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An Introduction To Stakeholder Theory


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An Introduction To Stakeholder Theory

  1. 1. Stakeholder theory Stakeholder management and strategic planning
  2. 2. Two broad stakeholder theories <ul><li>Friedman </li></ul><ul><li>Freeman </li></ul>
  3. 3. Theory one <ul><li>Milton Friedman – focus on the shareholders as they only stakeholders who matter. The business of business is making a profit and building shareholder value the prime purpose. </li></ul>
  4. 4. Theory two <ul><li>* The quickest way to destroy shareholder value is to ignore stakeholders </li></ul>
  5. 5. Where did it start? <ul><li>R. Edward Freeman (1984) </li></ul><ul><li>Stakeholder theory is about identifying the groups who are stakeholders in a corporation and need to be managed </li></ul>
  6. 6. Why are stakeholders important? <ul><li>Corporations and organisations operate with the consent of the community. </li></ul><ul><li>Communities comprise groups of stakeholders </li></ul><ul><li>Winning the consent of these stakeholders provides a licence to operate </li></ul>
  7. 7. Who are stakeholders? <ul><li>The directly involved: </li></ul><ul><li>- investors </li></ul><ul><li>- employees </li></ul><ul><li>- suppliers </li></ul><ul><li>- customers </li></ul>
  8. 8. Other stakeholders <ul><li>Government </li></ul><ul><li>Political parties </li></ul><ul><li>Trade unions </li></ul><ul><li>Community groups </li></ul><ul><li>NGOs </li></ul><ul><li>Plant neighbours </li></ul>
  9. 9. A key question for you <ul><li>Is the media a stakeholder? </li></ul>
  10. 10. Why pay attention to stakeholders? <ul><li>Moral or philosophical reasons – corporate social responsibility </li></ul><ul><li>Practical reasons – licence to operate </li></ul><ul><li>Strategic planning reasons – identifying opportunities and threats </li></ul>
  11. 11. Some key management questions <ul><li>Why should specific companies pay attention to stakeholders? </li></ul><ul><li>Who are the organisation’s stakeholders? How do we identify them? </li></ul><ul><li>What is the basis for their interest/legitimacy? </li></ul><ul><li>What do they want? </li></ul>
  12. 12. Some key management questions <ul><li>Which stakeholders are most important? How do we set priorities? </li></ul><ul><li>Do we need separate strategies for different stakeholder groups? </li></ul><ul><li>Can we reach all stakeholder groups? </li></ul><ul><li>How do we balance stakeholder interests? </li></ul>
  13. 13. Managing stakeholders – a strategic context <ul><li>The quality of relationships with stakeholders are the key determinant of corporate reputation </li></ul><ul><li>Stakeholder management is the core of public affairs management </li></ul><ul><li>Symmetric and asymmetric communication theory is relevant to stakeholder management </li></ul>
  14. 14. Managing stakeholders – an communications approach <ul><li>Identify the stakeholders </li></ul><ul><li>Identify the relationship you want with them </li></ul><ul><li>Identify the urgency/timing need for communicating with them </li></ul><ul><li>Identify their information needs </li></ul><ul><li>Identify the best communication channel </li></ul>
  15. 15. Some practical examples <ul><li>Employees – face to face as frequently as possible </li></ul><ul><li>Investors – as laid down by ASX/ASIC regulations </li></ul><ul><li>Governments – building up goodwill for the future </li></ul><ul><li>The media – when and where appropriate </li></ul>
  16. 16. Managing stakeholders – a PA and issues management approach <ul><li>Craig Fleisher’s emerging PA model: </li></ul><ul><li>Managing PA and issues management on a year round process </li></ul><ul><li>Cultivating and maintaining enduring stakeholder relationships </li></ul><ul><li>Influencing stakeholders using refined information </li></ul><ul><li>Managing the grassroots </li></ul>
  17. 17. Fleisher model <ul><li>Communicating in an integrated manner </li></ul><ul><li>Continually aligning values and strategies with the public’s interests </li></ul><ul><li>Improving external relationships using contemporary management practices </li></ul>
  18. 18. Using PA planning techniques <ul><li>Identify stakeholder management needs as an integral part of: </li></ul><ul><li>Issues monitoring and environmental scanning </li></ul><ul><li>Analysing threats and being sceptical </li></ul><ul><li>Using standard analytical tools: SWOT, PEST, Porter model </li></ul>
  19. 19. Planning techniques <ul><li>Undertaking scenario planning: What ifs? </li></ul><ul><li>Constantly testing internal perception against external realities </li></ul><ul><li>Creating risk, opportunity and issues profile </li></ul><ul><li>Producing issues maps and stakeholder matrices </li></ul>
  20. 20. Setting priorities <ul><li>Categorise stakeholders by: </li></ul><ul><li>Stakeholders directly interested in your success </li></ul><ul><li>Allies and potential allies </li></ul><ul><li>Entrenched opponents </li></ul><ul><li>Independent monitors and opinion formers </li></ul><ul><li>Uninvolved </li></ul>
  21. 21. Management strategies <ul><li>Directly interested – recruit as advocates </li></ul><ul><li>Allies – encourage </li></ul><ul><li>Opponents – neutralise </li></ul><ul><li>Independents – maintain dialogue </li></ul><ul><li>Uninvolved – monitor and anticipate </li></ul>
  22. 22. Some conclusions <ul><li>Two theories – empirically one wrong and one right </li></ul><ul><li>Focus on identifying stakeholders and why they are important </li></ul><ul><li>Integrate stakeholder management into strategic planning </li></ul><ul><li>Set stakeholder priorities </li></ul>