Influence of stakeholders on the organizational management
Influence of stakeholders on the organizational management
Stakeholders are the people or groups who have an interest, claim, or stake in the organization. Hence, stakeholders usually focus on the performance of the organization and ensure that it remains at an acceptable level. Stakeholders do not have any role in the management of the organization, but they do influence the organizational management.
Stakeholders influences the decision making process. They ensure that the organizational work environment remains dynamic, stimulating, and rewarding and there are good working conditions available in the organization so that the organization can perform well.
However, it is to be understood that the stakeholders have their own interests which are required to be satisfied by the organization. These interests can vary and can relate to productivity, environment, quality, technology, as well as financial, regulatory, welfare, or ethical issues etc. The organization is required to define, fully understand and address the interests of the stakeholders. This is a very delicate process which is required to be addressed with discretion since it can help the organization to achieve the long term success. The organization which does not have the ability to satisfy its stakeholders defeats the purpose of its existence.
For these reasons, management is required to assess the organizational setting and its own role. The major task of the management is to build relationships and to develop a framework for partnership. This framework connects the people of the organization with one another, and with its stakeholders with the stakeholders. For doing it, management is required to identify critical relationship, develop satisfactory working relationships with several key individuals and groups involved, and finally work for the maintenance of these relationships. With the conservation of organizational resources, time, money and personnel as mandate, organizational management seeks to capitalize on available external sources of power, influence, advice, and support as well as to identify those areas of potential difficulty, such as competition and rivalry, erosion of customer’s goodwill, shifting of customer’s demand and loyalty etc. In the present environment of increasing regulation, it is essential for the organizational management to identify and comply with the multiple sets of changing requirements of the regulatory agencies and guidelines issued by the state and central government agencies.
Like a living organism, an organization exists in a dynamic environment to which it must adopt continuously. The organizational management is required to identify the relevant issues affecting the organizational performance and to construct a network of the pattern of inter-relationships. It is to be noted that the organization is normally surrounded by a complex array of people, units, and other organizations which interrelate with it on the basis of various roles. These people, units, and organizations can be termed as ‘publics with opinions’. The network of the inter-relationships provides the management critical informations for taking decisions.
Stakeholders can be divided into two main categories namely (i) internal stakeholders, and (ii) external stakeholders. Internal stakeholders have direct influence on the resources of the organization. External stakeholders are people who have no direct role in the organizational operations, but they have some interest in it or its activities. The demands put forth by the external stakeholders motivate the organization to perform as well as to achieve its objectives and targets. Internal stakeholders in an organization consists of its employees and the management, while the external stakeholders are investors, customers, suppliers, lenders, regulatory agencies, government agencies, trade unions, local community, pressure groups, and general public etc.
The organizational stakeholders influence maximum the management of the organization specially the process of decision making. These stakeholders can be classified in another way. As per this classification, stakeholders can be (i) customers, (ii) suppliers, (iii) advisers, (iv) controllers, and (v) adversaries. These five categories of stakeholders are shown in Fig 1 and described below.
Fig 1 Classification of organizational stakeholders
Customers are those stakeholders to whom the organization supplies goods and services. They normally make significant demands on the organization. Sales and marketing personnel are frontline executives who are in direct touch with the customers. Management is to recognize the fact that there are always distinct customers groups. Management is to identify these groups for monitoring more effectively their several sometimes conflicting demands. Management is to acknowledge that feedbacks from the customers groups are important inputs for sustaining the organizational performance. In fact, management priorities are to stem from the recognition of the multilevel demands of the customers.
There are two categories of the external customers with whom the organization need to develop relationships. The first category are the direct customers whom the organization supplies the materials and in the second category those customers come who uses the supplied materials ultimately. The second category of customers is less visible but plays a very important role since their opinion of the organizational products carries more weight in the market. Hence management has to take their feedback more seriously while taking decisions.
Besides external customers there are internal customers within the organization who also provide useful feedbacks. Internal customer network of the organization provides management with the required information concerning relationship to be developed, aspects of the work flow to be considered, and regulations and guidelines which are required to be satisfied.
Organizations may have some remote customers. These customers are those customers who are served by the organization very rarely. Some of these customers may not even know that they are being served. Further there are some customers of the organization who are due to the services rendered by the organization to the community or due to the general service at large (social service. These customers comes under the category of remote customers.
Organizational management while assessing the stated and the implied goal for the organization, must first analyze the needs of primary or visible customers as well as those of the less visible and remote customers. If the customers’ requirements are relatively stable, then the planning, organizing, and staffing needs of the organization can be assessed by the management in a more stable manner, This results in a net positive effect in the efficiency of allocation of the organizational resources such as financial, material, space, and personnel etc.
Organizational customers have a potential capacity to control the organization. When the organization has only a few customers then it becomes easy for the customers to take charge of the organization thus limiting its independence. On the other hand, the organization which is having multiple customers is required to set priorities, balance conflicting demands, and maneuver so as to satisfy major groups of customers.
It is also necessary for the management to maintain continuous awareness of potential new customers and their needs. Organizational management is required to reach out to the potential customers in a variety of ways such as organizing conferences, or participating in conferences. Management can also become part of various committees or give demonstrations, presentations or lectures to provide learning experience to the potential customers.
Suppliers can be divided into three categories namely (i) resource suppliers, (ii) associates, and (iii) supporters.
Resource suppliers – No organization is totally self-sufficient and hence it has to arrange from outside necessary resources such as raw materials, funds or capital, service, and goodwill etc., which it needs to function and survive from. In this respect, the organization is the customer of other organizations. Within the organization, one department can be a supplier of services or materials to other department/ departments. In such a case resource supplier is an internal department of the organization. The flow pattern of the organization based on the internal customer concept is useful in identifying which aspects of the work are within the department’s immediate control and which originate in one or several other departments.
Resource suppliers are usually external to the organization. External suppliers can be regular supplier or one time supplier. For some specialty products, there may be limited suppliers or even one supplier in a geographic area. The viability of such a supplier is of interest and concern for the management since the organization relies on the product supplied by him for its functioning.
Further, management may take opportunity to partner with resource supplier in the development of a specialized product. Also, management is to ensure that the supplier of a product which is covered under regulations from statutory authority follows the specific regulations. Then there can be supplies which are covered by patents or may include policies, procedures, and safeguards. Also, confidentiality clause may be a very important clause for some supplies. Management has to ensure through agreements that these requirements are fulfilled by the supplier.
Associates – Individuals or groups outside the organization who work cooperatively with the organization in a joint effort are associates of the organization. Through informal sharing of ideas or information among themselves, individuals or groups associate to one another. Associates have a common interest and common work which unites them with the organization. Management which recognizes the efforts of associates obtains active cooperation from the associates.
Supporters – Different socially, economically, and politically powerful individual or groups in the society can be supporters of the organization. Brand ambassadors for the product of the organization also come under supporter category. Supporters mobilize ‘friendly power’ for the organization, giving it encouragement and help in developing an environment of goodwill toward the organization.
Supporters help in the coordination of the major activities such as fund raising, public relations, and intermediate services for the organization. This type of support helps the organization to conserve its own resources for direct application of the immediate goals. Individual organizations may simply lack the power to mobilize certain political or economic resources on their own behalf and may have to depend on the supporting individuals or group to help in these matters. In this respect professional association foster relationship through regularly scheduled interactions with the authorities. Sometimes, organizations appoint such individual supporter to the company’s board to mobilize such power.
Supporters may help to coordinate activities to the mutual benefits of all participants, offsetting the destructive aspect of competition and facilitating compliance with standards set by controllers by making the resources available for use by the organization.
Although advisers are like supporters in some ways, they have more specific role to play. They carry out the activities which tend to set trends for the industry. They provide a particular form of resource or support through their advice. However, there is an important difference between supporters and advisers. The assistance and support of advisers assist the organization to effectively use its resources and the support which it receives from other sources. Advisers stand apart from the organization and often have a more impersonal relationship with the organization than do supporters.
Advisers do not take decisions but their advices help the management in taking decisions. The advice may be in the form of overall guidelines, position papers, data analysis, sample procedures, and draft standards etc. Organizations must not ignore the advice of the adviser during decision making since the advices are usually impersonal.
Those individual or groups who have power over the organization are the controllers. Organization is required to meet a series statutory norms and regulations enforced by the local, state and central government agencies. They are also to meet the requirements of standardization organizations which have issues the licenses for the products of the organization. They are also to comply with the mandates of various accrediting agencies.
Some requirements are required to be complied by the management which is imposed on the organization by the outside agencies. For example, financial institutions may impose certain conditions for providing the finances or capital. Similarly suppliers may impose certain conditions in the contract while entering into contract for certain patented items. Membership of professional associations may mandate the organization to comply with the code of conduct of the association.
Certain controllers are internal to the organization and yet constitute a kind of separate entity. For example, workers are part of the organization but the trade unions which represent them are not part of the organization. Trade unions are also controllers since they exert pressure both on the workers as well as on the management. Another example is the board of directors of the company. The governing board is an integral part of the hierarchical structure of the organization, yet in many ways it differentiates from the organizational management since the decisions of the board are required to be complied by the organizational management. The assessments of the net effect of such controllers’ input provide the organizational management a sense of clear boundaries for planning and decision making.
Further there are the organizational values, ethics, vision, objectives, and polices which controls the actions of the management since it is obligated to follow these norms of the organization.
Management is required to keep management practices in line with the constraints put forward by the controllers.
Controllers may also impose conflicting regulations on the organization. The conflicting regulations put further constraints on the management towards decision making. Management is forced to assess the net effect of the multiple regulations on the work flow, products marketed, staffing patterns and job description and fine tune the decision making by changing the managerial style of functioning.
All the organizations have competitors, rivals, opponents and enemies. Further, the conflicting environment under which the organization functions is a source of struggle. Many a times, it is a target of the organizational opponents. Sometimes, even customers take an adversarial stance.
Outright opponents or enemies of the organization are those individuals or groups who seek actively and aggressively to limit the organization in its activities. These opponents or enemies may have the power to bring an activity to a halt or to prohibit an activity being started.
The concept of competition is well understood and accepted in the economic environment. Within reasonable boundaries, competition is favourable for customers, since it forces the organization to make products or services which are better and more assessable at reasonable prices. In present day environment sharp edge competition is visible in every field. Also, during these days there are several factors which can cause shift in customers’ loyalty.
Rivals are those organizations which produce different products but compete for resources, assistance, and support. Mini steel plants and micro steel plants are rivals for integrated steel plants since they compete for the same resources namely raw materials and technical manpower.
Within an organization, one department can be a rival to another department, when the management is to take decision for the allocation of resources such as budget allocation, allocation of funds for various schemes, and additional personnel etc.