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CMI 509 Managing Stakeholder Relationships

Second Edition 2021

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• The main purpose of this workbook is to support you as you study for the Chartered Management Institute Level 5 Qualification — in Management and Leadership, so it specifically focuses on the content of the syllabus for the unit 509 Managing Stakeholder Relationships.

ABOUT THIS WORKBOOK

• This workbook provides underpinning knowledge and develops understanding to improve your skills as well as to prepare you for future assessment. If you are studying towards the Level 5 Qualification — in Management and Leadership then, if you choose to do so, you will be assessed on your knowledge and understanding of the learning outcomes.

Ofqual unit number F/616/3213

Aims of unit

Good relationships, whether they are with customers, suppliers, partners or staff, are a key contributor to an organisation’s success. To build stakeholder relationships that are long lasting and sustainable, they need to be planned and developed. This unit explores the types and purposes of stakeholder relationships and the skills required to overcome challenges and manage these effectively.

Keywords

Stakeholder relationships, benefits and challenges, contractual framework, process, planning engagement, role of the manager, communication skills, collaborative working techniques, strategies for managing conflict, impact of stakeholder engagement

Learning Outcomes

1. Understand the different types and value of stakeholder relationships

2. Understand the frameworks for stakeholder management

3. Know how to manage stakeholder relationships

4. Know methods for measuring the impact of stakeholder engagement on organisational performance

BOOKS

• Project stakeholder management, Pernille Eskerod and Anna Lund Farnham: Gower, 2012

• Stakeholder relationship management: a maturity model for organisational implementation, Lynda Bourne Farnham: Gower, 2009

• Managing for stakeholders: survival reputation and success, R Edward Freeman, Jeffrey S Harrison and Andrew C Wicks Newhaven Conn: Yale University Press, 2007

• Stakeholders theory and practice, Andrew L. Friedman and Samantha Miles New York NY: Oxford University Press, 2006

JOURNAL ARTICLES

• Building understanding and knowledge: a case study in stakeholder orientation, Robert J. Duesing and Margaret White Journal of Managerial Issues, Winter r2013, vol 25 no 4, pp 401-415

• How the larger corporations engage with stakeholders through Twitter, Lilia Mamic Ivana and Isidoro Arroyo Almaraz International Journal of Market Research, 2013, vol 55 no 6, pp 851-872

• Who and what really matters to the firm: moving stakeholder salience beyond managerial perceptions, Pete Tashman and Jonathan Raelin Business Ethics Quarterly, Oct 2013, vol 23 no 4, pp 591-616

• Stakeholder happiness enhancement: a neo-utilitarian objective for the modern corporation, Thomas M. Jones and Will M. Felps Business Ethics Quarterly, Jul2013, vol 23 no 3, pp 349-379

• Creating shared value, Michael E. Porter and Mark R. Kramer Harvard Business Review, Jan-Feb 2011, pp 6277

Learning Outcome

One -Understand the different types and value of stakeholder relationships

Assessment criteria

1. Analyse the types of stakeholder relationships within organisations

2. Examine the benefits and challenges for organisations working with different stakeholder groups

Indicative content

1. Stakeholder relationships may include but are not limited to internal: team members, line managers, senior managers, board members; external: customers, pressure groups, government agencies; connected :suppliers, partners, contractor; balance of power, value, impact, power/interest (Freeman, 1984; Eden and Ackerman, 1998).

2. Benefits refer to identifying and sharing best practice, use specialist advice and support to deliver against plans and may also include but are not limited to access to expertise, financial, achievement of objectives, corporate social responsibility, quality. Challenges may include but are not limited to authority, change management, intellectual property, conflict of interest, differences in culture, values and beliefs, leadership conflict, confidentiality, information sharing.

Learning Outcome

2 Understand the frameworks for stakeholder management

Assessment criteria

1. Examine the contractual frameworks for stakeholder engagement and management

2. Specify a process for planning stakeholder engagement

Indicative content

1. Contractual frameworks may include agreements (e.g. service level and trade union agreements),contracts, compliance (legislation and regulation), governance.

2. Process refers to approaches to partner, stakeholder and supplier relationship management including negotiation, influencing and effective networking and may include but is not limited to stakeholder types and needs, objectives, risk/value, engagement methods, reporting, timescales, authority

Learning Outcome 3

Know how to manage stakeholder relationships

Assessment criteria

1. Analyse the role of the manager in managing stakeholder relationships

2. Evaluate the use of collaborative working techniques to manage stakeholder relationships 3.3 Discuss methods for managing conflict in stakeholder engagement

1. Role may also include but is not limited to clarifying needs and expectations, developing and implementing plans, allocating resources, ensuring agreements are met, reviewing effectiveness.

2. Collaborative working techniques refers to enable delivery through others, building trust (e.g. Svendsen, 1998), negotiating, influencing and effective networking , identifying and sharing best practice; and may also include but is not limited to assertiveness, problem solving, consulting, active listening, respect, consensus, equal concern for task and people (Blake and Mouton, c1950s), agreeing shared goals, diversity, empowering others, involvement (Friedman and Miles, 2006 and Egan, 2011, Bourne,

Indicative content 2009).

3. Methods may include but are not limited to investigation, negotiation, mediation, compromise, arbitration. Conflict refers to managing conflict at all levels (e.g. gender, age groups, across organisational and international cultures).

Learning Outcome 4 Know methods for measuring the impact of stakeholder engagement on organisational performance

Assessment criteria

4.1 Examine methods for measuring the impact of stakeholder engagement on organisational performance

Indicative content

4.1 Methods may include but are not limited to inspection, audit, impact assessment, cost benefit analysis. Impact may include but is not limited to reputation, advocacy, support, trust, perception, attrition, opportunity cost, achievement of objectives.

Stakeholder Theory

Stanford Research Institute

The stakeholder theory has been in the management agenda for a number of years. Since Richard E. Freeman published his landmark book in 1984, several essays have been published aiming to compose the mosaic of this theory.

Despite such effort, it is still vague (Jones & Wicks, 1999) to explain the nature of the relationships between a given organization and the people, groups and other organizations able to participate in its decision-making.

Definitions

The term stakeholder first “appeared in the management literature in an internal memorandum at the Stanford Research Institute, in 1963” (Freeman, 1984, p. 31).

The word means “any group or individual who can affect or is affected by the achievement of the organization's objectives” (Freeman, 1984, p. 46).

Bryson (1995, p. 27) proposed a more comprehensive definition for the term: “A stakeholder is defined as any person, group, or organization that can place a claim on an organization's attention, resources, or output or is affected by that output”.

STAKEHOLDER RELATIONSHIP MANAGEMENT

BOURNE 2009

• Stakeholders are defined as: Individuals or groups who will be impacted by, or can influence the success or failure of an organisation’s activities (Bourne 2009).

• Stakeholders are groups or individuals who supply critical resources, or place something they value at risk through their investment of funds, career or time in pursuit of the organisation’s business strategies or goals. Alternatively, stakeholders may be groups or individuals opposed to the organisation or some aspect of its activities. By definition, a stakeholder has a stake in the activity.

This stake may be:

• An interest in the outcome, an individual or group affected by the work or the outcome, whether direct or indirect;

• Rights (legal or moral);

• Ownership, such as intellectual property rights, or real property rights; • Contribution in the form of knowledge (expertise or experience) or support (in the form of funds, human resources, or advocacy (Bourne 2009).

STAKEHOLDER RELATIONSHIP MANAGEMENT

BOURNE 2009

• Projects involve more than the delivery of a product, service or result: projects create change.The challenge for organisations to deliver successful projects in a climate of uncertainty is met by ensuring that all those groups and individuals affected by the change – stakeholders - are engaged in a way that enhances their collaboration.

• We are social animals: we don’t thrive in isolation. We need to build relationships in our personal and professional lives to be effective human beings. Building relationships requires us to understand two important factors: firstly, a sustainable relationship provides benefits to both parties; and secondly communication is the only tool to build and maintain robust relationships.

• This is indisputably the case in personal relationships, but the same factors apply to professional relationships. We all communicate: sometimes we do so unconsciously, but we need to appreciate that the most effective communication, personal or professional, is planned – we know the purpose of the communication, we are certain that the relationship is important, and we are clear about the level of effort we need to apply to the communication activity.

Stakeholder engagement Bourne 2009

Only when the needs (expectations) of each stakeholder and the stake or stakes they may have in the outcome are known and understood is it really possible to begin to understand the drivers or business needs of a sponsor or other senior management stakeholders for what may be in reality, unrealistic targets.

STAKEHOLDER RELATIONSHIP MANAGEMENT

BOURNE 2009

With this realisation messages can be crafted and a communication campaign or program begun to attempt to ‘educate’ the senior management stakeholder on what can be achieved in the context of what he or she needs.

The sponsor’s needs cannot be assumed and may not even be related to the project itself. But this understanding of needs and expectations is crucial. It is a fundamental starting point for any campaign to reach agreement on alternative project objectives and management of perception both of the sponsor himself but also the perceptions of the stakeholders of the sponsor.

The Stakeholder Circle

• The methodology The Stakeholder Circle methodology is based on the concept that success of an organisation’s activities to achieve its business strategies and objectives (often projects) depends on the engagement and involvement of the stakeholder community.

• All decisions or understanding of the relationships are made from the perspective of the manager of the activity.

• Surrounding the activity itself is the team; often overlooked in many stakeholder engagement processes

• Surrounding the team is the community of stakeholders that has been identified as being important to the success of the activity at the present time.

• The outermost circle references potential stakeholders: those who may, or will, be important to the success of the work at a later stage.

The Stakeholder Circle

• To develop the 'circle', Stakeholders are weighted according to the three characteristics.

• Power: Some stakeholders (either alone or operating as a group) can kill the project using their own power, other stakeholders have the power to change or damage the project but cannot on their own cause it to be cancelled or fail – this is the power axis in the stakeholder circle.

• Proximity: This aspect considers how closely a stakeholder is associated with the day-to-day running of the project. The center of the diagram represents the project. The space between the two circles represents the sphere of influence of the project on its whole stakeholder community. The proximity of a stakeholder to the project is represented by how close their segment is to the project in the center.

• Urgency / Importance: The width of the arc represents the amount of urgency or importance attributed to a stakeholder from the teams perspective (ie, how likely the stakeholder is to use its power), the wider the segment, the greater the urgency.

Stakeholder Circle (Bourne & Walker, 2008)

Dr. F.Edward Freeman, a professor at the University of Virginia, Freeman Stakeholder Approach (1984)

• Freeman is the acknowledged father of the stakeholder approach

• Freeman is particularly known for his work on stakeholder theory originally published in his 1984 book Strategic

Management: A Stakeholder Approach

• Stakeholder Approach (1984) introduced the concept of stakeholders, all of those individuals or groups other than shareholders (or owners) who have a stake in the particular decision or action of companies.

Dr. F. Edward Freeman, a professor at the University of Virginia, Freeman Stakeholder Approach (1984)

• It suggests that shareholders are merely one of many stakeholders in a company.

• The stakeholder ecosystem, this theory says, involves anyone invested and involved in, or affected by, the company: employees, environmentalists near the company’s plants, vendors, governmental agencies, and more. Freeman’s theory suggests that a company’s real success lies in satisfying all its stakeholders, not just those who might profit from its stock.

Definition: What Is Stakeholder Theory?

• Freemans stakeholder theory holds that a company’s stakeholders include just about anyone affected by the company and its workings. That view is in opposition to the long-held shareholder theory proposed by economist Milton Friedman that in capitalism, the only stakeholders a company should care about are its shareholders - and thus, its bottom line. Friedman’s view is that companies are compelled to make a profit, to satisfy their shareholders, and to continue positive growth.

Stakeholder Approach (1984)

• Dr. Freeman suggests that a company’s stakeholders are "those groups without whose support the organization would cease to exist." These groups would include customers, employees, suppliers, political action groups, environmental groups, local communities, the media, financial institutions, governmental groups, and more. This view paints the corporate environment as an ecosystem of related groups, all of whom need to be considered and satisfied to keep the company healthy and successful in the long-term.

Power-Interest Grid Source: Eden and Ackermann (1998)

Power-Interest Grid Source: Eden and Ackermann (1998) cited in Bryson, John 2004. “What to do When Stakeholders Matter: Stakeholder Identification and Analysis Techniques.” Policy Management Review 6(1): 21-53.

The power-interest grid, as shown to the right, helps to visualise the positions of individual stakeholders and the relations among them. The two dimensions of the grid – power and interest – speak to the reality that not all of the players who have an interest in agricultural land use planning also have power to influence decisions. The two-dimensional grid generates four categories of stakeholders:

• · Players: have both an interest and significant power

• · Subjects: have an interest but little power

• · Context setters: have power but little direct interest

• · Crowd: have little interest or power

PowerInterest Grid

Source: Eden and Ackermann (1998)

Eden and Ackermann, 1998

Friedman verses Freeman

Relationship Management

• It can be said that a stakeholder is “a person who has something to gain or lose through the outcomes of a planning process, programme or project” (Dialogue by Design, 2008).

• Therefore, stakeholder management is essentially stakeholder relationship management “as it is the relationship and not the actual stakeholder groups that are managed” (Friedman & Miles, 2006).

Friedman verses Freeman

Freeman puts forth what he calls the “stakeholder theory” while Friedman advocates for the “stockholder theory.”

Freeman’s stakeholder theory identifies different “stakes” that influence an organization. Each of these parts is integral to the well-functioning of the organization.

Donaldson and Preston (1995) Normative

Stakeholder Theory

• Donaldson and Preston (1995) claim that the normative thesis is the “fundamental basis” of stakeholder theory and involves acceptance of the following ideas: Stakeholders are persons or groups with legitimate interests in procedural and/or substantive aspects of corporate activity

• Donaldson and Preston (1995) claim that the normative thesis is the “fundamental basis” of stakeholder theory and involves acceptance of the following ideas:

• Stakeholders are persons or groups with legitimate interests in procedural and/or substantive aspects of corporate activity. Stakeholders are identified by their interests in the corporation, whether the corporation has any corresponding functional interest in them.

• The interests of all stakeholders are of intrinsic value. That is, each group of stakeholders merits consideration for its own sake and not merely because of its ability to further the interests of some other group, such as the shareowners. (Emphasis in the original)

• Normative stakeholder theory “attempts to interpret the function of, and offer guidance about, the investor-owned corporation on the basis of some underlying moral or philosophical principles”. Normative justifications of stakeholder theory “appeal to underlying concepts such as individual or group ‘rights’, ‘social contract’, or utilitarianism”.

• The normative thesis finds its practical upshot in stakeholder management. Stakeholder management requires, as its key attribute, simultaneous attention to the legitimate interests of all appropriate stakeholders, both in the establishment of organizational structures and general policies and in case-by-case decision making If true, the normative thesis underwrites morally the practice of stakeholder management.

Donaldson and Preston (1995) Normative Stakeholder Theory

Mitchell, Agle, and Wood

Theory of Stakeholder Salience

• Salience model is a method for classifying stakeholders and to decide who do matter! ... The stakeholder salience is decided by the assessment of their power, legitimacy and urgency in the organization.

Power – is the ability of a stakeholder to impose their will

Mitchell, Agle, and Wood Theory of Stakeholder Salience

Mitchell, Agle, and Wood

Theory of Stakeholder Salience

A ladder of stakeholder management and engagement (Friedman and Miles 2006:162)

• According to Friedman and Miles (2006), stakeholder plays a vital role in the success of an organization by having clear relationship-exchange with an organization.

• Friedman and Miles have collected a lot of historical information, studies and theory of Stakeholder concept. The book Developing

Stakeholder Theory

includes all the relevant academic Stakeholder theories - so this is like a summary of all Stakeholder topics. Friedman and Miles have developed further and created their own models of Stakeholder theory.

• Friedman and Miles explore the implications of contentious relationships between stakeholders and organizations by introducing compatible/incompatible interests and necessary/contingent connections as additional attributes with which to examine the configuration of these relationships.

A

ladder of stakeholder management

and

engagement (Friedman and Miles 2006:162)

• A ladder of stakeholder management and engagement (Friedman and Miles 2006:162)

Stakeholder management tool and nature of response Intention of engagement Level of influence Style of dialogue and associated examples Degrees of stakeholder power stakeholders in Forming or Proactive or responsive/ trusting 12

A ladder of stakeholder management and engagement (Friedman and Miles 2006:162)

Ann Svendsen (1998) who suggested fostering collaborative stakeholder relationships through a six stage process.

F - Create a Foundation for Relationship Building

O- Create a More Effective Organization for Relationship Building

S- Develop a Stakeholder Strategy

T- Build a Trusting Relationship

E- Evaluate and Improve Relationships

R- REFRESH or revisit the previous elements

Anna Heikkinen Nine elements of firm-stakeholder relationships and the related empirical research questions

John Egan

2011 Relationship Marketing

Exploring Relational Strategies in Marketing, John Egan explores the application of the strategies of relationship marketing in marketing theory and practice, with an aim to build up and improve relationships between enterprises, consumers and other stakeholders in order to satisfy their needs and improve the enterprise’s business performances.

For that reason, it is important for enterprises to understand the concept of relationship marketing and to successfully apply strategies of relationship marketing in their business doing so as to maintain and improve their competitive position in the market.

Egan (2011) Relationship Marketing

Egan (2011) Relationship Marketing

Relationship Marketing

• Relationship Marketing suggests that relationships add quality to marketing transactions.

• In consumer markets, the premise is that building strong relationships will have a positive influence on exchange outcomes (Palmatier et al., 2006, p. 140).

• Barnes and Howett (1998, p. 16) express the view that two characteristics must be present for an exchange situation to be described as a relationship:

• The relationship is mutually perceived to exist and is acknowledged as such by both parties.

• The relationship goes beyond occasional contact and is recognized as having some special status.

• True relationships will not exist if these factors are absent!

The Blake Mouton Managerial Grid

• The Blake Mouton Managerial Grid is based on two behavioral dimensions:

• Concern for People: this is the degree to which a leader considers team members' needs, interests and areas of personal development when deciding how best to accomplish a task.

• Concern for Results: this is the degree to which a leader emphasizes concrete objectives, organizational efficiency and high productivity when deciding how best to accomplish a task.

• Blake and Mouton defined five leadership styles based on these, as illustrated in the diagram below.

•

The Blake Mouton Managerial Grid

• Also known as the Managerial Grid, or Leadership Grid, it was developed in the early 1960s by management theorists Robert Blake and Jane Mouton. It plots a manager's or leader's degree of task-centeredness versus her person-centeredness, and identifies five different combinations of the two and the leadership styles they produce.

The Blake Mouton Managerial Grid

• The Impoverished or "indifferent" manager is mostly ineffective. With a low regard for creating systems that get the job done, and with little interest in creating a satisfying or motivating team environment , his results are inevitably disorganization, dissatisfaction and disharmony.

Understanding the Model

• Produce-or-Perish Management – High Results/Low People

• Also known as "authoritarian" or "authority-compliance" managers, people in this category believe that their team members are simply a means to an end. The team's needs are always secondary to its productivity.

• This type of manager is autocratic, has strict work rules, policies and procedures, and can view punishment as an effective way of motivating team members. This approach can drive impressive production results at first, but low team morale and motivation will ultimately affect people's performance, and this type of leader will struggle to retain high performers.

• They probably adheres to the Theory X approach to motivation, which assumes that employees are naturally unmotivated and dislike working.

A manager who believes people are self-motivated and happy to work is said to follow Theory Y.

Understanding the Model

• Middle-of-the-Road Management – Medium Results/Medium People

• A Middle-of-the-Road or "status quo" manager tries to balance results and people, but this strategy is not as effective as it may sound. Through continual compromise, he fails to inspire high performance and also fails to meet people's needs fully. The result is that his team will likely deliver only mediocre performance.

• Country Club Management – High People/Low Results

• The Country Club or "accommodating" style of manager is most concerned about her team members' needs and feelings. She assumes that, as long as they are happy and secure, they will work hard. What tends to be the result is a work environment that is very relaxed and fun, but where productivity suffers because there is a lack of direction and control.

Understanding the Model

• Team Management – High Production/High People

• According to the Blake Mouton model, Team management is the most effective leadership style. It reflects a leader who is passionate about his work and who does the best he can for the people he works with.

• Team or "sound" managers commit to their organization's goals and mission, motivate the people who report to them, and work hard to get people to stretch themselves to deliver great results. But, at the same time, they're inspiring figures who look after their teams. Someone led by a Team manager feels respected and empowered, and is committed to achieving her goals.

• Team managers prioritize both the organization's production needs and their people's needs. They do this by making sure that their team members understand the organization's purpose , and by involving them in determining production needs.

• When people are committed to, and have a stake in, the organization's success, their needs and production needs coincide. This creates an environment based on trust and respect, which leads to high satisfaction, motivation and excellent results. Team managers likely adopt the Theory Y approach to motivation, as we mentioned above.

NoteBlake and his colleagues added two more leadership styles after Mouton's death in 1987, although neither appears on the grid itself, for the reasons explained below.

Paternalistic Management. A Paternalistic manager will jump between the Country Club and Produce-or-Perish styles. This type of leader can be supportive and encouraging, but will also guard his or her own position –and paternalistic managers don't appreciate anyone questioning the way they think.

Opportunistic Management. This doesn't appear on the grid because this style can show up anywhere within it.

Opportunistic managers place their own needs first, shifting around the grid to adopt whichever style will benefit them. They will manipulate and take advantage of others to get what they want.

Stakeholder Analysis Four Key Benefitds

Getting the projects into shape

If you get stakeholders involve with your project at an early stage, they will be more likely to support you, their input can also improve the quality of the project.

Winning resources

Gaining support of powerful stakeholders can help you to get more resources, for example people, time or money. This could lead more likely to success of your project.

Building understanding

Communicatingthroughout your project with your stakeholders will built trust and they will be able to fully grasp what you are doing and understand the benefits of your project, this means they can actively support you.

Getting ahead of the game

Understanding your stakeholders means that you can anticipate and predict their reactions to your projects as it develops, so you can plan actions that can win their support.

How to conduct stakeholder Analysis

Identifying your stakeholders

• Brainstorm who are your stakeholders, think everyone that your project can affect them, for example, your boss, shareholders, suppliers, your team, customers

Prioritise stakeholders

• You may have a list of people and organisations that are affected by your work. Some may be interested in it, some might not care, some might try to block or help you to advance.

• Classify your stakeholders according to their power over your work and their interest in it.

How to conduct stakeholder Analysis

High power, highly interested people ( Manage closely): fully engage these people, make greatest effort to satisfy them.

High power, less interested people (Keep Satisfied): Keep them satisfied but not so much that they become bored with your message.

Low power, highly interested (keep informed) Keep them informed, talk to them so no major issues are arising.

Low power, less interested people (monitor) Don’t bore them with excessive communication, monitor them.

How to conduct stakeholder Analysis

The full participation of stakeholders in both project design and implementation of is a key to – but not a guarantee of – success. Stakeholder participation:

• Gives people some say over how projects or policies may affect their lives

• Is essential for sustainability

• Generates a sense of ownership if initiated early in the development process

• Provides opportunities for learning for both the project team and stakeholders themselves

• Builds capacity and enhances responsibility

A stakeholder analysis can help a project or programme identify:

The interests of all stakeholders who may affect or be affected by the programme/project Potential conflicts or risks that could jeopardise the initiative

Opportunities and relationships that can be built on during implementation

Groups that should be encouraged to participate in different stages of the project Appropriate strategies and approaches for stakeholder engagement

Ways to reduce negative impacts on vulnerable and disadvantaged groups

Understand your key stakeholders

You need to understand how your stakeholders feels about your project, you need to know how to engage them and how to communicate with them. Key questions that could help include:

• What financial or emotional interest do they have in the outcome of your work? Is it positive or negative?

• What motivates them most of all?

• What information do they want from you, and what is the best way of communicating with them?

• What is their current opinion of your work? Is it based on good information?

• Who influences their opinions generally, and who influences their opinion of you? Do some of these influencers therefore become important stakeholders in their own right?

• If they aren’t likely to be positive, what will win them around to support your project?

• If you don't think that you’ll be able to win them around, how will you manage their opposition?

• Who else might be influenced by their opinions? Do these people become stakeholders in their own right?

Understand your key stakeholders

Stakeholder Management Process

Understand your key stakeholders

Stakeholder Matrix

Stakeholders Example Flexible Working

The flexible working research proposal needs to consider the Stakeholders. Stakeholders are, as defined by Edward Freeman in his book Strategic Management (Freeman, 1984) “any group or individual who can affect or is affected by the achievement of the organization's objectives”

As shown in the Stakeholder analysis in Fig. 1 the Board of Partners are the most important Stakeholders as they will need to authorize the implementation of flexible working. The will need to consider the cost implications along with the affect the new regime will have on its employees. The Line Managers will need to be convinced of the benefits as the new procedures will cause them more work with rotas and keeping each employee satisfied. They need to ensure the continued level of high service already received by clients while implementing these new procedures. The Employees are likely to be constructive during this process, as it will benefit the majority. However there may be some who are not convinced by flexible working due to the lack of continuity that it may cause in the workplace. The HR Department may need some extra training in how to deal with flexible working requests. Lastly S&P clients need to be considered but, if the process runs smoothly, they should be unaware of the new working regime as the service they receive should be unaltered.

Fig. 1

Stakeholder theory CMI

• In the past, companies have predominantly been managed with an eye to the financial returns for shareholders. This approach is still common, but an exclusive focus on maximising shareholder returns has come under increasing criticism for business as well as social reasons. Stakeholder theory argues that the interests of all stakeholders – not just those with a financial stake in the business - should be taken into consideration.

• Proponents of this approach argue that this approach will contribute to the success of the business and ultimately the interests of shareholders. Fundamental to stakeholder thinking is that the interests of all stakeholders are taken into account in order to maximise the value of the organisation. The needs of each stakeholder should be understood, respected and incorporated into company thinking and plans. To achieve this, managers need to identify their key stakeholders, and understand their interest in, contribution to or affect on the organisation and its ability to meet its objectives.

• The stakeholder concept has its origins in the study of corporations and how they make decisions. R. Edward Freeman's Strategic Management: A Stakeholder Approach (1984) which is regarded as a seminal work of stakeholder theory.

• The assertion that organisations should concern themselves with the demands of multiple constituencies can be traced further back to classic management studies by Chester Barnard and Mary Parker Follett. Growing interest in the role of business in society has also contributed to the popularity of the stakeholder approach, which focuses not just on the internal processes within a company, but the wider business and social context in which it operates.

• The aim of stakeholder analysis is to provide decision makers with information about the individuals and groups that may affect the achievement or otherwise of their goals. This makes it easier to anticipate problems, gain the support of the most influential stakeholders, and improve what the organisation offers to different groups and individuals and how it communicates with them.

DEFINITION CMI

• A stakeholder is any group or individual with an interest or a stake in the operations of a company or organisation - anyone who can affect or be affected by its activities.

• This includes: internal stakeholders such as employees, departments, divisions or subsidiary companies; external stakeholders such as business partners, customers and suppliers; and wider groups within society such as government departments, the media and pressure groups.

• Stakeholder analysis is the process of identifying an organisation’s stakeholders and their interests, assessing their influence, or how they are impacted by the organisation, so as to formulate strategies for managing relationships with them.

• At strategic level an organisation may conduct a broader review of stakeholder relationships to inform the strategy making and objective setting process. At an operational level, an individual manager may undertake a stakeholder analysis within their own division or department in order to better manage the motivation, cohesion and commitment of key stakeholder groups.

• Equally stakeholder management is relevant to projects and programmes

1 Gather information

Involve as many relevant people as practicable to ensure that you get a full picture of all stakeholders. Relevant information can be gathered through brainstorming sessions, interviews and literature or Internet searches.

2. Identify stakeholder groups

Various sets of stakeholders have been suggested by different writers. Stakeholders can be internal – employees, managers, trade union members or departments, for example, or external such as customers or suppliers. A distinction can also be drawn between primary and secondary stakeholders. Primary stakeholders define the business and are vital to its continued existence. For example, the following are normally considered primary stakeholder groups: employees › shareholders and/or investors › customers › suppliers.

Secondary stakeholders are those who may affect relationships with primary stakeholders. For example, an environmental pressure group may influence customers by suggesting that your products fail to meet eco standards.

Secondary stakeholders could include: government – central or local government bodies › legal authorities – inspectors and regulators › the media – press, broadcasters, online media › social groups - consumer groups, pressure groups, community groups › commercial organisations –landlords, business partners, competitors.

Stakeholder groups will vary enormously according to the nature of the business. A public sector contractor, for example, might list central or local government as a primary, rather than a secondary stakeholder. A train company or media company may list its industry regulator as a primary stakeholder.

3. Map your stakeholders

• One way to map stakeholders is to construct a diagram with the organisation at the centre, show primary stakeholders round it, and secondary stakeholders in a second tier:

4. Be specific

5. Prioritise your stakeholders

A power/interest

grid

6. Understand your stakeholders

Put yourself in the place of each stakeholder and ask yourself what their perspective of your business may be. What are their needs and concerns? What affects or influences them? What do they believe? What do they value? What motivates them? What potential threats or opportunities do they represent?

Consider what you know about their actual and previous behaviour and what underlies it. It can be helpful to draw up a table listing each stakeholder and showing the level of priority you have assigned to them, the relationship you have with them and how they are impacted by your organisation.

7. Develop strategies for action

Once you have decided which stakeholders you most need to influence and have begun to understand what motivates them, you will be in a position to consider the way forward. Here are a few questions to consider:

• How can you improve the products and services you offer to customers?

• Do you need to tailor your offering to different customer segments?

• How can you cooperate more effectively with suppliers?

• What will enhance the morale of your employees?

• What internal issues need to be resolved?

• What might encourage external stakeholders to be more cooperative?

• What opportunities are there to communicate and engage with different groups of stakeholders?

• How can you change public perceptions of your organisation

• Which policies or actions might run the risk of alienating them or increasing the threat they pose to your business?

• Which areas should you focus on

8. Communicate and develop relationships with stakeholders

9. Monitor and review

Stakeholders and Project Management

“Stakeholder: individuals or groups who have an interest in the project, programme or portfolio because they are involved in the work or affected by the outcomes”, source: APM Body of Knowledge, 6th edition (2013)

“Stakeholder: any individual, group or organisation that can affect, be affected by, or perceive itself to be affected by, an initiative (programme, project, activity, risk)”, source: PRINCE2TM: Glossary of Terms (2009)

What is stakeholder engagement?

• Stakeholder engagement is the process by which an organisation involves people who may be affected by the decisions it makes or by its implementation.

• It is more than just communication which will only give you a sense of ‘yes’, ‘no’ or ‘maybe’. Developing an understanding of what people are saying requires both listening and responding.

• Stakeholders Engagement is a continuous and systematic process by which an organization establishes a constructive dialogue and a fruitful communication with its key stakeholders. The purpose of involvement is to convey to decision makers' expectations and interests of stakeholders, so that they can take it into account in decision making.

What is stakeholder engagement?

“stakeholders have multiple priorities and are constrained by time” (Friedman & Miles, 2006)

One of the skills of stakeholder engagement is “to be able to see from their perspective and think about what will matter to them” (Flynn, 2007).

Benefits of Effective Stakeholder Engagement

Learning -Engaging with different perspectives provides opportunities for learning and potentially changing your approach to ensure it fits the needs of stakeholders.

On decision-making - Understanding the views and interests of your stakeholders can lead to more effective decision-making. This is more than just getting the language right. In understanding issues and concerns, it provides an opportunity to reflect on what will and will not work, and why.

Saving time and money - Engaging early can lead to savings of both time and money in the long run . This is not only critical to developing a robust policy or product, but to develop a real understanding of needs. Start on implementation before it, it’s likely you’ll need to go back to the drawing board.

Benefits of Effective Stakeholder Engagement

TRUST - EFFECTIVE STAKEHOLDER ENGAGEMENT IS CRITICAL TO BUILDING LASTING CREDIBILITY AND TRUST – IN YOUR ORGANISATION AND/OR PRODUCT.

RISK MANAGEMENT - BEING OPEN TO DIFFERENT CAN IMPROVE RISK MANAGEMENT THROUGH POTENTIALLY HIGHLIGHTING ISSUES YOU MAY NOT HAVE BEEN AWARE OF AND HELP YOU PRIORITISE.

ACCOUNTABILITY -ENGAGING WITH STAKEHOLDERS IS CENTRAL TO IMPROVING ACCOUNTABILITY WITHIN YOUR OWN ORGANISATION AS WELL AS TO THE WIDER MARKET.

TRANSPARENCY IS IMPORTANT – BE CLEAR ABOUT THE OUTCOMES YOU ARE HOPING TO ACHIEVE AND THE STEPS ON THE WAY.

UNDERSTAND NEEDSUNDERSTANDING THE FULL RANGE OF NEEDS AND VIEWS CAN LET TO BETTER POLICY MAKING AND BETTER OUTCOMES.

Why should I engage stakeholders?

1. Increased trust and confidence across the project community

2. Increased certainty and pace of progress

3. Clearer understanding of remaining resistance

4. More robust risk management: "If we don't do it, or we can't operate". (e.g. Shell in Nigeria or BP in Indonesia)

5. Increased 360° awareness of organisational circumstances. For example:

• Sustainability compliance management: "If we don't do it, we won't be successful" (e.g. Sustainable coffee sourcing at Nestlé, supply chain engagement at Adidas) Market development: "If we do it, we can access new markets" (e.g. Danone with its base of the pyramid model)

• Innovation: "If we do it, we will be up to speed with our products”

• Strategy: "If we want to grow, we have to do it. It will not only save us money, but make us better" (Few companies engage for strategic purposes, although Unilever has made some strides).

Uncertainty of outcome

Why

should I

engage stakeholders? Risks of not doing it?

Diversion and distraction of resources

Example of Engagement Cycle

Example

Stakeholder Engagement Nippon Express

Example RBS

When should I engage stakeholders?

• Stakeholder engagement is needed throughout a project’s lifecycle. Here are some examples of when these interventions are needed.

Benefits of Stakeholder Engagement

• Stakeholder Engagement is not a new concept. Reporting requires companies to report annually on stakeholder engagement activities almost forcing the activity to be conducted at least once a year. On the downside, many reporting companies still confuses stakeholder engagement with other types of traditional communication activities such as marketing, promotions, sales talks or supplier conventions or annual investor briefings.

• Taking stakeholder concerns and interests into account can improve business relationships, which may make it easier for a company to operate; lead to ideas for products or services that will address stakeholder needs; and allow the company to reduce costs and maximize value.

Sustainability and Integrated Reporting requires stakeholder engagement not only to:

Stakeholder Engagement

Provide feedback on progress towards a more sustainable future

Identify material risks and opportunities

Obtain input for organisational priorities and activities

However, many companies miss the opportunity to use stakeholder engagement to:

Pool knowledge, experience and co-create solutions that addresses societal, industry and business issues

Develop new products and services or even enter new markets

Build collaborative partnerships and relationships that contribute to value creation (profitability)

Underestimate the power of collaboration within an industry or value chain as many companies only focus on existing stakeholder groups such as customers, employees, investors

Stakeholder Engagement , Some considerations for more effective stakeholder engagement:

Ensure that the right stakeholders are identified – stakeholders very seldom see themselves as neat little homogenous stakeholder groups.

Furthermore a concerted effort must be made to ensure that stakeholders are qualified to provide the right insight/feedback into a specific sustainability aspect. This may require capacitating stakeholders with the knowledge and skills to be able to engage.

Ensure that the right stakeholders are identified early enough to ensure that a variety of perceptions and inputs can be obtained that represents the views, opinions of a wide variety of stakeholders as this will ensure balanced and fair representation of opinions on a specific subject matter. Companies should be cautious not to only engage stakeholders they have existing or good relationships with, but be resilient and courageous enough to listen to opposing and critical voices.

Ensure that engagement happens regularly (not just once a year) so that a variety of opinions, insights, knowledge and collaboration can be obtained and feedback can be provided on actions taken based on specific stakeholder requirements and expectations.

Costs of stakeholder management

• It takes time and money – this goes without saying. But it’s likely it will cost a lot more if you need to start again or spend time repairing relationships.

• Information is never perfect. Incorporating everyone’s views can lead to indecision.

• There can be conflict and a loss of control of the agenda. While stakeholder engagement is very much on ongoing process, it’s important to timeframe what decisions will be taken when so you can progress.

• On balance, effective stakeholder engagement will always win-out.

MANAGING STAKEHOLDER EXPECTATIONS

• The process of managing stakeholders is an activity of communicating with stakeholders and managing their expectations and concerns for the purpose of meeting the stakeholder needs, addressing issues, resolving conflict situations, and achieving the organisations goals. The process is generally based on holding communications.

• An effective stakeholder management process is the guarantee that timely and relevant feedback is provided and that the steering of the change effort is made according to the stakeholder management strategy.

• The organisations management team takes responsibility for managing stakeholder expectations, resolving conflicts and detecting and settling any issues. In general, the process of managing stakeholders is comprised of the following key elements:

MANAGING STAKEHOLDER EXPECTATIONS

• Managing stakeholder expectations: when expectations of the stakeholders are actively managed, the organisation gets a higher likelihood for success. The management team should continuously negotiate and influence desires of the stakeholders to achieve strict conformity of organisational goals and expectations.

• Managing stakeholder perception: it is important for organisational success to ensure that the stakeholders are engaged with the business on a scheduled basis and they are aware of current status of the business. High-level stakeholder perception increases the likelihood that the stakeholders provide the necessary support level and the business strategy can be implemented as expected.

• Recording stakeholder activity: the leadership team is ultimately responsible for recording and logging all the activities stakeholders undertake. Therefore, the manager should formally track all interactions with stakeholders and between them and then make records of the results, in order to secure stakeholder acceptance and the communications plan adherence.

• Solving problems and resolving conflicts: The management team should address the stakeholders concerns and assess risks and threats to prevent issues and conflicts.

MANAGING STAKEHOLDER EXPECTATIONS

• 1. Identify who the stakeholders are..

• 2. Identify the stakeholder’s preferred method of communication. By using the most effective manner of communication you will help ensure the stakeholder remains content. If you make the mistake of using the wrong method (or non-preferred method) it will cause frustration and lack of confidence. It will show you didn’t listen to their initial direction.

• 3. Keep stakeholders engaged throughout the process with timely updates. Ask the right questions, of the right people.

• 4. Accurately map expectations. Be crystal clear on the expectations from the stakeholder’s point of view. Ask them how they will measure success.. Inevitably you will discover conflicting definitions of success. Some will consider meeting the final deadline their number one priority. Another might consider end user functionality of the final product as most important. How do you manage these conflicts? One way would be to facilitate a meeting of all stakeholders (where practical) and help them come to mutually satisfying agreements.

MANAGING STAKEHOLDER EXPECTATIONS

• Classify the level of communication for each stakeholder. Understand who requires hand holding and insists on receiving all details. Who prefers a basic, occasional overview? Who wants daily or weekly communication?

• 6. Identify which stakeholders will be advocates and which will be road blockers. Map your strategy accordingly.

• 7. Engage the stakeholders in decision making. Stroke their egos. You probably have already identified the best course of action, but present your findings in such a way that you leave room for the stakeholders to feel they have been involved in the process.

• 8. The manner in which the project is accomplished is vitally important, not just delivering on the required specs. Stakeholders will remember the overall mood of the entire process. Their measure of success is not just the finished product, but the way you attained the end goal.

Stakeholder Value

• Stakeholder value involves creating the optimum level of return for all stakeholders in an organization. This is a more broad-based concept than the more common shareholder value , which usually focuses just on maximizing net profits or cash flows .

• The stakeholder value concept still places some emphasis on net profits or cash flows, but it also incorporates the needs of other stakeholders, such as employees, the local community, governments, customers, and suppliers. Thus, stakeholder value might also include matching the charitable contributions made by employees, funding local "green" initiatives, minimizing resource usage, or bolstering the employee benefits plan, even though doing so is not strictly necessary from a competitive perspective.

• The stakeholder value concept tends to result in lower net profits, unless taking the steps noted above results in so much community goodwill that the sales of the business actually increase. However, this is not normally the case. Instead, the CEO must be prepared to defend his or her actions to the board of directors expending funds in areas that are more likely to benefit stakeholders than shareholders.

• The stakeholder value concept has merit when setting corporate strategy for the long-term, since it builds support among a large group that may be willing to assist the entity during those times when its financial situation declines. It can also lead to favorable legislation that gives the organization a better competitive posture than might otherwise be the case. Further, it can result in a generally positive corporate brand image.

Stakeholder Value

• The value delivered to all the company’s stakeholders (customers, suppliers, employees, shareholders, and the community). It is central to the Stakeholder Value Perspective in which the social responsibility is an organizational matter and, as a matter of fact, society is best served by organizations pursuing joint interests and economic symbiosis.

Example

Stakeholder Conflict Examples

Managing Conflict

Conflict Resolution

Managing Conflict

Approach Objective and Typical Response Supporting Rationale Likely Outcome

Forcing Get your way. "I know what's right. Don't question my judgement or authority."

Avoiding Avoid having to deal with conflict.

"I'm neutral on that issue. Let me think about it."

Compromising Reach an agreement quickly.

"Let's search for a mutually agreeable solution."

Accommodating. Don't upset the other person.

"How can I help you feel good about this? My position isn't important enough to risk bad feelings between us."

Collaborating Solve the problem together.

"This is my position. What's yours? I'm committed to finding the best possible solution."

Better to risk causing a few hard feelings than to abandon a position you're committed to. You will feel vindicated, and the other party will feel defeated and possibly humiliated.

Disagreements are inherently bad because they create tension. Interpersonal problems don't get resolved. They can cause long-term frustration, which will be manifested in a variety of ways.

Prolonged conflicts distract people from their work, take time, and engender bitter feelings. Participants become conditioned to seek expedient, rather than effective longterm solutions.

Maintaining harmonious relationships should be our top priority. Other person is likely to take advantage of you.

Positions of both parties are equally important. Equal emphasis should be placed on quality of outcome and fairness of decision-making process. The problem will most likely be resolved. Both parties will be committed to solution and satisfied that they have been treated fairly.

Conflict Management Techniques

• Conflict situations are an important aspect of the workplace. A conflict is a situation when the interests, needs, goals or values of involved parties interfere with one another. A conflict is a common phenomenon in the workplace. Different stakeholders may have different priorities; conflicts may involve team members, departments, projects, organization and client, boss and subordinate, organization needs vs. personal needs. Often, a conflict is a result of perception. Is conflict a bad thing? Not necessarily. Often, a conflict presents opportunities for improvement. Therefore, it is important to understand (and apply) various conflict resolution techniques.

Forcing

Also known as competing. An individual firmly pursues his or her own concerns despite the resistance of the other person. This may involve pushing one viewpoint at the expense of another or maintaining firm resistance to another person’s actions.

• Examples of when forcing may be appropriate

• In certain situations when all other, less forceful methods, don’t work or are ineffective

• When you need to stand up for your own rights, resist aggression and pressure

• When a quick resolution is required and using force is justified (e.g. in a life-threatening situation, to stop an aggression)

• As a last resort to resolve a long-lasting conflict

Possible advantages of forcing:

• May provide a quick resolution to a conflict

• Increases self-esteem and draws respect when firm resistance or actions were a response to an aggression or hostility

Some caveats of forcing:

• May negatively affect your relationship with the opponent in the long run

• May cause the opponent to react in the same way, even if the opponent did not intend to be forceful originally

• Cannot take advantage of the strong sides of the other side’s position

• Taking this approach may require a lot of energy and be exhausting to some individuals

Win-Win (Collaborating)

• Also known as problem confronting or problem solving. Collaboration involves an attempt to work with the other person to find a win-win solution to the problem in hand - the one that most satisfies the concerns of both parties. The winwin approach sees conflict resolution as an opportunity to come to a mutually beneficial result. It includes identifying the underlying concerns of the opponents and finding an alternative which meets each party's concerns.

Examples of when collaborating may be appropriate:

• When consensus and commitment of other parties is important

• In a collaborative environment

• When it is required to address the interests of multiple stakeholders

• When a high level of trust is present

• When a long-term relationship is important

• When you need to work through hard feelings, animosity, etc

• When you don't want to have full responsibility

Win-Win (Collaborating)

Possible advantages of collaborating:

• Leads to solving the actual problem

• Leads to a win-win outcome

• Reinforces mutual trust and respect

• Builds a foundation for effective collaboration in the future

• Shared responsibility of the outcome

• You earn the reputation of a good negotiator

• For parties involved, the outcome of the conflict resolution is less stressful (however, the process of finding and establishing a win-win solution may be very involved – see the caveats below)

Some caveats of collaborating:

• Requires a commitment from all parties to look for a mutually acceptable solution

• May require more effort and more time than some other methods. A win-win solution may not be evident

• For the same reason, collaborating may not be practical when timing is crucial and a quick solution or fast response is required

• Once one or more parties lose their trust in an opponent, the relationship falls back to other methods of conflict resolution. Therefore, all involved parties must continue collaborative efforts to maintain a collaborative relationship

Compromising

Compromising looks for an expedient and mutually acceptable solution which partially satisfies both parties.

Examples of when compromise may be appropriate:

• When the goals are moderately important and not worth the use of more assertive or more involving approaches, such as forcing or collaborating

• To reach temporary settlement on complex issues

• To reach expedient solutions on important issues

• As a first step when the involved parties do not know each other well or haven’t yet developed a high level of mutual trust

• When collaboration or forcing do not work

Possible advantages of compromise:

• Faster issue resolution. Compromising may be more practical when time is a factor

• Can provide a temporary solution while still looking for a win-win solution

• Lowers the levels of tension and stress resulting from the conflict

Some caveats of using compromise:

• May result in a situation when both parties are not satisfied with the outcome (a lose-lose situation)

• Does not contribute to building trust in the long run

• May require close monitoring and control to ensure the agreements are met

Withdrawing

• Also known as avoiding. This iswhen a person does not pursue her/his own concerns or those of the opponent. He/she does not address the conflict, sidesteps, postpones or simply withdraws.

Examples of when withdrawing may be appropriate:

• Whenthe issueistrivial and not worththe effort

• Whenmore important issues are pressing, and you don't have time to deal with it

• In situations where postponing the response is beneficial to you, for example -

• When itisnot the right timeor place toconfront the issue

• When you need time to think and collect information before you act (e.g. if you are unprepared or taken by surprise)

• Whenyou see no chance of gettingyour concerns met or you would have to put forth unreasonable efforts

• Whenyouwouldhave todeal with hostility

• When you are unable tohandle the conflict (e.g. if you are too emotionallyinvolved or others can handle itbetter)

Possible advantages of withdrawing:

• When the opponent is forcing / attempts aggression, you may choose to withdraw and postpone your response until you are in a more favourable circumstance for you to push back

• Withdrawing is a low stress approach when the conflict is short

• Gives the ability/time to focus on more important or more urgent issues instead

• Gives you timetobetter prepare and collect information before youact

Some caveatsof withdrawing:

• May lead to weakening or losing your position; not acting may be interpreted as an agreement. Using withdrawing strategies without negatively affecting your own position requires certain skill and experience

• When multiple parties are involved, withdrawing may negatively affect your relationship with a party that expects your action

Smoothing

• Also known as accommodating. Smoothing is accommodating the concerns of other people first of all, rather than one's own concerns.

Examples of when smoothing may be appropriate:

• When it is important to provide a temporary relief from the conflict or buy time until you are in a better position to respond/push back

• When the issue is not as important to you as it is to the other person

• When you accept that you are wrong

• When you have no choice or when continued competition would be detrimental

Possible advantages of smoothing:

• In some cases smoothing will help to protect more important interests while giving up on some less important ones

• Gives an opportunity to reassess the situation from a different angle

Some caveats of smoothing:

• There is a risk to be abused, i.e. the opponent may constantly try to take advantage of your tendency toward smoothing/accommodating. Therefore it is important to keep the right balance and this requires some skill.

• May negatively affect your confidence in your ability to respond to an aggressive opponent

• It makes it more difficult to transition to a win-win solution in the future

• Some of your supporters may not like your smoothing response and be turned off

Persuasion Theory

Negotiation

• the process of discussing something with someone in order to reach an agreement with them, or the discussions themselves:

Negotiations Getting Ready to Implement the Strategy: The Planning Process

• Know your limits and alternatives

• Set your objectives (targets) and opening bids (where to start)

• Target is the outcome realistically expected

• Opening is the best that can be achieved

• Assess constituents and the social context of the negotiation

Goals, Strategy and Planning

The Direct and Indirect Effects of Goals on Strategy

• Direct effects

• Wishes are not goals

• Goals are often linked to the other party’s goals

• There are limits to what goals can be

• Effective goals must be concrete/specific

• Indirect effects

• Forging an ongoing relationship

Strategy: The overall plan to achieve one’s goals in a negotiation

Strategy versus Tactics

Tactics: Short-term, adaptive moves designed to enact or pursue broad strategies Tactics are subordinate to strategy Tactics are driven by strategy

Planning: The “action” component of the strategy process; i.e. how will I implement the strategy?

Approaches to Strategy

Unilateral: One that is made without active involvement of the other party

Bilateral: One that considers the impact of the other’s strategy on one’s own

Strategic Options

• Per Dual Concerns Model, choice of strategy is reflected in the answers to two questions:

• How much concern do I have in achieving my desired outcomes at stake in the negotiation?

• How much concern do I have for the current and future quality of the relationship with the other party?

The Dual Concerns Model

Avoidance: Don’t negotiate

Competition: I gain, ignore relationship

Collaboration: I gain, you gain, enhance relationship

Accommodation: I let you win, enhance relationship

The Nonengagement Strategy: Avoidance

If one is able to meet one’s needs without negotiating at all, it may make sense to use an avoidance strategy

It simply may not be worth the time and effort to negotiate

The decision to negotiate is closely related to the desirability of available alternatives

Competition – distributive, winlose bargaining

ActiveEngagement Strategies

Collaboration – integrative, winwin negotiation

Accommodation – involves an imbalance of outcomes (“I lose, you win”)

Understanding the Flow of Negotiations: Stages

and Phases

How does the interaction between parties change over time?

How do the interaction structures relate to inputs and outcomes over time?

How do the tactics affect the development of the negotiation?

Understanding the Flow of Negotiations: Stages and Phases

NEGOTIATION PROCEEDS THROUGH DISTINCT PHASES OR STAGES BEGINNING PHASE (INITIATION)

MIDDLE PHASE (PROBLEM SOLVING)

ENDING PHASE (RESOLUTION)

Preparation

Key Steps to an Ideal Negotiation Process

• What are the goals?

• How will I work with the other party?

Relationship building

• Understanding differences and similarities

• Building commitment toward a mutually beneficial set of outcomes

Information gathering

• Learn what you need to know about the issues

Key Steps to an Ideal Negotiation Process

Information using

Key Steps to an Ideal Negotiation Process

• Assemble your case

Bidding

• Each party states their “opening offer”

• Each party engages in “give and take”

Closing the deal

• Build commitment

Implementing the agreement

Getting Ready to Implement the Strategy: The Planning Process

• Define the issues

• Assemble the issues and define the bargaining mix

• The bargaining mix is the combined list of issues

• Define your interests

• Why you want what you want

Getting Ready to Implement the Strategy: The Planning Process

Know

Know your limits and alternatives

Set

Set your objectives (targets) and opening bids (where to start)

•Target is the outcome realistically expected

•Opening is the best that can be achieved

Assess

Assess constituents and the social context of the negotiation

Getting Ready to Implement the Strategy: The Planning Process

• Analyze the other party

• Why do they want what they want?

• How can I present my case clearly and refute the other party’s arguments?

• Present the issues to the other party

Getting Ready to Implement the Strategy: The Planning Process

• Define the protocol to be followed in the negotiation

• Where and when will the negotiation occur?

• Who will be there?

• What is the agenda?

Management of Negotiations Seven Factors to Consider

Preparation

Planning

Administrative

Communications

Techniques

Expectations

Closure

Tips

Aim high to begin with – easier to lose ground than gain

Give concessions ‘reluctantly’

Break down complex deals

Language:

• Make proposals with open questions such as:

• “what would happen if we…?”

• “suppose we were to…”

• “what would be the result of?”

• Dealing with stone-walls: “what would need to happen for you to be willing to negotiate over this?”

Always get agreement in writing

How to influence others

• The three ‘Ps’:

• Position (power?)

• Perspective (empathy)

• Problems (solutions)

Summary on the Planning Process

“...planning

is the most important activity in negotiation.”

Decision Making

Decisions in the Management Functions

1. Identification of problem

Rational Decision Making 8-step Process

3. Allocation of weights to criteria

2. Identification of Decision Criteria

4. Development of alternatives

5. Analysis of alternatives

6. Decide on an alternative

7. Implementation of decision

8. Evaluation of decision

The Decision-Making Process

Problem

Identification “My salespeople need new computers”

Allocation

Identification

Analysis

Implementation

Development of Alternatives

Levels of informationbased decision making

Strategic level, managers are largely concerned with longterm organisational planning.

Tactical level, medium term.

Operational, short-term dayto-day.

Levels of management

• Strategic management

• Board of directors and senior executives

• medium to long term focus

• strong requirement for information from external sources

• need highly summarised reports as well as varying amounts of detail.

Levels of management

• Tactical management

• middle, departmental, functional managers

• shorter to medium term focus

• need information from both inside and outside the organisation

• summarised and more detailed reports needed

Levels of management

• Operational management

• maintaining the status quo.

• foremen, supervisors, charge hands

• need information from within the organisation, rarely from outside

• need detailed information and unsophisticated summaries.

Levels of management

• Compared with strategic level, at the operational level...

• the planning horizon is narrower

• decisions are more structured

• information is required to be based more on internal sources, more historical, less summarised and more highly accurate

MIS and Decision Making

Fully structured decisions

• the MIS might make the decision itself

• or at least suggest an outcome and await edits

• for example, stock re-order Semi-structured decisions

• the MIS will provide support, charts, output summaries, and the manager will make the decision

Decision characteristics

About Rational Decision Making

Is it always possible to make rational decisions?

All alternatives and consequences are known

Preferences are clear

Single, welldefinedgoal is to be achieved

Problemis clear and unambiguous

Rational

Decision Making

Final choice will maximize payoff

Preferences are constant and stable No time or cost constraints exist

Intuitive decision making

• Based on “gut feeling”

• subconscious process of making decisions on the basis of experience, values, and emotions

• does not rely on a systematic or thorough analysis of the problem

• generally complements a rational analysis

Types of Problems & Decisions

Well-Structured Problemsstraightforward, familiar, and easily defined

Programmed Decisionsused to address structured problems

• minimize the need for managers to use discretion

• facilitate organizational efficiency

Types of Problems and Decisions

• Poorly-Structured Problems - new, unusual problems for which information is ambiguous or incomplete

• Nonprogrammed Decisions - used to address poorly- structured problems

• produce a custom-made response

• more frequent among higher-level managers

• Procedure, Rule, & Policy

Types of Problems & Level In the Organization

Ill-structured

Typeof

Problem

Top

Well-structured

Programmed Decisions

Nonprogrammed

Decisions

Level in Organization

Lower

Things to consider . .

• Certainty – how certain is a particular outcome?

• Risk – how much risk can you take?

• expected value - the conditional return from each possible outcome

• Uncertainty – Limited information prevents estimation of outcome probabilities for alternatives.

• Dimensions of Decision-Making Styles

• Value orientations

• Task and technical concerns

DecisionMaking Styles

• People and social concerns

• Tolerance for ambiguity

• Low tolerance: require consistency and order

• High tolerance: multiple thoughts simultaneously

Decision-Making Styles

Directive

• Prefersimple, clear solutions

• Make decisions rapidly

• Do not consider many alternatives

• Rely on existing rules

Analytical

• Prefercomplex problems

• Carefully analyze alternatives

• Enjoy solving problems

• Willing to use innovative methods

Conceptual

• Socially oriented

• Humanistic and artistic approach

• Solve problems creatively

• Enjoy new ideas

Behavioral

• Concern for their organization

• Interest in helping others

• Open to suggestions

• Rely on meetings

Decision Making Styles

Advantages and Disadvantages of GroupAided Decision Making

Advantages Disadvantages

1. Greater pool of knowledge

2. Different perspectives

3. Greater comprehension

4. Increased acceptance

5. Training ground

1. Social pressure

2. Minority domination

3. Voting , Trading

4. Goal displacement

5. “Groupthink” harmony

Aims of unit

Keywords

Learning Outcomes

1. Understand the different types and value of stakeholder relationships

2. Understand the frameworks for stakeholder management

3. Know how to manage stakeholder relationships

4. Know methods for measuring the impact of stakeholder engagement on organisational performance

CMI 509 Managing Stakeholder Relationships Materials (1) (1)