Managing Stakeholders (2) ROADMAP • Position-importance matrix • Diagnostic typology matrix • Stakeholder identification and salience typology • Stakeholder influence strategies • Issue management • FOSTERing stakeholder relationships • Issue analysis Stakeholder and Issue Analysis • Stakeholder engagement efforts by corporation to understand and involve relevant individuals, groups, or organizations by considering their moral concerns in strategic and operational initiatives • Issue analysis effort to understand the source, nature, and extent of a question or matter in dispute facing corporation – Will result in addressing or resolving the matter Basic Stakeholder Analysis • Corporations can increase understanding of stakeholders by asking the following: 1. Who are our stakeholders? 2. What are their stakes? 3. What opportunities and challenges are presented to our firm? 4. What responsibilities does our firm have to all its stakeholders? 5. What strategies or actions should our firm use to deal with stakeholder challenges and opportunities? Stakeholder Management Capability • Stakeholder management capability ability of managers to: – Identify stakeholders and their influence – Develop the organizational practices to understand stakeholders – Undertake direct contact with stakeholders A simple stakeholder map Position/Importance Matrix • Matrix mapping technique of categorizing an organization’s stakeholders by their influence according to two variables and plotting them on a two-by-two matrix: – Y Axis: Oppose or support corporation – X Axis: Importance of stakeholders • Allows managers to: – Assess power of stakeholders to achieve their demands – Whether they have means or resources to influence The Position / Importance Stakeholder Matrix Stakeholder Matrix Mapping Cont’d… • Four categories of stakeholders result from this analysis: – Problematic stakeholders - those who would oppose the organization’s course of action and are relatively unimportant to the organization – Antagonistic stakeholders - those who would oppose or be hostile to the organization’s course of action and are very important to the organization Stakeholder Matrix Mapping Cont’d… – Low priority stakeholders - those who support the organization’s course of action and are relatively unimportant to the organization. – Supporter stakeholders - those who would support the organization’s course of action and are important to the organization • After categorization is complete, managers can develop tactics and strategies to most appropriately deal with each stakeholder The Diagnostic Typology of Organizational Stakeholders • Matrix mapping (Potential for cooperation/threat) • Strategies for managing • Collaborate (mixed blessing stakeholders) • Defend (Non-supportive stakeholders) • Involve (Supportive stakeholders) • Monitor (Marginal stakeholders) The Diagnostic Typology of Organizational Stakeholders Cont’d… • Stakeholder management process: 1. Identify key organizational stakeholders by considering factors such as relative power, specific context and history of relationship and specific issues 2. Diagnose stakeholders according to critical dimensions of potential for threat or cooperation 3. Formulate appropriate strategies to enhance or change current relationships with key stakeholders 4. Implement strategies, attempting to transform the stakeholder relationship from less favourable to a more favourable one Stakeholder Identification and Salience • Salience degree to which managers give priority to competing stakeholder claims • Stakeholder identification and salience based upon stakeholder possession of one or more of three attributes: – Power a relationship among social actors in which one social actor, A, can get another social actor, B, to do something that B would not otherwise do – Legitimacy Perception or assumption that actions of an entity are are desirable, proper, or appropriate – Urgency degree to which stakeholder’s claim or relationship calls for immediate attention; 1) time sensitivity (degree to which managerial delay is unacceptable to stakeholder, 2)criticality (degree to which stakeholder considers claim to be important) Stakeholder Identification and Salience Cont’d… • Classes of stakeholders: a) Dormant (only power), discretionary (only legitimacy), or demanding (only urgency) stakeholders b) Dominant (power & legitimacy), dangerous (power and urgency) or dependence (legitimacy and urgency) stakeholders c) Definitive stakeholders (all three) • Enables managers to perform systematic categorization of stakeholder-management relationships – Allows managers to deal with multiple stakeholder influences Stakeholder Identification and Salience Cont’d… • Stakeholder attributes are variable, not steady state • Also, attributes are socially constructed • Consciousness and willful exercise may or may not be present Stakeholder Influence Strategies • Frooman (1999) how do stakeholders try to act to influence the organization’s decision making / behaviour? – Resource dependence exists when a stakeholder is supplying a resource and can exert some form of control over it • Two general means of control over an organization: – Withholding strategies stakeholder discontinues providing a resource with intention of changing a certain behaviour – Usage strategies stakeholder continues to supply resource but specifies how it is to be used i.e. attaches conditions – The type of resource control will depend on whether stakeholder is dependent on the firm Stakeholder Influence Strategies Cont’d… • Resource dependence also arises from relationships between stakeholders: – Influence pathway where withholding and usage strategies could be used by an ally of the stakeholder with whom the organization has a resource dependence – The type of pathway (direct/indirect)will depend on whether the firm is dependent on the stakeholder • Four influence strategy possibilities: 1. Indirect / usage (firm power) 2. Indirect / withholding (low interdependence) 3. Direct / withholding (stakeholder power) 4. Direct / usage (high interdependence) The Issue Management Process • Involves six steps: 1. Identification of issues 2. Analysis of issues 3. Ranking or prioritizing of issues 4. Formulating issue response 5. Implementing issue response 6. Monitoring and evaluating issue response Issue Materiality • Issue materiality (sustainability materiality) question or matter that is sufficiently important to warrant management’s attention • An aspect or issue should be reported if it meets these criteria: – Reflects the organization’s significant economic, environmental, and social impacts – Substantively influence the assessments and decisions of stakeholders Issue Materiality Matrix Issue Materiality Matrix Cont’d… • Issues are plotted and ranked in decreasing order of importance – Priority issues for management would be upper righthand corner – Next priority would be issues located in the upper left and lower right corners – Their influence on operations and the ease or difficulty of addressing the issues would be deciding factors for rating – Issues in the lower left corner are of little importance to stakeholders or management Stakeholder Collaboration • Collaboration (vs. “management”) establish and maintain relationships that allows organization to tap into powerful source of energy, ideas and wider network – More integrated and company-wide – Responsibility for stakeholder collaboration assigned to senior executive(s) Approaches to CorporateStakeholder Relations Stakeholder Management Stakeholder Collaboration Fragmented among various departments Integrated management approach Focus on managing relationships Focus on building relationships Emphasis on buffering the organization Emphasis on creating opportunities and mutual benefits Linked to short-term business goals Linked to long-term business goals Idiosyncratic implementation dependent on division interests and personal style of manager Coherent approach driven by business goals, mission, values, and corporate strategies Stakeholder Collaboration Cont’d… • FOSTERing framework for organizations to develop collaborative stakeholder relationships • Involves six steps: – Creating a foundation – Organizational alignment – Strategy development – Trust building – Evaluation – Repeat the process Freeman on stakeholder collaboration Freeman on purpose, ethics and stakeholder theory Summary • The various stakeholder matrix mapping methodologies give managers a practical approach to assessing the influence of stakeholders. • The diagnostic typology of organizational stakeholders attempts to understand stakeholder influence by assessing the potential threat or potential for cooperation. • The salience stakeholder typology increases the complexity of analysis by using three attributes to assess stakeholder importance: power, legitimacy, and urgency. Summary Cont’d… • Frooman’s influence strategies provide another perspective on understanding stakeholders. He argues that managers should appreciate that stakeholders can influence one another and the corporation in direct and indirect ways and by withholding or specifying usage conditions. • Issue materiality analysis has a logical connection to stakeholder analysis. Examining stakeholders and issues together increases management understanding of the environment in which the corporation operates. • The FOSTERing model suggests how to move towards collaborating with stakeholders.
