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Why Managing Stakeholders Is Important

2684 words (11 pages) Essay in Management

11/05/17 Management Reference this

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In order to justify why managing stakeholders is important to organization, first we have to clarify what is a stakeholder? Stakeholder is a person, group, or association that has direct or indirect post in an organization because it can affect or be affected by the organization’s achievement objectives, and rules. Key stakeholders in a business organization include creditors, customers, administrations, employees, government (and itsagencies), owners (shareholders), traders, unions, and the community from which the businessgains its capitals.

Stakeholder can be dividing into primary and secondary groups. Primary stakeholders are important to the continued success of the organizational venture and include shareholders and investors, staffs, contractors, customers and suppliers. Secondary stakeholder can impact the business or are affected by the organizational venture. They are not involved in direct transactions with the company. Also they are not directly critical to the survival of the business yet they can often have long-term impacts on the organization venture.

Stakeholder management is the central part of an organization’s effectiveness. Stakeholders play important roles as advocates, sponsors, partners and agents of change. Stakeholder management it seems to be very important than ever because of the increasingly globalizations and the interconnected nature of the modern world. Administrative reforms across the world are also encouragement the need for pay more attention to stakeholder analyses as they emphasize markets, contribution, flexibility, and deregulation. The need to manage relationships has become such a part and parcel of the need to manage that Feldman and Khademian (2002) assert that “to manage is to govern.” And it is hard to visualize effectively managing relationships without creating use of carefully done stakeholder analyses. In addition as organizational ventures grow they are likely to have more complex and entangled webs of stakeholders, hence it becomes necessary that entrepreneurs have the ability to understand and negotiate these relationships.

Use of stakeholder mapping is planned to identify stakeholders, group them and develop strategies for managing them: characteristically by securing their support and collaboration or overcoming their holdout. It is very useful in helping entrepreneurs/directors to understand the social/economic and political situation. Stakeholder mapping works by first identifying who the stakeholders in a project are and then establishing their personal degree of interest and power. From here, strategies may be worked out in order to manage and respond to the different situations that can occur. Stakeholder positions can vary over time and the map will need to be revisited at various points in the project. Stakeholders may also need to be increased or removed from the map as the project growths.

In the case study of John Lewis Partnership, John Lewis’s primary stakeholders regarding to the Mayfield’s plan to close the Stevenage Distribution Centre is the Stevenage Partners which is the employees and their customers.Both employees and customers are from the primary group which is important to the continued success of the organizational venture. At first, employees can be described as the backbone of the organization in which an organization could not operate without employees. The profitability could be depending on the employee at some points, this is due to the service level and productivity is mostly based on the performance of the employee.

Customers are the most important people for any business. They are the source upon which the success of the organization depends. Duplication business is the backbone of selling. It assists to provide profits and certainty for the business. Organizations are reliant on their customers. If they do not improve customer loyalty and satisfaction, they could lose their customers and without customers the organization would not appear. The aim of the organization is to fulfill the needs and wants of the customers. The customer makes it possible to achieve business aims and as the same time the customers could make it vice-versa.

Johnson and Scholes (1999) Power Interest Matrix






Level of Interest

Figure 1: Johnson and Scholes (1991) power interest matrix

According to the Johnson and Scholes’ power interest matrix (1999), this tool is very important to identify and evaluate impact and expectations of particular stakeholders.

Stakeholders such as local community in group A requires minimal effort is less interest and less power. They have little power to influence decision and actions in company; they don’t have a high level of interest, so that organization should not invest so much time and effort to them.

Stakeholders such as Supplier in group B require keep Informedis high level of interest andless power. This group has a high level of interest in the company and its activities but has limited means to influence decisions or actions. However, this group may contain potential allies; therefore they should be kept informed.

Stakeholders such as Government in group C (Keep satisfied) is high power and less interest. This group can present some difficulties. Although they behave passively they can have an enormous impact on the company or project. So, company must put enough work in with this group people and to keep them satisfied, instead they will bore with your message. Not only that, company also recognizetheir potential reactions, engage in a dialogue in order to learn more about their discontent and involve them according to their interest.

Stakeholders such as employee and customers group D (Key players) are highinterest and high power people. The most important group of stakeholders with a high level of interest and power.Employees in John Lewis Partnership are key player because managers will often spend twenty to forty percent of their time to communications; all of employees are requested to 1 day conferences with their regional area. So that partners can affect the company’s activities and influence decision of company.

Type: clan

Dominant attributes: participation, teamwork, cohesiveness, sense of family.

Leader style: facilitator, mentor, parent figure.

Bonding: tradition, loyalty, interpersonal, cohesion.

Strategic emphases: toward developing human resources, morale, and commitment.

Type: adhocracy.

Dominant attributes: entrepreneurship, adaptability, dynamism, creativity.

Leader style: innovator, risk taker, entrepreneur.

Bonding: risk, flexibility entrepreneur.

Strategic emphases: toward innovation.

Type: hierarchy

Dominant attributes: rules and regulations, order. Uniformity, efficiency.

Leader style: administrator, organizer, coordinator.

Bonding: clear expectations, procedures, policies.

Strategic emphases: predictability, smooth operation and toward stability.

Type: market

Dominant attributes: competitiveness, environment exchange, goal achievement.

Leader style: achievement oriented, production and decisive.

Bonding: goal orientation, competition, production.

Strategic emphases: market superiority and toward competitive advantages.

Organic Process

A model of cultural congruence for organizations (reproduced with permission of Elservier Science from Cameron and Freeman, 1991)

There are four types of Cameron and Freeman’s (1991) cultural framework such as clan, adhocracy, hierarchy and market. Besides that, the four types of core attribute includes, the dominant characteristics or values, the dominant style of leadership, the bases for bonding or coupling and the strategic emphases present in the organization. Organization culture of John Lewis is type ‘clan’. By developing human resources, partners are encouraged to make customer service decisions themselves on-the-spot. This means that most despicable of retail irks- having to wait for ages while the person you have complained to fetches their manager is neatly avoided. By cohesiveness, none of the seventy thousand people work at John Lewis is an employee. They are all partner.

The Cultural Web

The Cultural Web is refers to the six interrelated elements that can help to make up what Johnson and Scholes name the’ ‘paradigm” the model of the work environment. Besides that, there are six elements are stories, ritual and routines, symbols, organizational structure, control system and power structures. First, stories is refers to the people talked about inside and outside company and past event. Who and what the company chooses toeternalize says a good deal about what it values, and perceives as great behavior. For example, John Lewis partnership are best known for the fact that their business is owned for the benefit of their employees, but we know that to cut our way through competitive conditions, they have to continue to prize sound relationships with their customers and suppliers and sustain a keen sense of civic responsibility. Other than that, John Lewis partners decided to host and impromptu mass sleepover due to a deluge of snow. It made up its beds and let more than 100 people stay the night, laying on food for everyone. Certainly, they got a good PR kick out of it- not to mention a lot of happy customer to spread the word in their community. Second, ritual and routines is refers to the actions of people and daily behavior that signal acceptable behavior. This mean what is valued by management and what is expected to happen in given situation. For example, there is a tradition of internal journalism with seven thousands copies each week of internal publications; managers will often spend twenty to forty percent of their time on communications; all partners can invited to one-day conferences within their regional area. So that partners can affect the company’s activities and influence decisions. Third, symbols refer to the visual representations of company including formal or informal dress codes, how plush the offices are and logo. For example, none of the 70,000 people who work at John Lewis is an employee. They are all partners who jointly own the business. Fourth, organizational Structure is refers to the organization chart and the unwritten lines of influence and power that indicate whose contribution are most valued. For example, JLP’s structure is an example of representative democracy. The sharing of ‘power’ comes in various forms. All partners elect representatives to the governing Partnership Council; elected representatives account for 80 percent of Council members, with remaining 20 percent appointed by the Chairman. Fifth, control systems are refers to the ways that the organization is controlled such as financial systems, rewards and quality system. For example, there is a direct pay-off in the shape of an annual bonus based on the company’s profits. The Chairman and other director must ensure the continuing solvency of the business as well as keeping fund available for growth, but beyond whatever is necessary for these purposes, the annual profits are redistributed to members. Lastly, power structure is refers to the pockets of real power in the organization. This can involve a whole group of executives, one or two key senior executives or even a department.

Identify Andy Street’s Leadership style

It appears that Street practices transformational leadership style. A leader who practices transformational leadership style offers his or her followers a purpose that transcends short-term goals and focuses on higher order intrinsic needs (Judge &Piccolo, 2004). Street displays inspirational motivation when he reckons that Britain lacks of inspirational retailer and he is trying to develop a business model that is better than the rest. According to Bass (1998), a transformational leader has strong vision for the future based on values and ideas, and inspires followers with symbolic actions and persuasive language. In Street, one can see he spoke of the vision of John Lewis with the “same zeal as a missionary” and his followers in his company seem to share the company’s vision when he said “That’s what motivates us.”

Big Five personality dimension

According to Goldberg (1990), the Big Five personality traits have been traditionally named as Extraversion, Agreeableness, Conscientiousness, Emotional Stability and Openness. Street’s personality falls within the continuums of these Big Five personality traits. Although Extraversion is positively related to both leader emergence and leadership effectiveness (Judge, Bono, Ilies& Gerhardt, 2002), Street appears to be an introvert when it comes to industry occasions. According to Daft (2008), Extraversion refers to “the degree to which a person is outgoing, sociable, talkative, and comfortable meeting and talking to new people”. While Street does not enjoy attending industry occasions, he does find fun in “night out at the theatre or cinema with London friends”. Moreover, an extravert is also energetic and fast paced (Mushonga &Torrancen, 2008). Street is said to be a man who “walks fast, turns sharply and is bursting with nervous energy”. Thus, Street does not appeared to be exhibiting the characteristics of an introvert, such as less sociable, shy, cautious and fell comfortable being alone (Politics & Politics, 2011), in every aspect of his life.

Daft (2008) also noted that many successful leaders are introverts who are drained by social encounters and need time alone to reflect and recharge themselves. This description is evident in Street who hates lively and noisy industry occasions and finds solace on a mountain in Wales. McGregor (1960) said that the importance of the essential personality traits of a leader differ considerably across situations.

Furthermore, Street also shows a high degree of Emotional Stability which is “the degree to which a person is well-adjusted, calm, and secure”.A person with high degree of Emotional Stability is poised, secure, calm and have good emotional control whereas a person with low Emotional Stability tend to experience negative emotions, and hostile and critical to self and others (Digman, 1990, as cited in Politics & Politics, 2011). Although Street is fast and burst with nervous energy, he is described as a person who is not aggressive while still demanding detail. An individual with poor emotional regulations is lacking of self-confidence which is important characteristic of transformational leaders (McCrae & Costa, 1991; Bass, 1990, as cited in Judge & Bono, 2000). High Emotional Stability allows Street to convey his visions to his followers, deal with tough situations, such as expanding departmental stores and adopting a different business model, confidently. As he has good emotional regulations, he is able to solicits ideas and stimulate creativity in his followers without getting aggressive when they fail to meet his expectation.

Conscientiousness is “the degree to which a person is responsible, dependable, persistent, and achievement-oriented” (Daft, 2005, p. 100). This long process of Street moving up of his career ladder reflects Street’s high conscientiousness as his first position in John Lewis was not impressive in others’ eyes. In addition, he continues to expand his company despite tougher trading conditions; he stick to his beliefs even it can be lonely. A conscientious person like Street focuses on a few goals, not impulsive and not easily distracted (Daft, 2005); he or she is likely to be seen as a role model of appropriate behaviors by being responsible (Kalshoven, Hartog& De Hoogh, 2011). By being conscientious, Street exert idealized influence, one of the dimensions of transformational leadership, on his followers. Leaders with idealized influence behave in admirable ways, display conviction, take stands and appeal to followers on an emotional level, causing followers to identify with them (Judge & Piccolo, 2004).

Additionally, Street is a person who opens to new experience. A person who opens to new experience is “perceptive, imaginative, cultured, curious, creative, broad-minded and intelligent” (Barrick, Murray, Parks, Laura, Mount & Michael, 2005). As stated by Street, he does not conform to the existing business model but attempt to develop a better one. Other than that, Street also able to acknowledge the strength of others, such as Japanese department store when he travels, and reckons the shortcoming of the industry in his home country. This attitude requires openness to differences and independent of judgment, which is a core characteristic of creativity. Through being open to experience, Street is open to creativity and new ideas, and will encourage his followers to be creative in their job. In addition, being open to experience also lead Street to have individualized consideration to his followers by listening and attending to their concerns and needs. In fact, openness to experience is essential for the leader to transform his followers and organization. Without openness, Street is likely to follow the norms of the industry and overgeneralized his knowledge about people and organization.

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