Metaphors provide an alternate perspective to an event, issue, or a situation. In organisational studies, metaphors provide a more tangible perspective on how organisations run, strive, or even decline, in an attempt to simplify the understanding of what otherwise might be a complex state of existence. An example of such metaphors are companies as machines and organisations as organisms. Accordingly, I will aim to give context to the metaphors comparing intercompany interactions to the activities between the ‘rulers and ruled’ or ‘organisations as a collection of constituencies’, or ‘organisations as political arenas’, in other words, stakeholder management through power and politics. Many researchers have employed these political metaphors to study stakeholder management realising that through power, acquired be it or bestowed, political maneuvering is essential for organisational and individual excellence and conflict resolution, especially so during times of change. Starting with stakeholders, who are they, what do they want and how will they get it, this review will discuss the different theories researchers have developed to manage the multi-layered stack of stakeholders within an organisation.
Stakeholders and stakeholder management - a collection of constituencies
There must be, not a balance of power, but a community of power; not organised rivalries, but an organised peace.
(Woodrow Wilson, 28th U.S. President)
Who are the stakeholders?
Defining stakeholders have had a long journey to be developed and well-encapsulated. Initially, the definition started as individuals and groups directly correlated with the company, then reaching out to the immediate surrounding. Later, with globalisation and the exposure of companies to the world, the definition took on a more global meaning. In his seminal article Strategic management: A stakeholder theory, Freeman defined stakeholders as an individual or groups that are affected by the achievement and, oppositely, failure of the company. Later, other researchers either widened or contracted the term. Clarkson, for example, expanded the theorem to include the community and government effecting that are affected by the organisation performance. More recently, Jones took a more comprehensive approach in his definition of the term. He, divided the concept of stakeholders into inside and outside stakeholders, segregating the two by the concept of inducements (rewards/output) and contributions (skills or knowledge/inputs). This definition gave the interaction between the stakeholders and the organisation a more value-based relationship of give and take, presenting it with a more transactional nature. This transactional nature is corroborated by his statement that stakeholders will, generally, be motivated to contribute if the inducements are higher in value than their contributions; the association, thus, became inducement centric. A different, and more politically inclined perspective of categorising stakeholders comes in the form of segregation by urgency, legitimacy, and power the stakeholder has upon which the amount of attention given is measured.
What do they want?
Establishing that stakeholders have a reward or inducement interest with the organisation, identifying their needs becomes all the more essential to ensure their contribution sustainability. Jones illustrated the contributions of each of the inside and outside stakeholders in correlation with the inducement to contribute. For example, for inside stakeholders, shareholders contribute money and capital expecting dividends and stock appreciation as a reward. The workforce contributes skills and expertise expecting wages, bonuses, stable employment, etc. as inducement for their input. For outside stakeholders, the quality of purchased product and services is the inducement customers expect for their monetary contribution to the organisation. However, other researchers have generated more expansive lists as to the interest of stakeholders beyond the tangible gain. Some of those stakeholder interests include ‘concrete versus symbolic, economic versus social, and local versus domestic versus international.’ Regardless of what stakeholders want, the recognition of their interests is as vital to their management on the road to their attainment especially when those interests conflict.
How are they going to get it?
As mentioned earlier, Mitchel et. al categorised stakeholders through a more power related, politically inclined form. Other researchers corroborate this segregation citing influence as how stakeholders will get what they want. In their categories, influence will then become dependent on the urgency of the demand, the legitimacy of the claim, and ultimately the power the stakeholder has to invoke the request. Frooman, however, took the notion a level deeper and through his use of the resource dependence theory, outlined how stakeholders may be positioned to get their demands. Jawahar and Mclaughlin, on the other hand, developed an all-encompassing descriptive theory to map out the management techniques organisations may employ to give stakeholders what they want or for stakeholders to take.
Stakeholder management theories
The different theories of stakeholder management are all means to try to politically manage the interests, expectations, and rewards of all involved stakeholders within an organisation. Be it the workforce, the managers, the stockholders (inside stakeholders) or customers, the government, the community or even competitors (outside stakeholders); these interests might come in conflict with one another. Thus, stakeholder management theories play a vital part not primarily to ensure stakeholder satisfaction, that is getting what they want, but rather as conflict resolution methods between the varied players or constituents within this politically ruled operation, that is the organisation. Most of these theories have been developed from the pioneered work of Freeman.
Normative stakeholder management theory
A more philosophically and morally inclined theory, that has not been supported by empirical research, the normative theory focuses on stakeholders’ satisfaction as the ends rather than the means to attain company objectives. This theory’s main tenet is for firms to attend to all stakeholders’ concerns for the success of the management function. Donaldson and Preston stated that in this theory, normative concerns spurred through the application of normative stakeholder theory underpins the stakeholder theory of Freeman in all of its forms. This statement is based on the theory’s incline towards satisfying all the stakeholders at all times. As firms that adopt this theory categorise the stakeholders as the objective to be pleased rather than the instruments by which organisational objectives can be achieved. As aforementioned, this is a more morally geared theory that views all stakeholders as investors rather than assets. However, this theory has been disputed by many researchers as it fails to consider conflict of interest and conflict resolution within its stakeholders as ends ideology when their respective interests interject.
Instrumental stakeholder management theory
Unlike the normative theory of stakeholder management, the instrumental management theory links the means and the ends. This theory’s fundamental assumption is based on the company’s success, as such, managing means (stakeholders) through the scope of what works for the ends (marketplace success). Best described by Jones, utilizing the metaphor of contracts, stated that organisations contract its stakeholders on the basis of mutual trust and cooperation to achieve company goals; thus, instrumentally managing or otherwise using the stakeholder to achieve the objective. However, this theory falls short to explore further the cause and effect of its practice between stakeholder management and corporate performance to establish the proper value of its utilization. On the other hand, other researchers have also assumed its implicit linkage within the stakeholder theory.
Descriptive stakeholder theory
Multiple attempts at descriptive theory have been conducted, which was first introduced by Brenner and Cochran. According to them:
The stakeholder theory of the firm posits that the nature of an organisation's stakeholders, their values, their relative influence on decisions and the nature of the situation are all relevant information for predicting organisational behaviour.
In an attempt by Jones, he stated that due to an intrinsic justice towards their stakeholders, managers will behave as if they (their stakeholders) matter and make decisions accordingly. However, perhaps the most comprehensive approach towards a descriptive stakeholder theory is presented in Jawahar and Mclaughlin’s work, as they posit their theory based on resource dependence theory, prospect theory and organisational life cycle theory. According to them, the underlying premise is that organisations exist in ever-changing paradigms. In other words, it is in a constant state of change. As such, over time, different stakeholders will become more important than others depending on the critical organisational needs at the time. Accordingly, stakeholders will have to be managed based on the resources they provide (money, time, information, etc.), the prospect of the organisation (gain frame implying more conservative approaches or loss frame where riskier decisions tend to prevail).
And the Organisational life cycle determines the importance of stakeholders and the amount of attention given to their demands based on the stage the company is in. For example, at the start-up stage, shareholders and creditors are likely to be the primary stakeholder. On the other hand, during the emerging or growth stage, primary attention will be given to the employees and suppliers to address the needs of a growing organisation. Thus, this theory first identifies the stakeholders based on the organisation’s dependency on the stakeholder’s resources and gives a changing priority to said stakeholder based on the company’s current resource need. This is done through a prospect-relevant frame, where the priority of the resource is also measured depending on the organisational current and future prospect coupled with the organisation stage it is currently in. In other words, the descriptive theory gives agility to an organisation in its stakeholder management practices, as it weighs the importance of one against the other based on the influence one has at a certain time.
Power – The rulers and the ruled
Nearly all men can stand adversity, but if you want to test a man’s character, give him power.
(Abraham Lincoln, 16th U.S. President)
As described above, through multiple theories, organisations aim to manage their stakeholders depending on a set of guidelines to achieve unisons among their stakeholders’ needs and interests throughout the organisation’s life cycle. What unifies all the aforementioned is the notion that the stakeholder that is given higher attention and thus can demand more is the one holding power at a specific period of time or position throughout the constant or emergent state of change.
While McClelland defined power as the ability to change the behaviour of others, Jones took a more organisational change centric and conflict resolution perspective to the term and posited his definition as ‘the ability of one person or group to overcome resistance by others to achieve a desired objective or result.’ Similarly, Buchanan and Badham associated power with the ability to overcome resistance. However, most researchers seem to agree that at its core, power is the ability to make others perform actions they otherwise might not be inclined to do. As mentioned earlier, exercising power to manage stakeholders comes as an essential practice during times of conflict that are more prominently experienced during times of change. In correlation with Jawahar and Mclaughlin descriptive theory, power seems to shift from one set of stakeholders to the other, depending on the change period within the organisation. As such, it becomes a vital exercise to identify stakeholders and their powers to help manage and resolve the inevitable conflict that might result from contradicting interest.
McClelland and Burnham wrote “Contrary to what one might think, a good manager is not one who needs personal success or who is people-oriented, but one who likes power.” They considered power to be personal property, a possession or resource that can or, probably should, be accumulated. While many researchers consider power to be an invisible, albeit highly felt, successful currency, other researchers see that power corrupts. Much study has found that through the pursuit of power, an individual may be skewed into opportunistic behaviour with negative impact on others. However, regardless of the negative effect of power on an individual, the possession of it places its owner in a leveraged position that can influence others. Within an organisation, the power of a stakeholder can elevate their position on the priority scale to have their demands or interests met.
Within an organisation, power can be acquired and not only bestowed. In other words, power can be manufactured and not just legitimised by the legal foundation of a company. The main structural sources of power as described by Jones, and Buchanan, and Badham are authority, position in the organisation’s communication network and the centrality of the position role. These are the legitimised sources of power. While the sources of power that can be manufactured are ability of reducing uncertainty, ability to cultivate allies, degree of unity, and nonsubstitutability. Another important source of power is access of information and resources; both aforementioned scholars have emphasized this source of power to be one of the greatest. Linking it to the descriptive theory of Jawahar and Mclaughlin, being in control of information and resources elevates the stakeholder’s positions to be in a stable place of importance. However, as described by Jones, ultimately, unobtrusive power becomes the biggest source of leverage within an organisation. This is the formation of dominant coalitions within an organisation, not to be mistaken by simply just creating allies. This coalition is the partnership between a set of managers or employees ‘who use their combined power secretively to influence the decision-making process in ways that favour their interests.' It is due to the control of the goals, assumptions and/or values that the power of coalitions prevail.
Identifying power of stakeholders
As established earlier, organisations are in a constant state of change, be it part of the organisational life cycle or an emergent change such as a restructure. As such, much of the research done to study the concept of power has been done with the premise of change. This change constitutes the arena that determines each stakeholder or stakeholders’ power over the other. To identify the stakeholders based on their order in the chart of power, Grundy proposed a two-part approach by which to identify power and commitment of stakeholders towards a change. The first part: To identify stakeholders through stakeholder brainstorm. As well as to assess how much power or influence each individual or group possesses. And finally, assess the stakeholder’s attitude toward the change. The second part involves developing a strategy to persuade stakeholders higher on the influential scale of the proposed change.
Politics - political arenas
Real politics are the possession and distribution of power.
(Benjamin Disraeli, Former UK primer minister)
There is a relationship between power and politics. While power is the ability of an individual to get others to fulfill their demands, it is through political tactics that this can be done. Jones adds that political tactics come to play a bigger role during times of uncertainty or disagreement. As established throughout this article, these times are in a constant crest and trough in the organisation life cycle. Different researchers have studied the concept of politics within an organisation, some viewing it as an illegitimate, ostensibly parochial practice. Others saw politics as the ability to effectively influence others towards an objective that serves the company’s goals. Despite the negative and positive views of politics, empirical studies and findings found that effectively playing the political game can achieve goals. Just as government politics, organisation politics require a set of skills and political astuteness to engage in the battle.
Resistance and conflict resolution
When power and politics are discussed, they are often mentioned within the premise of resistance to change and conflict resolution as a result of this resistance. Not all conflict though is discussed from a negative perspective. To overcome organisational inertia or stagnation, conflict can be beneficial. For example, opposing points of view between managers can improve the decision-making process. In fact, research shows that within a certain limit, conflict and organisation effectiveness can be positively correlated. Nonetheless, the conflict remains a source of concern to managers within organisations especially when the threshold of effective conflict has been crossed. Different reasons could be attributed to conflict within an organisation. Interdependence, difference in goals and priorities, bureaucratic factors, incompatible performance criteria and competition all pose as reasons for conflict. But regardless of the reason, it is vital for an organisation to analyse and interpret the conflict in order to resolve it.
The political game
To play the political game within an organisation, individuals require certain attributes to achieve the outcome desired. From an organisation goal-achievement point of view, political astuteness is essential. Being aware of the interests, goals, and values of different stakeholders within the organisation assists in exercising leadership in ways that consider diverse and competing needs. For individuals and subunits, the utilizations of tactics that mimic and then deploy the power acquired insures the attainments of their goals. As Jones outlines, becoming indispensable within the organisation by increasing the nonsubstitutability factor and centrality in the role is a tactic used to leverage power. Other individuals and subunits associate with powerful managers as a political tactic to exploit power by association. The broader, albeit trickier, tactic is forming coalitions within the organisation. These coalitions are not necessarily only built with inside stakeholders, but outside stakeholders as well, such as customers and suppliers. As mentioned earlier, powerful coalitions are able to influence the decision-making process and control the agenda of business priorities. This tactic, however, requires a multitude of negotiation and management skills as the parties within the coalition may change frequently as the environment changes.
Therefore, to play the game of politics, organisations must engage in an act of power balance with an assumption that power flows to those with the resources the organisation needs. Similarly for other stakeholders, their resource dependency on others should become a major factor in their decision-making process utilizing skills of bargaining, negotiation, and diplomacy to attain their interest through their careful deployment of power.
With all the different theories and views of researchers about the topic, it may be concluded that regardless of the logic, right of claim, and rationale of one stakeholder’s claim, demand, or even right over the other, political power is what prevails. Going back to the original opening statement of metaphors and choosing that of organisations as political arenas to describe the inner workings of organisations, just like a political scene of a parliament or a senate, influence and resource control matter, just as much as correctness, if not more. Forming coalitions, like lobbying practices, creates an accumulation of power that otherwise an individual might not live up to. Through the power of politics, the righteousness of interests can be skewed. Organisations will support, if not succumb, to the power any stakeholder holds depending on the stage and period of time the organisation is going through. Henry Kissinger once said that at his initial assignment to President JFK’s office, he thought the decision-making process would largely depend on intellect and correctness, however, he soon realized how dangerously immature this thought was, the process is about power and politics. As such, theories like the descriptive theory of stakeholder management coupled with the power of opposing parties create a parity that helps organisations balance an act of survival on the quest for strive.
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