Stakeholder Management

Stakeholder Management

Nature of Stakeholder Management

A stakeholder is any party that is affected or can affect a program or the activities of a given organization. Stakeholder management focuses on building strategic constituencies that recognize that an organization must deal with both external and internal groups that can affect its operations (Martz, 2013). While the organization prefers autonomy in the execution of their roles, they are often faced with challenges in the form of constraints and controls (Fanelli et al., 2006). These constraints and restrictions are expensive since they cost money that will be used to comply with specific regulations or arbitrate with pressure groups. Some of these constraints include strikes, government regulations, protests, and many other disruptions from the special interest groups (Kumar et al., 2016). To ensure effectiveness, an organization must be aware of the external and internal factors that affect its operations to interact successfully and smoothen its operations.

In system limits theory, the relationship between stakeholders and an organization is referred to as interdependence. While this relationship limits the individual autonomy of the organization, weak interactions are costly to business operations (Fanelli et al., 2006). Better relationships are realized when the organization interacts with its stakeholders so that each mutually benefits (Kumar et al., 2016). As said earlier, poor relationships result in can lead to restrictions and regulations by the relevant authorities. When organizations establish relationships with stakeholders, they achieve more autonomy because they voluntarily surrendered to the engagement.

Effective stakeholder management can be achieved through six steps. The first step is the identification of stakeholders. Identification and establishment of a relationship with stakeholders are significant, especially in managing crises. According to Willems et al. (2016), the other step is identifying the stakes in the relationship. A stake refers to a shared interest in the relationship that can be of importance for the success of the engagement. Stakeholders such as employees, labor unions, and many other special interest groups have a stake (Martz, 2013). The genuineness of the stake is often evaluated by the values of the business organization (Wolfe et al., 2002). As such, the most challenging part of an organization in stakeholder engagement is the management of conflicts among its stakeholders that are driven by the pursuit of their stakes.

The third step in stakeholder management is considering the significance of the stake. As said earlier, the legitimacy of a stake is determined by the organization’s values. The genuineness of the stake is often evaluated based on whether the stakeholder is morally, legally justified to pursue the claim, and whether it will affect the operations and direction of the organization (Wolfe et al., 2002). The fourth step is the evaluation of opportunities and challenges that stakeholder brings to the organization. According to Kumar et al. (2016), the identification of the challenges and opportunities can either be a source of corporation or threat to the parties. The possibilities can be of considerable significance to the organization if they are actualized. However, appropriate measures have to be put in place to overcome the challenges.

The fifth step is considering the duties to the stakeholders. According to Martz (2013), an organization must understand the ethical obligations it has on its stakeholders to maintain a long term relationship. These responsibilities revolve around the economic, environmental, and social duties of the whole community.

The last step is focusing on relationship enhancement. The stakeholder relationship can be actualized through the implementation of strategic actions geared toward enhancing successful engagements (Martz, 2013). The organization should focus on professionals who will provide guidance and make strategic decisions that will maintain long term relationships with the stakeholders and ensure successful operations of the organization.

Methods of Stakeholder Management

One of the stakeholder management methods is mapping. Before an organization undertakes its roles, it is significant to identify the critical stakeholders in its business environment. This identification exercise should be accompanied by the analysis of their needs, concerns, and expectations based on their proximity to the organization’s operations (Kumar et al., 2016). Also, the organization needs to map its internal stakeholders, which may include employees, shareholders, and other individuals of compelling interest (Martz, 2013). This approach assists the organization in identifying whether it has the requisite resources to effectively undertake its operations.

The other stakeholder management method is through influence. A deep understanding of the influence level is vital in determining how the different stakeholder groups will interact with your organization. There exist different ranges of control a stakeholder can have on the organization (Martz, 2013). Some of the influence may range from a positive complement to activism, where they engage the community against the business operations of the organization (Wolfe et al., 2002). It is thus significant for the organization to scale the level of influence so that it can anticipate future challenges or opportunities.

Factors influencing Stakeholder Management Methods

One of the factors that influence stakeholder management is goal setting. According to Wolfe et al. (2002), goal setting is significant for effective management of stakeholders. For any activity, the organization needs to understand the objectives that it intends to realize to maintain long-term stakeholder relationships. Goal setting influences the level of influence and mapping of stakeholders (Kumar et al., 2016).  The values and core functions of an organization affect its approaches. If an objective is not representative of the organizational values and is key to stakeholder management, then that means that an imperfect engagement process would emerge that would threaten the operations of the firm.

The other factor that influences stakeholder management is the organization’s competencies. The organization should not only focus on its core functions but also create links between the community, technology, and environment (Kumar et al., 2016). Organization’s competencies influence the mapping exercise of stakeholders and determination of their level of influence in the firm. Lack of skilled professionals on the organization’s part can influence engagement and negotiations with the different stakeholders within the business environment (Fanelli et al., 2006). Effective stakeholder management requires professionals who are equipped to identify stakeholders, analyze their expectations, and how they influence the affairs of the organization (Martz, 2013). This approach would minimize conflicts and ensure smooth operations of the organization.

Stakeholder Management and its Influence in Organizational Effectiveness

While stakeholders may not have in the firm, they influence the organizational management procedures. The influence of stakeholders is in the decision-making process of the organization (Fanelli et al., 2006). They play a vital role in ensuring that the operating environment is not only rewarding but also has the right working conditions that would drive the success of the organization (Martz, 2013). On the contrary, it is significant to note that these stakeholders have their claims, which they require to be satisfied by the organization. These stakes range from economic, environmental, regulatory, ethical to many other issues that may be of significance to them. According to Wolfe et al. (2002), it is the role of the organization to define and address the specific interests of the stakeholders. This process is not only risky but also delicate since the output will determine the long term success of the organization (Wolfe et al., 2002). The organizations that do not the ability to satisfy the interests of its stakeholders are often riddled with conflicts, which, if persistent, may derail their smooth operations and make it ineffective.

Conclusion

It is the role of the organizational management team to not only build relationships but also forge a partnership with the crucial stakeholders after mapping. This framework builds alliances between the employees and the external stakeholders, which is critical for long term relationships. The management team is required to identify sources of conflicts as opportunities to maintain and enhance these relationships. Also, the management team needs to ensure that the stakeholder engagement process complies with the legal, moral, and ethical obligations specific to the locality. This approach will have an overall goal of benefiting both the stakeholder and ensuring the achievement of organizational goals.

References

Fanelli, A., & Misangyi, V. F. (2006). Bringing out charisma: CEO charisma and external stakeholders. Academy of Management Review, 31(4), 1049-1061.

Kumar, K., Boesso, G., & Michelon, G. (2016). How do strengths and weaknesses in corporate social performance across different stakeholder domains affect company performance? Business Strategy and the Environment, 25(4), 277-292.

Martz, W. (2013). Organizational effectiveness evaluation checklist, 1-36.

Wolfe, R. A., & Putler, D. S. (2002). How tight are the ties that bind stakeholder groups? Organization Science, 13(1), 64-80.