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Stakeholder Theory, Symbiosis and Appraisal
Stakeholder Theory, Symbiosis and Appraisal
By : Jane A Link
The One-Eyed Doe
There was once a doe, blind in one eye and accustomed to graze as near to the edge of the cliff as she possibly could, in the hope of securing her greater safety. She turned her sound eye towards the land that she might get the earliest tidings of the approach of hunter or hound, and her injured eye towards the sea, from whence she entertained no anticipation of danger. Some boatmen sailing by saw her, and taking a successful aim, mortally wounded her. Yielding up her last breath, she gasped forth this lament: "O wretched creature that I am! To take such precaution against the land, and after all to find this seashore, to which I had come for safety, so much more perilous."
The moral of this Aesop fable? ‘Trouble comes from the direction we least expect it’.
It is now widely acknowledged that businesses operate within the K-economy with globalisation, open markets, and shareholders seeking increasing ROI , presenting three of the most critical pressures, and risks, to the business enterprise.
In attempting to mitigate these risks and leverage maximum value from IT services, increasing numbers of businesses are recognising the importance of Stakeholder Appraisal and transforming themselves into Stakeholder Corporations – actively seeking out, formally recognising and encouraging Stakeholder inclusiveness toward enhanced ‘Stakeholder Symbiosis’ - the concept that recognises Stakeholders as mutually dependent upon each other for success and financial benefit.
The main drivers behind the development of Stakeholder theory are:
-to assist managers in improving the value of the outcomes of their actions whilst minimising any damage or harm to Stakeholders and,
-to assist managers in understanding their Stakeholder environments and manage more effectively within the inevitable symbiotic milieu (Logsdon et. all 1998) .
At the highest level, Stakeholder Appraisal involves identifying, assessing, communicating with and managing all individuals and groups with an interest – a “stake” – in the organisation or, specific functional area of scrutiny. Organisations and businesses of all sizes and sector orientations now include Stakeholder Appraisal as an essential ingredient to the mix of strategic development.
With links to ethics, governance, leadership values and social responsibility; Governments, charities, political and social groups recognise the growing importance and prominence Stakeholders command. Recent years have seen the fast food giant McDonalds and Coca-Cola bowing to their respective customer Stakeholders.
Coke Wars: Global corporate Coca-Cola produce a range of 400 beverage brands with operations in 200 countries. Coke’s net operating revenues for 2004 were $21.9b with Coke dominating the European $21.2b carbonated soft drinks market. In a bid to salvage its continued loss of market share to Pepsi in April, 1985, Coca-Cola decided to change Coke’s flavour. What Coca-Cola’s management team didn’t realise, however, was that the volunteers for the ‘new Coke’ taste test were not informed that their favouring the ‘new Coke’ meant scrapping the original flavour. A month after the new Coke was introduced, Coca-Cola receive numerous complaints nationwide from customers who were enraged by the replacement. Eventually, in July, under pressure from the public who had been holding mass demonstrations outside Coke’s head offices and boycotting the ‘new Coke’, the old Coke returned. As if the public’s pride was restored, sales of Classic Coke and the company’s share prices reached a new record high.
Better Burgers: McDonald’s operate 30,000 franchises and local restaurants in 119 countries on 5 continents. In 2004, average annual sales generated per restaurant was $1.8m with total corporate cash sales for 2004 $3.9b. Inspired by a group of New York girls’ attempts to sue McDonalds for ruining their health – “… rendered defenceless by the onslaught of McDonald’s advertising”, Morgan Spurlock’s critically acclaimed documentary “SuperSize Me” attempted to discover whether eating nothing but McDonalds for 30 days could adversely affect health. The girls lost their case but Morgan Spurlock’s health was diminished. The publicity surrounding Spurlock’s documentary and the upsurge in reported obesity rates – nearly 1/3 of the U.S. population is clinically obese and in July 2004 the UK Government released figures showing almost 27% of youngsters were overweight or clinically obese – subsequently saw McDonalds announcing in April 2004 that it would be phasing out its supersized menu items and introducing ‘healthy options’. Most recently in March 2005, McDonalds quickly announced it’s “Balanced, Active Lifestyles Platform” to educate consumers about the benefits of a balanced lifestyle including more fruit and vegetable options at McDonalds following their settling of an $8.5 million lawsuit accusing the company of failing to inform consumers of delays in a plan to reduce fat in the cooking oil used for its popular french fries and other foods.
Benefits to IT Service Organisations
Specifically in relation to an IT Services Organisation , the very nature of Stakeholder Appraisal – in providing a flexible, context specific paradigm -focuses attention on primary and secondary business influencers, decision-makers and service recipients. This distinction being made to enable close scrutiny of the primary Business/IT service drivers:
·Business Alignment
·Business Confidence
·Customer Experience and
·Value Added Services
Many benefits of carrying out Stakeholder Appraisal can be gained, generally:
·focussing attention on specific issues, individuals and opportunities for change. Within the context of IT Service issues, this is particularly helpful as often complex, interdependent relationships of groups depending on common resources typically exist, for example the Service Desk, network and telecommunications availability etc.
·assisting managers and advisors to assess an IT Service and Service Improvement Programme environment,
·providing a snap-shot of current Stakeholder value positioning; informing the negotiating position in project talks and customer expectation management.
And, more specifically:
·to draw out the interests of Stakeholders in
relation to the issues which the Programme or IT Service is seeking to address (at the identification stage) or the purpose of the programme (once it has started)
·identify conflicts of interests between Stakeholders and the IT Service Organisation which will influence the IT Service Organisation’s assessment of a programme's risks
·help to identify relations between Stakeholders which can be built upon; enhancing Stakeholder Symbiosis
·help to assess the appropriate type of participation by different Stakeholders, at successive stages of the Service Improvement Programme Cycle.
The Practicalities
The practical application of Stakeholder theory very much depends on the environment and motivational factors. Though, generally, the following phased approach is adopted:
-Defining aims and objectives
-Identifying Stakeholders
-Initial Stakeholder Analysis and mapping – Power, Legitimacy, Urgency :
oPower: Stakeholder Power; exists where one individual, A, can get another, B, to do something that B would not normally have otherwise done (Dahl, 1957 ; Pfeffer, 1981 ; Weber, 1947 ).
oLegitimacy: Stakeholder Legitimacy; an assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs and definitions (Suchman, 1995 ; Weber, 1947).
oUrgency: Stakeholder Urgency; a multidimensional concept that includes both criticality and temporality, with a Stakeholder claim considered to be urgent both when it is important and when delay in paying attention to it is unacceptable (Mitchell, Agle and Wood 1997).
-Defining a communications strategy – frequency, channels, style – designed to enhance symbiosis
-Stakeholder engagement
-Ongoing management and refinement
Footnotes, References & Further Reading:
Aesop. Little is known about the life of Aesop; some believe that no such person ever existed. Those who believe Aesop existed generally agree that he lived during the 6th century B.C., living for some time on the island of Samos, and was, for at least part of his life, a slave.
K-Economy; presents knowledge-driven companies rather than effort-driven companies, intellectual capital instead of tangible, physical assets. Following on from the work of economists such as Joseph Schumpeter, Robert Solow and others, Romer presents a change to the neo-classical economic model by viewing technology (and the knowledge on which it is based) as an intrinsic part of the economic system. Knowledge becoming the third factor of production in leading economies. (Romer, 1986; 1990). Romer's theory differs from neo-classical economic theory in several critical ways; (1) Knowledge is the basic form of capital with economic growth being driven by the accumulation of knowledge (2) Technological developments can create technical platforms for further innovations which is a key driver of economic growth (3) Technology can raise ROI (4) Investment can make technology more valuable and visa versa – the ‘virtuous circle’ (5) Romer argues that earning monopoly rents on discoveries is crucial in providing incentives for companies to invest in R&D for technological innovation. Traditional economics view "perfect competition" as the ideal.
Return on Investment. Most common formula used is: Estimated Average Profit/Estimated Average Investment * 100. The profit measure is normally taken after depreciation but before taxation. A decision must then be made with regards whether to proceed with the project/investment or not i.e., is estimated return on investment sufficient to justify proceeding.
Symbiosis is a biological term which defines the interaction between two different organisms living in close physical association – especially to the advantage of both. Adam Smith argued that societies function best when economic interests and ethical interests coalesce; in The Wealth of Nations (1776, published in the same year as the Declaration of Independence), he established the notion that economic and ethical interests share a symbiotic relationship. Smith, A. (1776) The Wealth of Nations, Bantam Classics (March 4, 2003), ISBN: 0553585975.
Logsdon et. al (1998) Research in Stakeholder Theory. The Sloan Foundation Minigrant Project.
Chevalier, J. (2001) Stakeholder Analysis and Natural Resource Management. http://www.aiatsis.gov.au
Fiduciary. Relating to the relationship between a trustee and the person or body for whom the trustee acts.
Dodd, E. M. (1932) For whom are corporate managers trustees? Harvard Law Review, 45:1145-1163.
Berle, A.A., & Means, G. C. (1932) The modern corporation and private property. New York: Commerce Clearing House.
Barnard, C.E. (1938) The functions of the executive. Cambridge, MA: Harvard University Press.
Deetz, S.A. (1995) Transforming communication, transforming business: Business responsiveness in responsible workplaces. Cresskill, NJ: Hampton.
Freeman, R.E. (1984). Strategic management: A Stakeholder approach. Marshfield, MA: Pitman Publishing.
Freeman, R.E., & Gilbert, D.R. (1987) Managing Stakeholder interests. In S.P. Sethi & C.M. Fable (Eds.). Business and society: Dimensions of conflict and cooperation (pp.397-422). Lexington, MA: Lexington Books.
Strong, K.C., Ringer R.C., & Taylor, S.A. (2001). The rules of Stakeholder satisfaction. Journal of Business Ethics, 32: 219-230.
IT Services Organisation: IT Department, IT Outsource Companies, Customer Services functions.
Concept, model, theory, idea.
Mitchell, Agle and Wood (1997) put forward a theory of Stakeholder identification and salience suggesting that the degree to which managers give priority to competing Stakeholder claims is reliant on perceptions of three key attributes – power, legitimacy and urgency.
Dahl, R.A. (1957) The concept of power. Behavioural Science, 2: 201-215.
Pfeffer, J. (1981) Power in organizations. Marshfield, MA: Pitman.
Weber, M. (1947) The theory of social and economic organization. New York: Free Press.
Suchman, M.C. (1995) Managing legitimacy: Strategic and institutional approaches. Academy of Management Review, 20 (3) (July): 571-610.
About the Author
MBA, DMS, Cert.Ed., PRINCE2, ITIL, MCSE, MCP+i. With over 17 years senior exec experience within the IT profession.
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