Stakeholders
Stakeholders and governance play crucial role in business strategy. Strategy decisions are influenced by different stakeholders.
Stakeholders are those individuals or groups that depend on the organisation to fulfil their own goal and on whom the organisation depends. Managers must take all stakeholders into account.
Stakeholders can be divided into 5 main groups:
* Economic stakeholders - customers, suppliers, distributors and owners,
* Social/political stakeholders - policy-makers, councils, regulatory agencies,
* Technological stakeholders - key adopters, standard agencies and ecosystem members,
* Community stakeholders - for example, those who leave close to the factory or wider society groups,
* Internal stakeholders - specialised department, local offices, factories and employees.
Expectations of the different groups of stakeholders will differ and conflicts of interests may exist. Some may pursue short term profits that come in the expense of long-term investments. Investing in growth may require additional funding thus financial risks and independence issues arise. Going public may bring additional funds but require accountability and transparency. Expansion into mass market may require reduction in quality.
Taking stakeholders expectations into account is crucial for strategic choices.
Stakeholders mapping
It is useful to categorise stakeholders depending on their influence, power and interest in the organisational strategy.
Power/dimension matrix classifies stakeholders in relation to the power they hold and the extend to which they attend actively in particular strategic issue. They can have more power is some domains then others.
It is important to decide which stakeholders are most powerful. Power is not only derived from hierarchical position and it could be the know-how or networks that they have built-up. We look at the status, the claim on resources, representations and symbols of power.
Attention matters as well as power. Even powerful stakeholders may not attend to organisations strategy closely. Stakeholders will pay more attention to the issues that are critical for them.
Owners are generally the key stakeholders in strategic decisions. Their motives can be professional or personal.
The power/attention matrix is presented in figure below.
Corporate governance
Corporate governance is concerned with the structures and systems on control by which managers are held accountable to those who have legitimate stake in the organisation. Connecting stakeholders interest and managers actions is vital to business strategy.
Managers and stakeholders are linked together through the governance chain that shows the roles and relationships of different groups involved in the governance of an organisation. The larger the organisation, the more layers of chain.
There are generally two models of governance: shareholders based and stakeholders based.
The shareholders model of governance is dominant in publicly quote companies and shareholders have priority in terms of wealth generated as opposed to employees. The shareholders interest in the company is largely financial. Some researches believe that shareholders model promotes growth and innovation as well as better decision making. But shareholders may pursue their personal agendas, some shareholders may become dominant and focus on short-term goals.
The stakeholders model of governance is based on the principle that wealth is created by variety of stakeholders. This allows for long-term horizons and may increase the shareholders return over the long-run. Many stakeholders are more risk-averse and avoid risks in projects. This model also may encourage better management and long term prosperity of the company. However, the decision-making may be weaker, uneconomic investments and reduced innovation. Firms operating on the shareholders model often need to maintain legitimacy with regulators, consumers and employees.
The board of directors
The governing body of an organisation is typically the board of directors. They have the ultimate responsibility for the success of failure of the organisation. Directors are widely concerned with the strategy. Often board has to delegate much of their responsibilities to managers in order to get the ordinary business done. Boards must be competent to scrutinise the management actions. Respect, trust and responsibility are important for overall business performance.
Corporate Social Responsibility
Corporate Social Responsibility (CSR) considers the role organisations have in wider society. It also considers the ethics and behaviours of people which are closely linked to business strategy.
Global reach of companies makes them having a larger influence on the societies. CRS is the commitment on the organisations to behave ethically and contribute to economic development while improving the quality of life of their workforce and their families as well as the local community and society as a whole. CRS is concerned in the way organisations meet their legal obligations. Many companies believe that corporate philanthropy is a sensible investment. Companies set up systems, such as ISO14001 and begin to monitor their social responsibility performance. It is believed that the performance of an organisation should be measured in much wider scale as opposed to as only the financial metrics. Businesses adopt different principles of sustainability. social responsibility can be measured through the 'triple bottom line' and companies may avoid to selling anti-social products, wanting to prevent jobs losses and be prepared for reduction in profit for social better good.
댓글