3: Corporate communication_stakeholdermanagement25stud.pdf

# Understanding stakeholder management Stakeholder management is a central purpose of corporate communication, involving the management of relationships with various groups who can affect or are affected by an organization's objectives [2](#page=2) [8](#page=8). ### 1.1 Evolution of organizational theory: from neo-classical to socio-economic The understanding of an organization's purpose and its relationships has evolved significantly over time. #### 1.1.1 Neo-classical economic theory * **Core purpose:** The primary objective of organizations, according to neo-classical economic theory, is to generate profits [4](#page=4). * **Accountability:** Accountability is primarily to themselves and to shareholders [4](#page=4). * **Wealth creation:** The belief is that this profit-making activity creates wealth for the organization and, by extension, for society at large [4](#page=4). * **Model:** This perspective is often represented by the input-output model, which focuses on the flow of resources into and products/services out of the organization [5](#page=5). #### 1.1.2 Socio-economic theory * **Expanded scope:** This theory broadens the definition of "who counts" within an organization's considerations, extending beyond just shareholders [4](#page=4). * **Importance of other groups:** Other groups are recognized as important for the organization's long-term continuity and the welfare of society [4](#page=4). * **Model:** This perspective is captured by the stakeholder model, which acknowledges a wider array of individuals and groups with legitimate interests [6](#page=6). ### 1.2 The stakeholder model versus the input-output model The stakeholder model represents a fundamental shift from the simpler input-output model. #### 1.2.1 Key differences * **Complexity and dynamism:** The stakeholder model is more complex and dynamic than the input-output model [7](#page=7). * **Recognition of interests:** It recognizes and accounts for a greater number of individuals and groups with legitimate interests in the organization [7](#page=7). * **Legitimacy beyond financial terms:** An organization must be considered legitimate not only by market stakeholders but also by non-market stakeholder groups. This involves accountability in social and environmental terms, not just financial terms [7](#page=7). * **Motivation for engagement:** Engagement with stakeholders occurs for both instrumental reasons (achieving organizational goals) and normative reasons (ethical or moral obligations). This normative aspect has been a driver for Corporate Social Responsibility (CSR) initiatives [7](#page=7). > **Tip:** The shift to a stakeholder model signifies a move towards a more inclusive and ethically-driven approach to organizational management and strategy. ### 1.3 Defining stakeholders and their stakes The core of stakeholder management lies in understanding who stakeholders are and what their "stake" in the organization entails. #### 1.3.1 Defining a stakeholder A stakeholder is defined as "any group or individual who can affect or is affected by the achievement of the organization’s purpose and objectives". This highlights a two-way influence: the organization impacts stakeholders, and stakeholders impact the organization [8](#page=8). #### 1.3.2 Defining a stake A stake is described as "an interest or a share in an undertaking". This interest can vary significantly, ranging from a mere interest in the organization's activities to a formal legal claim of ownership [8](#page=8). #### 1.3.3 The nature of stakes * **Varied content:** The specific content of a stake is determined by the unique interests of the individual or group in relation to the organization [8](#page=8). * **Conflicting interests:** Stakes of different individuals and groups are often varied and can be in conflict with one another. This necessitates that organizations balance the competing interests of their stakeholders [8](#page=8). * **Strategic implication:** The recognition of these varied and potentially conflicting stakes has been a primary driver for the shift from an input-output model to a stakeholder model of strategic management [8](#page=8). ### 1.4 Perspectives on the nature of stakes There are several ways to categorize or view the nature of stakes held by stakeholders. #### 1.4.1 Economic versus moral nature One standard way to look at stakes is by their fundamental nature: * **Economic nature:** This refers to financial interests, such as profit, investment, wages, or the economic impact of the organization [9](#page=9). * **Moral nature:** This encompasses ethical considerations, rights, fairness, and the social impact of the organization's actions [9](#page=9). #### 1.4.2 Formal versus informal relationships Another perspective categorizes stakes based on the contractual basis of the relationship between the stakeholder and the organization: * **Contractual stakeholders:** These are groups or individuals with whom the organization has a formal contract or agreement. Examples include employees, suppliers, and shareholders with formal share ownership [10](#page=10). * **Community stakeholders:** This category includes individuals or groups who have a stake through non-formal contracts or agreements, often based on proximity, social relationships, or general societal expectations. The community in which the organization operates is a prime example [10](#page=10). > **Example:** An employee has a contractual stake (salary, benefits) and potentially a moral stake (job satisfaction, fair treatment). A local community might have a stake related to environmental impact (moral) and job creation (economic) [10](#page=10) [9](#page=9). Managers must increasingly listen to and communicate with a wide range of stakeholder groups to build and maintain their companies' reputations [3](#page=3). * * * # Stakeholder identification and communication Effective stakeholder communication begins with thorough identification and understanding of all relevant parties. This involves determining who the stakeholders are, what their specific interests or "stakes" are in the organization, and assessing the opportunities and challenges they present. Furthermore, it requires understanding the organization's responsibilities (economic, legal, ethical, and philanthropic) towards these stakeholders and determining the most effective ways to communicate and respond to them [12](#page=12) [13](#page=13) [14](#page=14). ### 2.1 Defining and segmenting publics The process of defining publics, or stakeholders, is fundamental to successful communication campaigns. Various methods can be employed to segment these publics, and mapping them in different ways provides valuable insights. The specific campaign objectives will guide the most appropriate segmentation strategy [15](#page=15) [16](#page=16). #### 2.1.1 Methods for defining publics Stakeholders can be defined based on a dependency criterion, and their relationships with the organization can be mapped and structured. This structuring involves categorizing publics into [17](#page=17): * Internal publics [17](#page=17). * External publics [17](#page=17). * Intermediaries [17](#page=17). It is also crucial to diagnose any missing groups and detail sub-groups or subgroups to create a comprehensive understanding [17](#page=17) [18](#page=18). #### 2.1.2 Structuring and prioritizing relationships A schematic pattern of relationships can be developed to prioritize stakeholders. This prioritization can be based on: * **Functional-essential:** Critical for core operations [18](#page=18). * **Functional-needed/desired:** Important for broader organizational goals [18](#page=18). * **Hierarchical-formal:** Defined by formal organizational structures [18](#page=18). The quality of the relationship with stakeholders can be assessed through several dimensions: * Knowledge [19](#page=19). * Attitude [19](#page=19). * Behavior [19](#page=19). * Information Climate [19](#page=19). #### 2.1.3 Mapping the information climate and audience activity Mapping the information climate involves understanding: * Informing needs [20](#page=20). * Information needs [20](#page=20). * Consultation requirements [20](#page=20). * Allocation processes [20](#page=20). * Conversation preferences [20](#page=20). Understanding audience activity involves assessing their level of interest (low, medium, high) and identifying different stages of public awareness and engagement: * Latent publics [20](#page=20). * Aware publics [20](#page=20). * Active publics [20](#page=20). ### 2.2 Models for stakeholder analysis and prioritization Various models can be used to identify and position stakeholders based on their influence on the organization's operations and their stance on specific issues. Two prominent models are the Stakeholder Salience Model and the Power-Interest Model [21](#page=21). #### 2.2.1 The stakeholder salience model This model identifies and classifies stakeholders based on their salience to the organization, determined by the possession of three attributes: * **Power:** The ability to influence the organization [22](#page=22). * **Legitimacy:** The perceived validity of the stakeholder's claim or relationship [22](#page=22). * **Urgency:** The degree to which stakeholder claims require immediate attention [22](#page=22). The central idea is that stakeholders with higher salience, possessing more of these attributes, warrant higher priority for regular communication. This model categorizes stakeholders into seven types based on the combination of these attributes [22](#page=22) [23](#page=23) [24](#page=24): * **Latent stakeholders** (possess only 1 attribute): * Dormant stakeholders (power only) [24](#page=24). * Discretionary stakeholders (legitimacy only) [24](#page=24). * Demanding stakeholders (urgency only) [24](#page=24). * **Expectant stakeholders** (possess 2 attributes): * Dominant stakeholders (power + legitimacy) [24](#page=24). * Dangerous stakeholders (power + urgency) [24](#page=24). * Dependent stakeholders (legitimacy + urgency) [24](#page=24). * **Definite stakeholders** (possess all 3 attributes: power, legitimacy, and urgency) [24](#page=24). #### 2.2.2 The power-interest model This model categorizes stakeholders based on the power they wield and the extent of their interest in the organization's activities. The two key dimensions are [25](#page=25): * **Power:** The stakeholder's ability to influence outcomes [25](#page=25). * **Interest:** The degree to which a stakeholder is likely to engage with or be affected by the organization's actions [25](#page=25). ### 2.3 Communication strategies based on stakeholder models The insights gained from stakeholder identification and analysis models inform the development of tailored communication strategies. These strategies are designed to effectively engage with different stakeholder groups based on their characteristics, power, interest, and salience. Such segmentation and identification are considered the very essence of public relations. The models of Grunig also offer valuable links to developing these communication strategies [27](#page=27) [28](#page=28) [29](#page=29). > **Tip:** When identifying stakeholders, consider not only those directly involved but also those who may be indirectly affected or have a vested interest in the organization's outcomes. > **Example:** For a new factory construction project, direct stakeholders might include employees, investors, and local residents. Indirect stakeholders could include environmental advocacy groups, future generations affected by environmental impact, or suppliers who benefit from increased production. Understanding their respective power, interest, and urgency is crucial for effective communication. * * * # Stakeholder engagement and organizational relationships Stakeholder engagement is a proactive approach focused on building direct, long-term relationships by fostering mutual understanding and shared value [31](#page=31). ### 3.1 The evolution and importance of stakeholder engagement The concept of managing organizational relationships has evolved from a more transactional view to one emphasizing active engagement. This shift is driven by the growing recognition of the benefits derived from direct interaction with stakeholders. Engaging stakeholders directly serves several key purposes [31](#page=31) [32](#page=32): * **Enhancing understanding:** To foster deeper comprehension of specific issues relevant to the organization and its stakeholders [31](#page=31). * **Strengthening reputation:** To build goodwill and improve the overall reputation of the organization [31](#page=31). * **Building lasting relationships:** To cultivate more enduring and mutually beneficial long-term connections [31](#page=31). > **Tip:** The move towards stakeholder engagement signifies a departure from merely "managing" stakeholders to actively involving them in dialogue and collaborative processes. ### 3.2 Approaches to organizational relationships Organizations conceptualize their relationships with society and stakeholders in three primary ways, which directly influence their engagement strategies [34](#page=34): 1. **A strict commercial logical approach:** * This approach prioritizes economic considerations such as profit, growth, and efficiency [34](#page=34). * Social value creation and active collaboration with stakeholders are often viewed as activities that detract from or come at the expense of economic returns [34](#page=34). 2. **A focus on competitive gain, reputation, and innovation:** * This perspective emphasizes interactions and relationship building that extend beyond single, isolated transactions [34](#page=34). * It recognizes the value of a strong reputation and the capacity for innovation, often fostered through broader stakeholder connections [34](#page=34). 3. **A focus on social value creation:** * This approach prioritizes creating social value for both the corporate organization and other actors and groups within society [34](#page=34). * It involves a deliberate consideration of the bidirectional and positive links between social and economic value [34](#page=34). * There is a clear recognition of the interdependence between the organization's well-being and that of society [34](#page=34). * Emphasis is placed on joint value creation, where benefits are shared and mutually developed [34](#page=34). ### 3.3 Principles of stakeholder engagement Stakeholder engagement, as defined by Cornelissen is characterized by several key principles [35](#page=35): * **Integrated:** Engagement is woven into the fabric of the organization's operations and strategy [35](#page=35). * **Relationship-focused:** A primary objective is the deliberate building and nurturing of relationships [35](#page=35). * **Bridging emphasis:** Engagement aims to create connections and understanding, acting as a bridge between the organization and its stakeholders [35](#page=35). * **Mutual opportunities and benefits:** Engagement seeks to create advantages and positive outcomes for all parties involved [35](#page=35). * **Linked to long-term goals:** Engagement activities are directly tied to the organization's enduring business objectives [35](#page=35). * **Mission and values-driven:** Engagement is guided by a clear sense of the organization's mission and core values [35](#page=35). > **Tip:** Understanding these principles helps differentiate effective stakeholder engagement from superficial public relations efforts. ### 3.4 Stakeholders versus publics The terms "stakeholders" and "publics" are sometimes used interchangeably, but they carry distinct connotations [36](#page=36) [40](#page=40). * **Stakeholders:** These are groups or individuals in whom the organization has a "stake" – meaning they have an interest in or are affected by the organization's activities, or the organization has an interest in them due to their impact or potential impact [40](#page=40). * **Publics:** This term refers to groups with whom the organization shares commonalities or has something in common. The focus here is on shared interests or characteristics [40](#page=40). The concept of "friendship" as described by Aristotle can offer insight into building robust relationships, requiring three pillars: the sharing of pleasures, being useful to one another, and a commitment to a common good. This framework resonates with the principles of effective stakeholder engagement, which also aims for mutual benefit and shared purpose. Marshal McLuhan's concept of the "global village" further highlights the interconnectedness of modern society, underscoring the importance of managing relationships across diverse groups [37](#page=37). * * * ## Common mistakes to avoid * Review all topics thoroughly before exams * Pay attention to formulas and key definitions * Practice with examples provided in each section * Don't memorize without understanding the underlying concepts

| Term | Definition | |------|------------| | Stakeholder | Any group or individual who can affect or is affected by the achievement of an organization's purpose and objectives. | | Stake | An interest or a share in an undertaking, which can range from a simple interest to a legal claim of ownership. | | Neo-classical economic theory | An economic perspective where the primary purpose of organizations is to generate profits and create wealth, with accountability primarily to shareholders. | | Socio-economic theory | An economic perspective that recognizes a broader range of groups beyond shareholders as important for an organization's continuity and societal welfare. | | Input-output model | A model that views an organization as a system that takes inputs from the environment, processes them, and produces outputs, with a primary focus on economic transactions and shareholder interests. | | Stakeholder model | A model that acknowledges and accounts for the diverse interests of various individuals and groups who have legitimate stakes in an organization. | | Corporate Social Responsibility (CSR) | A business model that helps a company be socially accountable to itself, its stakeholders, and the public by recognizing the impact of its business activities on society and the environment. | | Contractual stakeholders | Stakeholders who have a formal contract or agreement with the organization. | | Community stakeholders | Stakeholders who are part of the community surrounding the organization and have non-formal agreements or shared interests. | | Publics | Groups of people who have common interests, concerns, or relationships with an organization, often used interchangeably with stakeholders. | | Stakeholder salience model | A model used to identify and classify stakeholders based on their possession of power, legitimacy, and urgency, determining their prominence in communication. | | Power | The ability of a stakeholder to influence the organization's decisions or actions. | | Legitimacy | The perceived validity and appropriateness of a stakeholder's claim or interest in the organization. | | Urgency | The degree to which a stakeholder's claim or interest demands immediate attention. | | Power-interest model | A model that categorizes stakeholders based on the power they wield and the level of interest they exhibit in the organization's activities. | | Stakeholder engagement | A proactive and integrated approach focused on building relationships with stakeholders, creating mutual opportunities, and aligning with long-term business goals, driven by mission and values. | | Latent publics | Groups of people who are not yet aware of their connection or shared interest with an organization. | | Aware publics | Groups of people who have recognized their shared interest or connection with an organization. | | Active publics | Groups of people who are actively involved or taking action regarding their shared interest or connection with an organization. |