Canadian Business and Society

ETHICS, RESPONSIBILITIES, AND

Fifth
SUSTAINABILITYAND
Edition

CHAPTE
R4
Stakeholder
and Issue
Analysis
Prepared By:
Renée Majeau, NAIT

© 2020 McGraw-Hill Education Limited 4-1

 Learning Outcomes
1. Explain stakeholder analysis in an
organization.
2. Describe stakeholder management
capability.
3. Understand stakeholder matrix
mapping.
4. Discuss the diagnostic typology of
organizational stakeholders.

© 2020 McGraw-Hill Education Ltd. 4- 2

 Learning Outcomes

5. Apply the stakeholder identification and salience

typology.
6. Explain the application of stakeholder influence
strategies.
7. Identify the use of stakeholder collaboration
approaches.
8. Learn about approaches to issue analysis.

© 2020 McGraw-Hill Education Ltd. 4- 3

 Stakeholder and Issue
Analysis
• Stakeholder engagement  efforts by corporation to
understand and involve relevant individuals, groups, or
organizations by considering their moral concerns
• Issue analysis  effort to understand the source, nature,
and extent of a question or matter in dispute facing
corporation
 Will result in addressing or resolving the matter

© 2020 McGraw-Hill Education Ltd. 4- 4

 Basic Stakeholder
Analysis
• Corporations can increase understanding of stakeholders
by asking the following:
1. Who are our stakeholders?
2. What are their stakes?
3. What opportunities and challenges are presented to our firm?
4. What responsibilities does our firm have to all its stakeholders?
5. What strategies or actions should our firm use deal with
stakeholder challenges and opportunities?

© 2020 McGraw-Hill Education Ltd. 4- 5

 Freeman’s Stakeholder
Management Capability
• Stakeholder management capability  ability of
managers to:
 Identify stakeholders and their influence
 Develop the organizational practices to understand
stakeholders
 Undertake direct contact with stakeholders

© 2017 McGraw-Hill Education Ltd. 4- 6

 Stakeholder Matrix
Mapping
• Matrix mapping  technique of categorizing an
organization’s stakeholders by their influence according to
two variables and plotting them on a two-by-two matrix:
 Y Axis: Oppose or support corporation
 X Axis: Importance of stakeholders

• Allows managers to:

 Assess power of stakeholders to achieve their demands
 Whether they have means or resources to influence

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 The Position / Importance
Stakeholder Matrix

FIGURE 4.1

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 Stakeholder Matrix
Mapping Cont’d…

• Four categories of stakeholders result from this analysis:

 Problematic stakeholders - those who would oppose the
organization’s course of action and are relatively unimportant to
the organization
 Antagonistic stakeholders - those who would oppose or be
hostile to the organization’s course of action and are very
important to the organization

© 2020 McGraw-Hill Education Ltd. 4- 9

 Stakeholder Matrix
Mapping Cont’d…
 Low priority stakeholders - those who support the
organization’s course of action and are relatively unimportant to
the organization.
 Supporter stakeholders - those who would support the
organization’s course of action and are important to the
organization
• After categorization complete, managers can develop
tactics and strategies to most appropriately deal with each
stakeholder

© 2020 McGraw-Hill Education Ltd. 4- 10

 The Diagnostic Typology of
Organizational Stakeholders
• Two assessments are critical:
 Stakeholders’ potential to threaten the organization
 Their potential to cooperate with it

• Stakeholders can be classified into four types:

 Type 1: Supportive stakeholder and strategy
 Type 2: The marginal stakeholder and strategy
 Type 3: The non-supportive stakeholder and strategy
 Type 4: The mixed-blessing stakeholder and strategy

Source: Savage et al., 1991

© 2020 McGraw-Hill Education Ltd. 4- 11
 The Diagnostic Typology of
Organizational Stakeholders
• Cont’d…
Stakeholder management process:
1. Identify key organizational stakeholders by considering factors
such as relative power, specific context and history of relationship
and specific issues
2. Diagnose stakeholders according to critical dimensions of potential
for threat or cooperation
3. Formula appropriate strategies to enhance or change current
relationships with key stakeholders
4. Implement strategies, attempting to transform the stakeholder
relationship from less favourable to a more favourable one

© 2020 McGraw-Hill Education Ltd. 4- 12

 Stakeholder
Identification and Salience
• Salience  degree to which managers give priority to
competing stakeholder claims
• Stakeholder identification and salience based upon
stakeholder possession of one or more of three attributes:
 Power  a relationship among social actors in which one social
actor, A, can get another social actor, B, to do something that B
would not otherwise do
 Legitimacy  Perception or assumption that actions of an entity
are are desirable, proper, or appropriate
 Urgency  degree to which stakeholder’s claim or relationship
calls for immediate attention
Source: Mitchell et al., 1997
© 2020 McGraw-Hill Education Ltd. 4- 13
 Stakeholder Identification
and Salience Cont’d…
• Classes of stakeholders:
a) Dormant, discretionary, or demanding stakeholders
b) Dominant, dangerous or dependence stakeholders
c) Definitive stakeholders
• Enables managers to perform systemic categorization
of stakeholder-management relationships
 Allows managers to deal with multiple stakeholder
influences

© 2020 McGraw-Hill Education Ltd. 4- 14

 Stakeholder
Influence Strategies

• Frooman (1999)  how do stakeholders try to act to

influence the organization’s decision making / behaviour?
 Resource dependence  exists when a stakeholder is supplying
a resource and can exert some form of control over it
• Two general means of control over an organization:
 Withholding strategies  stakeholder discontinues providing a
resource with intention of changing a certain behaviour
 Usage strategies  stakeholder continues to supply resource but
specifies how it is to be used i.e. attaches conditions
Source: Frooman, 1999
© 2020 McGraw-Hill Education Ltd. 4- 15
 Stakeholder
Influence Strategies Cont’d…
• Resource dependence also arises from relationships between
stakeholders:
 Influence pathway  where withholding and usage strategies could
be used by an ally of the stakeholder with whom the organization has
a resource dependence
• Four influence strategy possibilities:
1. Indirect / usage
2. Indirect / withholding
3. Direct / withholding
4. Direct / usage

Source: Frooman, 1999

© 2020 McGraw-Hill Education Ltd. 4- 16
 Stakeholder Collaboration

• Collaboration (vs. “management”)  establish and

maintain relationships that allows organization to tap into
powerful source of energy, ideas and wider network
 More integrated and company-wide
 Responsibility for stakeholder collaboration assigned to senior
executive(s)

Source: Svendsen, 1999

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 Approaches to Corporate-
Stakeholder Relations
Stakeholder Management Stakeholder Collaboration
Fragmented among various
Integrated management approach
departments
Focus on managing relationships Focus on building relationships
Emphasis on buffering the Emphasis on creating opportunities
organization and mutual benefits
Linked to short-term business
Linked to long-term business goals
goals
Idiosyncratic implementation Coherent approach driven by
dependent on division interests business goals, mission, values,
and personal style of manager and corporate strategies
TABLE 4.2
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 Stakeholder Collaboration
Cont’d…
• FOSTERing  framework for organizations to develop
collaborative stakeholder relationships
• Involves six steps:
 Creating a foundation
 Organizational alignment
 Strategy development
 Trust building
 Evaluation
 Repeat the process

© 2020 McGraw-Hill Education Limited 2 - 19

 Issue Analysis

• Two approaches to issue analysis:

 The issues management process
 Issue salience (materiality) analysis

© 2020 McGraw-Hill Education Ltd. 3- 20

 The Issue Management
Process
• Involves six steps:
1. Identification of issues
2. Analysis of issues
3. Ranking or prioritizing of issues
4. Formulating issue response
5. Implementing issue response
6. Monitoring and evaluating issue response

Sources: Carroll, 1989; Bryson, 1988

© 2020 McGraw-Hill Education Ltd. 3- 21
 Issue Materiality
• Issue materiality (sustainability materiality) 
question or matter that is sufficiently important to warrant
management’s attention
• An aspect or issue should be reported if it meets these
criteria:
 Reflects the organization’s significant economic, environmental,
and social impacts
 Substantively influence the assessments and decisions of
stakeholders

© 2020 McGraw-Hill Education Ltd. 3- 22

 Issue Materiality Matrix:
Example

FIGURE 4.2

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 Issue Materiality
Matrix Cont’d…
• Issues are plotted and ranked in decreasing order of
importance
 Priority issues for management would be upper right-hand corner
 Next priority would be issues located in the upper left and lower
right corners
 Their influence on operations and the ease or difficulty of
addressing the issues would be deciding factors for rating
 Issues in the lower left corner are of little importance to
stakeholders or management

© 2020 McGraw-Hill Education Ltd. 3- 24

 Summary
• The appropriate identification of stakeholders is very important
to business corporations as one approach to understanding the
environment in which they operate. (LO 4.1)

• Freeman’s stakeholder management capability provides a good

starting point for understanding stakeholder relationships. (LO
4.2)

• The various stakeholder matrix mapping methodologies give

managers a practical approach to assessing the influence of
stakeholders. (LO 4.3)

© 2020 McGraw-Hill Education Ltd. 4- 25

 Summary Cont’d…

• The diagnostic typology of organizational stakeholders

attempts to understand stakeholder influence by
assessing the potential threat or potential for
cooperation. (LO 4.4)

• The salience stakeholder typology increases the

complexity of analysis by using three attributes to
assess stakeholder importance: power, legitimacy, and
urgency. (LO 4.5)

© 2020 McGraw-Hill Education Ltd. 4- 26

 Summary Cont’d…

• Frooman’s influence strategies provide another

perspective on understanding stakeholders. He argues
that managers should appreciate that stakeholders can
influence one another and the corporation in direct and
indirect ways and by withholding or specifying usage
conditions. (LO 4.6)

© 2020 McGraw-Hill Education Ltd. 4- 27

 Summary Cont’d…

• The most sophisticated approach to understanding

stakeholders is through collaboration or engagement.
Collaboration changes the approach from managing
stakeholders to dialoguing with them. (LO 4.7)

• Issue materiality analysis has a logical connection to

stakeholder analysis. Examining stakeholders and
issues together increases management understanding of
the environment in which the corporation operates.
(LO 4.8)
© 2020 McGraw-Hill Education Ltd. 4- 28