1.4 Stakeholder analysis and management
This section provides an introduction to the original ideas of stakeholder identification and management.
The word ‘stakeholder’ is now commonplace in most managers’ vocabulary, but like so many terms in the management lexicon it can mean different things. For example, in the private sector it has a set of nuances that may not be shared in the public sector, and vice versa. However, most commentators agree that stakeholders are important – no organisation can fulfil its purpose or achieve its mission without the support of others. However, in an increasingly global environment this becomes even more important, a point made by Anders Dahlvig, president and CEO of the furniture chain IKEA:
The world has changed enormously in the past decade … All of us now act in ways we did not 10 years ago. Globalisation means stakeholders and responsibilities everywhere, which have to be managed. It’s quite a different level of complexity.
Although there is now widespread agreement that stakeholders have a vital role to play in the life of an organisation, this was not always the case. If we travel back in time to the 19th Century, the only stakeholder who was likely to carry any sway in an organisation was the owner of a business; businesses were run as wealth-creating machines for the benefit of just the owner. Workers had little if any influence and neither customers nor suppliers enjoyed much more. However, relationships began to change following the industrial revolution. Workers acquired new rights and, moving into the 20th century, customers and shareholders began to exert their influence in ways that were unimaginable a hundred years before. During the last 20–30 years, a greater sensitivity to the environmental impact of organisations’ actions also began to emerge and, in a sense, we all became stakeholders of ‘big business’, irrespective of whether we bought or used an organisation’s products or services. Add to the mix increasing concern about human rights and corporate social responsibility, and the word ‘stakeholder’ takes on a whole range of complex dimensions.
From a theoretical point of view, the stakeholder concept draws from a number of disciplines, as illustrated in Figure 1.
In order to understand better why the stakeholder concept is important, we need first to define what a stakeholder is and, second, to explore the nature of their relationship to an organisation. We will address both questions and consider how stakeholders and their interests might be identified. We will also focus in this reading primarily on the analysis and management of stakeholders at the macro-level of the organisation as a whole and their relationship to the management of organisational strategy – as this was the area of management for which the ideas about stakeholder management were first developed and applied.
It must be stressed, however, that the basic ideas of stakeholder analysis and management are regularly used by managers working at all other levels. Small projects will also have an array of stakeholders whose influence needs to be identified and managed. Even making relatively minor changes to the routine work of a team or department involves dealing with the sometimes competing interests and influence of different stakeholders. Those involved in planning a community project or charity event will also have to take account of their different stakeholders. Even in your personal life you can better understand complex choices and problems by thinking about the various stakeholders involved. The activities in this course and the next will help you explore the many possible ways in which you can use the basic ideas and models of stakeholder analysis and management in very different situations and contexts.
Activity 3 Stakeholders and the management context
This activity introduces you to some of the background thinking about stakeholders, who are especially important when considering the organisational and strategic dimensions of management, in terms of ensuring that organisational objectives are delivered without impediment. The key task for this activity is to use the ideas from the reading as a way to analyse and make sense of a much wider set of management issues and situations.
You may not be directly involved in negotiations about strategy and external stakeholders, but you have to deal with a network of stakeholders in most management activities and initiatives. In practice, it may well be that colleagues working in other functional areas and/or departments are key internal stakeholders for your work. And at a more immediate and personal level, a good grasp of stakeholder analysis and management can be extraordinarily useful when organising complex family and community undertakings – your children’s education, for instance, or a local campaign for better facilities in the community.
While you read through this section, log your responses to the following tasks:
- For most managers, stakeholder analysis is often most readily applied to the internal, functional stakeholders. Make a list of the key internal, functional stakeholders who impact on your work. You can then extend this list by considering other individuals or groups with an interest in the issues on which you work.
- Stakeholder analysis can also be applied more widely on any major undertaking you are involved in. For example, it would be very beneficial to map out all the stakeholders relevant to your. In this way, you use the stakeholder concept to identify a wide network of influences on any given situation.
You should also try out some of the frameworks for mapping out the power and interest of stakeholders, suggested in this section. The identification of stakeholders is only part of the issue; for practical purposes, the key issue is deciding what to do about these stakeholders; stakeholder management is the key issue. This often introduces issues of power that you, as a manager, must consider.