Sunday, September 25, 2005

Stakeholder Theory is Flawed

Tell me about your stakeholders. Who are they? Who says?
Well, governments, accountant and economists and even misguided public relations people. That's who. But stakeholder theory is, as currently envisioned, flawed.
Organisation are a coalition of multiple relationships. These relationships coalesce into what people recognise as organisations. Such organisations are given rights and privileges by governments and so are, lets pretend, a single entity.
Of course this is a nonsense. Organisations, as we are told to understand them are dependent on both internal and external relationship. They are a nexus of relationships. Organisations are not hard bounded. They are coalitions.
If you were to say, one of my stakeholder groups are my customer, I would challenge your view by asking 'how many types of customer do you have?
Regular, occasional, prospective, past, engaged of just gratification or impulse consumers. I would go further. When, I would ask, are these people customers, where are these people when they are customers, what do they know, or want to know about your organisation, brand, product, benefits and advantages of being a customer? How interactive are they as customers? What is the social framemarket segmentation. This is about society. that describes your customer? And so my questions could continue. Very soon, you will find that you have a coalition of people who, at some time might be described as customers. This goes a whole lot further than merely 'having a stake'. It asks much more of what we mean by 'a stake' and what we mean by an organisation.
Equally lets look at shareholders. Are they a stakeholder group? Are they current of past stockholders, do they remember they own your shares. Are they dependent of the return or changing stock value or not? Are they engaged with your organisation or are your shares just part of a wide portfolio.
So we find that shareholders are not just one kind of investor. The Relationship Value Model exposes this quite clearly. They are a coalition of people who, at some time might be a shareholder with an interest in the organisation. What kind of social frame describes your shareholders.
Like companies 'stakeholders' are not a hard bounded group but are a coalition and, in their own way at their own time in specific environs and applying specific knowledge and interactivity, form a nexus of relationships that the stakeholder theorists would describe as stakeholders.
They look like cattle, moo like cattle and therefore are cattle. But just like the farmer, you might like to recognise them for their individuality. Daisy is different to Gerty.
These people are distinguished by the social space they inhabit from time to time and that changes everything in accounting and public relations.
It is the foundation from which one can 'landscape' the interactions that form your organisation to include both the hard bounded legal organisations and the wider, wealth sustaining and wealth creating entity. This is the nexus of relationships to value for both the opportunities and threats that are inherent in organisations.
Having good relationships with this nexus can mean the difference between value creation and its destruction.
Time for PR practice re-think.
Imagine that you wanted to help a consumer product like shampoo.
Think of the social frames that are involved.
There is the time when the TV advert comes on when the consumer is at home flicking through a magazine. There is the time when the consumer reads about the companies that sell shampoo. There are the places where the shampoo is on display in shops. There are the places people actually use shampoo. There is the environment where shampoo can be purchased and so the list goes on. Each will describe an environment or network; a time; available knowledge and the knowledge that the consumer want to use (attention) and gradually the social frames are created each one offering a communication opportunity to help memories bring about convergence between the product or brand and the person's perceptions, needs, desires and actions.
This is not a stakeholder, it is more than market segmentation it describes the opportunity to create, sustain a body of shared values and lever wealth from relationships.