Steps in Identifying StakeholdersIdentifying all of a firm’s stakeholders can be a daunting task. In fact, as we will note again shortly, a list of stakeholders that is too long actually may reduce the effectiveness of this important tool by overwhelming decision makers with too much information. To simplify the process, we suggest that you start by identifying groups that fall into one of four categories: organizational, capital market, product market, and social. Let’s take a closer look at this step. Step 1: Determining Influences on Mission, Vision, and Strategy Formulation. One way to analyze the importance and roles of the individuals who compose a stakeholder group is to identify the people and teams who should be consulted as strategy is developed or who will play some part in its eventual implementation. These are organizational stakeholders, and they include both high-level managers and frontline workers. Capital-market stakeholders are groups that affect the availability or cost of capital—shareholders, venture capitalists, banks, and other financial intermediaries. Product-market stakeholders include parties with whom the firm shares its industry, including suppliers and customers. Social stakeholders consist broadly of external groups and organizations that may be affected by or exercise influence over firm strategy and performance, such as unions, governments, and activist groups. The next two steps are to determine how various stakeholders are affected by the firm’s strategic decisions and the degree of power that various stakeholders wield over the firm’s ability to choose a course of action. Show
Step 2: Determining the Effects of Key Decisions on the Stakeholder. Step 2 in stakeholder analysis is to determine the nature of the effect of the firm’s strategic decisions on the list of relevant stakeholders. Not all stakeholders are affected equally by strategic decisions. Some effects may be rather mild, and any positive or negative effects may be secondary and of minimal impact. At the other end of the spectrum, some stakeholders bear the brunt of firm decisions, good or bad. In performing step 1, companies often develop overly broad and unwieldy lists of stakeholders. At this stage, it’s critical to determine the stakeholders who are most important based on how the firm’s strategy affects the stakeholders. You must determine which of the groups still on your list have direct or indirect material claims on firm performance or which are potentially adversely affected. For instance, it is easy to see how shareholders are affected by firm strategies—their wealth either increases or decreases in correspondence with the firm’s actions. Other parties have economic interests in the firm as well, such as parties the firm interacts with in the marketplace, including suppliers and customers. The effects on other parties may be much more indirect. For instance, governments have an economic interest in firms doing well—they collect tax revenue from them. However, in cities that are well diversified with many employers, a single firm has minimal economic impact on what the government collects. Alternatively, in other areas, individual firms represent a significant contribution to local employment and tax revenue. In those situations, the effect of firm actions on the government would be much greater. Step 3: Determining Stakeholders’ Power and Influence over Decisions. The third step of a stakeholder analysis is to determine the degree to which a stakeholder group can exercise power and influence over the decisions the firm makes. Does the group have direct control over what is decided, veto power over decisions, nuisance influence, or no influence? Recognize that although the degree to which a stakeholder is affected by firm decisions (i.e., step 2) is sometimes highly correlated with their power and influence over the decision, this is often not the case. For instance, in some companies, frontline employees may be directly affected by firm decisions but have no say in what those decisions are. Power can take the form of formal voting power (boards of directors and owners), economic power (suppliers, financial institutions, and unions), or political power (dissident stockholders, political action groups, and governmental bodies). Sometimes the parties that exercise significant power over firm decisions don’t register as having a significant stake in the firm (step 2). In recent years, for example, Wal-Mart has encountered significant resistance in some communities by well-organized groups who oppose the entry of the mega-retailer. Wal-Mart executives now have to anticipate whether a vocal and politically powerful community group will oppose its new stores or aim to reduce their size, which decreases Wal-Mart’s per store profitability. Indeed, in many markets, such groups have been effective at blocking new stores, reducing their size, or changing building specifications. Once you’ve determined who has a stake in the outcomes of the firm’s decisions as well as who has power over these decisions, you’ll have a basis on which to allocate prominence in the strategy-formulation and strategy-implementation processes. The framework in the figure will also help you categorize stakeholders according to their influence in determining strategy versus their importance to strategy execution. For one thing, this distinction may help you identify major omissions in strategy formulation and implementation. Having identified stakeholder groups and differentiated them by how they are affected by firm decisions and the power they have to influence decisions, you’ll want to ask yourself some additional questions:
The stakeholder-analysis framework summarized in the figure is a good starting point. Ultimately, because mission and vision are necessarily long term in orientation, identifying important stakeholder groups will help you to understand which constituencies stand to gain or to lose the most if they’re realized. Two ChallengesTwo of the challenges of performing stakeholder analysis are determining how stakeholders are affected by a firm’s decisions and how much influence they have over the implementation of the decisions that are made. Many people have a tendency to fall into the trap of assessing all stakeholders as being important on both dimensions. In reality, not all stakeholders are affected in the same way and not all stakeholders have the same level of influence in determining what a firm does. Moreover, when stakeholder analysis is executed well, the resulting strategy has a better chance of succeeding, simply because the entities you might rely on in the implementation phase were already involved in the strategy starting with the formulation phase. Thus, you now have a good idea of how to engage various stakeholders in all the stages of the P-O-L-C framework. KEY TAKEAWAYThis section introduced stakeholders, their roles, and how to begin assessing their roles in the development of the organization’s mission and vision. While any person or organization with a stake in your organization is a stakeholder, managers are most concerned with those stakeholders who have the most influence on, or will be most influenced by, the organization. On the basis of your assessment of stakeholders, you now can be proactive in involving them in the P-O-L-C stages. EXERCISES
4.5 Crafting Mission and Vision StatementsLEARNING OBJECTIVES
Communicating and Monitoring Mission and VisionAt this point, you have an understanding of what a mission and vision statement is and how creativity, passion, and stakeholder interests might be accounted for. The actual step-by-step process of developing a mission and vision might start with the mission and vision statements, but you should think of this process more broadly in terms of multiple steps: (1) the process, (2) the content of the mission and vision statements, (3) communicating mission and vision to all relevant stakeholders, and (4) monitoring. As shown in “Process, Content, Application, and Monitoring in Mission and Vision Development,” Information Week contributor Sourabh Hajela breaks out one way you might manage your mission/vision development checklist. Let’s dive in to the development process first. Mission and vision statements are statements of an organization’s purpose and potential; what you want the organization to become. Both statements should be meaningful to you and your organization. It should be shared with all of the employees in the organization to create a unified direction for everyone to move in. Process, Content, Application, and Monitoring in Mission and Vision Development
Sourabh Hajela Adapted fromhttp://www.informationweek.com/news/management/showArticle.jhtml?articleID=17500069 (retrieved October 29, 2008). Mission and Vision-Development ProcessMission and vision development are analogous to the “P” (planning) in the P-O-L-C framework. Start with the people. To the greatest extent possible, let those people responsible for executing the mission and vision drive their development. Sometimes this means soliciting their input and guiding them through the development of the actual statements, but ideally, it means teaching them how to craft those statements themselves. Involve as many key stakeholders as possible in its development; otherwise, they won’t consider it theirs. Assign responsibility so that it’s clear how each person, including each stakeholder, can contribute. ContentThe content of the mission and vision statements are analogous to the O (organizing) part of the P-O-L-C framework. Begin by describing the best possible business future for your company, using a target of five to ten years in the future. Your written goals should be dreams, but they should be achievable dreams. Jim Collins (author of Good to Great) suggests that the vision be very bold, or what he likes to call a BHAG—a big, hairy, audacious goal—like the United State’s goal in the 1960s to go to the moon by the end of the decade, or Martin Luther King’s vision for a nonracist America. Recognizing that the vision statement is derived from aspects of the mission statement, it is helpful to start there. Richard O’ Hallaron and his son, David R. O’ Hallaron, in The Mission Primer: Four Steps to an Effective Mission Statement, suggest that you consider a range of objectives, both financial and nonfinancial.[1] Specifically, the O’Hallarons find that the best mission statements have given attention to the following six areas:
When writing your statements, use the present tense, speaking as if your business has already become what you are describing. Use descriptive statements describing what the business looks like, feels like, using words that describe all of a person’s senses. Your words will be a clear written motivation for where your business organization is headed. Mission statements, because they cover more ground, tend to be longer than vision statements, but you should aim to write no more than a page. Your words can be as long as you would like them to be, but a shorter vision statement may be easier to remember. CommunicationsThe communications step of the mission and vision statements development process is analogous to the “L” (leading) part of the P-O-L-C framework. Communicate often: Internal communications are the key to success. People need to see the vision, identify with it, and know that leadership is serious about it. Managers must evaluate both the need and the necessary tactics for persuasively communicating a strategy in four different directions: upward, downward, across, and outward. [2] Communicating UpwardIncreasingly, firms rely on bottom-up innovation processes that encourage and empower middle-level and division managers to take ownership of mission and vision and propose new strategies to achieve them. Communicating upward means that someone or some group has championed the vision internally and has succeeded in convincing top management of its merits and feasibility. Communicating DownwardCommunicating downward means enlisting the support of the people who’ll be needed to implement the mission and vision. Too often, managers undertake this task only after a strategy has been set in stone, thereby running the risk of undermining both the strategy and any culture of trust and cooperation that may have existed previously. Starting on the communication process early is the best way to identify and surmount obstacles, and it usually ensures that a management team is working with a common purpose and intensity that will be important when it’s time to implement the strategy. Communicating Across and OutwardThe need to communicate across and outward reflects the fact that realization of a mission and vision will probably require cooperation from other units of the firm (across) and from key external stakeholders, such as material and capital providers, complementors, and customers (outward). Internally, for example, the strategy may call for raw materials or services to be provided by another subsidiary; perhaps it depends on sales leads from other units. The software company Emageon couldn’t get hospitals to adopt the leading-edge visualization software that was produced and sold by one subsidiary until its hardware division started cross-selling the software as well. This internal coordination required a champion from the software side to convince managers on the hardware side of the need and benefits of working together. ApplicationIt is the successful execution of this step—actually using the mission and vision statements—that eludes most organizations. “Yes, it is inconvenient and expensive to move beyond the easy path” and make decisions that support the mission statement, says Lila Booth, a Philadelphia-area consultant who is on the faculty of the Wharton Small Business Development Center. But ditching mission for expediency “is short-term thinking,” she adds, “which can be costly in the end, costly enough to put a company out of business.” [3] That is not to say that a mission statement is written in stone. Booth cites her own consulting business. It began well before merger mania but has evolved with the times and now is dedicated in significant part to helping merged companies create common cultures. “Today, our original mission statement would be very limiting,” she says. Even the most enthusiastic proponents acknowledge that mission statements are often viewed cynically by organizations and their constituents. That is usually due to large and obvious gaps between a company’s words and deeds. “Are there companies that have managers who do the opposite of what their missions statements dictate? Of course,” says Geoffrey Abrahams, author of The Mission Statement Book. “Mission statements are tools, and tools can be used or abused or ignored.…Management must lead by example. It’s the only way employees can live up to the company’s mission statement.” [4] Ultimately, if you are not committed to using the mission statement then you are best advised not to create one. MonitoringThe monitoring step of the mission and vision statements development process is analogous to the “C” (controlling) part of the P-O-L-C framework. Identify key milestones that are implied or explicit in the mission and vision. Since mission and vision act like a compass for a long trip to a new land, as Information Week’s Hajela suggests, “while traveling to your destination, acknowledge the milestones along the way. With these milestones you can monitor your progress: A strategic audit, combined with key metrics, can be used to measure progress against goals and objectives. To keep the process moving, try using an external audit team. One benefit is that an external team brings objectivity, plus a fresh perspective.” [5] It also helps motivate your team to stay on track. KEY TAKEAWAYThis section described some of the basic inputs into crafting mission and vision statements. It explored how mission and vision involved initiation, determination of content, communication, application, and then monitoring to be sure if and how the mission and vision were being followed and realized. In many ways, you learned how the development of mission and vision mirrors the P-O-L-C framework itself—from planning to control (monitoring). EXERCISES
Share with your friends: What stakeholders are relevant to an organization's mission and vision?Customers, employees, and investors are the stakeholders most often emphasized, but other stakeholders like government or communities (i.e., in the form of social or environmental impact) can also be discussed. Mission statements are often longer than vision statements.
Who are the stakeholders in a mission statement?In order, the most important stakeholders for your mission statement are: Your customers and prospects. Your employees. Your investors.
How do mission statements affect stakeholders?A mission statement helps employees understand where their contribution fits into the company's objectives. It also helps other stakeholders decide whether they want to do business with the organization.
Why do stakeholders need to understand a companies mission and vision statements?Mission and vision statements play three critical roles: (1) communicate the purpose of the organization to stakeholders, (2) inform strategy development, and (3) develop the measurable goals and objectives by which to gauge the success of the organization's strategy.
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Which important stakeholders might you intentionally exclude from a mission or vision statement?
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