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Journal of Business Ethics (2006) 69:195–205 !

Springer 2006
DOI 10.1007/s10551-006-9085-6

The Role of Strategic Conversations


with Stakeholders in the Formation
Morgan P. Miles
of Corporate Social Responsibility Linda S. Munilla
Strategy Jenny Darroch

ABSTRACT. This paper explores the role of strategic ‘‘The stakeholders in a firm are individuals and
conversations in corporate social responsibility (CSR) constituencies that contribute, either voluntarily
strategy formation. The authors suggest that explicitly or involuntarily, to its wealth-creating capacity
engaging stakeholders in the CSR strategy-making pro- and activities, and who are therefore its potential
cess, through the mechanism of strategic conversations, beneficiaries and/or risk bearers’’ (Post et al.,
will minimize future stakeholder concerns and enhance
2002: 8).
CSR strategy making. In addition, suggestions for future
research are offered to enable a better understanding of In order to improve competitive positioning, many
effective strategic conversation processes in CSR strategy corporations worldwide have, over the past few
making and the resulting performance outcomes. decades, redesigned corporate policies to include
some type of guidelines for appropriate responses to
KEY WORDS: boundary spanning employees, corpo-
corporate social responsibility (CSR) issues. As part
rate social responsibility strategy, stakeholders, strategic
conversations
of this transformation, some attention has been
focused on the inclusion of corporate stakeholders in
the development of strategies related to social con-
Morgan P. Miles is professor of marketing at Georgia Southern cerns. This philosophy is partly based on the premise
University. His research interests include the interface between that companies that ‘‘create and implement sustain-
marketing, ethics, and corporate entrepreneurship. He has ability plans not only benefit their bottom line, they
been a Senior Research Associate for the Judge Institute of benefit the air we breathe, the water we drink, and
Management, Cambridge University, a visiting Professor of our standard of living’’ (Alcan, 2005). It is good
Marketing, at the University of Stockholm, a visiting pro- business then to actively engage all stakeholders –
fessor of entrepreneurship at the University of Otago, and investors (current and future), customers, suppliers,
most recently a visiting professor of entrepreneurship at pro-environmental/special interest groups, employ-
Massey University.
ees, community members, etc. – in the development
Linda S. Munilla is professor of marketing, Georgia Southern
University. Her research interests include marketing and
of sustainable strategies that reflect both economic
environmental ethics. and socially responsible outcomes (see Maignam
Jenny Darroch is an assistant professor of marketing at the Peter et al. (2005) for an excellent illustration of relevant
Drucker and Masatoshi Ito Graduate School of Management corporate stakeholders).
at Claremont Graduate University. Her current research
focuses on the interface between marketing and entrepreneur-
ship, in particular the comparison between market driven and
driving markets firm behavior. Earlier research looked at the Corporate social responsibility
antecedents of innovation within firms. Prior to joining
Claremont Graduate University, Jenny was the Director of The basic belief that ‘‘...organizations are account-
Entrepreneurship and Senior Lecturer in Marketing at the able to a larger society’’ (Kerin et al., 2003: 22) has
University of Otago in New Zealand. evolved into debate about the accountability of
196 Morgan P. Miles et al.

corporations to a myriad of special interest stake- CSR strategy-making process will, through the
holders. Much of the discussion is centered on mechanism of strategic conversations, maximize
whether CSR should take priority over a company’s stakeholder engagement and organizational sustain-
obligation to make money for its stockholders, or ability.
vice versa (Bakan and Burke, 2005). For example
Mintzberg et al. (2002: 67) suggest that
Strategic conversations
‘‘In the past 15 years, we in North America have
experienced a glorification of self-interest perhaps Strategic conversations are multi-directional multi-
unequalled since the 1930s. It is as if, in denying dimensional communication mechanisms for better
much of the social progress made since then, we shaping and integrating the strategic intent of top
have reverted to an earlier and darker age. Greed management with both the firm’s capabilities and the
has been raised to some sort of high calling; competitive realities the organization encounters. For
corporations have been urged to ignore broader strategic conversations to be effective in strategy
social responsibilities in favor of narrow share- making, communications must explicitly involve
holder value...’’ both talking and reflective listening by all participants.
Typically, strategic conversations have been used to
The above quote illustrates the extent to which a create open channels of unfiltered information
firm’s social responsibility behavior has been a pop- between top managers and ground level marketing,
ular subject in recent decades. Social responsibility can technology, and sales force boundary-spanning
be viewed as running the gamut from a purely employees (BSEs) (for a discussion of BSEs see
stockholder perspective, such as that advocated by Bezrukova et al., 2003). These conversations help the
Friedman (1962), where the sole focus is on a firm’s BSEs to understand the strategic intent of top
responsibility to its equity holders, to a perspective management while simultaneously enabling execu-
that suggests that firms have an obligation to all tive-level managers to gain a richer and more honest
stakeholders, not just its equity holders (see for understanding of both the possible future the firm
example Polonsky, 1995; Post et al., 2002; Mintzberg faces and the ability of the firm to align itself with its
et al., 2002). Munilla and Miles (2005) propose that desired future.
a corporation’s commitment may follow a Social In the past few years, one facet of organizational
Responsibility Continuum that ranges from a compliance planning has evolved that includes ...‘‘the capability
perspective (corporations meet legal and ethical of organizations to perceive what is going on in their
requirements but do not expend stockholder monies business environments, to think through what this
for non-economic priorities), to a strategic perspective means for them, and then to act upon this new
(corporations change their business models to in- knowledge’’ (Van der Heijden et al., 2002: 2). Van
clude CSR strategies that create economic returns der Heijden et al. (2002) refer to this strategy as
for stockholders), to a forced perspective (corporations adaptive organizational learning, a holistic, proactive
are pressured by various entities to go beyond approach to the organizational management learning
compliance or strategic interests and expend re- process that is centered on scenario planning, the use
sources that may not, in the long-term, be in the best of positive and negative scenarios to examine a range
interest of the stockholders). of potential situational antecedents and their corre-
But wherever companies fall on the CSR spec- sponding consequences. As one approach to scenario
trum, most would agree that a concerted effort must planning, strategic conversations evolve as ‘‘...people
be made to align strategies to take full advantage of come together to share and analyze information,
CSR business opportunities while also including ideas and paradigms that are of strategic importance
stakeholders in the strategy-making process. This to our organization’’ (Maricopa, 1999).
paper explores the use of strategic conversations in This philosophy of active stakeholder engagement
the formation of CSR strategies from a conceptual by management reflects structural changes in orga-
perspective and suggests that explicitly including nizational communication models that evolved in
conversations with diverse stakeholder groups in the the l980s, as a strategic response to market and
The Role of Strategic Conversations with Stakeholders 197

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 ended, bi-directional dialogue between management
hierarchical ‘functional’ approach to a flatter ‘cus- and other relevant stakeholders.
tomer-driven’ structure for organizational commu- Figure 1 adapts Kotler and Keller’s (2006) per-
nications (Raspberry and Lindsay, l994: 52). In spective of a market orientated firm to illustrate the
addition, the rapid and widespread adoption of role of various ‘‘actors,’’ that is, those involved in
e-mail and the Internet for intra and inter organi- strategic conversations who inform the firm about
zational communications made it possible for all the CSR issues of importance. Customer needs
stakeholders to have a voice in organizational issues. should be the focus of the organization’s strategy
These changes altered the communication flow formation efforts. BSEs that actually interact with
within organizations – which traditionally flowed customers, technologies, suppliers, competitors,
downward – to one which also allows stakeholders regulators, and other external stakeholders are next
and BSEs to directly communicate with top exec- in importance to the strategy formation process.
utives. Figure 1 illustrates an example of a hierar- BSEs tend to have the most informed perspective of
chical model designed to include all stakeholders in opportunities and capabilities, and a firm might
the communication process. It illustrates that for actually be able to exploit these opportunities (for
effective strategy making to occur, there should be a more on the opportunity discovery, assessment, and
channel for honest, unfiltered information to flow exploitation process see Shane and Venkataraman,
from the BSEs who directly interact with stake- 2000). In addition, BSEs tend to be most aware of
holders and technology and strategy making top the value drivers for their specific target markets and
executives. For strategic conversations to be most the concerns of relevant stakeholders. This deep
effective, all levels of an organization must, at a understanding of the competitive environment and
minimum, be aware of stakeholder concerns. Hastak the target market mandates that BSEs have influence
et al. (2001) suggest that consumer survey research on the organization’s strategic conversations.
techniques should be explicitly integrated into pol- Liedtka and Rosenblum (1996: 147) discussed the
icy-making processes. Strategic conversations enrich metaphor of strategic conversations ‘‘as a way of
this communication process to include direct, open thinking about how organizations address (its)
198 Morgan P. Miles et al.

external and internal questions.’’ Strategic conver- the values of its stakeholders. Engaging in strategic
sations consist of open issue oriented, fact-based conversations with stakeholders is presented as one
conversations between stakeholders, BSEs, and top method for identifying the corporation’s core values
management. Likewise, Von Krogh and Roos that are ultimately incorporated into brand building
(1995: 391–392) suggest that (Urde, 2003), creating a synergistic enhancing
‘‘convergence of branding and CSR’’ (Blumenthal
‘‘Strategic conversations ... are oriented towards
and Bergstrom, 2003).
the advancement of the company, to the creation
When there is a lack of congruence and accuracy
of the future for the business. You (in theory)
between what an organization perceives its stakeholders
meet with other people in the organization to
value and what they actually value, the result can be
discuss issues of a different nature than operational
highly dysfunctional for the organization and its
issues...Strategic conversations are also about the
stakeholders. For example, when Robert Shapiro,
creation and acquisition of resources for the future
Monsanto’s CEO during the mid 1990s, shifted
and how these resources should be allocated in
Monsanto’s business domain from that of a chemical
the future. In short, strategic conversations are the
company to a bio-tech firm, he and his executives felt
cradle of a company’s strategy.’’
that Monsanto would reap an enhanced reputation as an
While strategic conversations have been used to environmental leader by creating new environmentally
better align the perceptions, values, and concerns of sustainable agricultural technologies that would be
top management with BSEs (see Chesley and much less dependent on pesticides and fertilizers (see
Wenger, 1999; Liedtka and Rosenblum, 1996), little Magretta, 1997). Unfortunately, for Monsanto’s
work has been done on leveraging strategic con- executives and shareholders, Shapiro did not foresee the
versations to better align the aspirations of top negative, strategically significant impact to Monsanto’s
management with BSEs and other relevant stake- reputation that resulted from stakeholder concerns
holders (for an excellent discussion of the impact of about the safety and ethical implications of bio-
communications with stakeholders on the mental technology. Monsanto’s reliability, trustworthiness,
models of management see Bronn and Bronn, 2003). credibility, and responsibility associated with the pro-
In one seminal study, Buysse and Verbeke (2003: duction and consumption of genetically modified
453) found that ‘‘more proactive environmental (GM) agricultural products (see Hall and Vredenburg,
strategies are associated with a deeper and broader 2003; Miles and Covin, 2000) were greatly diminished
coverage of stakeholders.’’ In fact, without engaging resulting in the destruction of brand equity and value for
stakeholders in strategic conversations, top manage- the organization and its stakeholders.
ment runs the risk of intellectual isolation from its Monsanto’s experience with GM agricultural
stakeholders and its own BSEs, creating a ‘‘bunker products is not unique and, in fact, is typical of the
mentality’’ that offers a very management-centric, myopic blindness of strategy making often evident
limited perspective of the firm, its capabilities, and within organizations. This ‘‘strategic myopia’’ is
potential futures. largely due to the current trend of top management
Maignan et al. (2005) developed a step-by-step to ‘‘stack’’ governing boards with directors, includ-
approach to be used by firms who want to integrate ing independent board members who are tightly
CSR into their long-term goals. In the communi- aligned with the interests of top management, who
cation loop of the model, ‘‘gaining stakeholder then communicate only with middle management.
feedback’’ is one of the eight steps. The model is Those in these middle management positions are
designed to build ...‘‘an organizational identity and often promoted due to their willingness to consis-
reputation based on stakeholders’ norms and values’’ tently support and reinforce the perspectives of top
(Maignan et al., 2005: 975), leveraging stakeholder management. Therefore, middle management tends
engagement to build and reinforce brand and cor- to reflect only top management’s values, under-
porate reputation. Urde (2003) suggests that for a standings, and knowledge base (see Bedeian, (2002)
brand to be effective, the organization’s mission, its for an excellent discussion of this issue). Often,
brand, and its products must all consistently reflect opportunities for strategic innovation can only be
The Role of Strategic Conversations with Stakeholders 199

discovered and realized through alternate commu- quantity and quality of information and technology
nication channels that bypass business level man- transfers between the various stakeholders of the
agement and allow for a direct reflective dialogue to firm, BSEs, and top management. For example, in
be established between top management and BSEs. the late 1990s, DuPont considered developing a
This myopic, management-centric perspective of titanium dioxide mine adjacent to the Okefenokee
strategy making suggests that what is good for National Wildlife Refuge in Georgia. However,
executives is good for the firm and what is good for DuPont quickly realized that a large-scale mining
the firm must be good for its stakeholders. This type operation next to an environmentally fragile
of outlook effectively limits meaningful conversa- wilderness area would likely result in strong oppo-
tions with BSEs and stakeholders, thus resulting in a sition. To understand the nature and impact of this
strategy that may be unpopular, unwise, and, over decision, DuPont organized stakeholder meetings
time, one that may prove unsustainable. For exam- with national and local environmental groups, pro-
ple, Atkinson et al. (1997) note that managers should business economic development groups, and regu-
explicitly integrate stakeholders’ preferences and lators (DuPont Postpones ...., 1997). Ultimately, and
needs into the organization’s performance manage- following open and continual strategic conversations
ment system in order to enhance organizational with these highly diverse stakeholder groups,
performance. Similarly, Polonsky and colleagues DuPont decided that it was in its best interest to
(Polonsky, 1995; Polonsky et al., 2002) argue for the abandon the strip-mining project (Sissell, 1999).
inclusion of stakeholders in the strategic marketing While regulators did not mandate DuPont to make
processes. Likewise, Post et al. (2002) suggest that this decision, the strategic conversations between
comprehensive stakeholder management is abso- DuPont and its stakeholders ultimately shaped
lutely essential for any strategy to be effective and DuPont’s subsequent strategy and resulted in a better
sustainable since stakeholders contribute to the strategy making process. This is an illustration of
organization’s resource base, shape the structure of strategic conversations effectively shaping strategy
the industry in which the firm operates, and create formation and impacting CSR and DuPont’s con-
the social/political arena in which the organization cept of strategy.
exists. Recent changes in technology have resulted in
the Internet emerging as a forum for CSR-type
strategic conversations. For example, the Business
Illustrations of stakeholder engagement Alliance for Local Living Economics, a cooperative
of organizations and individuals involved in CSR
Strategic conversations can help bridge critical gaps issues, has used the Internet’s World Café web site
in perceptions through issue-oriented, fact-based forum to facilitate honest, open conversations
open conflict between top management (who are between diverse groups of stakeholders in a virtual
responsible for developing intended strategies and and, subsequently, physical context (see http://
the strategic vision for the organization), BSEs (who www.livingeconomies.org and http://www.the
tend to create emergent strategies), and relevant worldcafe.com). For example, in Atlanta the World
stakeholders (Eisenhardt et al., 1997). For example, Café has helped in the formation of a forum of
Chesley and Wenger (1999: 55) report on the suc- business leaders, scholars, and government decision
cessful transformation of strategy making through makers who have an interest in promoting the
the use of sometimes high conflict strategic con- environmentally sustainable and economically just
versations at the U.S.’s National Reconnaissance development of Atlanta. Another example is HP,
Office, a once ‘‘super-secret spy organization.’’ This which in its 2006 corporate Citizenship Report states,
suggests that even the most highly classified intelli- ‘‘Stakeholder engagement is an important part of our
gence arm of the U.S. Government can actually global citizens activity,’’ and that ‘‘HP is integrating
leverage strategic conversations to transform itself stakeholder engagement into our core business
into a more strategically relevant organization. practices’’ (accessed 3-28-06, http://www.hp.com/
Strategic conversations are dynamic and recursive hpinfo/globalcitizenship/gcreport/publicengage/
in nature, resulting in an increase in both the stakeholder.html). HP worked with SustainAbility, a
200 Morgan P. Miles et al.

stakeholder consultancy firm, in 2005 to train munication channel provided top management with
employees who deal with external stakeholders and ‘‘un-filtered’’ information from the BSEs who were
additional training is planned in 2006. creating technology that had the potential to be
The emergence of global CSR communication highly valuable to Ericsson and its stakeholders in the
consulting firms such as SustainAbility, have gener- environmentally sustainable ‘‘intelligent car’’ and
ated innovative methods for more direct engage- ‘‘intelligent house’’ Projects. This type of open and
ment with stakeholders: ‘‘It is unusual for any of our honest, conflict-based communication between
projects to not involve stakeholder analysis or engage employees who span the boundaries between the
of some sort...’’ (http://www.sustainability.com, firm and its technology, customers, regulators,
accessed 3-06-06). Companies can even sign up for partners, competitors, and other stakeholders, is
the Center for Sustainable Community Develop- critically important to how those within the orga-
ment’s ‘‘Online Stakeholder Workshops’’ that will nization perceive the future of the organization and
provide direction for fostering stakeholder relation- the impact of new technologies upon that future.
ships (http://www.sfu.ca/cscd/cli/online_work- Strategic conversations tend to by-pass business unit
shop.htm, accessed 3-8-06). middle-managers who typically serve as information
In addition, strategic conversations between top and value gatekeepers for top management. In
management, BSEs, and stakeholders can be an addition, strategic conversations seemed to help
instrumental component of a firm’s decision to adopt minimize turf protection and dysfunctional organi-
international environmental and social accountabil- zational behaviors. Thus, strategic conversations
ity standards and its subsequent implementation of provided multiple advantages to Ericsson. These
the standards (see Miles et al., 1997 for additional findings are supported by Eisenhardt et al. (1997)
information on ISO14000 environmental standards who argue that strategy making benefits from open,
and Miles and Munilla, 2004 for additional infor- fact-based conflicts driven by honest, unfiltered
mation on SA8000 social accountability standards). information.
Both ISO14000 and SA8000 certification processes At Skandia, honest, open strategic conversations
mandate significant inputs from stakeholders and have become embedded into the strategy making
offer an opportunity to initiate and engage in fruitful process (Skandia is a global insurance and financial
strategic conversations between many various services firm, headquartered in Stockholm). Skan-
stakeholder groups. For example, the ISO14000 dia leverages its internal innovation program to
environmental management system certification foster the open interaction between strategy mak-
process includes the establishment of an environ- ing top management and strategy implementing
mental management system that must acknowledge BSEs who operate at different levels of the orga-
the organization’s relevant stakeholders. ISO14000 nization (see Covin and Miles, forthcoming).
forces the organization to assess its supply chain to These multi-level conversations provide honest,
ensure that its vendors are in compliance with unfiltered input to top management from the
ISO14000 standards (see Miles et al., 1997). Like- employees, who actually work with customers,
wise, SA8000 social accountability certification technologies, and vendors. As a consequence, top
requires input from workers, local suppliers, and management has a more realistic understanding of
other stakeholders (see Miles and Munilla, 2004). the firm, its capabilities, opportunities, and social
Both of these CSR certification frameworks man- responsibilities.
date that the organization engage its external stake- What is common at both Ericsson and Skandia is
holders in some form of strategic conversations. that strategic conversations are valuable in the
Related work with Ericsson (see Covin and strategy formulation process since they are a mech-
Miles, forthcoming) suggests that Ericsson’s pro- anism that allows top managers, other managers,
grams, designed to encourage corporate entrepre- BSEs, and sometimes other internal and external
neurship, enhanced open strategic discussions stakeholders the opportunity to directly exchange
between the developers of environmentally benefi- knowledge about specific resources, the business in
cial technology, top management, and stakeholders general, and the environment in which the business
(see Darroch et al., 2005). For Ericsson, this com- operates.
The Role of Strategic Conversations with Stakeholders 201

The role of strategic conversations in closing 2. The Futures Gap – The gap between Top
gaps Management’s perception of Future and the
firm’s role in that future, BSEs’ perception of
Strategic conversations are critical to a firm’s ability to Future and the firm’s role in that future, and
compete in an emerging and constantly changing stakeholders’ perception of the Future and
future because they help shape mental models of top the firm’s role in that future.
management, BSEs, and stakeholders by the transfer These gaps extend Bronn and Bronn’s (2003)
of honest and unfiltered information. Markides (1997: framework of the gaps in congruency and accuracy
13) stated that a ‘‘prerequisite to strategic innovation is between an organization’s stakeholders’ and man-
an honest, fundamental questioning of the mental agement’s perceptions of its own and each others’
models or industry recipes that seem to govern the point of view on organizational issues. The Perfor-
behavior of any individual or organization.’’ The mance/Capability Gap is defined as the differences
realization that there may be a wide variance of mental between the perceptions of a firm’s current CSR
models and values among and between top manage- performance and its CSR capabilities as viewed by
ment, BSEs, and stakeholders is the first step in various stakeholders: the corporation’s executives,
encouraging strategic conversations. For example, BSEs, and stakeholders. Often top management is so
Bronn and Bronn (2003: 291) suggest that insulated from the reality of the firm’s operations
‘‘Organizations are undergoing dramatic changes that it fails to understand the fundamental strengths
as stakeholder groups exert an ever-increasing and weaknesses of the firm, its customers, suppliers,
influence on the place and responsibilities of and competitors and is myopic with respect to many
organizations in society. Important drivers in this of the issues of paramount importance to external
process include the environmental movement, stakeholders. By contrast, BSEs tend to have the
the search for total quality management, and the deepest understanding of the firm’s capabilities, but
concept of sustainable development, ethics and this understanding is almost always very narrow in
organizational learning. Because the various scope and only relevant to their specific area(s) of
stakeholders can view these complex issues quite operations. Strategic conversations among BSEs and
differently from the organization, it is important between BSEs and top management allow the deep
that those working with communications (and but narrow understandings of the abilities of differ-
strategy, our words) are able to understand the ent business areas to be aggregated into a corporate
underlying complexities of stakeholder relation- profile of capabilities.
ships.’’ In this paper, the Futures Gap is defined as the
differences between (a) the vision of the ‘‘most
Based on an understanding of strategic CSR man- probable’’ future; (b) the vision of an ‘‘ideal’’ future;
agement, the authors propose two primary gaps and (c) the various visions, held by management,
between the perceptions of an organization’s top BSEs, and stakeholders, of the firm’s role in the
management, BSEs, and stakeholders. In addition, creation of these futures. The Futures Gap can be
we argue that strategic conversations can be used conceptualized as the distance between what the
effectively to close or at least minimize either or firm’s executives, BSEs, and stakeholders value. For
both of these gaps. example, BP (British Petroleum) recently re-
These two gaps are invented itself as an energy company that is deeply
1. The Performance/Capability Gap – The gap concerned about long-term environmental and
between Top Management’s perception of economic sustainability. While some of BP’s more
the firm’s CSR current performance and its environmentally oriented stakeholders envision BP
capabilities, BSEs’ perception of the firm’s as a leader in the commercialization of alternative
CSR current performance and its capabili- energy, BP’s executives may see a somewhat
ties, and stakeholders’ perception of the different short-term future, with the world’s econ-
firm’s current CSR performance and its omy and BP remaining highly dependent upon coal,
capabilities. oil, and other carbon based sources of energy.
202 Morgan P. Miles et al.

The authors suggest that the role of strategic around an organization (see Nonaka and Takeuchi,
conversations is to reduce the magnitude of the 1995 and Darroch, 2003 for a discussion of
Performance/Capability gaps (thus providing a techniques that facilitate knowledge transfer within
common ground upon which to base subsequent organizations). Table I summarizes these steps of
discussions) and to help bridge the Futures Gap to effective strategic conversations.
allow the entire organization to transform itself to While a plethora of research on strategy forma-
better (1) recognize, create, and discover attractive tion/making exists (for summaries see Mintzberg
economic opportunities; (2) be able to realistically and Lampel, 1999 and Eisenhardt and Sull, 2001),
evaluate economic opportunities with respect to the very little research on how top management actually
firm’s strategic intent and capabilities; and (3) be able participates with stakeholders in honest and open
to profitability exploit economic opportunities (see conversations that centers on fact-based conflict and
Shane and Venkataraman, 2000). Strategic conver- that foster deep strategic thinking has been con-
sations can effectively minimize these gaps in ducted (see Liedtka, 1998). Out of these conversa-
understanding between strategy making top man- tions between top management, BSEs, and
agement, middle management, strategy implement- stakeholders emerges a description of a more com-
ing BSEs, and stakeholders by making tacit monly desired future (bridging the Futures Gap).
knowledge held by top management, other man- This desired future may or may not be aligned with
agement, BSEs, and stakeholders explicit and, current strategy, but the Futures Gap can be bridged
therefore, useful in the strategy formation and real- through this form of dynamic emergent strategy
ization process. In fact, the authors argue that sharing making. Top management rationalizes these emer-
tacit knowledge is an essential first step in the stra- gent strategies, which are often combined with in-
tegic conversation process. Further, transforming tended strategy, to either reinforce or shape the
tacit knowledge into explicit knowledge is a critical future concept of strategy (see Burgelman, 1983).
second step for managers to take as they formally
capture strategic conversations and integrate the
essence of those conversations into strategy. There- Conclusion and research implications
fore, integral to strategic conversations is the facili-
tation of the flow of tacit knowledge and the transfer Managers are increasingly cognizant of the role their
of tacit knowledge into explicit knowledge in and organizations play in the wider social community.

TABLE I
The steps of effective strategic conversations

Stepa Outcomes

1. Questioning and understanding the mental models A richer understanding of the preferred
and concerns of top management, BSEs, and relevant strategic intent of the various participants
stakeholders
2. Sharing tacit knowledge among and between Enhancing the organization’s knowledge base,
organizational and stakeholder groups creating a shared understanding of the firm’s history,
capabilities, performance, and future
3. Transforming relevant tacit knowledge into explicit Codifying the firm’s knowledge base
knowledge
4. Using this shared explicit knowledge to evaluate A forced ‘‘reality check,’’ to determine
intended and emergent strategies in the process whether there really is a ‘‘shared understanding’’
of strategic rationalization of the firm’s history, capabilities, performance, and future
5. Strategy formation Enhanced competitive standing as an outcome of more
informed and relevant strategy making
a
Adapted from von Krogh and Roos (1995), Liedtka and Rosenblum (1996), Liedtka (1998), Bronn and Bronn (2003).
The Role of Strategic Conversations with Stakeholders 203

Increasingly, we are exposed to multiple examples of quences of effective strategic conversations. For
firms that manage to demonstrate a pluralistic example, we propose that firms holding effective
mindset – for example, Johnson & Johnson and strategic conversations will be perceived as more
Procter & Gamble, along with other member socially responsible, innovative and enjoy stronger
companies of the Global Environmental Manage- brands than firms which do not. The impact of
ment Initiative (GEMI), demonstrate their ability to technology on strategic conversations would be an-
provide superior returns to shareholders while other research area that would be of great value to
maintaining a strong CSR profile (GEMI, 2004). both scholars and managers.
In the current paper, we propose that traditional We also suggest research programs that examine
models of strategic decision making are not likely to each step of effective strategic conversations pro-
support the effective adoption of CSR principles cesses, as proposed in Table I. For example, how are
that align the interests of stakeholders, top managers, mental models extracted and questioned? How is
and BSEs. By adopting an inside-out perspective to tacit knowledge shared between managers, BSEs,
strategic decision making in which managers believe and stakeholders? How is tacit knowledge converted
that what is good for managers must be good for the into explicit knowledge and then evaluated? How
firm and what is good for the firm is also good for do strategic conversations inform strategy formation?
stakeholders is unlikely to advance a CSR position. In summary, we believe that the most effective
Managers need to be adept at including the processes, outcomes, and overall value of strategic
perspectives of both BSEs and stakeholders early in conversations in the CSR strategy making and
the strategy making process, thereby adopting an strategy realization areas are yet to be fully under-
outside-in approach to strategy formation. stood by scholars or managers.
We propose the use of strategic conversations as
one way of enabling BSEs to link the organization References
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agree with every divergent perspective that might www.csrwire.com/print.cgi?sfArticleId=4010.
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