CHAPTER 2

Strategic Management of
Stakeholder Relationships
Chapter Objectives
• To define stakeholders and understand their importance
• To distinguish between primary and secondary stakeholders
• To discuss the global nature of stakeholder relationships
• To consider the impact of reputation and crisis situations on
social responsibility performance
• To examine the development of stakeholder relationships
• To explore how stakeholder relationships are integral to social
responsibility
Building Effective Relationships

Building effective relationships is

considered one of the more
important practices of business
today.
Stakeholders

• Those people and groups to which an organization is

responsible
• Those with a stake, or claim, in some aspect of a
company’s products, operations, markets, industry, or
outcomes
Primary Stakeholders

• Groups fundamental to a company’s operation and survival

• Balancing the needs and perspectives
of primary stakeholders is a strategic imperative
Secondary Stakeholders

• Groups that may influence and/or be affected by the company,

but are not engaged in economic exchanges with the firm
• These groups are not fundamental to an organization’s daily
survival
• They can place significant pressure on a business and
therefore, cannot be ignored
Stakeholder Orientation

• There is a two-way relationship between the firm and a

number of stakeholders.
• This approach recognizes other stakeholders and
explicitly acknowledges the dialog that exists between a
firm’s internal and external environments.
Stakeholder Orientation (cont.)

• The degree to which a firm understands and addresses

stakeholder demands. Comprises three sets of activities:
1. The organization-wide generation of data
about stakeholder groups and assessment
of the firm’s effects on these groups
2. The distribution of this information throughout
the firm
3. The organization’s responsiveness as a whole
to this intelligence
Stakeholder Attributes

• Power
• Legitimacy
• Urgency
Reputation Management

The process of building and sustaining

a company’s good name and generating positive
feedback from stakeholders
Reputation Management Process

• Identify how the organization wants to be viewed by

stakeholders.
• Determine how stakeholders evaluate the company
and their impressions of its image.
• Evaluate others’ impressions of organizational
performance.
• Understand the company’s reputation.
Crisis Management

The process of handling a high-impact

event characterized by ambiguity
and the need for swift action
Crisis Management Stages

• Prodromal stage
• Acute stage
• Chronic stage
• Resolution
Development of
Stakeholder Relationships
• Relationships are founded on principles of:
– Trust
– Commitment
– Communication
Social Capital

An asset, which resides in relationships,

that is characterized by mutual goals and
trust
Implementing a Stakeholder
Perspective in Social Responsibility
1. Assessing the corporate culture
2. Identifying stakeholder groups
3. Identifying stakeholder issues
4. Assessing the organization’s commitment to social
responsibility
5. Identifying resources and determining urgency
6. Gaining stakeholder feedback
Link Between Stakeholder Relationships
and Social Responsibility

• Reactive behavior
• Defensive behavior
• Accommodative behavior
• Proactive behavior