Ch.6 Purpose and Stakeholders Flashcards
What is Organisational values?
Definition & Importance:
Organisational values are the fundamental ideals and principles guiding an organisation’s strategy and
operations.
For instance, Charityworks values creativity, innovation, commitment, and fun.
McKinsey emphasizes client interests, an independent viewpoint, and client confidentiality.
Real-world Application:
Values dictate how an organisation operates.
They set boundaries on acceptable actions and inform strategic goals.
Discrepancy between Stated and Practiced Values:
Although organisations might have formal value statements, there can be a gap between these and the values they practice.
Organisations should ensure that their actions align with their declared values.
Influence of contemporary (External) Norms:
The United Nations’ 17 Sustainable Development Goals (SDGs) serve as a significant source of values, with leading corporations pledging to align their strategies with these goals.
Conflict of Values:
Large companies, even if committed to societal values, might face tension between different stakeholder concerns.
What is Stakeholder management?
Given their influence, managers must consider all stakeholders while making decisions.
Stakeholder demands can vary significantly; for instance, while investors might prioritize profit maximization,
customers might value product quality, and society might emphasize environmental considerations.
Recognizing the different power dynamics and values of each stakeholder group is crucial.
What are the five Classifications of stakeholders?
Economic Stakeholders:
Include suppliers, customers, banks, and owners (shareholders).
Social/Political Stakeholders:
Comprise policy-makers, local councils, regulators, and government agencies.
Technological Stakeholders:
Include key adopters, standards agencies, and members of complementary service ecosystems.
Community and Society Stakeholders:
Represent groups affected by the organization’s actions, such as local residents or broader societal groups.
Internal Stakeholders:
Include specific departments, local offices, factories, and employees at different organizational levels.
What is the idea of Stakeholder mapping?
Purpose and Importance:
Stakeholder mapping helps in identifying stakeholder power and attention to understand strategic priorities. This
ensures that strategies align with the values of the most influential stakeholders.
Stakeholder mapping: Describe the Power/Attention Matrix.
Power/Attention Matrix:
The matrix classifies stakeholders based on their power and attention towards specific strategic issues. Stakeholders can shift their positions on the matrix based on specific issues.
Power: It’s vital to identify which stakeholders are the most powerful. Power can stem from hierarchical positions,
resources controlled, networks, or expertise.
Attention: It refers to how closely stakeholders monitor an organization’s activities. Stakeholders’ attention can
vary based on criticality, communication channels, and cognitive capacity.
What is the importance of Owners in an organisation?
Owners are central stakeholders in strategic decisions. Their influence and focus can differ based on ownership
models.
Name a few of other ownership model (not main).
Private Equity Funds: Aim for quick financial improvement.
Non-Profit Organisations: Focus on social missions.
Partnerships: Owned by senior employees; prioritize professional standards.
Employee-Owned Firms: Profits are shared among employees.
Benefit Corporations: Jointly pursue commercial goals and public benefits.
What is Organizational purpose?
Definition: Organisational purpose emphasizes the non-economic values guiding an organization. It connects with the mission, vision, and objectives.
Variation: While some organizations solely focus on profit, others recognize and integrate social values of stakeholders.
In Practice: Organizations’ mission, vision, and purpose statements are often publicly available, but they should be scrutinized for genuine commitment.
What is Corporate Social Responsibility (CSR)? What are the approaches to CSR?
Definition: Corporate Social Responsibility (CSR) involves organizations behaving ethically, surpassing minimum legal obligations, and contributing to broader societal welfare.
Approaches to CSR:
1. Laissez-faire: Focus solely on profit and shareholder interests. Minimal social responsibilities beyond legal
requirements. No organisational purpose in the sense of commitment to higher goals than financial
performance.
2. Enlightened Self-interest: Balancing profit with broader stakeholder interests. The belief that responsible
actions can benefit the business in the long run.
3. Forum for Stakeholder Interaction: Emphasizes a triple bottom line, considering environmental, social, and
economic factors.
4. Shapers of Society: Organizations driven primarily by a social mission. They prioritize societal transformation
over profit.
What is a Hybrid organisation?
Entities that merge various values and structures. They aim to balance economic motives with social and environmental commitments.
What are the two models for managing hybridity?
- Virtuous Circle Model: Social and financial goals reinforce each other. The success in one domain supports the other.
a. Strategy is set to serve both social objectives and financial objectives at the same time. (enlightened self-interest model)
b. Virtuous circle model of mutually reinforcing social and financial objectives is exemplified by the share
value approach (Porter). Social demands are not a constraint but a source of economic opportunity. 3 key
opportunities for creating shared value:
i. Reconceiving products and markets, Redefining productivity in value chaon, Building local
communities.
Dynamic Balance Model: Navigates the tension between conflicting social and financial objectives. Strategies
are adjusted based on changing circumstances.
Managing Tensions in Dynamic Balance:
1. Organisational Guardrails: Structures or systems that ensure adherence to social values.
2. Dynamic Decision-making: Flexible adjustments between financial and social goals based on changing
circumstances.
3. Both/and Leadership: Leaders are champions of both financial and social goals, avoiding an either/or
mindset.
What is organisational governance?
Governance deals with the structures and systems that hold managers accountable to stakeholders.
Importance: Effective governance is essential for making strategic decisions. Weak governance can lead to severe
consequences, such as the collapse of the German fintech company, Wirecard, in 2020.
What is the Governance chain?
This represents the roles and relationships of groups involved in an organisation’s governance. In small businesses, this chain is straightforward, but in large corporations, it’s more complex.
For instance, in large publicly quoted corporations, individual investors often invest through funds like unit trusts or pension funds. These funds then invest in companies and receive performance reports, which are the responsibility of the company’s board. This multi-layered structure can dilute accountability.
What is the Principal-Agent model in governance?
A framework used to analyse the governance chain. Principals employ agents to act on their behalf. In large corporations, there are many layers of agents, which can lead to imperfect reporting mechanisms.
Issues arise due to:
1. Knowledge Imbalances: Agents typically have more expertise and information than principals.
2. Monitoring Limits: Principals often cannot closely oversee agent activities, especially if their attention is
divided across many investments.
3. Misaligned Incentives: Agents might pursue personal objectives unless their incentives align with those of the principals.
Solution: For effective governance, there needs to be well-informed principals, robust monitoring systems, and carefully crafted incentives.
