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Managing Stakeholder Power & Influence

Author: Jim Riley  Last updated: Sunday 23 September, 2012

How should a business respond to these variations in stakeholder power and influence?  The matrix below provides some guidance on the approaches often taken:

High level of interest

Low level of interest

High level of power

Key players
Take notice of them

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


High profits lead not only lead to good dividends but also greater investment (retained) in the business


Suppliers have an interest in the growth and prosperity of the business


Local community, employees and shareholders benefit from business involvement in the community

Wage rises might be at the expense of lower profits and dividends


Managers have an interest in organisational growth but this might be at the expense of short term profits


Expansion of production activity might cause extra noise and disruption in local community

There are two main approaches to handling the often conflicting needs of stakeholders:

Shareholder Approach

Stakeholder Approach

The traditional approach
Business (management) acts in best interest of shareholders / owners
Principal aim is to maximise shareholder returns
Main focus is on growth & profit

Increasingly popular
Business takes much more account of wider stakeholder interests
Approach based on consultation, agreement, cooperation
E.g. social and environmental concerns become more important

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:

Approach

Description

Workers Councils

Compulsory for some larger firms in the EU
Brings worker representatives from across departments & activities for regular discussion of business issues

Stakeholder Directors

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)
Also applies to settling disputes between firms and their suppliers (e.g. negotiating agreement on contractual disputes rather than resorting to legal action)

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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Creating & Protecting Business Ideas
Startups and Understanding the Market
Market Research for a Startup
Locating the Startup Business
Choosing a Legal Structure for a Startup
Employing People in a Startup
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Finance

Revenues
Breakeven Basics
Costs, Revenues and Profits
Business Costs
Using Budgets
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Investment Appraisal Basics
Financial Strategies
Measuring and Improving Profit
Improving Cash Flow
Working Capital
Balance Sheet
Income Statement
Financial Efficiency Ratios
Profitability Ratios and ROCE
Liquidity Ratios
Gearing

Marketing

Competition
Products & Brands
Place (Distribution)
Promotion
Pricing
Price Elasticity of Demand

Business Organisation

Basics of Business Growth
Business Activities
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Franchising
Sole Traders and Partnerships
Limited Companies
Generating and Protecting a Business Idea
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People

Working in Teams
Communication Basics
Communication Methods
Workforce Planning
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Employee Motivation
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Operational Objectives
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Scale and Resource Mix
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Economic Sectors
Government Spending & Taxation
Inflation
Unemployment
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Change Management







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