Post-Crisis Planning using Stakeholder Theory

“These unhappy times calls for the building of plans.”

Franklin D Roosevelt (1932)

Frederick, Davis and Davis (1988) set out a 7-step method of stakeholder analysis. The 7 steps are:

Step 1. Mapping stakeholder relationships

Step 2. Mapping stakeholder coalitions

Step 3. Assessing the nature of each stakeholder’s interest

Step 4. Assessing the nature of each stakeholder’s power

Step 5. Constructing a matrix of shareholder moral responsibilities

Step 6. Developing specific strategies

Step 7. Monitoring shifting coalitions

By carefully examining each of these 7 steps in detail, we obtain a much better understanding.

Owners Financial Community Political Groups Activist Groups Government Customers Suppliers Customer Advocate Groups Unions Employees Trade Associations Competitors FIRM

Step 1: Mapping Stakeholder Relationships

“Genius is the capacity for seeing relationships where lesser men see none.”

William James (1895)

Freeman (1984) suggested a series of 9 questions that start the stakeholder analysis. 1. Who are the stakeholders currently?

2. Who are our potential stakeholders? 3. How does each stakeholder affect us? 4. How do we affect each stakeholder?

5. For each division and business, who are the stakeholders?

6. What assumptions does our current strategy make about each important stakeholder? 7. What are the current ‘environmental variables’ that affect us and our

stakeholders [inflation, GNP, prime rate, confidence in business (from polls), corporate identity, media image, and so on]?

8. How do we measure each of these variables and their impact on us and our stakeholders?

9. How do we keep score with our stakeholders?

(Freeman, 1984, p.242)

Freeman (1984) used this series of questions to identify the typical stakeholders to a large firm. These he incorporated into a stakeholder map. His map is reproduced in Figure 3.

Step 2: Mapping Stakeholder Coalitions

“A coalition of groups...is waging a massive propaganda campaign against the president of the United States. ...an all-out attack. Their aim is total victory for themselves and total defeat [for him].”

Gerald R. Ford (1974)

The next step is to ascertain and map any coalitions that may have formed. Coalitions between stakeholders and stakeholder groups may emerge against the firm at their time of weakness or because they caused damage to the other or another party’s property or the environment (Weiss, 1994). An example of this may be a group of neighbours and an environmental group joining forces to campaign against asbestos contamination following a fire at the firm’s factory.

Step 3: Assessing the Nature of each Stakeholder’s Interest Talk in terms of the other person’s interest.

Dale Carnegie (1932)

According to Weiss (1995), this step and the next overlap somewhat. To assist with both Steps 3 and 4, Hatten and Hatten (1988) developed a stakeholder audit (see Figure 4).

Supporter

(Active) Uncommitted(Non-active) Opposition (Active) Who are the stakeholders:

Currently active? Potentially active? For or against? Actions:

What are they doing, and what actions have they taken to get what they want?

What are the thresholds between their indifference and activism? What could trigger a response?

What are their sensitive areas?

What are they asking for; what are their objectives? Beliefs:

What do their executives believe in? Is their knowledge of us accurate?

What assumptions do they make about us?

What assumptions about them are implicit in our strategy? How do they think we affect their success, and they ours? What is their/our power relative to us/them?

How do they measure our performance, we measure theirs? What do we really want? Are these objectives legitimate? What do we really want?

How will time and current trends affect their satisfaction, relative power, and activism?

Co operative Potential:

With which of our stakeholder sets are they related? What differences are there between them and us? How could they be influenced?

Stakes:

What is their stake in us? What is our stake in them? What is their real power in our affairs?

What power do we have in their affairs?

Figure 4: A Stakeholder Audit

It is felt that by systematically working through the categories defined in this audit, you force a wider and more objective view of the problem, the participants and the firm’s actual and potential role in the process (Weiss, 1994).

Step 4: Assessing the Nature of each Stakeholder’s Power

“Remember, all men would be tyrants if they could.”

Abigail Adams (1774)

This section gets down to ‘what’s in it for them and me’. In other words, who stands to win, who stands to lose and/or draw out of the crisis? Freeman (1984) identified three distinct types of power stakeholders. Those with:

• Voting power, eg. owners and stockholders.

• Political power, eg. government and government/semi government bodies such as the Environmental Protection Agency.

• Economic power, eg. insurers and customers.

By taking this step, it is possible to identify the groups with whom you wish to work and co-operate, those you can counter, and those you can completely neutralise (Weiss, 1995).

Step 5: Constructing a Matrix of Shareholder Moral Responsibilities “When the freedom they wished for most was freedom

from responsibility, then Athens ceased to be free and was never free again.”

Edith Hamilton (1930)

This step determines what responsibilities and moral obligations the firm has to each of the identified stakeholders. Carroll (1989, p.69) first constructed a matrix, which he titled a Stakeholder Moral Responsibility Matrix. This matrix is reproduced below as Figure5.

Nature of Focal Company Responsibilities Legal Economic Ethical Voluntary Owners Customers Employees Community Interest Groups h ol der s

Step 6: Developing Specific Strategies

“A strategy is trying to understand where you sit in today’s world. Not where you wish you were or where you hoped you would be, but where you are. It’s trying to understand where you want to be five years out. It’s assessing the realistic chances of getting from here to there.”

John Welch (1974)

The beauty of this approach to crisis management is that rather than take a knee-jerk response to problems as they arise, a set of strategies can be developed in advance to protect the firm in the long-term. To assist in the development of such a strategy, Weiss (1995) has developed a series of questions based on the work of Freeman (1984) and Carroll (1989). The questions are relevant in that they force the planner to consider how and when to approach a stakeholder. To assist the planner, four ‘Golden Rules’ were also developed by Weiss to guide them through the process. The questions and rules are set out in Figure 6.

Questions

1 Should you approach each stakeholder directly or indirectly? 2 Should you take an offensive or defensive position?

3 Should you accommodate, negotiate, resist, avoid, or do nothing? 4 What combination of strategies should you employ for each stakeholder? Golden Rules

1 Your goal is to create a win-win set of outcomes, if possible.

2 Ask “What is our business? Who are our customers? What are our responsibilities to the stakeholders, to the public and to the firm?”. You must keep the company mission and responsibilities in mind as you move forward.

3 Consider what the probable consequences of your actions will be. For whom? At what costs? Over what period of time? What does a win-win situation look like for us?

4 Keep in mind that the means you use are as important as the ends you seek. That is, how you approach and treat each stakeholder can be as important as what you do with and to them.

Figure 6: Questions to Assist in Developing Specific Strategies & Tactics

Source: Adapted from Weiss (1995, pp.42-43)

Perhaps the most important message from this is that every action a firm takes will have some response from at least one stakeholder. It is just like a game of chess. The managers of the firm have to appreciate not only the next move but also several moves ahead to achieve their goal.

Step 7: Monitoring Shifting Coalitions

“We spend all day broadcasting on the radio and TV, telling people back home what’s happening here. And we learn what’s happening here by spending all day monitoring the radio and TV broadcasts from back home.”

P.J. O’Rourke (1991)

Changes occur over time and with new events. As a result, it is important for the firm to monitor any alterations to stakes and stakeholders. One method is to use a simple timeline or a diary.