Stakeholder Mapping and Stakeholder Analysis - Essay Example

Stakeholder mapping and Stakeholder analysis For any business venture, organisation, project, mission or task there are a number of stakeholders, whose interest is very much dependent on the success or failure of the steps being taken. The numbers of stakeholders increase as the size of the venture increases. Any business operates within a complex system of interests and influences. While serving the interests of a number of stakeholders, the decisions are influenced from a number of interest groups, depending upon the criticality of the policy or decision. While identifying the stakeholders, a company is supposed to look beyond the formal structure of the organisation. The stakeholders can very well be found beyond the formal structure of the company. Therefore in order to find out all the stakeholders, the company is also required to have a look at informal and indirect relationships as well. The company management has to make a balancing assessment and evaluate all such external forces in order to take them along with company’s objectives. Two major elements for stakeholder management are Stakeholder mapping and Stakeholder analysis. By managing the interest of stakeholders an organisation can enhance the wealth in such a manner that economic benefits can be generated by positive relationships between the organisation and its stakeholders (Preston and Donaldson, 1999). This necessitates that the service values as perceived by stakeholders are determined in an objective manner. This includes determination of elements like information and knowledge sharing about the functioning of the company, joint ventures, acquisitions and mergers, complementary resources and capabilities. In fact, at times, the operational direction of the company is set by the manner in which the stakeholders perceive the company, its missions and objectives. Key stakeholders like shareholders, employees, financers etc. often make use of influencing strategies to guide the organisation or to set the priorities for the company (Frooman, 1999). Therefore while taking crucial corporate decisions, it is necessary to know about the expectations of different stakeholders and to determine the extent to which they could and would exert their influence. Mitchell et al (1997) contend that an influential model of how stakeholders influence organisations is based on attributes of power, legitimacy and urgency. Johnson & Scholes (1999) define stakeholder as, “Stakeholders are groups or individuals who have a stake in, or expectation of, the organization’s performance.” Besides the owners the list includes various other groups, like employees, public interest groups like environmental organizations, strategic partners, journalists or public monitoring bodies. Now for a sustainable business enterprise the business operations must be a partner in the sustainable development of society/ country. For any business to survive, sustainable development is the development that keeps an eye on the present as well as on the future, and meets the needs of the present without compromising the ability of future generations to meet their own needs. Taking into account the impact of business operations on the environment becomes a crucial factor in such a development. Now environment watch agencies call upon the companies to make an ‘environment audit’ along with their annual financial figures. In fact, a ‘green business’ is not only good for the environment and humanity but good for businesss bottom line as well, because it gives an opportunity to the enterprise for managing the waste, cutting costs on wasteful expenditure, conserving energy and preserving the natural balance. Stakeholder Analysis Such an analysis helps the management, advisors and administrators to make an assessment about a project environment and to prepare a futuristic projection or strategy for the coming years. In general stakeholder analysis helps in; i. Identifying people and organisations that are bound to impact the functioning of the project or company in future. This affect could be positive or negative depending upon the nature of the stakeholder. ii. Identifying the positive or negative influences that the respective stakeholders might have iii. Finding out some of the problems at the beginning of the project itself and thus helping out in resolution of the problems. iv. Aligning in the interest of the stakeholders in line with the objectives of the project or the new initiative. v. Identifying the points of conflicts between some of the stakeholders vi. Identifying the stronger points which help in better bonding between different set of stakeholders and other partners. The management or project leader can subsequently build on these stronger points so that the desired objectives are achieved in minimum possible time within the resources available to the project. vii. Preparing the roles of different set of stakeholders for future collaboration and other such ventures. viii. Reassuring the financiers and other crucial stakeholders about the professional approach and sincere intentions of the management. ix. Assessing the stronger and weaker points of the company It is with such objectives that stakeholder analysis is taken up by the team strategic management team of the company. Precision of the analysis depends upon how objectively the influence chain and influence flows are analysed by the analysts. Direct stakeholders include employees, management, customers, shareholders, financers, suppliers, distributors etc. while indirect stakeholders include the general populace, the NGOs, the government, etc. who are affected by the impact of the business on general environment. In competitive times, in order to present a responsive face in public, take care of all stakeholders who have placed their faith in the company, stakeholder analysis presents a strategic tool. Realizing this importance, the best-managed companies are looking for more from their investor relations departments and demanding continuous improvements across this spectrum. Building on advances in technology as well as the learning’s from disciplines such as marketing-focused customer relationship management (CRM) forms an essential component of investor management. The underlying principle is now ‘growth and profitability in the face of intensifying competition and discerning customers’. In general main types of stakeholders are1; Primary stakeholders: Who are ultimately affected, either positively or negatively by the outcomes of the decision or project. Secondary stakeholders: Indirect beneficiaries or the ‘intermediary persons or organisations who are indirectly affected in positive or negative manner. Key stakeholders: The one’s whose support proves critical for the implementation of the project. These stakeholders could be from either of the above two categories having significant influence over the functioning of the company. Stakeholder analysis tries to figures out all stakeholders and then categories them in these categories. Subsequently, a balanced approach in adopted by the company; which often happens to be a compromise between the goals of the organisation and the stakeholder groups. This is termed as2 ‘Behavioural theory of the Firm’. Stakeholder analysis is generally carried out in three simple steps; First step: Identifying the stakeholders Second step: Finding out the power of each stakeholder, interest and influence Third Step: Comparing all the stakeholders and finding out the most important and crucial one’s for the sake of the project or the company. This analysis is recorded with the help of stakeholder map, which in turn helps in stakeholder management. Cleland (1999) also offers a process for managing stakeholders. This process involves: Identifying appropriate stakeholders Specifying the nature of the stakeholder’s interest Measuring the stakeholder’s interest Predicting what the stakeholder’s future behaviour will be to satisfy him/her or his/her stake Subsequently evaluating the impact of the stakeholder’s behaviour on the project team’s latitude in managing the project. Yukl (1998) defines three main source groups of power and describes their characteristics: i. Position Power: This is derived from the formal statutory or organisational authority with the individual or group of individuals. This results in control over HR policies, incentive schemes, pay packages, punishment, information exchange, technology implementation, environment etc. Managerial level positions, regulators etc. often have such wide ranging powers. ii. Personal Power: This power is derived from the individual’s traits, expertise, human interactions and relationship influences. It depends upon the charisma of the individual. iii. Political Power: This power may also come up by formal or informal arrangements in the company. For example a union leader will be in a position to wield substantial amount of political power as opposed to the top management. The power of alliances and coalitions amongst business groups too are categorised has having enough political power. Stakeholder Mapping Preparing some kind of stakeholder grid or map in order to have an understanding about stakeholders is known as stakeholder mapping. Such a mapping helps in identifying the proportionate amount of time, efforts and resources required to be spent on the stakeholders. Mitchell et al. (1997) state that, “Demanding stakeholders, those with urgent claims but having neither power nor legitimacy, are the ‘mosquitoes buzzing in the ears’ of managers: irksome but not dangerous, bothersome but not warranting more than passing management attention, if any at all”. Therefore management is able to develop appropriate strategy depending upon the power and influence of the stakeholders. Greening (2002) also argues that a judgment of stakeholders’ salience by the company influences subsequent interactions between these stakeholders and a number of factors like stakeholder culture, background etc. affect the relationship in the long run. Besides rewarding investors with dividends and interests, companies can use what they learn from individual relationships to improve the focus of their shareholder marketing and retention efforts. As is the case with the most valuable customers, who deserve maximum attention for retaining him with the company, the person or group of persons holding the larger or largest stake in the company deserve the most attention. Therefore companies need to set priorities to determine the handling of such prospects. Every company should therefore develop and adopt its own unique set of investor relations strategies based on its own underlying competitive strengths and weaknesses. Stakeholders can be characterized (and weighted) by three main attributes3; 1. Power: The power could be in the form of money, other resources, or policy influencing. If such powerful stakeholder decide that the project need to cancelled, changed, replaced or diverted then they can do it with the help of the power conferred on them by virtue of their position in the project. 2. Proximity /Legitimacy: This signifies how closely a stakeholder is in a position to impact the routine functioning of the company or the project. Each category of stakeholder has different circle of influence. The stakeholder’s proximity to the project implies that he has more influence over the project functioning. 3. Urgency/ Importance: This implies how soon and to what extent the functioning of the company or the project will be impacted if the stakeholder decides to use his power i.e. how detrimental will it be if the power is used. Stakeholder theories therefore come out with the suggestion about the perspectives and expectations that stakeholders might hold. Gibson (2000) contends that the influential concepts of justice, social rights and equity make up the stakeholder theory all the more important which confers some powers on the stakeholder over project development or change initiative. For example, if an extension of an airport is planned by the government or the airport management company, then some of the key stakeholders would be: The workforce; The management; The passengers i.e. air travellers; The investors; The residents living in the vicinity of the airport; The airlines; The suppliers and other business associates; The government etc. Stakeholder mapping will help us in identifying the powers of each stakeholder, which in turn will help the airport authority to pay due attention. Whenever a decision of expansion of airport is announced, then their might be welcome from some quarters while some others might not like the idea. For example, the rights of the ‘customer’ of the airport might appear in conflict with those of the residents, who will have to part with their land and buildings. In addition the area residents will have to bear with more noise while the situation would be far better for air travellers as they’d get better facilities. But at the same time it needs to be emphasised that the resultant benefits accruing out of the increased business activities at the airport, will in some way be passed on to the area residents as well. This is where the stakeholder management plays a crucial role. In order to resolve the conflicting situation, the strategic management team comes out with a list of benefits and ideas helping out the area residents, which subsequently takes care of their concerns and thus project gets a go ahead. The power/ interest grid for setting up stakeholder priorities is another important tool which helps in stakeholder mapping. This grid also helps in prioritising the stakeholders and their concerns. The level of power and interest depicts the influence the stakeholder has on the project. The main four categories are; High power, High interest people: This category requires fullest attention and engagement from the company’s management. All efforts need to be made to satisfy the need of this category. High Power, Less Interest Group: This group too happens to be highly influential, but they are not as much interested in routine functioning of the project or company. They do expect the company bosses or the project leader should keep them informed about any policy initiatives, but they don’t require daily feeds. Low power, High Interest People: This segment though doesn’t have much power to impact the direction of the functioning, is very much concerned with the health of the project. For example the retail investor in a public limited company often finds it interesting to learn that their company is doing well. While it may not be obligatory to engage this segment by the company management, but often taking them into confidence helps in improving the credit ratings of the company. It proves to be a good public relations exercise and goes a long way in establishing brand equity. Low power, low interest group: This segment requires lesser attention, but the company management must keep a constant vigil on their needs, apprehensions etc. so that it doesn’t unnecessarily flare up, which might bring a bad name for the company. Once the stakeholders are identified then the company plans appropriate strategies to handle them, which can be summarised as in the table. S No. Stakeholder Stakeholder Interest/s in the project Assessment of Impact Potential strategies for obtaining support or reducing obstacles Finding out the assessment of impact and potential strategies for obtaining support often requires extensive discussions and brain storming sessions to make it a comprehensive effort. References: 1. Cleland, D.I. (1999), Project Management Strategic Design and Implementation, McGraw-Hill, Singapore. 2. Focus (2008). Success Factors - Target groups, Stakeholders & Networking. Available online at http://www.focus-project.eu/focus_targetgroups.html (Jan 7, 2009) 3. Frooman, J. (1999). ‘Stakeholder influence strategies’, Academy of Management Review, Vol. 24 No. 2. 4. Gibson, K. (2000). ‘The moral basis of stakeholder theory’. Journal of Business Ethics, Vol. 26. 5. Johnson, G., Scholes, K. (1999). ‘Exploring Corporate Strategy’. Hemel Hempstead: Prentice Hall Europe 6. Mitchell, R.K., Agle, B.R. and Wood, D. (1997). ‘Towards a theory of stakeholder identification and salience: defining the principle of who and what really counts’, Academy of Management Review, Vol. 22 No. 4. 7. Preston, L.E. and Donaldson, T. (1999). ‘Stakeholder management and organizational wealth’. Academy of Management Review, Vol. 24 No. 4. 8. Tutor2u (2008). Stakeholders - Interests and Power. Available online at http://tutor2u.net/business/strategy/stakeholders-interests-and-power.html (Jan 8, 2009) 9. Yukl, G. (1998), Leadership in Organisations, Prentice-Hall, Sydney 10. Bourne, Lynda and Walker, Derek H.T (2005). Visualising and mapping stakeholder influence. Management Decision. Vol. 43 No. 5. Emerald Group. Read More