A Stakeholder Perspective on Global Business Strategy
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An observation which has permeated the chapters of this book is the notion that strategic management can (and should) be considered within the framework of a planning process, i.e. in a formalised, structured and systematic fashion, despite the organizational challenges which are likely to be encountered. A central tenet of planning systems, in general, is that the starting point of the process is the formulation of clear objectives (McDonald, 2017). This does, however, beg the question of whose objectives are they? In the literature, there is a tendency to talk about a ‘company’s objectives’ as if the organization is a living entity, divorced from the individuals and groups who actually formulate them. It is also often assumed that these are set in a manner which does not refer to other ‘stakeholders’ who can help or hinder their implementation or, indeed, be impacted by them.
What appears at first sight to be a relatively straightforward issue becomes more complex when we scratch its surface. The stakeholder concept, like many other ‘common-sense’ principles, has a variety of dimensions that must be thoroughly understood if the issues it raises are to be effectively managed. In the sections which follow we address this challenge and provide a range of examples to illustrate the highly practical dimensions of a subject which, to many, appears abstract and therefore unmanageable (Friedman and Miles, 2006).
Management by Objectives
It is generally accepted, in principle, that managerial decision-making should be rooted in clearly stated objectives, the identification of tasks and the allocation of responsibilities and budgets to ensure their effective and efficient implementation (Drucker, 1974). In practice, however, a cursory observation of organizational behaviour paints an altogether different picture.
With this dichotomy in mind, a series of questions draw attention to the scope of the issues that this final chapter will address (adapted from Egan & Greenley, 1998). Are a company’s objectives the collective goals of the Board? Or of individual directors? Or of certain groups of senior managers with vested interests? Are they formulated to satisfy the self-interest of the individuals, the interests of the functions they represent or are they explicitly created to optimise company-wide performance? Are company objectives set to satisfy the short-term dividend interests of shareholders or the longer-term interests of future generations of employees, customers or more growth-motivated investors? Do the objectives accommodate the needs and value systems of suppliers and intermediaries? Do they impinge on the profitability of direct and generic rivals? Are they designed to create profit at the expense of employee remuneration and job security? Or pension commitments? Do they comply with or confront government edicts and those of other regulatory authorities? Do they compromise the safety or general welfare of local communities? And so on.
Stakeholder principles are unusual in management theory in the sense that they have been discussed in the literature for many years but have attracted only limited empirically-focused research, certainly not in the holistic sense we have aimed to present in this chapter. Perhaps the most famous case and certainly the earliest was the 1920s/30s Hawthorne experiments undertaken in a Western Electric factory on the outskirts of Chicago led by Elton Mayo (1949).
In this research, it was convincingly demonstrated that simply involving factory workers as passive subjects in experiments would significantly enhance their productivity. These experiments founded the Human Resource Movement and provided a major setback to the excessive rationality of the scientific management principles of Frederick Taylor.
Having made this observation, there are growing signs of tension in the contemporary era between companies and their employees which suggest that stakeholder harmony on this dimension is coming under threat in some sectors. For example, Amazon’s sharp focus on delivering excellence in customer service is allegedly undermining its workforce human relations, as Bloodworth’s (2018) exposé on work practices in the company’s warehouse facilities revealed (he worked ‘undercover’ in one location for six months and reported draconian management practices).
More generally, ‘gig economy’ workers such as Uber drivers are lobbying for employment-status benefits such as sick leave and holiday pay while lawmakers are struggling to legislate for these new ways of working.
As we mentioned in the opening remarks to this chapter, research on stakeholder principles has remained functionally-biased although a more eclectic research stream is emerging in the field, largely in response to developments in strategic management processes and marketing management practice which are forcing ever greater mutual dependencies amongst stakeholder groups. The role of cultural dimensions of stakeholder principles in global strategic management has barely been touched upon here but they are extremely important, for example, the subtle importance of guanxi (social networks of influence) in Chinese business relationships.
Evidence has been put forward in this chapter and elsewhere that a structured and systematic planning approach to managing the diverse and often conflicting multiple stakeholder interests surrounding a company will have a positive impact on global business strategy performance. However, two caveats have also been firmly drawn.
First, delusions of stakeholder cohesion are very often and very easily shattered in turbulent global business environments.
Second, since long-term relationships will only survive in an atmosphere of trust, careful consideration should be given before responding to environmental turbulence with short-term, knee-jerk reactions, particularly if these are likely to breach a hard-earned stakeholder equilibrium.
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All content © Colin Edward Egan, 2020