Reflections on Unit 4 - The Organisation: Stakeholders, purpose and responsibility

The Learning Outcomes are - be able to

• review the strategic purpose of the organisation, and observe how different perspectives can have an impact upon the choice of strategy to pursue
• prepare a stakeholder analysis which describes the balance of exchange of resources and power in your organisation, to identify where stakeholder priorities may be in conflict, and appreciate how managers can mediate between stakeholder groups to deliver a consensus
• develop an appreciation of the relevance of corporate social responsibility to modern strategic thinking, and the impact that corporate citizenship, ethics and environmental responsibility may have upon the organisation

 The context is whether or not your strategy should be to create value for shareholders primarily, or a wider body of stakeholders.

Sloan (1967) supported shareholders. Drucker (1988) supported shareholders. In whose interests should the firm operate?

Grant also supports the shareholder view for 4 reasons.

1. If you're not seeking profit maximisation then your attractiveness to providers of capital will be reduced and you eventually won't exist.
2. If managers are not pursuing profits single-mindedly, then owners will replace them with managers who will.
3. Companies that are doing well and making money are more likely to be inclined to treat their employees well and behave more responsibly than those who are struggling or failing.
4. Diluting organisational purpose makes the process more complex which undermines success.

Stakeholder:- Any group or individual who can affect or is affected by the achievement of the organisation's objectives.

Stakeholder theory is the alternative to shareholder theory. Stakeholder theorists argue that a focus on profit can allow a large number of externalities to emerge.

Smith (2003) attributes problems and scandals at Enron, Global Crossing, Tyco and Worldcom to shareholder theory.

Less sensational example:-

A restaurant may create noise, congestion, smell and obesity which are all not accounted for in the cost of its food. Stakeholder theorists regard these externalities as important, and to be successful organisations should focus on their impact on a wide range of stakeholders (including shareholders) rather than just shareholders.

u4s2p10 - Organisational Purpose. Some definitions

Purposes or Objectives?

Purposes reflect the values and beliefs of the main stakeholders in an organisation, recognise culture and reflect the politics of stakeholder relationships. Purpose statements are normally called mission statements.

Objectives are more specific. Express particular stakeholder group expectations, or milestones. More likely to be quantifiable.

NATO - example of an org with a changed purpose.