Chapter 13 Stakeholders

Chapter Outline STAKEHOLDERSINTERNALCONNECTEDEXTERNALCONFLICT

DefinitionA stakeholder is a group or individual, who has an interest in what the organisation does. Or an expectation of the organisation. Can be categorised into 3 groups:InternalConnectedExternal

Internal StakeholdersAre intimately connected to the organisation, and their objectives influence how the org is run

StakeholderNeed/ExpectationExampleEmployeesPay, working conditions, job securityIf workers are to be given more responsibility, they will expect increased payManagers / DirectorsStatus, pay, bonus, job securityIf growth is going to occur, the managers will want increased profits, leading to increased bonuses

Connected StakeholdersRefers to those parties who have a contractual relationship with the organisation

StakeholderNeed/ExpectationExampleShareholdersSteady flow of income, possible capital growth & the survival of the bizRise in dividend streamCustomersSatisfy customer needs through value-for-money p/sIncreases in quality & price, may lead to customer dissatisfaction

Connected Stakeholders

StakeholderNeed/ExpectationExampleSuppliersPaid promptlyDecisions which delay payment to suppliers to ease cash flow. Suppliers may cease supplying goodsFinance providersAbility to repay the finance incl. interest, security of investmentFirms ability to generate cash

External Stakeholders

StakeholderNeed/ExpectationExampleCommunity at largeGeneral public esp. when their lives are affected by org decisionsLocal residents attitude towards out-of-town shopping centresEnvironmental pressure groupsOrg does not harm external environmentAirport wants to build a new runway - objection

External Stakeholders

StakeholderNeed/ExpectationExampleGovernmentCompany activities are central to the success of an economy. Meet legislation (OHS)Actions of companies could break the lawTrade unionsTaking an active part in decision-making processUnion consultation if org decides to close a specific department

Another approachPrimary (internal and connected, i.e. those who have a contractual relationship with the organisation) vs. Secondary stakeholders

Stakeholder Conflict

StakeholderConflictEmployees vs managersJobs/wages vs bonusCustomers vs S/holdersProduct quality vs profit/dividendsPublic vs S/holdersEffect on environment vs profit/dividendsManagers vs S/holdersGrowth vs independence

Mendelows power-interest matrixLevel of interestLow High Low High Level of Power

Minimal effortKeep informedKeep satisfiedKey players

Stakeholder mappingis used to assess the significance of stakeholder groups with implications for:Framework of corporate governanceKey blockers and facilitators of change must be identifiedTry to reposition certain stakeholders and discourage others form repositioning themselves, depending on their attitudes

Each groups has 3 basic choicesLoyalty: They can do as they are toldExit: E.g. by selling shares, or getting a new job.Voice: They can stay and try to change the system. Those who choose to voice are those who can, to varying degrees, influence the org. Influence implies a degree of power and willingness to exercise it.

Strategic values of stakeholdersOrg can make strategic gains from managing stakeholder relationshipsE.g.Employee and customer loyaltyContinuity and stability in relationships with employees, customers and suppliers

Measuring stakeholder satisfaction

Stakeholder groupMeasureEmployeesStaff turnover, pay and benefits relative to market rate, job vacanciesGovernmentPollution measures; promptness of filing annual returns; accident rate; energy efficiencyDistributorsShare of joint promotions paid for; rate of running out of inventory

Chapter Summary STAKEHOLDERSINTERNALCONNECTED & EXTERNALCONFLICTEmployeesDirectorsConnectedS/holdersCustomersSuppliersFinanciersExternalCommunityPressure groupsGovernmentTrade unionsResolutionNature

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