Chapter 5
Strategic Management and Corporate Public Affairs
LEARNING OUTCOMES
After studying this chapter, you should be able to:
1.
2.
3.
4.
5.
6.
7.
Describe the concept of corporate public policy and relate it to strategic management.
Articulate the four major strategy levels and explain enterprise-level strategy.
Explain corporate social performance reporting.
Identify the major activities of public affairs departments.
Highlight key trends with respect to the public affairs function.
Link public affairs with the strategic management function.
Indicate how public affairs may be incorporated into every manager’s job.
TEACHING SUGGESTIONS
INTRODUCTION – This chapter provides a broad overview of how social, ethical, and public
issues fit into the general strategic management processes of the organization. Corporate public
policy, that part of management decision making that encompasses these issues, is discussed.
Corporate social performance reporting also is examined. Finally, the chapter covers public
affairs management as the formal organizational approach companies use to deal with these
issues. The overarching goal of the chapter is to focus on planning for the turbulent social and
ethical stakeholder environment currently existing.
KEY TALKING POINTS – After laying the groundwork and introducing concepts necessary for
the study of (1) business and society in Part 1 of the textbook and (2) corporate governance in
Part 2 of the textbook, this chapter provides the initial steps in applying those concepts to
specific issues. The authors provide an insight into how corporations currently deal with the
issues that lie at the intersection of business operations and social issues. Students should find
this chapter quite interesting as more and more companies are employing corporate public policy
as part of its strategic management process. Furthermore, it provides information about a
potentially fascinating and important career path. As the authors show by relating corporate
public policy to the firm’s strategic planning process, public policy professionals can play a key
role in setting the strategic direction for the firm, working in concert with a firm’s board of
directors and other members of top management. Playing a role in this process gives the public
policy staff a significant say in both the firm’s values and operations, and the role it plays in its
society. Another important facet of the chapter is its emphasis on the proactive position firms
now take toward social issues. Following the evolution of corporate social responsibility to
responsiveness to performance, corporate public affairs departments are at the cutting edge of
determining how the firm will respond to current social issues and how the firm’s report their
efforts in those areas. The better public affairs departments actively scan the environment
specifically to identify looming issues before they become critical.
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Chapter Notes
PEDAGOGICAL DEVICES – In this chapter, instructors may utilize a combination of:
Cases:
The Body Shop International PLC (1998-2007)
Coke and Pepsi in India: Issues, Ethics, and Crisis Management
Chiquita: An Excruciating Dilemma Between Life and Law
The Betaseron Decision (A)
Ethics in Practice Cases:
Not Much Range for this Manager
Search the Web:
Enterprise-Level Strategy in Action http://www.microsoft.com/about/corporatecitizenship/citizenship/default.mspx.
The Body Shop and Values Reporting –
http://www.thebodyshopinternational.com/Values+and+Campaigns/Our+Principles+and
+Policies/.
Public Affairs Council – http://www.pac.org/index.shtml
Video clips:
Socially Responsible Investing
Protesting Nike Sweatshops
Anita Roddick and The Body Shop
Boeing Going Green
Boeing 787 Dreamliner
Power Point slides:
Visit http://academic.cengage.com/management/carroll for slides related to this and other
chapters.
LECTURE OUTLINE
I.
THE CONCEPT OF CORPORATE PUBLIC POLICY
A. Corporate Public Policy Defined
B. Corporate Public Policy and Strategic Management
C. Relationship of Ethics to Strategic Management
II.
FOUR KEY STRATEGY LEVELS
A. Four Strategy Levels Described
B. Emphasis on Enterprise-Level Strategy
1. Importance of Core Values
2. Other Manifestations of Enterprise-level Strategic Thinking
III.
THE STRATEGIC MANAGEMENT PROCESS
A. Strategic Corporate Social Responsibility
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B.
C.
Chapter Notes
Social Auditing and Social Performance Reporting
1. Development of the Social Audit
Corporate Social Performance Reporting
1. Global Reporting Initiative
IV.
PUBLIC AFFAIRS
V.
PUBLIC AFFAIRS AS A PART OF STRATEGIC MANAGEMENT
VI.
THE CORPORATE PUBLIC AFFAIRS FUNCTION TODAY
A. Public Affairs Activities and Functions
1. Activities and Functions
2. Influence of Public Affairs on Corporate Strategy
VII. IMPORTANT PUBLIC AFFAIRS CONCEPTS TODAY
A. Looking Out and Looking In
B. Buffering and Bridging
C. Tools and Techniques
D. Ethical Guidelines
E.
International Public Affairs Continues to Grow
1. Competencies Needed
VIII. PUBLIC AFFAIRS STRATEGY
A. Design of External Affairs and Corporate Social Performance
B. Business Exposure and External Affairs Design
IX.
INCORPORATING PUBLIC AFFAIRS INTO ALL MANAGERS’ JOBS
A. Make Public Affairs Relevant to All Managers
B. Help Managers Develop a Sense of Ownership
C. Make It Easy for Operating Managers
D. Show How Public Affairs Makes a Difference
X.
FUTURE OF CORPORATE PUBLIC AFFAIRS IN THE TWENTY-FIRST CENTURY
XI.
SUMMARY
SUGGESTED ANSWERS TO DISCUSSION QUESTIONS
Students should recognize that their answers to these discussion questions should be well
reasoned and supported with evidence. Although some answers will be more correct than others,
students should be aware that simplistic answers to complex questions, problems, or issues such
as these will never be “good” answers.
1.
Corporate public policy is an integral part of the firm’s overall strategic management
process. Strategic management is concerned with the firm’s identification of corporate
Business and Society
Chapter Notes
purpose and positioning in its operating environment, which is determined by the firm’s
top management. The company’s public policy, or its position regarding public, social,
global and ethical issues, is a significant part of its overall purpose and position in its
operating environment. Therefore, the firm’s public policy must be a component part of its
strategy in order to proactively address the myriad of issues that can and will confront the
firm in these areas.
2.
The enterprise (or societal) level of strategy is the one most directly concerned with social,
ethical, and public issues. This is the level that asks, and attempts to answer, what role the
business plays in society and what the firm stands for. This level encompasses the
strategic thinking that is necessary to address social, ethical and public issues. Corporate
governance is an important topic at this level, as boards of directors should provide
leadership for the firm’s enterprise-level strategy. This strategy often is manifested not
only in a firm’s stated vision, mission, values statements and/or codes of conduct, but the
implementation and effectiveness of such items. Furthermore, this strategy also includes
the extent to which firms employ board and senior-level committees, including, among
others, public policy/issues committees, ethics committees, governance committees, social
audit committees, and corporate philanthropy committees.
3.
The textbook presents six steps in the strategic management process (which boards and top
management are responsible for activating): 1) goal formulation, 2) strategy formulation,
3) strategy evaluation, 4) strategy implementation, 5) strategic control, and 6)
environmental analysis. It is important to note that these steps are interactive and not
sequential. Although listed last, environmental analysis provides “raw material” for each
of the other steps.
4.
A social audit is a systematic attempt to identify, measure, monitor, and evaluate the firm’s
performance with respect to its social efforts, goals, and programs. It can operate as a tool
for strategic control by comparing the results of the firm’s efforts to its social goals,
assuming of course, that the firm has included setting social goals in its planning process.
To the extent that the firm’s actual performance doesn’t meet its stated standards, a firm
can take corrective action to bring the two into alignment. Many companies currently
issue reports describing their social performance, but these are not social audits as their
methodology often is less rigorous. These may be called, among other things, CSR
reports, social performance reports and corporate citizenship reports. The goal of these
reports is to make various stakeholders aware of a firm’s various social programs and
activities. Social performance reports have become popular as (1) society has come to
expect firms to document their achievement in these areas, (2) the reports can increase the
competitive position of a firm, and (3) globalization drives the issuance of such reports.
5.
Public affairs (PA) focuses on the formalization and institutionalization of corporate public
policy, which includes governmental relations, corporate communications and issues and
crisis management. The Public Affairs Council defines PA as “the management function
responsible for interpreting the corporation’s noncommercial environment and managing
the corporation’s response to that environment.” Public relations (PR), on the other hand,
usually focus on communications with external publics. There is confusion because PA,
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Chapter Notes
the more recently developed department, often evolved out of the PR office. There has
been significant overlap in the past, and their separate identities are still forming. Further,
confusion also exists because some (1) public relations executives changed their titles, but
not their functions, to public affairs and (2) public affairs departments embrace public
relations as part of their responsibilities.
6.
The easy answer to why international public affairs is growing is because global business
operations are increasing rapidly. As multinational corporations enter more and more
international markets, they must be ready to deal with many different issues
simultaneously. In addition to corporate expansion into new markets, the following also
have contributed to the expansion of international public affairs: changes in sales in
existing markets, changes in CEO priorities, changes in regulatory burden, and acquisition
of new business units.
7.
A collaborative/problem-solving strategy emphasizes long-term relationships with
stakeholders and finding mutually beneficial solutions to problems. An
individual/adversarial external affairs strategy emphasizes the primacy of the firm over its
stakeholders, and generally denies claims against it, leading to adversarial relationships.
The collaborative model is much more effective, as evidenced by the corporate social
performance rankings of companies who employ the collaborative model versus the
rankings of those companies who employ the individual/adversarial model.
8.
Because PA management is very complex and has far-reaching effects on the firm, it
makes sense to inculcate a PA perspective throughout the organization. The textbook
suggests four strategies for doing this: 1) make PA truly relevant to managers, 2) help
managers develop a sense of ownership in PA, 3) show how PA makes a difference, and 4)
make it easy for managers. I have listed the four strategies in my order of importance.
Proper motivation is a necessity for managers to get involved in PA—making it relevant to
them and getting them to “own” the issues goes a long way toward that goal. If managers
are properly motivated, making it easy for them becomes less important. However, if the
PA system appears nebulous and too difficult to implement, those attempting to implement
PA strategies will meet resistance and resentment from coworkers. Consequently, ease of
implementation of PA strategies cannot be overlooked.
GROUP PROJECT
Divide students into groups of four to five students. Have each group review the current social
performance report of a different company. Students should compare the current social
performance report with the most recent social performance report issued by the company prior
to the current report. Students should determine what the company is trying to achieve with the
issuance of its corporate social performance reports. Students should compare the two reports to
determine whether the company is merely reporting on its activities or showing improvement
and actions taken toward stated goals. Students should prepare a short presentation for the class
indicating the successes and failures of the company with regards to social performance.
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Chapter Notes
Students also should assess whether the company is effectively integrating corporate public
policy as part of its strategic management process.