, and political structures
  within which they operate (i.e., their
  environments)
• Organizations are both products of these
  structures and de-stabilizers of these structures

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Trends and Tensions in Contemporary Organizations

• What do you think are the most significant
  challenges organizations face today?

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Essential Features of Organizations

• Open system input, transformation, output
• Subsystems boundary spanning, production,
  maintenance, adaptation, management
• Domains range of products and services produced
  (functions) for serving markets and customers
• Environmental Transactions dealing with factors
  outside the organizational boundaries

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Open Systems View of Organization
ENVIRONMENT
Raw Materials Resources
Products Services
Output
Transformation
Input
Organization
Production Maintenance Adaptation Management
Boundary Spanning
Boundary Spanning
Subsystems
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Assessing Organizational Effectiveness

• Goals approach
• Achieving organizational goals is being effective
• Official Goals Mission (broad and long term)
  provide legitimacy to public
• Operative Goals specific goals that direct
  behavior in the short term (what organizations
  are really doing)
• Official and operative goals often differ (e.g.,
  higher education prisons Sears)

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What are the Benefits of Setting Goals?

• Guidelines for action
• Serve as constraints on actions
• Source of legitimacy
• Serve as standards for performance
• Source of motivation
• Rationale for organizing

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Areas of Organizational Goal Setting

• Management Performance and Development
• Employee Performance and Development
• Social Responsibility

• Market goals
• Innovation
• Productivity
• Physical and Financial Resources
• Profitability

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Problems with Goal Approach

• Multiple goals are set that conflict
• Whose goals receive priority?
• When should goals change?
• Individuals set goals not organizations process
  is political
• Goals are set and pursued through complex
  processes of bargaining among powerful coalitions
  of individuals in organizations

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Assessing Organizational Effectiveness

• External resource approach
• Evaluation of a firms ability to manage and
  control external environment
• Obtaining scarce and valued inputs
• Measured by quality and costs of inputs stock
  price quality of products/ services ROI
• Example Software firm hires the best engineers
  with competitive compensation university
  acquiring research faculty

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Assessing Organizational Effectiveness

• Internal Systems Approach
• Innovation and quick response to changes
• Measured by decision making time, product
  innovation rate, time to get new products to
  market, reduction of conflict and motivation
  problems
• Example 3M 25 of sales must come from
  products less than 5 years old

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Assessing Organizational Effectiveness

• Technical efficiency approach
• Ability to convert skills and resources into
  goods and services efficiently
• Measured by rate of reduction of defects,
  reduction of product costs and delivery times,
  increases in customer service and product quality
• Example TQM processes at Stanley Engineering
  Six Sigma Process at Motorola and GE lean
  production systems

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Assessing Organizational Effectiveness Balanced
Scorecard
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Assessing Organizational Effectiveness Areas of
Balanced Scorecard

• Financial
• Cash flow analysis, income statement, balance
  sheet, financial ratios, budgets, EVA analyses
• Customer
• Monitor customer service, defections, changes in
  quality of customer
• Quality
• TQM, business process re-engineering, Six Sigma,
  waste prevention/reduction
• Employee Performance
• Performance evaluation methods

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Assessing Organizational Effectiveness

• Stakeholder Approach
• Stakeholders are any individuals, groups, or
  organizations that have an interest in the firms
  activities and ultimate survival
• Organization is effective to the extent that it
  creates value for and satisfies key stakeholders
  continually over time
• Must keep interests and desires of stakeholders
  headed roughly in same direction

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Two-Tier Stakeholder Map
Consumer Advocate Groups
Financiers
Government
Customers
Primary Stakeholders
Employees
Firm
Competitors
Suppliers
Communities
Owners/Shareholders
Media
Secondary Stakeholders
Special Interest Groups
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Managing Stakeholders

• Inducements and contributions balance
• Inducements are what the firm provides for
  stakeholder (e.g., employees receive wages)
• Contributions are what the stakeholder provides
  for the firm (e.g., employees provide effort,
  knowledge, physical labor, etc.)
• Firms would like to provide as little inducement
  as possible for adequate levels of stakeholder
  contribution and vice versa

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Arguments for and against Engaging Stakeholders?

• What advantages do firms gain by engaging with
  stakeholders?
• What disadvantages are associated with engaging
  with stakeholders?

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Stakeholder Engagement Process
Set engagement objectives
Identify and assess stakeholders
Measure and report progress
Repeat process
Develop engagement plan techniques
Respond to engagement results
Implement engagement plan
Assess the engagement process
From Blackburn (2007)
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Mapping Stakeholders

• Assess importance of stakeholders using
• Power based on access to coercive, utilitarian,
  or normative means by which to impose its will in
  the relationship
• Legitimacy claims based on having a contract,
  exchange, legal title, legal right, moral right,
  at-risk status, or moral interest in the harms
  and benefits generated by company actions
• Urgency based on the degree to which stakeholder
  claims call for immediate attention

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Power
2
4
7
5
Legitimacy
6
Urgency
3
Based on Mitchell, Agle, Wood (1997)
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Mapping Stakeholders

• Assess potential for threat vs. potential for
  cooperation
• Opportunity
• Capacity or resources
• Willingness

Based on Savage et al. (1991) and Freeman et al.
(2007)
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Potential for Threat
Low
High

Supportive Stakeholder Friends Involvement
strategies
Mixed Blessing Stakeholder Rule
Setters Collaborative strategies
High
Potential for Cooperation
Non-supportive Stakeholder Critics Defensive
strategies
Marginal Stakeholder Monitors Monitor
Low
Fringe stakeholders?
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Managing Fringe Stakeholders

• Radical Transactiveness (RT)
• Dynamic capability of organizations to identify,
  explore, and integrate stakeholders on the
  fringe poor, isolated, weak, non-legitimate,
  and non-human
• Result competitive imagination
• Generate disruptive innovations and creative
  destruction for imagining new business
  possibilities
• Capabilities Fan out and Fan in

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Managing Stakeholders

• Managing multiple goals of stakeholders
• setting priorities or preference ordering
• sequential attention
• bargaining and compromise
• Satisficing
• At least minimal satisfaction of all current
  stakeholders is organizational effectiveness.