Chapter 3: Stakeholder Management and Communication Corporate Communication: A Guide to Theory & Practice

Overview Introduction to the concept of stakeholders Overview of models used by organizations for communicating and collaborating with stakeholders Contemporary organizations realize they need to communicate with their stakeholders to develop and protect their reputations Came about in part because of government and international community promoted this perspective

Stakeholder initiatives Range of schemes and initiatives have developed at industry, national and transnational level UN Global Compact Initiative Global Reporting Initiative World Bank’s Business Partners for Development OECD’s Guidelines for Multinational Companies

Stakeholder Management Neo-classical theory: purpose of organizations is to make profits accountable to themselves and shareholders Socio-economic theory: other groups besides shareholders count accountability extends to groups considered to be important for the continuity of the organization and the welfare of society There is now widespread move away from the neo-classical theory and adoption of the stakeholder perspective.

Neo-classic model The organization is the centre of the economy – investors, suppliers and employees are contributing inputs (investment, resources, labour) Power lies with the corporation Benefits go to customers Contributors of inputs are compensated appropriately

Stakeholder model All groups or individuals with legitimate interest in an organization do so to obtain benefits No priority for one set of interests or benefits over another Recognises that organizations and various stakeholder groups are mutually dependent More groups are recognised Far more complex and dynamic picture emerges with this version Takes into account instrumental AND normative reasons for engaging with stakeholders

The nature of stakes and stakeholders Stakeholder: any group or individual who can affect or is affected by the achievement of the organization’s purpose and objectives (Freeman, 1984) Stake: ‘an interest or a share in an undertaking, [that] can range from simply an interest in an undertaking at one extreme to a legal claim of ownership at the other extreme’ (Carroll, A.B., 1996)

Types of stakes Types of stakes Description Example Equity stakes Held by those with direct ownership Shareholders, directors, minority interest owners Economic or market stakes Those who have an economic interest, but not an ownership interest Employees, customers, suppliers, competitors Influencer stakes Neither equity or economic stake but have interests Consumer advocates, environmental groups, trade organizations, government agencies Edward Freeman was among one of the first writers to describe stakeholders. (Freeman, 1984)

Types of stakeholders Type of stakeholder Description Example Primary Stakeholder Without their continued participation the organization cannot survive Employees Suppliers Consumers Secondary Stakeholder Can generally influence or affect, or are influenced or affected by the organization but are not engaged in financial transactions Do have a moral/normative interest Capacity to mobilize public opinion for or again organization Media Special interest groups

Alternative stakeholder conceptualization Contractual stakeholders Community stakeholders Customers Consumers Employees Regulators Distributors Government Suppliers Media Shareholders Local communities Lenders Pressure groups Clarkham, 1992

Benefits of stakeholder model To be a good citizen as an end in itself Employee morale Reputation of organization

CSR initiatives Direct outcome of shift in models Includes philanthropy, community involvement, ethical and environmentally friendly business practices Recognizes business needs to deliver wider societal value beyond shareholder/market value alone

Basic stakeholder identification analysis 1. Who are the organization’s stakeholders? 2. What are their stakes? 3. What opportunities and challenges are presented to the organization in relation to these stakeholders? 4. What responsibilities (economic, legal, ethical, and philanthropic) does the organization have to all its stakeholders? 5. In what way can the organization best communicate with and respond to these stakeholders and address these stakeholder challenges and opportunities?

Stakeholder salience model

The power–interest matrix ‘Key players’ need to be communicated with at all times ‘Keep informed’ need to have regular communication ‘Keep satisfied’ players are most challenging to maintain relations wit because they lack interest

Stakeholder Communication: From Awareness to Commitment

Organization–stakeholder communication models Examples of informational strategy are press releases, newsletters and reports on a company website Persuasive strategy works through campaigns, meetings and discussions with stakeholders to try to change and tune knowledge, attitudes or behaviour of stakeholders to be favourable. Includes corporate adverting and educational campaigns Dialogue strategy is when both parties engage in an exchange – focus is on mutual understanding and decisions Examples include active consultation

Characteristics of the ‘old’ and ‘new’ approaches to organization-stakeholder relationships

Collaboration and Engagement Focus on changing the relationship between the organization and its stakeholders from ‘management’ to ‘collaboration’ and from ‘exchange’ to ‘long-term relationships’. 'Collaboration’ implies a two-way symmetrical model of dialogue and consultation