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6.3 Stakeholder Management Approach

The stakeholder managementAn approach to management that places specific focus on key constituents. It is more measurable due to its focus on relationships with key stakeholders. It also recognizes that the interests of stakeholders often conflict. approach adds focus to the systems approach by building “strategic constituencies.” Robbins declared that an organization should be concerned only with the “strategic constituencies”Robbins (1990). in the environment who can threaten the organization’s survival. This approach recognizes that an organization must deal with external and internal publics who can constrain or enhance its behavior.

Although organizations would prefer to have complete autonomy, they are often confronted with constraints and controls. Constraints are often considered undesirable because they “cost money—to comply with regulations or to make changes to accommodate pressure groups,”Grunig, Grunig, and Ehling (1992), p. 68. and they “restrict creativity and adaptation.”Pfeffer and Salancik (1978), p. 15. However, it is inevitable that an organization meets with some constraints, especially in heavily regulated industries. Examples include labor strikes, government regulations, boycotts, and protests by special interest groups.

To be effective, an organization “must be aware of environmental publics such as customers, suppliers, governmental agencies, and communities and interact successfully with them.”Grunig, Grunig, and Ehling (1992), p. 72. They must also be aware of the internal publics, such as employees and labor unions, who can affect or be affected by the organization. The relationship between an organization and its stakeholders is called interdependenceThe relationship between an organization and its stakeholders. in systems theory literature. Although these interdependent relationships limit autonomy, good relationships with stakeholders limit it less than bad relationships. When organizations collaborate with key stakeholders the end result is often an increase of autonomy. Good relationships are developed when an organization voluntarily interacts with its stakeholders to find mutually beneficial solutions. Poor relationships can result in forced compliance to restrictions and regulations. When organizations voluntarily establish relationships with stakeholders they have more autonomy because they are not forced into these relationships.

The Stakeholder Management Process

Stakeholder management centers on a six-step process as summarized in the following list. The process requires that the public relations function first identify key stakeholders, describe their stakes in the organization, and determine if those stakes are significant. Once these steps have been accomplished, opportunities and challenges must be evaluated, determine the organization’s responsibility to the stakeholder, and finally create relationship strategies.

Six Steps in the Process of Stakeholder Management

  1. Identify stakeholders.
  2. Describe the stakes.
  3. Consider the significance of stakes/claims.
  4. Evaluate opportunities.
  5. Consider responsibilities to stakeholders.
  6. Consider relationship-enhancing strategies and actions.

Step 1: Identify the Stakeholders

According to Carroll, the stakeholder management process begins by identifying the stakeholders.Carroll (1996). Establishing these relationships is often advantageous for both organization and publics, as the relationships can be genuinely developed before they are urgently needed in a crisis situation. (In the next chapter we will show you how to construct a stakeholder map and analyze the connections between the organization and its publics.)

Step 2: Describe the Stakes

The next step is describing the stakes or claims these groups have in the organization. A stakeAn interest or a share in the performance or success of an organization. is an interest or a share in the performance or success of an organization. Employees, shareholders, and other groups may have such a stake. A stakeholder group could also assert a claimSomething demanded of an organization by a stakeholder group or asserted to be due to a stakeholder by an organization. on the organization if it believes the organization owes them something. For example, environmental groups believe that corporations have a responsibility to care for the environment. The legitimacy of the stakeholders’ stake or claim must also be considered. The legitimacy of the stake or claim will be influenced by what the organization values. When management gives profits highest priority, then the interests of the owners, including shareholders, is paramount. Other values, such as concern for the environment, good working conditions, and customer satisfaction, would consider the needs of other stakeholders in an organization holding these values in addition to a profit motive. Stakes or claims can also be in conflict with each other. For example, the pressure to report profits may lead an organization to lay off employees, which would conflict with the benefits of having greater employee morale. The difficult part of stakeholder management is being able to manage the potential conflicts of interests among the stakeholders, and it is often a challenging pursuit to achieve a balance of stakeholder interests.

Step 3: Consider the Significance

The third step is to consider the significance of the stakeholders’ stake or claim. Mitchell, Agle, and Wood developed a comprehensive model that included the stakeholder attributes of legitimacy, power, and urgency as a way to evaluate the priority of stakeholders.Mitchell, Agle, and Wood (1997), pp. 853–886. LegitimacyIn public relations, something determined to be valid based on a legal, moral, or presumed claim that can influence an organization's behavior, direction, process, or outcome. is determined by whether the stakeholder has a legal, moral, or presumed claim that can influence the organization’s behavior, direction, process, or outcome. Stakeholders have powerIn public relations, the ability of stakeholders to influence other parties to make decisions the party would not have otherwise made. when they can influence other parties to make decisions the party would not have otherwise made. UrgencyIn public relations, an issue that is time-sensitive or critical to the stakeholder. exists when the issue is immediately pressing (time sensitive) or when it is critical to the stakeholder. They used the combination of the three attributes to develop a prioritization strategy. Accordingly, latent stakeholdersStakeholders who possess only one of the three stakeholder attributes of legitimacy, power, and urgency related to a stake or claim. possess only one of the attributes; expectant stakeholdersStakeholders who possess two of the three stakeholder attributes of legitimacy, power, and urgency related to a stake or claim. possess two attributes, and definitive stakeholdersStakeholders who possess all three stakeholder attributes of legitimacy, power, and urgency related to a stake or claim. possess all three attributes. The more attributes stakeholders possess, the more critical their claim.

Step 4: Evaluate Opportunities

The fourth step is evaluating the opportunities and challenges the stakeholders present to the organization. According to Carroll, opportunities and challenges might be viewed as the potential for cooperation and the potential for threat. Opportunities are situations that advance the goals of an organization if they are seized, whereas challenges usually have to be overcome. Stakeholders can either help or hinder the efforts of an organization, and each group should be analyzed according to what it brings to the table in each situation.

Step 5: Consider Responsibilities to Stakeholders

The fifth step is to consider the responsibilities an organization has to its stakeholders, meaning the ethical obligations that are held with regard to decision making, disclosure, and maintaining long-term relationships that engender trust. Beyond the assessment of opportunities and threats, what legal, moral, citizenship, community, and philanthropic responsibilities should be followed in order for the organization to be considered a valuable member of society?

These responsibilities include the financial, environmental, and social impact the organization has on society as a whole, and consist of such areas as fiscal accountability to shareholders, safe work environments for employees, and reduced negative impact on the environment. More is said on the ethics of decision making elsewhere in this book, and using a philosophical framework to rigorously analyze responsibilities is helpful in practicing effective public relations. Such a framework leads to more understandable, consistent, and defensible decisions than a more relativistic ethical approach that can be attacked as capricious, biased, or worse. Determining organizational values can help to articulate the various responsibilities that decisions should seek to fill.

Step 6: Consider Relationship Enhancement

The final step is to consider the strategies and actions an organization should take to enhance its relationships with key stakeholders. Since that is the primary function of public relations, the responsibility for developing strategic plans should fall on its shoulders. Public relations professionals have been trained in a strategic process that focuses the organization’s communications and actions toward enhancing these relationships.

Employing stakeholder management techniques in professional practice means that the public relations professional holds the reins and responsibility for the relationships that are the very lifeblood of an organization. Using stakeholder management allows the professional to accurately assess the situation, prioritize resources, and make decisions that are the most strategic, helping to build long-term relationships with the most important publics and enhancing organizational effectiveness.