Stakeholders – Expectations and mapping
People play a complex role in the evolution of strategy. So it is important to consider what people expect an organisation to achieve and, therefore, what influence people can have over an organisation’s purposes. There are four main types of expectations – each of which influences an organisation’s purposes to some degree.
The most fundamental expectations are concerned with ‘whom should the organisation be there to serve and how should the direction and purpose of an organisation be determined’. This is covered by corporate governance and the regulatory framework within which organisations operate. Business ethics considers which purposes should be prioritised and why, and includes thoughts on corporate and social responsibility, together with the behaviour of individuals within organisations. The cultural context considers which purposes are prioritised and why. Expectations are influenced by history and experience which become ‘enshrined’ in corporate culture. Finally, there are considerations as to whom does the organisation serve. These are often different in practice from those who should be served due to the expectations of powerful individuals and groups – stakeholders.
Stakeholders are those individuals or groups who depend on the organisation to fulfil their own goals, and on whom, in turn, the organisation depends. This requires an understanding of both the power and interest of the different groups. Examples include financial institutions, customers, suppliers, shareholders, unions, and employees. Within the organisation, there are likely to be only a few individuals who have sufficient power to determine unilaterally the organisation’s strategy.
Stakeholder mapping identifies stakeholder expectations and power and helps in understanding political priorities. It underlines the importance of two issues:
- How interested each stakeholder group is to impress its expectations on the organisation’s purposes and choice of specific strategies;
- Whether stakeholders have the power to do so.
The power/interest matrix seeks to describe the political context within which an individual strategy would be pursued. It classifies stakeholders in relation to the power they hold and the extent to which they are likely to show interest in supporting or opposing a particular strategy.
It is easy to understand the appropriate strategies for each quadrant. Clearly, those in quadrants ‘C’ and ‘D’ are the stakeholders whose interests need to be understood. Stakeholder mapping might help in understanding better the following issues:
- Whether the actual levels of interest and power of stakeholders properly reflect the corporate governance framework within which the organisation is operating;
- Who the key blockers and facilitators of a strategy are likely to be and how this could be responded to;
- Whether repositioning of certain stakeholders is desirable and/or feasible;
- Maintaining the level of interest or power of some key stakeholders may be essential.
Power is the mechanism by which expectations are able to influence purposes and strategies. In strategic terms, power is the ability of individuals or groups to persuade, induce or coerce others into following certain courses of action. There are many sources and indicators of power, as shown below.
It should be remembered that the distribution of power will vary in relation to the particular strategy under consideration.
This post reviews the importance of understanding stakeholders expectations and their power which allows companies to better understand how to manage those stakeholders.