How do businesses deal with conflicts of stakeholder objectives? A compromise is often the answer. The solution can be found in The Stakeholder Map.
Taking such difficult decisions, which are based on weighing up the conflicting interests of these groups, is why managers and directors are often paid more than other employees.
To solve any stakeholder conflict, top management must first establish its priorities in a given situation:
- ‘Who is the most important stakeholder?’
- ‘Will bad publicity resulting from failure to meet the interests of one group lead to decreased sales revenue?’
- ‘How much will it cost to meet the needs of each stakeholder group?’
- ‘Will it cost more to satisfy a particular stakeholder group, or will the consequences of not satisfying this group cost more?’
- ‘How long will it take to satisfy a particular stakeholder group?’
- ‘Can many different stakeholder groups be satisfied with the same solution?’
- ‘Can the company afford not to meet the requirements of any one group?’
Constructing The Stakeholder Map
The Stakeholder Map, or Stakeholder Mapping, is a business model that allows managers to visually present the relative interest of stakeholders and their relative power (or influence) on the business. Interest and power (or influence) is measured using the high and low criteria.
Because it is extremely difficult to please all stakeholder groups at the same time, by using this model, managers can prioritize their actions which stakeholder group to satisfy first, or which stakeholder group will not be satisfied this time.
The Stakeholder Map also allows managers to assess how to deal with changing and conflicting stakeholder objectives using the following for strategies: Keep satisfied / Handle with care, Maximum effort / Top Priority, Minimum effort / Low Priority, Keep informed / Need help to participate.
Strategy: Keep satisfied / Handle with care
High Power & Low Interest (Top-Left): Influential stakeholders need to be handled with care. Stakeholders in this quadrant have high influence over a business, but low interest in daily running of the business (e.g. government, trade unions), so they must be kept satisfied, perhaps by consulting them on strategic decisions for the business.
Strategy: Maximum effort / Top priority
High Power & High Interest (Top-Right): Top priority stakeholders need to be given maximum effort. Stakeholders in this quadrant have high influence over a business, but low interest in daily running of the business (e.g. CEO and The Board of Directors, managers, some customers), so they should receive the most attention as they are the key stakeholders of the organization.
Strategy: Minimum effort / Low priority
Low Interest & Low Power (Bottom-Left): Low priority stakeholders will be given minimum effort. Stakeholders in this quadrant have low influence over a business, and low interest in daily running of the business (e.g. cleaning stuff, security guards), so they are unlikely to receive much, if any, attention from the decision-makers.
Strategy: Keep informed / Need help to participate
High Interest & Low Power (Bottom-Right): These stakeholders need to be constantly informed as they have the need to participate. Stakeholders in this quadrant have low influence over a business, but high interest in daily running of the business (e.g. suppliers, lower level production workers, some customers), so they need to be kept informed.
Final solution to the stakeholder conflict
Most strategies to handle stakeholder conflict will aim for a ‘best fit’ compromise. Managers will tend to make sure that the needs of all stakeholder groups are reasonably addressed and balanced considerations are given to each stakeholder.
Managers will also deal with stakeholder conflict in different ways depending on their leadership styles and the organizational culture. Autocratic leaders will take care of shareholders first, paternalistic leaders will consider employees first, while democratic leaders will try to listen to opinions of each stakeholder group before making the final decisions.
The outcome of any negotiation between stakeholder groups will also depend largely on the relative bargaining power of different stakeholders. Those stakeholders with more bargaining power in a given situation (e.g. suppliers) may win themselves better terms of trade during crisis situations. Pressure groups may be more effective in influencing business activity because of changes in external environment (e.g. social media allowing them to reach thousands or even millions of customers within minutes).
In general, it is believed that by hiring the right people and devoting time and spending money to train and develop employees, they will automatically deliver a high-quality service to the customers. So, take care of your employees first, and then they will take care of your customers properly.
