How should a business respond to variations in stakeholder power and influence? We provide some guidance on the approaches often taken.
High level of power
Keep them satisfied
Low level of power
Communicate regularly with them
Can usually be ignored
In handling its stakeholders, a business also has to accept that it will have to make choices. It is rare that “win-win” solutions can be found for key business decisions. Almost certainly the business cannot meet the needs of every stakeholder group and most decisions will end up being “win-lose”: i.e. supporting one stakeholder means another misses out.
There are often areas where stakeholder interests are aligned (in agreement) – where a decision can benefit more than one stakeholder group. In other cases, there is a clear conflict of interest. Here are some common examples:
|Where Stakeholder Interests are Aligned|
Where Stakeholder Interests Conflict
Shareholders and employees have a common interest in the success and growth of the business
Wage rises might be at the expense of lower profits and dividends
There are two main approaches to handling the often conflicting needs of stakeholders:
The traditional approach
Over the years various techniques and organisational models have been developed which help businesses handle their relationships with key stakeholder groups. Some of the most important are summarised below:
Compulsory for some larger firms in the EU
Outside representatives who hold a non-executive position on the Board Many UK plcs – particularly those selling direct to consumers and households, have taken steps to reflect customer interests on the Boards
Arbitration / Conciliation
Formal processes of resolving conflicts between employer and employees (e.g. ACAS)
Share options & other performance-related pay
Widened participation of share ownership amongst all employees, helps align interests of shareholders and employees
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