Social Responsibility and Business 4TH EDITION FERRELL • THORNE • FERRELL CHAPTER 2 Strategic Management of Stakeholder Relationships
Building effective relationships is considered one of the more important practices of business today. Building Effective Relationships
Stakeholders • Those people and groups to which an organization is responsible • Customers • Investors/shareholders • Employees • Suppliers • Governments • Communities • Those with a stake, or claim, in some aspect of a company’s products, operations, markets, industry, or outcomes
Primary Stakeholders • Groups fundamental to a company’s operation and survival • Customers • Employees • Shareholders • Investors • Suppliers • Government • Community • Balancing the needs and perspectives of primary stakeholders is a strategic imperative.
Secondary Stakeholders • Groups that may influence and/or be affected by the company, but are not engaged in economic exchanges with the firm: • Media • Special interest groups • General public • These groups are not fundamental to an organization’s daily survival. • They can place significant pressure on a business and therefore, cannot be ignored.
Stakeholder Orientation • There is a two-way relationship between the firm and a number of stakeholders. • Customers • Communities • Employees • Trade associations • Suppliers • Government/political groups • Investors • This approach recognizes other stakeholders and explicitly acknowledges the dialog that exists between a firm’s internal and external environments.
Stakeholder Orientation (cont.) • The degree to which a firm understands and addresses stakeholder demands. Comprises three sets of activities: • The organization-wide generation of dataabout stakeholder groups and assessmentof the firm’s effects on these groups • The distribution of this information throughoutthe firm • The organization’s responsiveness as a wholeto this intelligence
Stakeholder Attributes • Power • Extent to which coercive, utilitarian, or symbolic means can be used to impose a stakeholder’s views upon an organization • Legitimacy • Perception or belief that a stakeholder’s actionsare proper, desirable, or appropriate • Urgency • Pressure that a stakeholder exerts on managers and organizations by stressing the urgency of its claims
Reputation Management • The process of building and sustaininga company’s good name and generating positive feedback from stakeholders. • Most reputations take a long time to build or change. • Not handling a crisis situation to the satisfaction of stakeholders can damage a firm’s reputation.
Reputation Management Process • Identify how the organization wants to be viewed by stakeholders. • Determine how stakeholders evaluate the company and their impressions of its image. • Evaluate others’ impressions of organizational performance. • Understand the company’s reputation.
Crisis Management • The process of handling a high-impactevent characterized by ambiguityand the need for swift action • Threat to company goals • Short response time • Stressful, emotional, uncertain,and demanding context • Close organizational scrutiny by employees, stakeholders, customers, government regulators, the media, competitors, and creditors
Crisis Management Stages • Prodromal stage • Warning signs and symptoms may occur • Acute stage • Crisis occurs • Chronic stage • Ongoing crisis requires explanation and decision making • Resolution • Success and failure outcomes for organization and stakeholders
Development ofStakeholder Relationships • Relationships are founded on principles of: • Trust • Commitment • Communication • They are also associated with a degree of: • Time • Interaction • Shared expectations • Companies are searching for ways to develop long-term and collaborative relationships with their customers and business partners.
Social Capital • An asset, which resides in relationships, that is characterized by mutual goals and trust • Facilitates smooth internal and external transactions and processes
Implementing a Stakeholder Perspective in Social Responsibility • Assessing the corporate culture • Identifying stakeholder groups • Identifying stakeholder issues • Assessing the organization’s commitment to social responsibility • Identifying resources and determining urgency • Gaining stakeholder feedback
Link Between Stakeholder Relationships and Social Responsibility • Reactive behavior • Denying responsibility and doing less than is required • Defensive behavior • Admitting responsibility and doing the least that is required • Accommodative behavior • Accept responsibility and doing only what is required • Proactive behavior • Anticipate responsibility and doing more than is required