GTUMB62SS
STRATEGIC
MANAGEMENT
COVENTRY PROGRAMME
Lecture 5.
Lecture 5
Stakeholder Analysis: Organizational Purposes:
Values, Mission, Vision, Objectives, Culture &
Corporate Governance
Stakeholders and Strategic Management
Learning Outcomes:
➢Perform comprehensive stakeholder identification and analysis for any
organization
➢Critically analyse and interpret the importance of stakeholders to strategy
formulation and implementation
➢Describe the risks posed by stakeholders to organizational strategy and how
that could be managed.
➢Critically examine the stakeholder commitment model and suggest any
necessary improvement
➢Why it is critical for company managers to have a clear strategic vision of
where a company needs to head and why.
➢Explain Who’s Involved with Strategic Management
➢Discuss the role and responsibility of a company’s board of directors in
overseeing the strategic management process
➢Examine the role of Top Management and other employees in Strategic
Management
Stakeholders and Strategic Management
Managers/Strategists Understanding of Stakeholders:
➢Managers/strategists have to be aware that the decisions they have to make about
the purpose and strategy of their organisation are influenced by the expectations of
stakeholders.
➢This could be a very daunting task since there are likely to be stakeholders,
especially for large organizations (see Fig. 2) with different, perhaps conflicting,
expectations.
➢The implication of the above is that managers need to take a view on (i) which
stakeholders will have the greatest influence, therefore (ii) which expectations they
need to pay most attention to and (iii) to what extent the expectations and
influence of different stakeholders vary
Strategy & Stakeholder Analysis
◼ Who is a stakeholder?
➢ Pretty much easy to miss out identifying a stakeholder, but doing so,
whether they have a major or a minor stake in the project, can delay or
derail a project
➢ For a project to be successful, it must satisfy the users of its output
➢ Engaging the people or groups who have vested interest throughout the life
of a project is a key to, although not a guarantee of, a project’s success
(Burdford, 2012, p. 53; Kloppenborg, 2012, p. 116)
❖ Stakeholders are the individuals and groups who are affected by or impact
upon the performance of the organization (Jeffs, 2008).
Strategy & Stakeholder Analysis
◼ What you need to understand (Kloppenborg, 2012, p.116):
➢ First, there must be multiple users and each may have different wants and
needs
➢ Second, often, users do not fully understand what they want because they
do not know what alternatives may be available
➢ Third, the customer who pays for the project (the product or the needed
change) may not be the actual person or group who uses the result, and the
customer may not fully understand the user’s needs
➢ Fourth, when someone else is paying for the project, some users will ask for
many project outcomes that are expensive or time-consuming to deliver
➢ Many stakeholders in addition to the users of a project’s outcomes have an
interest in the project
Strategy & Stakeholder Analysis
◼ Identifying stakeholders:
➢ One way is to ask, “Who will use or be affected by the result of the needed
change?”
➢ The answer includes users of project results and others who may have some
changes forced upon them by the project
➢ The Project Management Body Of Knowledge (PMBOK) - identify stakeholders
analysis as “the process of identifying all people or organizations impacted by
the needed change, and documenting relevant information regarding their
interests , involvement and impact on project success” (Hugan, 2002)
(Kloppenborg, 2012, p. 116)
Strategy & Stakeholder Analysis
➢ Stakeholders also encompass those who are affected by the process of
executing the needed change
➢ This embraces people who:
✓Work on the project
✓Provide people or resource for the project
✓Have their routines disrupted by the project
(Kloppenborg, 2012, p. 116)
Stakeholder Aspirations/Expectations
➢Note that the decisions managers have to make about the purpose and
strategy of their organisation are influenced by the expectations of
stakeholders.
➢This poses a challenge because there are likely to be many stakeholders,
especially for a large organisation, with different, perhaps conflicting,
expectations.
Stakeholders of a Large Organization
Fig.1
Can you
think of any
other
stakeholders
of any large
firm not
herein
captured by
this model?
Source: From R.E. Freeman, Strategic Management: A Stakeholder Approach, pub. Pitman 1984
Copyright 1984 by R. Edward Freeman.
Strategy & Stakeholder Analysis
Identifying stakeholders:
◼ Another approach to identify stakeholders is to ascertain whether
they are internal to the organization performing the project or
external to it
◼ See Fig. 2 for an example of project stakeholders based on these
categories
(Kloppenborg, 2012, p. 116)
Strategy & Stakeholder Analysis
Fig.2
Strategy & Stakeholder Analysis
Types of External Stakeholders: They can be usefully divided into three types in terms of the nature
of their relationship with the organisation and, therefore, how they might affect the success or failure
of a strategy:
➢ Economic stakeholders, including suppliers, competitors, distributors (whose influence can be
identified using Porter’s five-forces framework (see Fig. 3) and shareholders (whose influence
can be considered in terms of the governance chain - the governance chain illustrates the roles
and relationships of different groups involved in the governance of an organization)
➢ Socio/political stakeholders, such as policy makers, regulators and government agencies who
will influence the ‘social legitimacy’ of the strategy
➢ Technological stakeholders, such as standards agencies and owners of competitive
technologies who will influence the diffusion of new technologies and the adoption of industry
standards
Strategy & Stakeholder Analysis
❖ The different types of stakeholders may have different influences in different
situations
❖ For example, the ‘technological group’ will be crucial for strategies of new product
introduction whilst the ‘social/political’ group is usually particularly influential in the
public sector context.
❖ Although internal stakeholders may have different influences on an organization’s
strategy, external stakeholders need to rely on their links with the internal stakeholders in
order to exert their influence on any strategy. For example, customers may exert
pressure on sales managers to represent their interests within the company. Could you
think of any other examples?
Strategy & Stakeholder Analysis
❖Since we couldn’t rule out the differences in expectations of different stakeholder groups, it is
also normal for conflict to exist regarding the importance or desirability of many aspects of
strategy.
❖For these differences and the subsequent conflicts, it calls for compromises to be reached in
most cases
❖Global organisations may experience additional complications since they are operating in
multiple areas. For example, an overseas division is part of the parent company, with all that
implies in terms of expectations about behaviour and performance, but is also part of a local
community, which has different expectations. These two ‘worlds’ may not sit comfortably
alongside each other.
❖For these reasons, the stakeholder concept is valuable when trying to understand the political
context within which strategic developments take place
Some Common Conflicts of Expectations
Fig.4
What are or
what have been
the common
conflicts of
expectations in
your
organizations?
Source: Johnson, Scholes & Whittington, 200…p. 155)
Strategy & Stakeholder Analysis
Stakeholder Mapping: The power/interest matrix
• Stakeholder mapping identifies stakeholder expectations and power and helps in
understanding political priorities
➢We can use stakeholder mapping in different ways to gain an understanding of stakeholder
influence
➢For this course, our stakeholder mapping is to identify stakeholder expectations and power
and help us in understanding political priorities. This mapping underlines the importance of
two issues:
1. How interested each stakeholder group is in impressing its expectations on the
organisation’s purposes and choice of strategies.
2. Whether stakeholders have the power to do so
• Understanding these helps with managing and communicating with each stakeholder
• The next slide for the stakeholder-interest grid
(E.g., Burdford, 2012, p. 56)
Fig.5
Strategy & Stakeholder Analysis
1.
Low power/low interest
➢ They are the easiest group to keep informed and least important to the project. Monitor
this group for changes in their power or interest
2.
High power/low interest
➢ Stakeholders with high power and low interest can be passive. They stay away from the
project until something happens to change their interest, making them key stakeholders.
Engage and consult with these stakeholders. Strive to keep them satisfied, meet their
needs, and keep them informed.
3.
Low power/high interest
➢
4.
These are project supporters or project ambassadors. Keep them involved in and informed
about the project. Albeit, they have low power, they can influence the key stakeholders
High power/high interest
These are the people you must make the greatest effort to fully engage
Strategy & Stakeholder Analysis
Stakeholder mapping might help in understanding better some of the following issues:
➢ In determining purpose and strategy, which stakeholder expectations need to be most
considered?
➢ Whether the actual levels of interest and power of stakeholders properly reflect the
corporate governance framework within which the organisation is operating, as in the
examples above (institutional investors, community groups).
➢ Who the key blockers and facilitators of a strategy are likely to be and how this could be
responded to – for example, in terms of education or persuasion.
➢ Whether repositioning of certain stakeholders is desirable and/or feasible. This could be
to lessen the influence of a key player or, in certain instances, to ensure that there are
more key players who will champion the strategy (this is often critical in the public
sector context).
➢ Maintaining the level of interest or power of some key stakeholders may be essential.
For example, public ‘endorsement’ by powerful suppliers or customers may be critical to
the success of a strategy. Equally, it may be necessary to discourage some stakeholders
from repositioning themselves
Strategy & Stakeholder Analysis
Group Class Exercise (30 minutes)
In groups of 5, pick any organization of your choice and decide on a
strategy that has become necessary to be implemented. Perform
stakeholder mapping in accordance with the implementation of this
strategy. You are to present your stakeholder mapping to the whole
class
Strategy & Stakeholder Analysis
Power:
➢ It is an undisputable fact that, in most organisations, power will be unequally shared between the
various stakeholders.
➢ Power is the ability of individuals or groups to persuade, induce or coerce others into following
certain courses of action
➢ This is the mechanism by which one set of expectations will influence strategic development or
seek compromise with others
➢ There are many different sources of power. On the one hand, there is power that people or groups
derive from their position within the organisation, the resources or know-how they control, and
through the formal corporate governance arrangements.
➢ Stakeholders may also have power by other means (see Fig. 4 below). This Figure 4 can be used to
understand how powerful each stakeholder is in influencing a particular strategy (as part of
stakeholder mapping).
Sources & Indicators of Power
Fig.7
Source: Johnson, Scholes & Whittington, 2008, p.161
Stakeholder Mapping
➢ The relative importance of these sources will vary over
time. Indeed, major changes in the business environment
can significantly shift the power balance between
organisations and their stakeholders.
▪ For example, consumers’ knowledge of different companies’ offerings
through Internet browsing has increased their power considerably as they
compare different offerings and reduce their traditional loyalty to a
particular supplier. Deregulation and ‘citizen empowerment’ have required
public service organisations to adopt more customer focused strategies.
Strategy & Stakeholder Analysis
❖It is also useful to understand the power held by external
stakeholders. The indicators of power here are slightly different:
1) The status of an external stakeholder can often be inferred by the speed
with which the company responds.
2) Resource dependence in terms of the relative size of shareholdings or loans,
or the proportion of a company’s business tied up with any one customer,
or a similar dependence on suppliers. A key indicator could be the ease with
which a supplier, financier or customer could switch or be switched at short
notice.
1) Symbols are also valuable clues about power. For example, whether the
management team wine and dine with a customer or supplier, or the level
of person in the company who deals with a particular supplier.
Strategy & Stakeholder Analysis
Stakeholder Commitment:
As a project manager, or change agent, or strategy developer
and implementer, how can you stimulate, develop and sustain
stakeholder commitment throughout the project life cycle?
Strategy & Stakeholder Analysis
Fig.6
ORGANIZATIONAL PURPOSES: VALUES,
MISSION, VISION & OBJECTIVES
What Does Strategy-Making, StrategyExecuting Process Entail?
The process of crafting and executing a company’s strategy is an ongoing,
continuous process consisting of five interrelated stages:
1. Developing a strategic vision that charts the company’s long-term direction, a mission
statement that describes the company’s purpose, and a set of core values to guide the
pursuit of the vision and mission.
2. Setting objectives for measuring the company’s performance and tracking its progress
in moving in the intended long-term direction.
3. Crafting a strategy for advancing the company along the path management has
charted and achieving its performance objectives.
4. Executing the chosen strategy efficiently and effectively.
5. Monitoring developments, evaluating performance, and initiating corrective
adjustments in the company’s vision and mission statement, objectives, strategy, or
approach to strategy execution in light of actual experience, changing conditions, new
ideas, and new opportunities.
The Strategy-Making, Strategy-Execution Process
Organizational Purposes: Values, mission, vision & objectives
Corporate Values:
➢Core values are the underlying principles that guide an organisation’s
strategy.
▪ For example, emergency services such as ambulance and the fire brigades have
an overriding commitment to saving life that employees are committed to the
extent that they will break strike action or risk their own lives to attend
emergencies when life is threatened. What is your company’s corporate value?
▪ Jim Collins and Jerry Porras have argued that the long-run success of many US
corporates – such as Disney, General Electric or 3M – can be attributed (at least
in part) to strong core values. Could this be said of any company/organization in
Ghana?
Organizational Purposes: Values, mission, vision & objectives
Corporate Values:
➢An organization risks some loses or damages to reputation and even existence if
its public statements of corporate values are not strictly adhered to.
➢It is also important to distinguish between the core values expressing the way
the organization is, as distinct from those to which the organisation wishes to
aspire.
➢Unless this distinction is clear there is room for considerable misunderstanding
and cynicism about statements of corporate values. In either case such
statements may be concerned with aspects of corporate social responsibility .
Organizational Purposes: Values, mission, vision & objectives
Mission and Vision Statements:
➢Whilst corporate values could be regarded as the backcloth and set boundaries within
which strategies are developed, a mission statement and a vision statement are
typically more explicitly concerned with the purpose of an organisation in terms of its
strategic direction.
➢A mission statement aims to provide employees and stakeholders with clarity about the
overall purpose and raison d’être of the organisation. It therefore has to do with building
understanding and confidence about how the strategy of the organisation relates to that
purpose.
➢A vision statement is concerned with what the organisation aspires to be. Its purpose is
to set out a view of the future so as to enthuse, gain commitment and stretch
performance. Quickly google the vision statements of any two Ghanaian companies
and compare whether they have any future orientation.
Values, Mission, Vision and Corporate Objectives
❑Although both mission and vision statements became widely adopted by the
early 2000s, many critics regard them as bland and wide ranging.
❑However, arguably if there is substantial disagreement within the organisation or
with stakeholders as to its mission (or vision), it may well give rise to real problems in
resolving the strategic direction of the organisation
❑So, given the political nature of strategic management, they can be a useful means of
focusing debate on the fundamentals of the organisation.
Distinction Between a Company’s Strategic Vision & Mission
To be well worded, a company mission
statement must employ language specific
enough to distinguish its business makeup
and purpose from those of other enterprises
and give the company its own identity.
Organizational Purposes: Values, mission, vision & objectives
Objectives:
➢Objectives are statements of specific outcomes that are to be achieved.
➢They are statements of important measurable outcomes
➢Objectives are set at both the corporate and business unit levels of the firm and are
expressed in financial terms
➢They could be the expression of desired sales or profit levels, rates of growth,
dividend levels or share valuations.
➢Nevertheless, organisations may also set other objectives such as market-based
objectives, many of which are quantified as targets – such as market share, customer
service, repeat business and so on.
STAGE 2: Setting Objectives
LO 2: The importance of setting both strategic & financial objectives
➢Concrete, measurable objectives are managerially valuable for three
reasons:
(1) They focus organizational attention and align actions throughout the
organization,
(2) they serve as yardsticks for tracking a company’s performance and
progress, and
(3) they motivate employees to expend greater effort and perform at a high
level.
STAGE 2: Setting Objectives
LO 2: The importance of setting both strategic & financial objectives
➢The managerial purpose of setting objectives is to convert the vision and mission into specific
performance targets
➢Objectives reflect management’s aspirations for company performance in light of the industry’s
prevailing economic and competitive conditions and the company’s internal capabilities.
➢Well-stated objectives must be (SMART): specific, quantifiable or measurable, and challenging,
attainable or achievable, realistic, and must contain a deadline for achievement (i.e., timebound)
As Bill Hewlett, cofounder of Hewlett-Packard, shrewdly observed,
“You cannot manage what you cannot measure. . . . And what gets measured gets
done.
Note: Objectives are an organization’s performance targets—the specific results
management wants to achieve.
Organizational Purposes: Values, mission, vision & objectives
Three Related Issues Managers Need to Consider with Respect to
Setting Objectives:
1. Objectives and measurement – Objectives must be quantifiable and
measurable. Some argue that objectives might not make any sense unless they
are measurable. But some qualitative-like objectives may also be needed
❖Specific quantified objectives are required in certain times, for example
when urgent action is needed and it becomes essential for management
to focus attention on a limited number of priority requirements – as in a
turnaround situation.
❖In other circumstances – for example, in trying to raise the aspirations of
people in the organisation – more attention needs to be paid to
qualitative statements of purpose such as mission or vision statements.
Organizational Purposes: Values, mission, vision & objectives
Three Related Issues Managers Need to Consider with Respect to Setting
Objectives:
2. Objectives and control.– A problem that may recur is that managers and
employees ‘lower down’ in the hierarchy might not be clear as to how their day-today work contributes to the achievement of higher level of objectives. Share your
experiences with us on this in relation to where you work.
➢This could be fixed in principle by a ‘cascade’ of objectives - defining a set of
detailed objectives at each level in the hierarchy.
➢Doing this requires consideration to be given to a trade-off: how to achieve
required levels of clarity on strategy without being over-restrictive in terms of
the latitude people have. There is evidence, for example, that innovation is
stymied by over-restrictive target setting and measurement.
Organizational Purposes: Values, mission, vision & objectives
Three Related Issues Managers Need to Consider with Respect to Setting
Objectives:
3. Simple rules.– Managers need to come up with simple rules to clarify the few
overarching objectives that are required to be met, especially in organizations in
which innovation and flexibility are important. But flexibility and latitude should be
permitted in how they are accomplished.
➢Research by Kathy Eisenhardt and her colleagues has started to establish the
nature of these simple rules. See the summary of these rules in table 1 below
they identify as important in organisations facing fast-changing environments;
and gives some examples of how they take form and their effects.
➢The suggestion is that the number of rules does not need to be many to result in
consistent patterns of behaviour.
Simple Rules
Stage 3: Crafting a Strategy
Stage 3: Crafting a Strategy
LO 3: Why the strategic initiatives taken at various organizational levels must be tightly
coordinated to achieve companywide performance targets.
➢the task of stitching a strategy together entails addressing a series of “hows”: how to attract
and please customers, how to compete against rivals, how to position the company in the
marketplace, how to respond to changing market conditions, how to capitalize on attractive
opportunities to grow the business, and how to achieve strategic and financial objectives.
➢Astute entrepreneurship is called for in choosing among the various strategic alternatives
and in proactively searching for opportunities to do new things or to do existing things in
new or better ways.
➢The faster a company’s business environment is changing, the more critical it becomes for
its managers to be good entrepreneurs in diagnosing the direction and force of the changes
under way and in responding with timely adjustments in strategy
Orchestrated by the CEO and other
senior executives.
Corporate Strategy
(for the set of businesses as a whole) How to
gain advantage from managing a set of
businesses
Two-Way Influence
Orchestrated by the senior executives
of each line of business, often with
advice from the heads of functional
areas within the business and other key
people.
Business Strategy
(one for each business the company has
diversified into). How to gain and sustain a
competitive advantage for a single line of
business
Two-Way Influence
Orchestrated by the heads of major
functional activities within a particular
business, often in collaboration with
other key people.
Functional Area Strategies
(within each business) How to manage a
particular activity within a business in ways that
support the business strategy
Two-Way Influence
Orchestrated by brand managers, plant
managers, and the heads of other
strategically important activities, such as
distribution, purchasing, and Website
operations, often with input from other
Operating Strategies
(within each functional area)
How to manage activities of strategic
significance within each functional area, adding
detail and completeness
In the case of a
single-business
company, these
two levels of the
strategy-making
hierarchy merge
into one level—
Business
Strategy—that is
orchestrated by
the company’s
CEO and other
top executives.
CORPORATE GOVERNANCE: THE ROLE OF THE BOARD OF DIRECTORS,
TOP MANAGEMENT, OTHER MANAGERS & EMPLOYEES IN THE
STRATEGY CRAFTING, STRATEGY-EXECUTING PROCESS
Who’s Involved with Strategic Management?
• Strategic management is more than the responsibility of an
organization’s top managers
• People at all levels of the organization play a role in strategy
• Developing it
• Implementing it
• Changing it
The Board of Directors
• Usually an elected group that represents a company’s shareholders
• They have a legal obligation to represent and protect the interests of
shareholders through corporate governance
• In the past, board participation was viewed as approving strategies designed
by management
• With increasing shareholder activism, boards are more involved in the
strategic process
Typical Board Responsibilities
• Review and approve strategic goals and plans
• Review and approve organization’s financial standards and policies
• Ensure the integrity of organization’s financial controls and reporting
system
• Approve an organizational philosophy
• Monitor organizational performance and regularly review
performance results
Typical Board Responsibilities (Cont.)
• Select, and compensate top level managers
• Develop management succession plans
• Review and approve capital allocations and expenditures
• Monitor relations with shareholders and other key stakeholders
Typical Board Responsibilities (Cont.)
In Ghana, the Companies code 1963 (Act 179) makes
provision for the appointment of directors, directors’
meeting, directors’ power and their limitations, duties of
directors, liabilities of directors and the enforcement of the
duties of directors.
The Role of Top Management
• Responsible for every decision and outcome, top management plays a
most significant role in strategic management process
• Top management includes C-Suite level officers, including
– CEO, Chief Executive Officer
– COO, Chief Operating Officer
– CFO, Chief Finance Officer
– CIO, Chief Information Officer
Other Managers and Organizational Employees
• Managers and employees at all levels have strategic responsibilities
that include:
• Strategy implementation, putting strategies into action
• Strategy evaluation, determining if the strategies are working
• Adjust the strategies to achieve desired ends
Although senior managers have the lead responsibility for crafting and executing a company’s
strategy, it is the duty of a company’s board of directors to exercise strong oversight and see
that management performs the various tasks involved in each of the five stages of the
strategy-making, strategy-executing process in a manner that best serves the interests of
shareholders and other stakeholders.
1. Oversee the company’s financial accounting and financial reporting practices.
2. Critically appraise the company’s direction, strategy, and business approaches.
3. Evaluate the caliber of senior executives’ strategic leadership skills
4. Institute a compensation plan for top executives that rewards them for actions and results
that serve shareholder interests.
Key Insight: Effective corporate governance requires the board of directors to
oversee the company’s strategic direction, evaluate its senior executives, handle
executive compensation, and oversee financial reporting practices.
Every corporation should have a strong independent board of directors that
(1) is well informed about the company’s performance,
(2) guides and judges the CEO and other top executives,
(3) has the courage to curb management actions the board believes are inappropriate or
unduly risky,
(4) certifies to shareholders that the CEO is doing what the board expects,
(5) provides insight and advice to management, and
(6) is intensely involved in debating the pros and cons of key decisions and actions.
Key Insight: Boards of directors that lack the backbone to challenge a strong-willed or
“imperial” CEO or that rubber-stamp almost anything the CEO recommends without
probing inquiry and debate abdicate their fiduciary duty to represent and protect
shareholder interests.