Stakeholder theory

Stakeholder management and

strategic planning
Two broad stakeholder theories

• Friedman

• Freeman
 Theory one
• 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.
 Theory two

* The quickest way to destroy shareholder

value is to ignore stakeholders
 Where did it start?
• R. Edward Freeman (1984)

• Stakeholder theory is about identifying the

groups who are stakeholders in a
corporation and need to be managed
 Why are stakeholders important?
• Corporations and organisations operate
with the consent of the community.
• Communities comprise groups of
stakeholders
• Winning the consent of these stakeholders
provides a licence to operate
 Who are stakeholders?
• The directly involved:
- investors
- employees
- suppliers
- customers
 Other stakeholders
• Government
• Political parties
• Trade unions
• Community groups
• NGOs
• Plant neighbours
 A key question for you

• Is the media a stakeholder?

Why pay attention to stakeholders?
• Moral or philosophical reasons – corporate
social responsibility

• Practical reasons – licence to operate

• Strategic planning reasons – identifying

opportunities and threats
Some key management questions
• Why should specific companies pay
attention to stakeholders?
• Who are the organisation’s stakeholders?
How do we identify them?
• What is the basis for their
interest/legitimacy?
• What do they want?
Some key management questions
• Which stakeholders are most important?
How do we set priorities?
• Do we need separate strategies for
different stakeholder groups?
• Can we reach all stakeholder groups?
• How do we balance stakeholder interests?
 Managing stakeholders – a
strategic context
• The quality of relationships with
stakeholders are the key determinant of
corporate reputation
• Stakeholder management is the core of
public affairs management
• Symmetric and asymmetric
communication theory is relevant to
stakeholder management
 Managing stakeholders – an
communications approach
• Identify the stakeholders
• Identify the relationship you want with
them
• Identify the urgency/timing need for
communicating with them
• Identify their information needs
• Identify the best communication channel
 Some practical examples
• Employees – face to face as frequently as
possible
• Investors – as laid down by ASX/ASIC
regulations
• Governments – building up goodwill for the
future
• The media – when and where appropriate
Managing stakeholders – a PA and
issues management approach
• Craig Fleisher’s emerging PA model:
• Managing PA and issues management on
a year round process
• Cultivating and maintaining enduring
stakeholder relationships
• Influencing stakeholders using refined
information
• Managing the grassroots
 Fleisher model
• Communicating in an integrated manner
• Continually aligning values and strategies
with the public’s interests
• Improving external relationships using
contemporary management practices
 Using PA planning techniques
Identify stakeholder management needs as
an integral part of:
• Issues monitoring and environmental
scanning
• Analysing threats and being sceptical
• Using standard analytical tools: SWOT,
PEST, Porter model
 Planning techniques
• Undertaking scenario planning: What ifs?
• Constantly testing internal perception
against external realities
• Creating risk, opportunity and issues
profile
• Producing issues maps and stakeholder
matrices
 Setting priorities
Categorise stakeholders by:
• Stakeholders directly interested in your
success
• Allies and potential allies
• Entrenched opponents
• Independent monitors and opinion formers
• Uninvolved
 Management strategies
• Directly interested – recruit as advocates
• Allies – encourage
• Opponents – neutralise
• Independents – maintain dialogue
• Uninvolved – monitor and anticipate
 Some conclusions
• Two theories – empirically one wrong and
one right
• Focus on identifying stakeholders and why
they are important
• Integrate stakeholder management into
strategic planning
• Set stakeholder priorities