Q&A - Why might the objectives of stakeholders be in conflict?

Many business objectives complement each other and are acceptable to a broad range of stakeholders. For example, an objective for a business start-up of achieving survival would be supported by nearly all the stakeholders.  It is in no-one’s interest for a business to fail! However, once a business becomes better established and larger, then potential conflicts begin to arise.  Let’s look at two examples in a little detail:

Business expansion versus higher short-term profit:

An objective of increasing the size and scale of a business might be supported by managers, employees, suppliers and the local community – largely for the extra jobs and sales that expansion would bring. 

However, an expansion is often associated with increased costs in the short-term (e.g. extra marketing spending, new locations opened, more production capacity added).  This might result in lower overall profits in the short-term, which may cause conflict with the business shareholders or owners.  In the longer-term, however, most business owners would be pleased to support an expansion if it increases the overall value of the business.

Job losses versus keeping jobs

This has been a big issue for many businesses during the economic downturn in 2008-2010.  In order to reduce costs and conserve cash, business managers have often made redundancies amongst the workforce or introduced other measures like short-time working to reduce wage costs.  This will have been supported by business owners and managers. 

However, it creates a potential conflict with stakeholders such as employees (who are directly affected), the local community (affected by local job losses) and suppliers (who suffer from a reduction in business).

Here are some other potential causes of conflicts between stakeholders:

• “Short-term” thinking by managers may discourage important long-term investment in the business
• New developments in the business such as a major product launch or new factory may require extra finance to be raised, which reduces the control of existing investors
• Investing in new machinery to achieve better efficiency may result in job losses
• Extending products into mass markets may result in lower quality standards

Shareholder conflict: the story so far – and its relevance to evaluation [10 May 2012]
Vodafone takes over Cable and Wireless Worldwide [23 Apr 2012]
Stakeholders argue over executive pay [23 Nov 2011]
Lesson Worksheet - Stakeholders in a Business [6 Oct 2011]
Lesson Video - An Introduction to Stakeholders [6 Oct 2011]
Stakeholders gripped by the bad news coming from BAE Systems [28 Sep 2011]
Stakeholder or shareholder: who matters most? [28 Dec 2010]
Q&A - Outline the ways in which a business can better manage stakeholder conflict [28 Dec 2010]
Q&A - How should a business manage its stakeholders? [28 Dec 2010]
Q&A - What power do stakeholders have over what a business does? [28 Dec 2010]
The Frost Report does Stakeholders [9 Oct 2010]
What must it feel like to be the ‘most hated’ CeO? [10 Jun 2010]
Q&A - What are stakeholders? [1 May 2009]

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