Stakeholders

Identifying Stakeholders - a Primary and an Ongoing Task 

"Satisfy stakeholders!" is the project manager's mantra. For successful projects, it's not enough to deliver on the customer's demand; projects have to meet all stakeholder expectations. Identifying stakeholders is a primary task because all the important decisions during the initiation, planning and execution stages of the project are made by these stakeholders.

The five primary project stakeholders are the project manager, the project team, the functional management, the sponsor, and the customer.  In a larger sense, anyone who participates in the project or is impacted by its results is a stakeholder. Each stakeholder has an essential contribution to make and all stakeholder expectations need to be met. Contributions made by different people to the project, is the principal criteria for identifying stakeholders.

Shareholder Value Perspective VERSES Stakeholder Values Perspective

Shareholder Value Perspective
 
The Shareholder Value Perspective emphasizes profitability over responsibility and sees organizations primarily as instruments of it's owners.  Shareholder Value proponents, believe an organization’s success can be measured by things such as share price, dividends and economic profit, and see stakeholder management rather as a means than as an end in itself. They believe social responsibility is not a matter for organizations and claim society is best served by organizations pursuing self-interest and economic efficiency. The Shareholder Value philosophy is not blind to the demands placed on corporations by stakeholders other than the shareholders. However, recognizing that it is expedient (instrumental) to pay attention to stakeholders, does not mean that it is the corporation's purpose to serve them. The purpose of a company is first and foremost to maximize shareholder value, within what is legally permissible. Advocates of the shareholder value perspective are convinced that society is best served by economic rationale. Responsibility for employment, local communities, the environment, consumer welfare and social developments are not organizational matters, but are better left to individuals and governments. By pursuing enlightened self-interest and maintaining market-based relationships between the corporation and all stakeholders, pursuing maximal value for the shareholders will result in societal wealth being maximized. 
 
Stakeholder Values Perspective
 
The Stakeholder Values Perspective emphasizes responsibility over profitability and sees organizations primarily as coalitions to serve all parties involved. Stakeholder Value advocates believe an organization’s success should be measured by the satisfaction among all stakeholders and also sees stakeholder management both as an end and a means. They believe social responsibility is an organizational matter and claim society is best served by pursuing joint-interests and economic symbiosis. A company is not an instrument of shareholders, but a coalition between various resource suppliers, with the intention of increasing their common wealth. Advocates of this perspective refuse to give shareholders a higher moral claim on the organization than providers of other resources. Recognizing the moral claims by stakeholders other than the shareholders, introduces other values than solely financial value to the spectrum of what needs to be pursued by the organization. Stakeholder management is not merely instrumental to create shareholder value, but normative. Due to having strongly motivated employees and nurturing high levels of trust with all parties surrounding the organization, pursuing the joint interests of all stakeholders is not only more just, but will also maximize societal health.

Strategic Stakeholders Management

To maximize shareholder value, managers ought to pay attention to key stakeholder relationships.  Stakeholder management is a means to an end. The end, or the ultimate result, may have nothing to do with the welfare of stakeholders in general. Instead, the firm's goal is the advancement of the interests of only one stakeholder group--its shareholders. The firm's interest in stakeholder relationships is instrumental and contingent on the value of those relationships to corporate financial success; Instrumental [strategic] ethics enters the picture as an addendum to the rule of wealth maximization for the manager-agent to follow.

In this formulation, stakeholder management is part of a company's strategy but in no way drives that strategy. Implicit in this perspective is the assumption that modes of dealing with stakeholders that prove upon adoption to be unproductive will be discontinued, as will those that involve resources that are no longer needed. The concerns of stakeholders enter a firm's decision-making processes only if they have strategic value to the firm.
 
Two variants of the Strategic Stakeholder Management approach are the direct effects model and the moderation model. In the direct effects model, managers' attitudes and actions toward stakeholders (their stakeholder orientation) are perceived as having a direct effect on firm financial performance, independent of firm strategy. In the moderation model, managerial orientation toward stakeholders does impact firm strategy by moderating the relationship between strategy and financial performance. 

The Normative Approach towards Stakeholders

According to this perspective, managerial relationships with stakeholders are based on normative, moral commitments rather than on a desire to use those stakeholders solely to maximize profits. In short, a firm establishes certain fundamental moral principles that guide how it does business--particularly with respect to how it treats stakeholders--and uses those principles to drive decision making. 

One genesis of this normative model is the fact that firm decisions affect stakeholder outcomes. Ethics, generally speaking, deal with obligations that arise when an individual or corporate agent's decisions affect others; regardless of precisely what constitutes an ethical decision, decisions made without any consideration of their impact on others are usually thought to be unethical. Capturing the implications of this view for stakeholder management; we state that stakeholder interests have intrinsic worth. That is, certain claims of stakeholders are based on fundamental moral principles unrelated to the stakeholders' instrumental value to a corporation. 

A firm cannot ignore or abridge these claims simply because honoring them does not serve its strategic interests. In a sense, these claims are independent of, and should be addressed prior to, corporate strategic considerations. Stakeholder interests are thought to form the foundation of corporate strategy itself, representing "what we are" and "what we stand for" as a company. 

We cannot connect ethics and strategy unless there is some point of intersection between the values and ethics we hold and the business practices that exemplify these values and ethics. In order to build strategy on ethics and avoid a process that looks a lot like post hoc rationalization of what we actually did, we need to ask "what do we stand for?" in conjunction with our strategic decisions”. 

The second genesis of a normative stakeholder orientation based on moral principles, is the argument that making a strategic commitment to morality is not only conceptually flawed but is also ineffective. First, strategically applying ethical principles-that is, acting according to moral principles only when doing so is to your advantage-is, by definition, not following ethical principles at all. In addition, if the purpose of acting ethically is to acquire a good reputation, that in turn will provide a firm with economic benefits, why not pursue the good reputation directly without the intellectual excursion into moral philosophy? In some cases, of course, the behavior called for will coincide with that dictated by ethics, but in others it may not. What difference does ethics make if one can act instrumentally without reference to ethics? 

From a practical perspective; the instrumental benefits of stakeholder management, paradoxically result only from a genuine commitment to ethical principles. Firms that create and sustain stakeholder relationships based on mutual trust and cooperation will have a competitive advantage over those that do not. If a firm's commitment to trust and cooperation is strategic rather than intrinsic, it will be difficult for the firm to maintain the sincere manner and reputation required for its differential desirability as an economic partner. In other words, trustworthiness, honesty, and integrity are difficult to fake. Thus, in order to reap the instrumental benefits of stakeholder management, a firm must be committed to ethical relationships with stakeholders regardless of expected benefits. Strategically applied moral commitments are not really moral and paradoxically, cannot lead to the strategic outcomes desired. 

This model is called the Intrinsic or Normative Stakeholder Commitment Model because the interests of stakeholders have intrinsic values that enter into a firm's decision making process, prior to strategic considerations and form a moral foundation for corporate strategy itself.

Source: Value Based Management.net