Strategic Management of Stakeholder Relationships CHAPTER 2 Strategic Management of Stakeholder Relationships

Chapter Objectives To define stakeholders and understand their importance To distinguish between primary and secondary stakeholders To discuss the global nature of stakeholder relationships To consider the impact of reputation and crisis situations on social responsibility performance To examine the development of stakeholder relationships To explore how stakeholder relationships are integral to social responsibility

Building Effective Relationships Building effective relationships is considered one of the more important practices of business today.

Stakeholders Those people and groups to which an organization is responsible 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 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 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. 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 data about stakeholder groups and assessment of the firm’s effects on these groups The distribution of this information throughout the firm The organization’s responsiveness as a whole to this intelligence

Stakeholder Attributes Power Legitimacy Urgency

Reputation Management The process of building and sustaining a company’s good name and generating positive feedback from stakeholders

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-impact event characterized by ambiguity and the need for swift action

Crisis Management Stages Prodromal stage Acute stage Chronic stage Resolution

Development of Stakeholder Relationships Relationships are founded on principles of: Trust Commitment Communication

Social Capital An asset, which resides in relationships, that is characterized by mutual goals and trust

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 Defensive behavior Accommodative behavior Proactive behavior