Stakeholders and Their influence on Organisation Operations

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The idea 'stakeholder' is a variant of 'stockholder', which relates to 'investors in' or 'owners in' a firm or business. Stakeholders can be defined as 'individuals and groups who are affected by the activities of an organisation. The most leading stakeholders can be seen as those with most to lose from the organisation's actions, but this does not all the time reflect their relative power.'. (Hannagan, T (2002), 'Management: Concepts and Practices' P142.)

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In the past it had been the base idea that businesses fundamentally rely upon, and in turn effect their economic capital, which is represented in the form of stockholders. The rise to prominence of stakeholders (through studies and reports) has allowed firms to realise that there are population and infrastructure beyond the business which are significant to it and who must have their interests protected. An organisation's stakeholders are all parties who can reasonably be understood to be affected by its decisions. They can be deemed to characterize the businesses' collective and environmental capital as well as economic. Stakeholders can be of very different and assorted guises and also harbour conflicting interests. In the main they can be categorised into three major groups: Internal, connected and External Stakeholders.

Internal stakeholders comprise managers and employees and are those that are situated within the business and sway the 'day-to-day' running of the organisation. connected stakeholders cover groups such as shareholders, suppliers and customers, and are parties which spend or have dealings with the firm. The third group, External stakeholders, are those not directly connected to the organisation but who can be influenced or sway activities of the firm straight through assorted means. External stakeholders comprise the Government, neighbours, pressure groups, local councils and the surrounding community.

As well as stakeholders, organisations and the population complicated with them are thinkable, to adhere to written and unwritten ethical boundaries. The degree to which these are adhered depends upon as assorted a blend as government enforced performance to plainly the moral fibre of a boss or employee. On occasions only the 'eye of the beholder' can truly rejoinder either the moral considerations were taken on board when manufacture a decision. This makes gauging an organisations ethical stance very difficult as the image they portray to the collective may not match the internal reality. 'The ethical environment refers to justice, respect for the law and a moral code. The escort of an organisation, its administration and employees will be measured against ethical standards by the customers, suppliers and other members of the collective with whom they deal' ( Hnc / Hnd Btec (2002) 'Business policy Book: Organisations, Competition and Environment' P267).

During the policy of this study, the effect of stakeholders and ethical / moral issues on organisations will be investigated at depth using assorted theories and research.

Stakeholders are found in all organisations, businesses or firms - from a local grocer store to huge multinational companies such as McDonalds and Microsoft. The estimate of stakeholders per business will vary as will their importance and influence. The type of organisation or product / service it supplies will also resolve its stakeholders. A collective petite Corporation may have far more stakeholders than a house owned business due to its vast numbers of shareholders. As too might a Nuclear Power station such as Sellafield which may have many more stakeholders from the environment groups (Greenpeace / 'Save the World' etc) / government / local residents / trade unions than a more 'low risk' facility or industry. However, as new events such as the 'Foot and Mouth Epidemic' / Bse, and new reports into colourings in packaged foods, it is impossible to predict when an organisation will gain new stakeholders - either of the wanted or unwanted kind.

The advent of a new stakeholder often provides the business with an ethical dilemma of how to (or how not to) satisfy this new member's needs, whilst avoiding conflict with the present stakeholders. In an ideal world a fine equilibrium could be achieved to satisfy all stakeholders whilst obtaining the organisations goals in behalf and sales (often behalf maximisation and / or sales maximisation). Any way inescapable stakeholders may have wholly conflicting measurements of success, resulting in one stakeholder being rewarded having a detrimental effect on someone else stakeholder.

Perhaps the main form of stakeholder arrival / administration is the "Stakeholder Corporation" concept. Its authors, Wheeler and Sillanpaa, argue that 'In the future, amelioration of loyal relationships with customers, employees, shareholders, and other stakeholders will come to be one of the most leading determinants of industrial viability and business success. Increasing shareholders value will be best served if your business cultivates the hold of all who may sway its importance'. This firmly supports the idea of 'stakeholder symbiosis' which believes all stakeholders are dependent upon one someone else when achieving success and financial well-being.

Whilst this appears an ideal scenario theory, it takes petite list of conflicting stakeholders, whose personal perspectives of success may be situated at faultless opposite ends of the spectrum. In a theoretical situation it may seem viable to appease all stakeholders with a fine equilibrium of benefits and concessions, but human behaviour tends to diversify over time - with inescapable parties deeming themselves 'winners' or 'losers' in the scale of organisational fairness. The Premiership footballer is a prime example of a stakeholder in an organisation (club) who carries greatest power and often gets what he wants even if it has a detrimental effect. Despite his inescapable privileges over other stakeholders such as fans, ground staff and the local community, he will often not be content unless his financial gains are on a par with fellow team-mates, and the finance is in the hands of this elect minority. Operations and activities at the club may be designed nearby satisfying the present 'high profile' stakeholders with petite consideration for the long-term effect. The fall from grace and into bankruptcy of Leeds United Football Club being the most widely publicised case.

'Stakeholder Power: Four Gates of Engagement' is a theory put forward by Steven Walker and Jeffrey Marr. It presents a practical framework for assessing stakeholder group commitment levels. It is their view that organisations must be proactive in their arrival to relationships with inherent stakeholders in order for the stakeholder to want a connection back. In order to accomplish this the framework suggests the organisation / stakeholder connection should pass sequentially straight through the 'four gates' of Awareness, Knowledge, Admiration and Action. Each time a gate is passed, the connection gains attributes, hopefully finally resulting in an performance connection where the two strive towards multi-beneficial goals and aims. Similarly to 'The Stakeholder Corporation', in theory it appears base sense, but for firms with many stakeholders, as with any relationship, the more groups or individuals complicated the higher the possibility of conflict. It may be viable to allege a strong 'Action' connection if the business has few stakeholders, but to keep hundreds of stakeholders happy must be at the charge of others.

Another arrival to stakeholder management, described by Freeman, is to analyse to what extent an organisation has developed its Stakeholder administration ability (Smc). Similar to the above fore-mentioned approach, Smc provides three levels in which an organisation can address its stakeholders:

Level 1: The Rational Level Level 2: The Process Level and Level 3: The Transactional Level.

At the level 1 stage a business plainly identifies its stakeholders and what their stakes maybe. Level 2 organisations have easily developed and applied processes or procedures to collate data and information on their stakeholders. This information is then used for decision-making. Level 3 organisations are in a position were their managers interact with stakeholders and form relationships. 'At this highest level of Smc, the administration must take the initiative in meeting stakeholders face to face and attempting to be responsive to their needs'. (Hannagan, T (2002), 'Management: Concepts and Practices' P87.) An organisation deemed to be in the Transactional level must be open to commentary and willing to rejoinder if it is to keep strong connection ties with its stakeholders. Any way stakeholder demands or actions which are detrimental to the company, its operations or other stakeholders must be dealt with in a strong managerial style as and when they occur.

In the case of organisations and in particular multi-national firms, it is increasingly the case that stakeholders are aware of what that business does in other countries in which it operates. Therefore concessions or benefits which have been easily agreed in one country may be demanded in another, yet cannot be afforded as easily. For years, companies such as Nike have used 'cheap' and sometimes 'child' labour to organize their products in countries such as China and India. Whilst very profitable to the business in financial terms and providing the employees in these developing countries probably a better lifestyle than they would otherwise expect, the firms ethics have been continuously called into question. Maybe a more long-term arrival would have recognised earlier the stakeholder inherent of large developing countries like China, India and Malaysia.

Ethical issues in the middle of employees and administration can have serious effects on a company. Unethical employment practices such as discrimination (by creed, age, sex etc), harassment (sexually, physically etc) and poor standards of condition and safety can severely damage an organisations image. Poor employment relations can lead to loss of reputation, low productivity, poor morale among staff and heavy financial costs resulting from tribunals and compensation pay-outs. Firms, which seek to exploit cheap labour in underdeveloped countries, risk alienating both their customers and the governments in their home and host countries. An ethical and socially responsible boss should recognise that a safe working environment with pleasant conditions has a motivational effect on staff and thus increases their loyalty and commitment towards the firm in general.

Some firms have set procedures which frame the ethical responsibilities. The business has to inescapable stakeholder groups. The car organize Daimler-Chrysler has recently implemented an 'employment pact', thus demonstrating the importance the business places in ethical responsibility to its employees. The Daimler-Chrysler web-site quoted 'The Daimler-Chrysler business illustrates that companies can equilibrium the needs of different stakeholders if alternative arrangements are put in place...They have negotiated an 'employment pact' which effectively guarantees 6000 jobs in their German plants until 2012, in Increasing to structures allowing for an growth in productivity and the long-term competitiveness of the Mercedes car group'. Taken from Daimler Chrysler's website. By according such a pact, the administration of Daimler-Chrysler are removing the burden of redundancy from their employees for a set period of time, thus Increasing a sense of importance, self-worth and safety among the workers. However, a large scale slump (although unlikely) in the sales of these vehicles could see the business paying 'idle' workers, which would most easily displease other stakeholders, in particular shareholders.

The main ask that has arisen from my research is either or not the theories, which have been put forward, are realistic. The assorted economists, researchers and theorists have recommend many models and structures which supposedly characterize 'best practice', but in how many organisations is this easily the case or is likely to be the case in the future? International economy trends propose that the faultless opposite to an 'ethical stakeholder economy' may be developing. 'The growth of multinational corporations, with their ability to move finance and production to wherever it is most profitable, has weakened the power of employees, local interest groups and even national governments'. (Sloman, John & Sutcliffe, Mark (2004) 'Economics for Business', 3Rd Edition - Prentice Hall P286).

The expansion of multinational organisations can effect in employees of very different backgrounds with few base bonds or interests. This, I feel, makes them less likely to join together to promote base beneficial goals and in greatest cases leads to employees vying against each other for a petite estimate of positions.

For example, the business for which I am employed has come to be increasingly disillusioned with the lack of employees willing to work overtime at weekends. As a effect and with the aid of an agency, the business has brought several workers of Polish origin to the organisation. These employees have petite contracts, receive less remuneration and are not entitled to the normal workforce privileges of 'time and a half' on Saturdays and 'double time' on Sundays. However, the early results in terms of profitability look promising and unfulfilled customer orders are now being met. This is against an offset of varying displeasure among the customary workforce and local community, with some employees aggrieved over the loss of overtime and inherent job vacancies for local friends and family.

As highlighted above, many firms are employing larger numbers of temporary, part-time, casual and department workers. This is part due to their high availability under the new 'flexible labour markets' created by the Eu and government deregulation in the mid 1990's. These workers have very petite say in the way the business is run due to the ease in which they can be 'hired and fired'. Incorporate this with share incentive schemes for managers (resulting in increased emphasis on profits), the present and time to come scenario appears one where ethical duties and less superior stakeholders are given very petite consideration or in fact their opinions dismissed!

A higher emphasis must also be settled on organisations to furnish spoton and honest information, particularly were it affects the collective good. greatest penalties must be inflicted on those who flaunt the truth if repeats of the Enron scandal are to be avoided. Firms cannot plainly be content with providing the information the clients want to hear when the actuality is a far different scenario. Maybe a part explication to this would be for every collective petite business (Plc) and hidden petite business (Ltd) to annually be audited by an external independent accountant. This Accountant / devotee would be given a 'free hand' in regards to all business figures. A confidentiality clause would be in place and only illegal or fraudulent activities would be reported.

Perception questionnaires and audits are base convention in many modern organisations as they exertion to gauge their image among customers. These audits, perhaps, should be more comprehensive to comprise all stakeholders and, in the case of many firms, the normal collective and their opinions.

Scandals such as the Enron Power business 'cover-up' and similar smaller scale scandals have seriously affected collective reliance like that at the telecommunications firm OneTel. Lack of collective reliance can endanger key structures of our everyday lives, such as democracy and the market place. No organisation, firm or community can function to its full inherent when trust is continuously being eroded by cynicism.

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