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Session 2: Stakeholder Management

Prof. Nathalie CRUTZEN

HEC-Management School of the University of Liege (Belgium)June 2012

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M. Friedman vs E. Freeman

Milton Friedman:

http://www.youtube.com/watch?v=RWsx1X8PV_A&feature=rela Edward Freeman: http://www.youtube.com/watch?v=bIRUaLcvPe8&playnext=1&list=PL4A0FC27E72ABA1A1&index=23Stakeholder vs Stockholder theoryhttp://www.youtube.com/watch?v=bQIKaOFB0b8

• Only responsibility = profit

• Only accountable to shareholders

• Only directed by shareholders’ interests

Responsibility = Profit, People &

Planet

Accountable to Society

Stakeholders’ interests taken into account

Stakeholders’ model

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Stakeholders

Definition: any individual or group which affects or is affected by the organization

Stakeholder management: Balancing the competing preferences or claims of specific stakeholders (SH)

How to find a “balance” – 3 criteria Power – how much can they influence the organization? Legitimacy – are their claims legitimate? actions

appropriate? Urgency – do their claims require immediate attention?

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Who are the stakeholders of a company ?

SHAREHOLDERS - STOCKHOLDERS

CONSUMERS

SUPPLIERS

LOCAL COMMUNITIES

http://www.arcelormittal.com/corp/news-and-media/multimedia-gallery/video-gallery/arcelorMittal-in-liberia

NGOs

MEDIA

http://www.youtube.com/watch?v=-gq15FEyi9A

EMPLOYEES

http://www.youtube.com/watch?v=Zkc9FOucT-Q

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Internal

Value Chain

ExternalExternalNGOs, communities, government, media, unions, banks,…

Value chainCustomers, suppliers

InternalEmployees, managers, shareholders

STAKEHOLDERS (Sabine Denis, 2012)MARKETPLACEInvestors & analystsLenders, debtors & insurersCustomers & ConsumersSuppliersBusiness partnersCompetitors

COMMUNITIESHost communitiesLocal neighboursMedia & Social NetworksGovernment & regulatorsOpinion LeadersSector & industry experts

ENVIRONMENTActivistsPeople without a voice

WORKSPLACEEmployeesTrade Unions

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Stakeholder management 3 approaches

Descriptive: legal requirement – "have to" deal with SH Instrumental / pragmatic: see SH as means to reach

performance goals – "makes business sense" Normative: the morally right thing to do – "should"

How? Identify stakeholders (map) Recognize the legitimacy of claims and issues Integrate opportunities and risks into strategic planning Develop internal SH management capability

Formalize relations communication strategy and tools Be pro-active, take initiatives (as opposed to reactive) Involve staff who have frequent SH relations in strategic planning Use, when feasible, a win-win negotiating approach

Tools Stakeholder mapping Issues and impact charts Priority table Influence grid

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Stakeholder management5 key questions

1. Who are our stakeholders? Stakeholder map

2. Which SH (demands) are “priority” in terms of:• Legitimacy, Power,

(Urgency)• Ability to help, ability to hurt,

and Likelihood of Acting

3. Which opportunities (potential cooperation) and threats (potential risks) do SH represent?

5. How to manage SH claims, relations?• Directly or indirectly, i.e., lobbying• Proactively or defensively• Negotiation strategy• Formalize SH relations within the

organization: centralized vs. decentralized

4. What are our responsibilities towards SH?• Economic• Legal• Ethical• Philanthropic

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Stakeholder Management Tools

• Several tools1. Stakeholder mapping (1)2. Issues and impact charts (3)3. Priority table (2)4. Influence grid (2)

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1. Typical stakeholder map

Firm

Government

Political groups Shareholder

sFinancial

institutionsSpecial interest groups, NGOs

Customers

Suppliers

Unions

Employees Media

Competitors

Consumer

groups

Trade assns.

Community

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ESC Rennes' stakeholders

ESCR

National government ministries

Accrediting bodies CCI

Financial institutions

Prospects

Students

Suppliers

Unions Employees

Media

Competitors

Companies

CGE - French bus. school

assn.

Local government

Alumni

Parents

International partners

French feeder schoolsManageme

nt

FacultyAdmin. staff

Program

Nationality

Associations

French partner schools

Issues?

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Mark and Spencer’s Stakeholders

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2. Issues and impactsSH Human

rightsTechnology implementation

Economic impact

Safety / social impact

Environmental impact

Proposed legislation

CustomersSuppliers

EmployeesRegulatorsUnions

NGOs

Investors

Unions

Media

How do sustainability issues affect specific stakeholders?

Does this group of stakeholders have an interest in and an impact on our activities in relation to this issue?

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3. Priority tableSH Ability to help

usAbility to hurt us

Likelihood of acting

Overall priority

Customers

Suppliers

Employees

Regulators

Unions

NGOs

Investors

Unions

Media

Score from 1 (least) to 5 (most)

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4. Influence Grid

LowLow

High

High

Supp

ort

Influence

EMPOWER

MONITOR

PARTNER

ENGAGE

Work together to achieve common goals

Influence their thinking

Enhance their influence

Track behavior and communications

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Something fishyCase study

You are a purchasing manager for a multinational food company specializing in the sale of fresh tuna and frozen fish products.

You have sub-contracted fishing boats using nets which, in addition to catching tuna, ensnare and kill dolphins.

Your office regularly receives scientifically-valid reports from government and environmental protection agencies about the depletion of the world’s oceans. One of them, the Marine Stewardship council (Fr.) keeps a close eye on your company’s operations and offers a sustainable fishing label which you really haven’t investigated.

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Something fishyCase study

Some of your fishing boats have physical confrontations with Greenpeace which oppose excessive fishing and the mistreatment of dolphins.

In addition, the media (video) draw regular attention to the plight of dolphins ensnared in nets.

Some of your customers, like the Auchan hyper market chain, have already taken a position, and you’ve lost their business. What if other retailers follow suit?

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Something fishyCase study - your turn!

Work in small groups for 30 mn. to analyze this situation

Identify major stakeholders (SH map) and their “priority”

Opportunities and risks How to manage stakeholders’ claims/relations?(Use SH map and influence grid tools)

More specifically, which strategy to use in dealing with Greenpeace? see video. Remember that Greenpeace is a large organization with its own issues.

Make recommendations

Be ready to present your analysis and recommendations Short PPT (5 min)

Click for video on Greenpeace warrior spirit

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Stakeholder managementKey points

Map your stakeholders Prioritize claims and issues in terms of legitimacy,

power, and urgency: Use the stakeholder influence grid to segment SH in terms

of support and influence

Consider opportunities and risks and integrate these into company objectives and strategy

Develop internal SH management capability Generally speaking, be pro-active, take initiatives Determine negotiation strategy with respect to each SH Formalize relations: communication strategy and tools For staff with frequent SH interactions

Train them in key issues and negotiation approaches Involve them in strategic decisions

Interactive Game on Stakeholders’ Theory

Objective Experience what it can be like to manage social

and environmental issues in a business To illustrate Session 2 This interactive game shows

How some decisions made by a firm may have an impact on various stakeholders and influence their satisfaction

And how stakeholders may have an impact on a firm

http://www.btplc.com/Responsiblebusiness/Ourstory/Interactivegames/BetterBusinessDilemmas/index.htm

Rules On the "big screen"

Evolution of the stakeholders’ satisfaction according to the "majority ": each group votes within some precise deadlines (simple majority)

By group Please, follow (and register!) the evolution of

your own decisions on your laptop

After several questions… General feedback Questions to groups