Chapter 13

Stakeholders

Chapter Outline

STAKEHOLDERS

INTERNAL CONNECTED EXTERNAL CONFLICT

Definition

• A 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:• Internal• Connected• External

Internal Stakeholders

Stakeholder Need/Expectation Example

Employees Pay, working conditions, job security

If workers are to be given more responsibility, they will expect increased pay

Managers / Directors

Status, pay, bonus, job security

If growth is going to occur, the managers will want increased profits, leading to increased bonuses

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

Connected Stakeholders

Stakeholder Need/Expectation Example

Shareholders Steady flow of income, possible capital growth & the survival of the biz

Rise in dividend stream

Customers Satisfy customer needs through value-for-money p/s

Increases in quality & price, may lead to customer dissatisfaction

Refers to those parties who have a contractual relationship with the organisation

Connected StakeholdersStakeholder Need

/ExpectationExample

Suppliers Paid promptly Decisions which delay payment to suppliers to ease cash flow. Suppliers may cease supplying goods

Finance providers

Ability to repay the finance incl. interest, security of investment

Firm’s ability to generate cash

External Stakeholders

Stakeholder Need/Expectation

Example

Community at large

General public – esp. when their lives are affected by org decisions

Local residents’ attitude towards out-of-town shopping centres

Environmental pressure groups

Org does not harm external environment

Airport wants to build a new runway - objection

External Stakeholders

Stakeholder Need/Expectation Example

Government Company activities are central to the success of an economy. Meet legislation (OHS…)

Actions of companies could break the law

Trade unions Taking an active part in decision-making process

Union consultation if org decides to close a specific department

Another approach

• Primary (internal and connected, i.e. those who have a contractual relationship with the organisation)

vs. • Secondary stakeholders

Stakeholder Conflict

Stakeholder Conflict

Employees vs managers Jobs/wages vs bonus

Customers vs S/holders Product quality vs profit/dividends

Public vs S/holders Effect on environment vs profit/dividends

Managers vs S/holders Growth vs independence

Mendelow’s power-interest matrix

Minimal effort Keep informed

Keep satisfied Key players

Level of interest

Low High

Low

High

Level of Power

Stakeholder mapping

• is used to assess the significance of stakeholder groups with implications for:– Framework of corporate governance– Key blockers and facilitators of change must

be identified– Try to reposition certain stakeholders and

discourage others form repositioning themselves, depending on their attitudes

Each groups has 3 basic choices

• Loyalty: They can do as they are told• Exit: 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 stakeholders

• Org can make strategic gains from managing stakeholder relationships

• E.g.– Employee and customer loyalty– Continuity and stability in relationships with

employees, customers and suppliers

Measuring stakeholder satisfaction

Stakeholder group Measure

Employees Staff turnover, pay and benefits relative to market rate, job vacancies

Government Pollution measures; promptness of filing annual returns; accident rate; energy efficiency

Distributors Share of joint promotions paid for; rate of running out of inventory

Chapter SummarySTAKEHOLDERS

INTERNAL CONNECTED & EXTERNAL CONFLICT

•Employees

•Directors

Connected

•S/holders

•Customers

•Suppliers

•Financiers

External

•Community

•Pressure groups

•Government

•Trade unions

ResolutionNature