Who decides what a Company should do? – Part 3

november 6th, 2012 · by John · Weblog EN, Weblog NL

In September, I published two weblogs on stakeholders. A company exists to create value. Not only for its shareholders, but also for its customers, to keep selling its products and services, for its employees, to ensure that products and services sold are produced and delivered, and for its suppliers, to keep on having the resources needed for the production and delivery of products and services. Society, including society at large, the local community and future generations is also an important stakeholder.

The question to be answered now is: how important are the various stakeholders in affecting, or being affected by your company? Two important concepts here are power and influence, and cooperative behavior.

Power and Influence

Stakeholders have power, and thus influence if a company organization is depending on the resources they can provide. There are three types of power:

  • Coercive power is based on the physical resources of force, violence or restrain. Government (police) is an example, but organized crime also has this kind of power.
  • Utilitarian power is based on the command of financial or material resources. We can easily think of a monopolistic supplier, and also trade unions having the power to call a strike fall into this type.
  • Normative power is based on a (perceived) command of symbolic resources such as being able to command attention of the media.

Cooperative behavior

From the first paragraph, it can be concluded that there often is some form of mutual dependence between an organization and it stakeholders. The greater this dependence, the greater will be the willingness of the stakeholder to cooperate.

Conclusion

To determine whether a stakeholder has power and whether he is willing to cooperate is subjective. A stakeholder may not even be conscious of being either one or both. Having power and being cooperative are dynamic characteristics; they can change from one moment in time to another. At the end it is management of the organization who has to decide which stakeholder has what characteristic.

We can map stakeholders according to the two characteristics (power and cooperation) and distinguish four important types of stakeholders:

  Type Characteristic Description
  Highly Supportive High on cooperation, high on power Typically includes management, employees, parent companies, suppliers and service providers.
  Marginally Supportive High on cooperation, medium on power Normally includes consumer groups, professional association for employees and shareholders.
  Marginally Non-supportive Not cooperating, medium on power In certain case, this could include unions, media and government.
  Highly Non-supportive Not cooperating, high on power This normally includes competition and various action and pressure groups

 

Having discussed the stakeholder, their stake, and their level of power and cooperation, we can answer the question “Who decides what a Company should do?” in part four of this series.

John Greijmans

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