Stakeholder Management Processes

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Stakeholder Management Processes

• PMBA 540
• Fall 2006

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The Stakeholder Approach of Making Decisions

• Stakeholders are any individuals, groups, or
  organizations that have an interest in the firms
  activities and ultimate survival
• Internal stakeholders owners or shareholders,
  employees, and managers
• External stakeholders customers, suppliers,
  government, unions, local community, general
  public, natural environment

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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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Managing Stakeholders

• Assess importance of stakeholders
• Power, legitimate rights, and urgency
• Assess potential for threat vs. potential for
  cooperation
• Opportunity, capacity, and willingness
• Determine appropriate strategies for managing the
  stakeholder

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Potential for Threat
Low
High

Supportive Stakeholder Get Involvement
Mixed Blessing Stakeholder Collaborative
strategies
High
Potential for Cooperation
Non-supportive Stakeholder Defensive strategies
Marginal Stakeholder 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.

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Total Responsibility Management Systems

• Focus is on the triple bottom line
• Economic (profits)
• Social (people)
• Environmental (place)
• TRM can be significant source of competitive
  advantage for firms who take the lead in these
  initiatives
• (e.g., Whole Foods Market)

Philanthropic Ethical Legal Economic
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Pressures for TRM

• Primary stakeholders owners, employees,
  customers, and suppliers
• Secondary stakeholders NGOs, activists,
  communities, and governments
• Social and institutional pressures and trends
  best of rankings and awards emerging global
  standards (e.g., UNs Global Compact) and
  reporting/accountability initiatives (e.g., GRI
  or SA 8000 or AA1000)

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Three Processes in the TRM Approach

• Institutionalizing a vision and set of values
  regarding responsible practice through the
  enterprise (inspiration)
• Integration of the responsibility into practice
  through strategy, management systems, and human
  resource capacity
• Improvement and innovation through measurement,
  feedback systems, and learning and remediation