GOVERNING THE ENTREPRENEURIAL VENTURE: STAKEHOLDER MAPPING JEAN CLARKE

GOVERNING THE
ENTREPRENEURIAL VENTURE:
STAKEHOLDER MAPPING
JEAN CLARKE
LEEDS UNIVERSITY BUSINESS
SCHOOL
AIMS OF THE LECTURE





To understand the meaning of stakeholder
Understand the importance of accounting for
a range of stakeholders in the entrepreneurial
venture
Examine different types of stakeholders
Introduce the concept of stakeholder mapping
Understand the importance of mapping
stakeholders
STAKEHOLDER DEFINITION



“Any group or individual that can affect, or is affected
by, the performance of the organisation” (Freeman
1987)
“Individuals or groups who depend on the organisation
to fulfil their own goals and on whom, in turn, the
organisation depends” (Johnson & Scholes 1999)
“The firm is a system of stakeholders operating within
the larger system of the host society that provides the
necessary legal and market infrastructure for the firms
activities” (Clarkson, 1994)
EXPECTATIONS AND PURPOSES
Corporate governance
•Whom should the
organisation serve?
•How should purposes
be determined?
Business ethics
Which purposes should
be prioritised? Why?
Organisational purposes
•Mission
•Objectives
Shareholders
Whom does the
organisation serve?
Cultural context
Which purposes are
prioritised? Why?
WHY CONSIDER
STAKEHOLDERS?







Failure to account for stakeholders often leads to poor
performance, failure or even disaster….
Nutt (2002) analysis of 400 strategic decisions - half “failed”
because didn’t attend to interests and information held by key
stakeholders.
Increased globalization, interconnected nature of the world
(Bryson and Bromiley, 1993)
Increasing tendency to make organisations more visibly
accountable to shareholders and also the wider community.
Emphasis on markets, participation, flexibility, and
deregulation (Peters 1996).
“To manage is to govern.” (Feldman and Khademian, 2002)
As entrepreneurial ventures grow they are likely to have
increasing numbers of stakeholders who can impact
performance
DIFFERENT TYPES OF
STAKEHOLDER GROUPS




Primary: a firm cannot exist without their
continuing participation
Primary stakeholders include: shareholders &
investors, employees, contractors, customers &
suppliers
Secondary: those who influence or affect or are
influenced/affected by, the corporation, but they
are not engaged in transactions with the
corporation or essential for its survival
Secondary stakeholders include: media, action
groups, government agencies, trade unions,
regulatory authorities
DIFFERENT TYPES OF STAKEHOLDERS
Stakeholder
Corporation
Entrepreneurship and Stakeholders:
Opportunity Recognition




Typical personality characteristics – locus of control, need for
independence and need for achievement - suggests that
entrepreneur will tend to take a central position in their
stakeholder environments
Cognitive approaches focus on the individual entrepreneur’s
search for and the analysis of information and, as a
consequence constrain the identification of opportunities.
Fail to adapt to the complexity of stakeholder relationships in
their entrepreneurial activity.
This approach is too narrow – entrepreneurs should use the
complexity of stakeholder relationships in order to go beyond
their cognitive limitations and thus facilitate the discovery of
new opportunities. (Vandekerckhove and Dentchev, 2005)
Entrepreneurship and Stakeholders:
Ethics and Social Responsibility





While entrepreneurship and innovation are widely seen as key
sources of economic growth and welfare increases they have
also meant losses and hardships for some members of society.
It is destructive of some stakeholder’s wellbeing even as it
creates new wellbeing among other stakeholders
Both the positive benefits and negative externalities of
innovation are problematic because entrepreneurs initiate new
ventures before their private profitability and/or social costs
can be fully recognised. (Dew and Sarasvathy, 2007)
The small business context can sometimes impose constraints
on the firm‘s corporate social responsibility e.g. lack of
awareness, size, resources, time etc (Lepoutre and Heene,
2006)
Burgeoning area of academic interest
STAKEHOLDER THEORY
(Donaldson and Preston, 1995)






Takes account of the various needs of the different
interested parties
Stakeholder power is key
Stakeholders get traded off against each other
Stakeholder interests are not always consistent
Stakeholders are rewarded in different ways
Stakeholders are not affected in the same way by
every strategic decision
ACTIONS FOR THE
ENTREPRENEUR/MANAGER







Identify the stakeholders & identify key individuals
Identify the orientation of different stakeholders
Establish political priorities and trends in the political environment
Assess the strength of the stakeholder influence on the company
behaviour
Evaluate stakeholder attitudes towards the business mission,
strategies, activities
Identify potential strategies to influence the perceptions of
individual stakeholders
Win over antagonistic stakeholders
STAKEHOLDER MAPPING I




To assist entrepreneurs/managers to
understand the socio/economic/political
context
To identify potential strategies
To identify the orientation of different
stakeholders
To establish socio/economic and
political priorities and trends
STAKEHOLDER MAPPING II

Used in relation to a particular strategic
development





e.g. launch/withdrawal of a product/service
Identifies the relationship that needs to be
established with the various groups of
stakeholders
Identifies key blockers & facilitators of
change
Underlines the importance of ethical issues
for managers
Relates power and interest
STAKEHOLDER MAPPING – THE
MATRIX
Level of interest
Low
High
Power
Low
High
A
B
Minimal effort
Keep informed
C
D
Keep satisfied
Key players
GROUP TASK: AN EXAMPLE OF
STAKEHOLDER MAPPING




Divide into groups of five individuals
 Launch of a New Product/Service
Step 1: Plot stakeholders in terms of their
level and nature of interest and power
Step 2: How you would need them to line up
to be successful?
Step 3: Any mismatches? Political priorities?
Step 4: Maintain stakeholders in their current
positioning?
THE DEFINITION OF POWER

“The extent to which individuals or groups are
able to persuade, induce or coerce others into
following certain courses of action” (Johnson
& Scholes 1999)
SOURCES AND INDICATORS OF
POWER
Sources of power







Within organisations
hierarchy (formal p.)
influence (informal p.)
control of strategic resources
possession of knowledge & skills
control of the environment
involvement in strategy
implementation





For external stakeholders
control of strategic resources
involvement in strategy
implementation
possession of knowledge (skills)
internal links
Indicators of power





Within organisations
status
claim on resources
representation
symbols





For external stakeholders
status
resource dependence
negotiation arrangements
symbols
ASSESSING STAKEHOLDER POWER


If I were to pursue this strategy with disregard to
the views of this particular stakeholder,
could/would they stop me?
 Analysis relates to particular strategy
 Implementation of some strategies may be
within the approved discretion of a certain
stakeholder group
 Some stakeholders may not want to exercise
their power
This requires: sharp political instinct as well as
objective assessment of power
ASSESSING STAKEHOLDER
INTEREST


To assess likely actions of stakeholders
 Use a variety of sources of information on stakeholder
interest
 formal
 informal
 Categorise interest as + (for) and - (against) or neutral
(0) in relation to strategy
 Level of interest may be dependent on one person
Test question: How high is this strategy on their
priorities? Active support/opposition?
MANAGING STAKEHOLDER
RELATIONSHIPS






Different styles for different stakeholder groups
Participation: key players, need for
education/communication
Intervention: low interest & high power: change agent drives & controls the strategy,but
threshold requirements are met
Education/communication: high interest/low
power (proponents), but Direction for opponents
Direction: low power/low interest
Styles depend on the position they should be in
NINE TYPICAL MAPS (Ambrosini et al 1998)
Interest
Pow
er
The political
battle ground
+++
- - -
The worthy case
The lone champion
+
The dream ticket The dogged opponent
+++
+++
+++
+++
-
-----
The political timebomb
NINE TYPICAL MAPS
The potential
lost cause
- - - - -
The political trap
???
???
???
???
The autocrat’s dream
THE POLITICAL BATTLEGROUND
Many key players divided in
support and opposition
 Danger: Limbo
 Strategy:




facilitate the dominance of supporters
overcome the resistance of opponents by
communication or reduce their interests
create a stalemate
+++
- - -
THE LONE CHAMPION


One powerful key player
Potential loss of the champion



due to decline in interest
loss of power
Alternatives:


broaden base of support
build power-base of supporters (box B)
+
THE WORTHY CAUSE


High levels of interest from
stakeholders with little power,
no key player
Cinderella strategy: find a
champion (key player - box B and C)

+++
+++
Empower stakeholders through
 assistance in forming alliances
 provision of info to lobby stakeholders in box C
THE DREAM TICKET





Occurs infrequently
Several powerful and
interested supporters
and no opponents
Danger of complacency
+++
+++
Keep stakeholders informed and
satisfied
Key: alliance building and maintenance
THE DOGGED OPPONENT

One powerful opponent

Change direction by reducing
resistance
Or reduce their interest, reduce
power
Associate strategy with an elite or a more
powerful champion


-
THE POLITICAL TIMEBOMB
Several opponents with little
----power
 Danger to disregard them
 May lead to alliances or
adverse lobbying of stakeholders
(box C)
 Political priorities: maintain stakeholders in
box B

THE POTENTIAL LOST CAUSE
Several powerful opponents
 May lead strategy to be abandoned
or modified
 May create political difficulties
wider than particular strategy
 Priority: change the orientation of
at least some stakeholders
 Involve respected outsider

- - - - -
THE POLITICAL TRAP
Low interest among all
powerful stakeholders
 May tempt managers to proceed
???
with strategy
 Dangerous as powerful stakeholder ? ? ?
may block strategy later in implementation
 Maintain stakeholders in current position
 Alternatively: Seek a champion

THE AUTOCRAT’S DREAM

No powerful or interested
stakeholders
???
???

Danger: complacency

Style: direction, monitor stakeholder activities
Advantages of Stakeholder Analysis





Stakeholder analysis can help entrepreneurs implement their
venture through securing support from powerful stakeholders
Allow them to understand the impact they are making on
society.
Help entrepreneurs to distinguish among competing voices
and various groups of stakeholders Mitchell (2002)
Stakeholder identification and analysis techniques can help
entrepreneurs meet their mandates, fulfill their missions and
create public value.
The use of stakeholder analyses can help frame issues that are
solvable in ways that are technically feasible and politically
acceptable and that advance the common good.
GROUP TASK



Get into groups of five individuals
Discuss how different stakeholders could be
moved to different positions on the typical
maps as outlined above
Present results to other groups