Corporate Social Responsibilities: How the Stakeholder Approach Affects How Firms Operate - Coursework Example

Critically Discuss This View against the Stakeholder Approach of Organisation and Discuss How the Stakeholder Approach Affects How Firms Operate Table of Contents Table of Contents 2 Introduction 3 Relationship of Neo Classical Theory and Social Economic Theory with Stakeholder Management 4 Stakeholder Management and Corporate Social Responsibility 6 Advantage of the Theories of CSR to the Firms 9 Critics of CSR Program 12 Conclusion 13 References 14 Introduction Stakeholders refer to a group of individuals who are directed towards the achievement of organisational objectives. These individuals also comprise of the authority to influence the future of any business organisation (Post & et. al., 2002). Hence, stakeholder management can be regarded as the procedure of scrutinizing, forming and retaining a constructive relationship with its investors, which deliberately intends to augment their expectation of returns from the investments. It is also described as the process of managing the prospects of any individual primary or secondary stakeholder of a business, in order to enhance the success of a particular company. It is a process which is performed in order to facilitate a business to obtain its future goals and objectives. This can be possible only with the help of retaining previous stakeholders or investors of the organisation (Banks, 2011). Hereby, the objective of this assignment is to highlight the importance of stakeholder management within an organisation. Moreover, it also describes the relationship of neo-classical and socio economic theories with stakeholder management. It further intends to highlight the manifestations of stakeholder management within the strategies of a firm with the help of Corporate Social Responsibilities (CSR). Relationship of Neo Classical Theory and Social Economic Theory with Stakeholder Management Neo Classical economics materialized from classical economics due to the marginalist revolution. Neo classical economics theory presents a notion which tends to influence a varied approach towards stakeholder management initiatives but it mainly focuses on three variables namely price, productivity and income. The theory was established in the period of 1970s-80s, with the motive to enhance the growth rate of an economy as well as the organisations by effective utilisation of its resources. For this reason, it is also described as normative as well as positive theory of economics. Normative theory describes that in order to enhance the productivity and revenue of the organisation, optimum salary needs to be offered to its workforces, to amplify the level of the deciphered dedication and commitment towards work by them. Thus, it would help to enhance the level of performance of the employees resulting in the fulfilment of the objectives of both the workers as well as the organisation (Fontaine & et. al., 2006). Moreover, it would also increase the level of motivation of the workers leading to the decline of turnover rate of the employees, which might prove extremely beneficial for the organisation in its long run. Moreover, it would also help in reducing conflicts among the employees resulting in uniformity and harmony within the hierarchy of the organisation. It would also facilitate the organisation to enhance its productivity as well as brand value among other players of the market. This would further facilitate the organisation to offer large amount of returns for the investment made by the stakeholders. As a result, it would help in improving their level of confidence and reliability, leading to attraction of new investors, which can certainly be highly advantageous for the expansion of an organisation as well as the economy. To be precise, it would help in reducing the level of poverty and unemployment from the economy, resulting in financial development of the country. Hence, neo classical theory is also referred to as a positive theory of economics (Hillman & Keim, 2001).Thus, from the above discussion, it can be affirmed that neo-classical theory mainly attempts to augment the value of an organisation by utilising its resources in a proficient and effective way. In the similar context, socio-economic theory of economics is often regarded as another significant notion in economics which mainly aims to augment the social status of an economy to facilitate the organisations existing within the structure. This can be possible only with the advancement of organisations of that particular country. It is fundamentally owing to the reason that development of a country is learnt to be entirely dependent over the improvement of the income rates of its citizens, which might result in the overall up-gradation of their living standards. This in turn leads toward the amplification of the quality of life, thereby improving the GDP of the economy further resulting in socio-economic development of the country. Thus, it would increase the opportunities and prospects of business ensuring in increasing instances of penetration and emergence of large number of renowned organisations as well as investors or stakeholders within the economy (Hillman & Keim, 2001). In addition, highly experienced employees can also be recruited for the purpose of enhancing the growth prospects through encouraged productivity of the organisation. This might help in the advancement of an organisation as well as the country. Thus, it can be confirmed that by enhancing the values and confidence of the stakeholders is directly operational to Market Value Addition (MVA). This means enhancement of MVA results in improvement of the profit margin of an organisation, which can be regarded as quite essential to sustain in long run (Jones, 1995). Stakeholder Management and Corporate Social Responsibility In this era of multifaceted and sophisticated world of competitiveness and sustainability, the concept of CSR has emerged to be highly important for all the personal and public organisations. This is fundamentally due to the fact that CSR acts as a specific tool and mainly depends on the self-regulated activities of a business firm. CSR is also referred as the commitment which an organisation attempts to preserve with its stakeholders by maintaining its operations’ in an ethical way, resulting in economic development of the nation as described by socio-economic theory. Moreover, it also attempts to improve the living standard of the workers of the organisation leading to fulfilment of their primary needs. In addition, CSR also comprises of a voluntary nature which proactively helps in supporting the interests of its stakeholders resulting in the accomplishment of organisational plans and objectives as specified by neo-classical theory. Thus, CSR can be depicted as a strategy which can be utilised by an organisation for recuperating performances both in terms of people and procedures as well as for the betterment of the society at large, which is depicted in the below figure (Mangos, n.d.). Corporate Social Responsibility Source: (Mallenbaker, 2004) It can be said in this context that in order to operate the business in a transparent and accountable way, appropriate stakeholder management is extremely essential. This can be maintained only through interactive, communal and responsive affiliation with the stakeholders along with their active involvement and communication in the activities of the organisations. It can be portrayed with the help of three CSR communiqué strategies namely stakeholder information strategy, stakeholder response strategy and stakeholder involvement strategy (Kakabadse & et. al., 2005). Stakeholder information strategy is one of the most significant policies which is mainly utilised in order to provide varied types of information to the stakeholders based on the activities of the organisation. It is a one-way communication process but tends to inspire the stakeholders to offer various types of resolutions prior finalising any verdict for its benefits. This strategy is utilised in order to offer the feeling that, the role played by the stakeholders are extremely essential for the efficient functioning of an organisation. This is the prime idea behind neo-classical theory. Another considerable strategy utilised for the purpose of this is stakeholder response approach (Coimbra, 2010). It is entirely based on two way asymmetric communication policies. In this case, information flows from both ends and endeavour to engage stakeholders while making any corporate resolutions. This is mainly considered owing to the reason that the management of an organisation desires to understand the viewpoints of external stakeholders in order to maintain transparency within the operations of the business as depicted by neo-classical theory. It also acts as a feedback system, perpetually to judge the position of the organisation in the market among other competitors. Moreover, it also offers a better understanding about the future activities of an organisation with the intention to improve the initiatives and participations of the stakeholders (Coimbra, 2010). Moreover, stakeholder involvement strategy, in contrast presents a different perspective. It mainly presumes a conversation with its stakeholders which depicts that persuasion might occur mutually from both ends. This means that both the management as well as the stakeholder might accept the changes in order to cope up with the alternating challenges as stated in the socio-economic theory. It is quite likely to further help in the augmentation of the mutual and ethical relationship within the management and stakeholders resulting in their active participation within the actions of the organisation. Thus, it might facilitate in the considerable amplification of the motivation and impetus of all the primary stakeholders resulting in improvement of organisational productivity and profitability. It might also help in the enhancement of the brand identity as well as the value of the organisation within the minds of the stakeholders by a significant extent (Morsing & Schultz, 2006). Hence, it can be revealed that stakeholder involvement strategy or management is entirely dependent on the stakeholder information approach due to the supposition that stakeholders play a responsive part in any organisation. Advantage of the Theories of CSR to the Firms In the modern times, the notion of CSR has gradually turned out to be a significant strategy for the organisations to survive in competitive market conditions. In a ruthless situation, where the market operates according to the needs and predilection of the customers, espousal of CSR policy tends to act as a powerful instrument for survival in long run (Morsing & Schultz, 2006). CSR is a technique in which the organisations intend to integrate the social and environmental concerns in their operations so as to retain a mutual relationship with the community and the stakeholders. This can be done by introducing various innovative techniques as well as training programmes for the employees, resulting in augmentation of their knowledge and technical abilities and thus facilitating their productivity level as described by neo classical theory. It is also quite likely to help in upgrading the dedication and commitment of the employees, leading to higher returns for the organisation. Effective training and knowledge enhancement programs are further expected to enhance the level of communication among the employees ensuing in lower level of turnover rates, ultimately assisting the organisation to sustain in the long run and preserve its competencies as illustrated by neo classical theory. This is due to the fact that employees are the most vital stakeholders as well as assets of an organisation to retain its brand equity among other players of the market (Kakabadse & et. al., 2005). Additionally, if the employees or the other stakeholders are also involved in the decision making procedure of the organisation, it is also likely to enhance their level of confidence and self esteem resulting in the augmentation of their level of effective initiatives. This might further help in presenting varied ideas which might prove highly beneficial for the research and development department of the organisation. Stakeholder response policy can also be a significant contributor in the process of invention of various products and/or services to be served to its target customers thereby attaining better customer satisfaction level (Stamp Consulting, n.d.). As a result, it is likely to reduce the level of switching costs of the customers resulting in the enhancement of their loyalty and dependency towards the organisation as described through socio-economic theory. It would also facilitate the organisation to enhance the profit margin along with total sales by boosting its portfolio in the market by a large extent. Consequently, it might also help an organisation to retain its competitiveness causing various challenges for new entrants. Hence, CSR is intrinsically related to the sustainable development of an organisation further leading to economic development of an economy (Scribd, n.d.). CSR may not be regarded as philanthropy, but it can certainly be regarded as a company strategy implemented to manage its operations in an efficient way certifying long time viability and sustainability, which is the prime motive of socio-economic theory (Post & et. al., 2002). This can be possible by active involvement of both the stakeholders and the management to accept varied changes by mutual arbitration and discussions. It is essential for both the stakeholders as well as the organisation to retain its image in this aggressive era and to enhance its turnovers. Moreover, positive reputation would also facilitate in attracting new customers or investors thereby enhancing accessibility of the new resources of finance for the organisation as proposed through socio-economic theory. It is also quite likely to lead towards the intensification of uniqueness and distinctiveness of the establishment which further helps to satisfy the customers and thus attain better customer loyalty (Scribd, n.d.). Hence, the above discussion apparently indicates that CSR initiatives can be described as an indication to maintain the long-term potentials of an organisation. Critics of CSR Program CSR is a behaviour which helps an organisation to enhance its long term interests along with an active participation for the upgradation of the community as well as the economy. Besides, the practices of CSR include much debates and criticisms as well (Scribd, n.d.). For instance, organisations mainly exist in order to offer varied products and/or services to its customers and thus satisfy their requirements. It further helps in enhancement of organisational profit as well as brand inimitability in the market. As a result, the organisation might offer higher returns to its shareholders and stakeholders, thereby augmenting their level of gratification. Thus, it can be affirmed that the organisations is more liable to their stakeholders rather than the society at large as per the notion of CSR. Besides, it is accepted that all types of organisations do not follow the rules and regulations of an economy and thus operate beyond social compliances. This depicts lack of adherence of the instructions of CSR policies in varied types of globally functioning organisations (Scribd, n.d.). It is also believed by various critics that CSR is observed as a distracting technique for stakeholders of an organisation. CSR is used by varied reputed organisations to offer highly budgeted advertising campaigns, thereby disturbing the attention of the public from ethical norms and regulations of the company. According to the critics, these organisations desire to commence CSR programmes only to enhance the profit margin of the organisation, which might prove harmful in future times (Scribd, n.d.). Conclusion Conclusively, it can be affirmed that stakeholder management refers to the entire procedure of classifying and categorising the interests and attributes of the stakeholders, in order to optimise the brand image of an organisation. Moreover, it also facilitates an organisation to enhance its identity along with corporate image among other competitors in the market. In addition, stakeholder management also helps in the enhancement of a mutual trust and self-assurance with the management of an organisation. Hence, it can be concluded, that stakeholder management is one of the most essential procedure of an organisation, resulting in enhancement of its productivity and prosperity in long run. Furthermore, stakeholder management also helps in the overall fulfilment of organisational visions by interpreting and controlling both the internal and external environmental conditions along with development of optimistic relationship with the stakeholders. This in turn tends to assist in enhancing the dependency and confidence of the stakeholders resulting in a substantial amplification of organisational productivity and profitability (Post & et. al., 2002). References Banks, M., 2011. Stakeholder Management at the Origin of Competitive Advantage. Proquest, Umi Dissertation Publishing. Coimbra, 2010. 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