My company, WidgetCo, designs and manufactures widgets here in Dullsville, USA. The company has been in operation since 1927, and moved to Dullsville shortly after WWII to take advantage of the large clustering of industry around the steel plant in Steelville. The steel plant and many of the other businesses have now closed, but WidgetCo has long been an innovator in widget design, so remains a thriving business. The company is now the largest employer in Dullsville. Operating as a differentiated provider, we are able to meet the needs of our customers -- mainly manufacturers -- who now are spread throughout the NAFTA region.
There are a number of stakeholders for WidgetCo, and we believe that it is important to take the needs of each into consideration when embarking on major strategic endeavors (Leigh, 2013). Internally, we see our stakeholder universe as consisting of management, the shareholders, the employees and the families of the employees. We believe at WidgetCo that we are all one big family, because many of our workers support their entire families on their jobs with us. Also, many workers are the children and grandchildren of former employees. Shareholders are motivated by the desire to earn a good return. Management is motivated by the need to keep the business running, meeting the needs of all other stakeholders.
There are large number of external stakeholders whose needs we need to take into consideration. The first is the external community here in Dullsville. We are the largest employer in town, and therefore all of Dullsville is dependent on us economically. The city relies on us for its tax base, for example. Even people not employed by us are affected. Either they know someone who is an employee, or they rely on employees to support their business, or their family relies on services provided by the city, which often comes from our tax base. The local environment is another stakeholder we need to consider. Because of the close connection between WidgetCo and the Dullsville area any impact that we have on the environment here is something that affects all of us. We therefore need to give strong consideration to what we use, how much we waste, where we dump and other environmental considerations. The other major external stakeholder group is our customers, who rely on us for timely delivery of exceptionally-crafted widgets. Our suppliers in turn are another stakeholder. Lastly, there are the secondary stakeholders such as regulators, government (especially local), the media and competitors -- anybody who might be affected by our actions indirectly (Rabinowitz, 2013).
Stakeholders -- especially the primary ones -- can have significant influence over the destiny of the business.
Kokemuller (2013) notes that stakeholders have increased their influence over business in recent years. For example, there is much more attention paid to governance and social responsibility these days, and this is driven by different stakeholder groups. Shareholder groups have become more active in promoting good governance, in order to protect their investments (Gillan & Starks, 2000). The media has also promoted governance, as well as environmental issues, thereby driving the agenda on some of the things that can affect strategy. Further, regulators have exerted greater influence. Take for example the Sarbanes-Oxley Act, which has imposed more regulations on publicly-traded companies like WidgetCo.
In addition to external influences like laws and media pressure, stakeholder groups can also influence the thinking and the culture inside the organization. There is a good example for this. We understand the importance of WidgetCo to the Dullsville economy. We are Dullsville these days, in a sense. It did not used to be that way. We have seen many industries leave this part of the country, often for overseas destinations, and the devastating impact that has on our communities is something that we have all noticed. The culture of the organization has therefore been changed by this experience. We have given strong commitments to our employees and to the people of Dullsville that we will stay, and we feel that this has very much characterized not only the culture of the organization but also our strategy. One example is a customer who was doing business with a big box store that wanted them to supply the product cheaper. That customer put pressure on us to offshore some of that production to help them. We said no. We went out and found other customers. Instead of offshoring to Mexico, we sell to customers down there. This approach to strategy has everything to do with the pressure we put on ourselves to meet the needs of our different stakeholders here in Dullsville.
The environment is an interesting stakeholder because it has no voice of its own. . We have noticed, however, that with the rise in environmental consciousness, we have had to change some of our practices. Our stakeholders in the local community called attention to things we were doing that they wanted to see changes. We saw this as an opportunity, and made some change that ultimately saved us money. There is no doubt that stakeholder interests have driven how the company works. But at the same time, we do not see those interests as being incompatible with the interests of other stakeholders -- making money for shareholders, maintaining jobs for the local community and acting as environmental and community stewards are not mutually exclusive tasks. We simply find a way to meet the needs of our major stakeholder groups as part of our approach to strategic management decision making.
The biggest way that stakeholders can have an influence is to engage us in dialogue. We do not want to guess at what our stakeholders want, but if they engage us they will find an accommodating partner in dialogue. Stakeholders will also find that if they are willing to work with us to find solutions instead of demanding solutions, they will have more influence. We still have to meet the needs of all of our stakeholders. We are proponents of active stakeholder management, working with them but also finding ways to maintain realistic positions about what people can expect from us. Nevertheless, we have enjoyed a lot of success out of initiatives that originated from one stakeholder or another.
Holzer (2008) makes some good points about stakeholder influence. We are open to our stakeholders, but we recognize that there are political dimensions to stakeholder management as well. He notes that stakeholder needs can originate out of left field, and that any organization would find this challenging. Certainly there have been times when we found this was our experience as well. There are groups and individuals who are stakeseekers, or stakeholders with specific agendas that they want us to address. We must, as a company, choose who we deal with and how. If we want to build coalitions with our stakeholders, we need to be proactive to some extent, so that we have a better sense of what their needs are, before we are blindsided with major issues from stakeholders that we had no way of predicting.
This approach involves engaging key stakeholders in dialogue, something that many firms might be hesitant to do. We have found that with many of our primary stakeholders, this has been successful. Our workers for example, have always been engaged and that is why they have never organized -- they have responsive management and that has negated the need. We have a PR person, and we do ensure that we work with local media to understand issues before they hit the front page. But there is a difference between dealing locally where everybody knows us and knows that we have an open door and dealing with stakeholders further afield. We try to identify such stakeholders and maintain open channels of communication with them. This means that when they have issues, they know that they can come to us and work with us.
Nevertheless, it can be a challenge to get buy-in from some stakeholder groups. This is particularly the case if trust does not exist. Trust might exist with internal stakeholder groups and the local community, but that trust has been built for decades -- we realize that other stakeholder groups might not have the same level of trust. So part of what we do to overcome resistance is that we work to build trust and open dialogue. Where stakeholders might prefer to leave issues unaddressed, we find that unfortunate. If we cannot be proactive in dealing with such situations, we at least move quickly to ensure the best resolution possible.
Where we find that there might be problems is when there is no good resolution. We saw this with some of the other companies in the area, when they began to lay people off. There was no good resolution, because the workers and the communities were going to suffer regardless of the approach that the company took to stakeholder management. This process, however, is part of stakeholder management as far…