Journal of Business Ethics (2006) 69:195–205 DOI 10.

1007/s10551-006-9085-6

Ó Springer 2006

The Role of Strategic Conversations with Stakeholders in the Formation of Corporate Social Responsibility Strategy

Morgan P. Miles Linda S. Munilla Jenny Darroch

ABSTRACT. This paper explores the role of strategic conversations in corporate social responsibility (CSR) strategy formation. The authors suggest that explicitly engaging stakeholders in the CSR strategy-making process, through the mechanism of strategic conversations, will minimize future stakeholder concerns and enhance CSR strategy making. In addition, suggestions for future research are offered to enable a better understanding of effective strategic conversation processes in CSR strategy making and the resulting performance outcomes. KEY WORDS: boundary spanning employees, corporate social responsibility strategy, stakeholders, strategic conversations

‘‘The stakeholders in a firm are individuals and constituencies that contribute, either voluntarily or involuntarily, to its wealth-creating capacity and activities, and who are therefore its potential beneficiaries and/or risk bearers’’ (Post et al., 2002: 8). In order to improve competitive positioning, many corporations worldwide have, over the past few decades, redesigned corporate policies to include some type of guidelines for appropriate responses to corporate social responsibility (CSR) issues. As part of this transformation, some attention has been focused on the inclusion of corporate stakeholders in the development of strategies related to social concerns. This philosophy is partly based on the premise that companies that ‘‘create and implement sustainability plans not only benefit their bottom line, they benefit the air we breathe, the water we drink, and our standard of living’’ (Alcan, 2005). It is good business then to actively engage all stakeholders – investors (current and future), customers, suppliers, pro-environmental/special interest groups, employees, community members, etc. – in the development of sustainable strategies that reflect both economic and socially responsible outcomes (see Maignam et al. (2005) for an excellent illustration of relevant corporate stakeholders).

Morgan P. Miles is professor of marketing at Georgia Southern University. His research interests include the interface between marketing, ethics, and corporate entrepreneurship. He has been a Senior Research Associate for the Judge Institute of Management, Cambridge University, a visiting Professor of Marketing, at the University of Stockholm, a visiting professor of entrepreneurship at the University of Otago, and most recently a visiting professor of entrepreneurship at Massey University. Linda S. Munilla is professor of marketing, Georgia Southern University. Her research interests include marketing and environmental ethics. Jenny Darroch is an assistant professor of marketing at the Peter Drucker and Masatoshi Ito Graduate School of Management at Claremont Graduate University. Her current research focuses on the interface between marketing and entrepreneurship, in particular the comparison between market driven and driving markets firm behavior. Earlier research looked at the antecedents of innovation within firms. Prior to joining Claremont Graduate University, Jenny was the Director of Entrepreneurship and Senior Lecturer in Marketing at the University of Otago in New Zealand.

Corporate social responsibility The basic belief that ‘‘...organizations are accountable to a larger society’’ (Kerin et al., 2003: 22) has evolved into debate about the accountability of

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Morgan P. Miles et al. CSR strategy-making process will, through the mechanism of strategic conversations, maximize stakeholder engagement and organizational sustainability.

corporations to a myriad of special interest stakeholders. Much of the discussion is centered on whether CSR should take priority over a company’s obligation to make money for its stockholders, or vice versa (Bakan and Burke, 2005). For example Mintzberg et al. (2002: 67) suggest that ‘‘In the past 15 years, we in North America have experienced a glorification of self-interest perhaps unequalled since the 1930s. It is as if, in denying much of the social progress made since then, we have reverted to an earlier and darker age. Greed has been raised to some sort of high calling; corporations have been urged to ignore broader social responsibilities in favor of narrow shareholder value...’’ The above quote illustrates the extent to which a firm’s social responsibility behavior has been a popular subject in recent decades. Social responsibility can be viewed as running the gamut from a purely stockholder perspective, such as that advocated by Friedman (1962), where the sole focus is on a firm’s responsibility to its equity holders, to a perspective that suggests that firms have an obligation to all stakeholders, not just its equity holders (see for example Polonsky, 1995; Post et al., 2002; Mintzberg et al., 2002). Munilla and Miles (2005) propose that a corporation’s commitment may follow a Social Responsibility Continuum that ranges from a compliance perspective (corporations meet legal and ethical requirements but do not expend stockholder monies for non-economic priorities), to a strategic perspective (corporations change their business models to include CSR strategies that create economic returns for stockholders), to a forced perspective (corporations are pressured by various entities to go beyond compliance or strategic interests and expend resources that may not, in the long-term, be in the best interest of the stockholders). But wherever companies fall on the CSR spectrum, most would agree that a concerted effort must be made to align strategies to take full advantage of CSR business opportunities while also including stakeholders in the strategy-making process. This paper explores the use of strategic conversations in the formation of CSR strategies from a conceptual perspective and suggests that explicitly including conversations with diverse stakeholder groups in the

Strategic conversations Strategic conversations are multi-directional multidimensional communication mechanisms for better shaping and integrating the strategic intent of top management with both the firm’s capabilities and the competitive realities the organization encounters. For strategic conversations to be effective in strategy making, communications must explicitly involve both talking and reflective listening by all participants. Typically, strategic conversations have been used to create open channels of unfiltered information between top managers and ground level marketing, technology, and sales force boundary-spanning employees (BSEs) (for a discussion of BSEs see Bezrukova et al., 2003). These conversations help the BSEs to understand the strategic intent of top management while simultaneously enabling executive-level managers to gain a richer and more honest understanding of both the possible future the firm faces and the ability of the firm to align itself with its desired future. In the past few years, one facet of organizational planning has evolved that includes ...‘‘the capability of organizations to perceive what is going on in their business environments, to think through what this means for them, and then to act upon this new knowledge’’ (Van der Heijden et al., 2002: 2). Van der Heijden et al. (2002) refer to this strategy as adaptive organizational learning, a holistic, proactive approach to the organizational management learning process that is centered on scenario planning, the use of positive and negative scenarios to examine a range of potential situational antecedents and their corresponding consequences. As one approach to scenario planning, strategic conversations evolve as ‘‘...people come together to share and analyze information, ideas and paradigms that are of strategic importance to our organization’’ (Maricopa, 1999). This philosophy of active stakeholder engagement by management reflects structural changes in organizational communication models that evolved in the l980s, as a strategic response to market and

The Role of Strategic Conversations with Stakeholders

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STAKE HOLDERS

BOUNDARY SPANNING EMPLOYEES

MIDDLE MANAGEMENT

TOP MANAGEMENT

unfiltered information flows

Figure 1. Parties to strategic conversations. Adapted from Kotler and Keller (2006).

technology turbulence, resulting in a shift from a hierarchical ‘functional’ approach to a flatter ‘customer-driven’ structure for organizational communications (Raspberry and Lindsay, l994: 52). In addition, the rapid and widespread adoption of e-mail and the Internet for intra and inter organizational communications made it possible for all stakeholders to have a voice in organizational issues. These changes altered the communication flow within organizations – which traditionally flowed downward – to one which also allows stakeholders and BSEs to directly communicate with top executives. Figure 1 illustrates an example of a hierarchical model designed to include all stakeholders in the communication process. It illustrates that for effective strategy making to occur, there should be a channel for honest, unfiltered information to flow from the BSEs who directly interact with stakeholders and technology and strategy making top executives. For strategic conversations to be most effective, all levels of an organization must, at a minimum, be aware of stakeholder concerns. Hastak et al. (2001) suggest that consumer survey research techniques should be explicitly integrated into policy-making processes. Strategic conversations enrich this communication process to include direct, open

ended, bi-directional dialogue between management and other relevant stakeholders. Figure 1 adapts Kotler and Keller’s (2006) perspective of a market orientated firm to illustrate the role of various ‘‘actors,’’ that is, those involved in strategic conversations who inform the firm about the CSR issues of importance. Customer needs should be the focus of the organization’s strategy formation efforts. BSEs that actually interact with customers, technologies, suppliers, competitors, regulators, and other external stakeholders are next in importance to the strategy formation process. BSEs tend to have the most informed perspective of opportunities and capabilities, and a firm might actually be able to exploit these opportunities (for more on the opportunity discovery, assessment, and exploitation process see Shane and Venkataraman, 2000). In addition, BSEs tend to be most aware of the value drivers for their specific target markets and the concerns of relevant stakeholders. This deep understanding of the competitive environment and the target market mandates that BSEs have influence on the organization’s strategic conversations. Liedtka and Rosenblum (1996: 147) discussed the metaphor of strategic conversations ‘‘as a way of thinking about how organizations address (its)

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Morgan P. Miles et al. the values of its stakeholders. Engaging in strategic conversations with stakeholders is presented as one method for identifying the corporation’s core values that are ultimately incorporated into brand building (Urde, 2003), creating a synergistic enhancing ‘‘convergence of branding and CSR’’ (Blumenthal and Bergstrom, 2003). When there is a lack of congruence and accuracy between what an organization perceives its stakeholders value and what they actually value, the result can be highly dysfunctional for the organization and its stakeholders. For example, when Robert Shapiro, Monsanto’s CEO during the mid 1990s, shifted Monsanto’s business domain from that of a chemical company to a bio-tech firm, he and his executives felt that Monsanto would reap an enhanced reputation as an environmental leader by creating new environmentally sustainable agricultural technologies that would be much less dependent on pesticides and fertilizers (see Magretta, 1997). Unfortunately, for Monsanto’s executives and shareholders, Shapiro did not foresee the negative, strategically significant impact to Monsanto’s reputation that resulted from stakeholder concerns about the safety and ethical implications of biotechnology. Monsanto’s reliability, trustworthiness, credibility, and responsibility associated with the production and consumption of genetically modified (GM) agricultural products (see Hall and Vredenburg, 2003; Miles and Covin, 2000) were greatly diminished resulting in the destruction of brand equity and value for the organization and its stakeholders. Monsanto’s experience with GM agricultural products is not unique and, in fact, is typical of the myopic blindness of strategy making often evident within organizations. This ‘‘strategic myopia’’ is largely due to the current trend of top management to ‘‘stack’’ governing boards with directors, including independent board members who are tightly aligned with the interests of top management, who then communicate only with middle management. Those in these middle management positions are often promoted due to their willingness to consistently support and reinforce the perspectives of top management. Therefore, middle management tends to reflect only top management’s values, understandings, and knowledge base (see Bedeian, (2002) for an excellent discussion of this issue). Often, opportunities for strategic innovation can only be

external and internal questions.’’ Strategic conversations consist of open issue oriented, fact-based conversations between stakeholders, BSEs, and top management. Likewise, Von Krogh and Roos (1995: 391–392) suggest that ‘‘Strategic conversations ... are oriented towards the advancement of the company, to the creation of the future for the business. You (in theory) meet with other people in the organization to discuss issues of a different nature than operational issues...Strategic conversations are also about the creation and acquisition of resources for the future and how these resources should be allocated in the future. In short, strategic conversations are the cradle of a company’s strategy.’’ While strategic conversations have been used to better align the perceptions, values, and concerns of top management with BSEs (see Chesley and Wenger, 1999; Liedtka and Rosenblum, 1996), little work has been done on leveraging strategic conversations to better align the aspirations of top management with BSEs and other relevant stakeholders (for an excellent discussion of the impact of communications with stakeholders on the mental models of management see Bronn and Bronn, 2003). In one seminal study, Buysse and Verbeke (2003: 453) found that ‘‘more proactive environmental strategies are associated with a deeper and broader coverage of stakeholders.’’ In fact, without engaging stakeholders in strategic conversations, top management runs the risk of intellectual isolation from its stakeholders and its own BSEs, creating a ‘‘bunker mentality’’ that offers a very management-centric, limited perspective of the firm, its capabilities, and potential futures. Maignan et al. (2005) developed a step-by-step approach to be used by firms who want to integrate CSR into their long-term goals. In the communication loop of the model, ‘‘gaining stakeholder feedback’’ is one of the eight steps. The model is designed to build ...‘‘an organizational identity and reputation based on stakeholders’ norms and values’’ (Maignan et al., 2005: 975), leveraging stakeholder engagement to build and reinforce brand and corporate reputation. Urde (2003) suggests that for a brand to be effective, the organization’s mission, its brand, and its products must all consistently reflect

The Role of Strategic Conversations with Stakeholders discovered and realized through alternate communication channels that bypass business level management and allow for a direct reflective dialogue to be established between top management and BSEs. This myopic, management-centric perspective of strategy making suggests that what is good for executives is good for the firm and what is good for the firm must be good for its stakeholders. This type of outlook effectively limits meaningful conversations with BSEs and stakeholders, thus resulting in a strategy that may be unpopular, unwise, and, over time, one that may prove unsustainable. For example, Atkinson et al. (1997) note that managers should explicitly integrate stakeholders’ preferences and needs into the organization’s performance management system in order to enhance organizational performance. Similarly, Polonsky and colleagues (Polonsky, 1995; Polonsky et al., 2002) argue for the inclusion of stakeholders in the strategic marketing processes. Likewise, Post et al. (2002) suggest that comprehensive stakeholder management is absolutely essential for any strategy to be effective and sustainable since stakeholders contribute to the organization’s resource base, shape the structure of the industry in which the firm operates, and create the social/political arena in which the organization exists.

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Illustrations of stakeholder engagement Strategic conversations can help bridge critical gaps in perceptions through issue-oriented, fact-based open conflict between top management (who are responsible for developing intended strategies and the strategic vision for the organization), BSEs (who tend to create emergent strategies), and relevant stakeholders (Eisenhardt et al., 1997). For example, Chesley and Wenger (1999: 55) report on the successful transformation of strategy making through the use of sometimes high conflict strategic conversations at the U.S.’s National Reconnaissance Office, a once ‘‘super-secret spy organization.’’ This suggests that even the most highly classified intelligence arm of the U.S. Government can actually leverage strategic conversations to transform itself into a more strategically relevant organization. Strategic conversations are dynamic and recursive in nature, resulting in an increase in both the

quantity and quality of information and technology transfers between the various stakeholders of the firm, BSEs, and top management. For example, in the late 1990s, DuPont considered developing a titanium dioxide mine adjacent to the Okefenokee National Wildlife Refuge in Georgia. However, DuPont quickly realized that a large-scale mining operation next to an environmentally fragile wilderness area would likely result in strong opposition. To understand the nature and impact of this decision, DuPont organized stakeholder meetings with national and local environmental groups, probusiness economic development groups, and regulators (DuPont Postpones ...., 1997). Ultimately, and following open and continual strategic conversations with these highly diverse stakeholder groups, DuPont decided that it was in its best interest to abandon the strip-mining project (Sissell, 1999). While regulators did not mandate DuPont to make this decision, the strategic conversations between DuPont and its stakeholders ultimately shaped DuPont’s subsequent strategy and resulted in a better strategy making process. This is an illustration of strategic conversations effectively shaping strategy formation and impacting CSR and DuPont’s concept of strategy. Recent changes in technology have resulted in the Internet emerging as a forum for CSR-type strategic conversations. For example, the Business Alliance for Local Living Economics, a cooperative of organizations and individuals involved in CSR ´ issues, has used the Internet’s World Cafe web site forum to facilitate honest, open conversations between diverse groups of stakeholders in a virtual and, subsequently, physical context (see http:// www.livingeconomies.org and http://www.the worldcafe.com). For example, in Atlanta the World ´ Cafe has helped in the formation of a forum of business leaders, scholars, and government decision makers who have an interest in promoting the environmentally sustainable and economically just development of Atlanta. Another example is HP, which in its 2006 corporate Citizenship Report states, ‘‘Stakeholder engagement is an important part of our global citizens activity,’’ and that ‘‘HP is integrating stakeholder engagement into our core business practices’’ (accessed 3-28-06, http://www.hp.com/ hpinfo/globalcitizenship/gcreport/publicengage/ stakeholder.html). HP worked with SustainAbility, a

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Morgan P. Miles et al. munication channel provided top management with ‘‘un-filtered’’ information from the BSEs who were creating technology that had the potential to be highly valuable to Ericsson and its stakeholders in the environmentally sustainable ‘‘intelligent car’’ and ‘‘intelligent house’’ Projects. This type of open and honest, conflict-based communication between employees who span the boundaries between the firm and its technology, customers, regulators, partners, competitors, and other stakeholders, is critically important to how those within the organization perceive the future of the organization and the impact of new technologies upon that future. Strategic conversations tend to by-pass business unit middle-managers who typically serve as information and value gatekeepers for top management. In addition, strategic conversations seemed to help minimize turf protection and dysfunctional organizational behaviors. Thus, strategic conversations provided multiple advantages to Ericsson. These findings are supported by Eisenhardt et al. (1997) who argue that strategy making benefits from open, fact-based conflicts driven by honest, unfiltered information. At Skandia, honest, open strategic conversations have become embedded into the strategy making process (Skandia is a global insurance and financial services firm, headquartered in Stockholm). Skandia leverages its internal innovation program to foster the open interaction between strategy making top management and strategy implementing BSEs who operate at different levels of the organization (see Covin and Miles, forthcoming). These multi-level conversations provide honest, unfiltered input to top management from the employees, who actually work with customers, technologies, and vendors. As a consequence, top management has a more realistic understanding of the firm, its capabilities, opportunities, and social responsibilities. What is common at both Ericsson and Skandia is that strategic conversations are valuable in the strategy formulation process since they are a mechanism that allows top managers, other managers, BSEs, and sometimes other internal and external stakeholders the opportunity to directly exchange knowledge about specific resources, the business in general, and the environment in which the business operates.

stakeholder consultancy firm, in 2005 to train employees who deal with external stakeholders and additional training is planned in 2006. The emergence of global CSR communication consulting firms such as SustainAbility, have generated innovative methods for more direct engagement with stakeholders: ‘‘It is unusual for any of our projects to not involve stakeholder analysis or engage of some sort...’’ (http://www.sustainability.com, accessed 3-06-06). Companies can even sign up for the Center for Sustainable Community Development’s ‘‘Online Stakeholder Workshops’’ that will provide direction for fostering stakeholder relationships (http://www.sfu.ca/cscd/cli/online_workshop.htm, accessed 3-8-06). In addition, strategic conversations between top management, BSEs, and stakeholders can be an instrumental component of a firm’s decision to adopt international environmental and social accountability standards and its subsequent implementation of the standards (see Miles et al., 1997 for additional information on ISO14000 environmental standards and Miles and Munilla, 2004 for additional information on SA8000 social accountability standards). Both ISO14000 and SA8000 certification processes mandate significant inputs from stakeholders and offer an opportunity to initiate and engage in fruitful strategic conversations between many various stakeholder groups. For example, the ISO14000 environmental management system certification process includes the establishment of an environmental management system that must acknowledge the organization’s relevant stakeholders. ISO14000 forces the organization to assess its supply chain to ensure that its vendors are in compliance with ISO14000 standards (see Miles et al., 1997). Likewise, SA8000 social accountability certification requires input from workers, local suppliers, and other stakeholders (see Miles and Munilla, 2004). Both of these CSR certification frameworks mandate that the organization engage its external stakeholders in some form of strategic conversations. Related work with Ericsson (see Covin and Miles, forthcoming) suggests that Ericsson’s programs, designed to encourage corporate entrepreneurship, enhanced open strategic discussions between the developers of environmentally beneficial technology, top management, and stakeholders (see Darroch et al., 2005). For Ericsson, this com-

The Role of Strategic Conversations with Stakeholders The role of strategic conversations in closing gaps Strategic conversations are critical to a firm’s ability to compete in an emerging and constantly changing future because they help shape mental models of top management, BSEs, and stakeholders by the transfer of honest and unfiltered information. Markides (1997: 13) stated that a ‘‘prerequisite to strategic innovation is an honest, fundamental questioning of the mental models or industry recipes that seem to govern the behavior of any individual or organization.’’ The realization that there may be a wide variance of mental models and values among and between top management, BSEs, and stakeholders is the first step in encouraging strategic conversations. For example, Bronn and Bronn (2003: 291) suggest that ‘‘Organizations are undergoing dramatic changes as stakeholder groups exert an ever-increasing influence on the place and responsibilities of organizations in society. Important drivers in this process include the environmental movement, the search for total quality management, and the concept of sustainable development, ethics and organizational learning. Because the various stakeholders can view these complex issues quite differently from the organization, it is important that those working with communications (and strategy, our words) are able to understand the underlying complexities of stakeholder relationships.’’ Based on an understanding of strategic CSR management, the authors propose two primary gaps between the perceptions of an organization’s top management, BSEs, and stakeholders. In addition, we argue that strategic conversations can be used effectively to close or at least minimize either or both of these gaps. These two gaps are 1. The Performance/Capability Gap – The gap between Top Management’s perception of the firm’s CSR current performance and its capabilities, BSEs’ perception of the firm’s CSR current performance and its capabilities, and stakeholders’ perception of the firm’s current CSR performance and its capabilities.

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2. The Futures Gap – The gap between Top Management’s perception of Future and the firm’s role in that future, BSEs’ perception of Future and the firm’s role in that future, and stakeholders’ perception of the Future and the firm’s role in that future. These gaps extend Bronn and Bronn’s (2003) framework of the gaps in congruency and accuracy between an organization’s stakeholders’ and management’s perceptions of its own and each others’ point of view on organizational issues. The Performance/Capability Gap is defined as the differences between the perceptions of a firm’s current CSR performance and its CSR capabilities as viewed by various stakeholders: the corporation’s executives, BSEs, and stakeholders. Often top management is so insulated from the reality of the firm’s operations that it fails to understand the fundamental strengths and weaknesses of the firm, its customers, suppliers, and competitors and is myopic with respect to many of the issues of paramount importance to external stakeholders. By contrast, BSEs tend to have the deepest understanding of the firm’s capabilities, but this understanding is almost always very narrow in scope and only relevant to their specific area(s) of operations. Strategic conversations among BSEs and between BSEs and top management allow the deep but narrow understandings of the abilities of different business areas to be aggregated into a corporate profile of capabilities. In this paper, the Futures Gap is defined as the differences between (a) the vision of the ‘‘most probable’’ future; (b) the vision of an ‘‘ideal’’ future; and (c) the various visions, held by management, BSEs, and stakeholders, of the firm’s role in the creation of these futures. The Futures Gap can be conceptualized as the distance between what the firm’s executives, BSEs, and stakeholders value. For example, BP (British Petroleum) recently reinvented itself as an energy company that is deeply concerned about long-term environmental and economic sustainability. While some of BP’s more environmentally oriented stakeholders envision BP as a leader in the commercialization of alternative energy, BP’s executives may see a somewhat different short-term future, with the world’s economy and BP remaining highly dependent upon coal, oil, and other carbon based sources of energy.

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Morgan P. Miles et al. around an organization (see Nonaka and Takeuchi, 1995 and Darroch, 2003 for a discussion of techniques that facilitate knowledge transfer within organizations). Table I summarizes these steps of effective strategic conversations. While a plethora of research on strategy formation/making exists (for summaries see Mintzberg and Lampel, 1999 and Eisenhardt and Sull, 2001), very little research on how top management actually participates with stakeholders in honest and open conversations that centers on fact-based conflict and that foster deep strategic thinking has been conducted (see Liedtka, 1998). Out of these conversations between top management, BSEs, and stakeholders emerges a description of a more commonly desired future (bridging the Futures Gap). This desired future may or may not be aligned with current strategy, but the Futures Gap can be bridged through this form of dynamic emergent strategy making. Top management rationalizes these emergent strategies, which are often combined with intended strategy, to either reinforce or shape the future concept of strategy (see Burgelman, 1983).

The authors suggest that the role of strategic conversations is to reduce the magnitude of the Performance/Capability gaps (thus providing a common ground upon which to base subsequent discussions) and to help bridge the Futures Gap to allow the entire organization to transform itself to better (1) recognize, create, and discover attractive economic opportunities; (2) be able to realistically evaluate economic opportunities with respect to the firm’s strategic intent and capabilities; and (3) be able to profitability exploit economic opportunities (see Shane and Venkataraman, 2000). Strategic conversations can effectively minimize these gaps in understanding between strategy making top management, middle management, strategy implementing BSEs, and stakeholders by making tacit knowledge held by top management, other management, BSEs, and stakeholders explicit and, therefore, useful in the strategy formation and realization process. In fact, the authors argue that sharing tacit knowledge is an essential first step in the strategic conversation process. Further, transforming tacit knowledge into explicit knowledge is a critical second step for managers to take as they formally capture strategic conversations and integrate the essence of those conversations into strategy. Therefore, integral to strategic conversations is the facilitation of the flow of tacit knowledge and the transfer of tacit knowledge into explicit knowledge in and

Conclusion and research implications Managers are increasingly cognizant of the role their organizations play in the wider social community.

TABLE I The steps of effective strategic conversations Stepa 1. Questioning and understanding the mental models and concerns of top management, BSEs, and relevant stakeholders 2. Sharing tacit knowledge among and between organizational and stakeholder groups 3. Transforming relevant tacit knowledge into explicit knowledge 4. Using this shared explicit knowledge to evaluate intended and emergent strategies in the process of strategic rationalization 5. Strategy formation
a

Outcomes A richer understanding of the preferred strategic intent of the various participants Enhancing the organization’s knowledge base, creating a shared understanding of the firm’s history, capabilities, performance, and future Codifying the firm’s knowledge base A forced ‘‘reality check,’’ to determine whether there really is a ‘‘shared understanding’’ of the firm’s history, capabilities, performance, and future Enhanced competitive standing as an outcome of more informed and relevant strategy making

Adapted from von Krogh and Roos (1995), Liedtka and Rosenblum (1996), Liedtka (1998), Bronn and Bronn (2003).

The Role of Strategic Conversations with Stakeholders Increasingly, we are exposed to multiple examples of firms that manage to demonstrate a pluralistic mindset – for example, Johnson & Johnson and Procter & Gamble, along with other member companies of the Global Environmental Management Initiative (GEMI), demonstrate their ability to provide superior returns to shareholders while maintaining a strong CSR profile (GEMI, 2004). In the current paper, we propose that traditional models of strategic decision making are not likely to support the effective adoption of CSR principles that align the interests of stakeholders, top managers, and BSEs. By adopting an inside-out perspective to strategic decision making in which managers believe that what is good for managers must be good for the firm and what is good for the firm is also good for stakeholders is unlikely to advance a CSR position. Managers need to be adept at including the perspectives of both BSEs and stakeholders early in the strategy making process, thereby adopting an outside-in approach to strategy formation. We propose the use of strategic conversations as one way of enabling BSEs to link the organization with its wider community. We have also explained why the use of strategic conversations may minimize both the performance/capability and futures gaps caused by different perceptions held by managers, BSEs, and stakeholders. While managers need not agree with every divergent perspective that might arise during a strategic conversation process, we suggest that the strategy making – strategy realization process would be greatly enhanced by an understanding of the concerns and preferences of diverse stakeholder groups through a public and open strategic conversation process. We hope that this area will attract considerable research attention. Accordingly, we propose a range of possible research topics. More specifically, we suggest data could be collected to empirically test the conceptual frameworks discussed in this paper. For example, we suggest that firms holding effective strategic conversations between managers, BSEs, and stakeholders should experience smaller gaps in perceptions of the corporations’ mission and values, key issues, brands and current and future performance than firms which do not hold strategic conversations. In addition, the impact of strategic conversations on corporate reputation and, ultimately, performance would enhance an understanding of the conse-

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quences of effective strategic conversations. For example, we propose that firms holding effective strategic conversations will be perceived as more socially responsible, innovative and enjoy stronger brands than firms which do not. The impact of technology on strategic conversations would be another research area that would be of great value to both scholars and managers. We also suggest research programs that examine each step of effective strategic conversations processes, as proposed in Table I. For example, how are mental models extracted and questioned? How is tacit knowledge shared between managers, BSEs, and stakeholders? How is tacit knowledge converted into explicit knowledge and then evaluated? How do strategic conversations inform strategy formation? In summary, we believe that the most effective processes, outcomes, and overall value of strategic conversations in the CSR strategy making and strategy realization areas are yet to be fully understood by scholars or managers. References
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Morgen P. Miles and Linda S. Munilla Georgia Southern University, 8154, Georgia Southern, Statesboro, GA, 30460, U.S.A. E-mail: mmiles@georgiasouthern.edu Jenny Darroch Peter Drucker and Masatoshi Ito, Graduate school of management, 1021, North Darimouth Ave, Claremont, CA, 91711, U.S.A.

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