19 June 2017

Stakeholder Analysis: Who and What Really Counts?

The word 'stakeholder' not only has a prominent place in public and nonprofit management theory and practice (Bryson, 2004) but also in the natural resources and environmental management. Analysis of stakeholder is crucial due to the increasingly interconnected of the global world (shared power world) which mean taking stakeholder account into the natural resources problem is a part of solutions (problem-solving). Consequently, the decision about the definition of stakeholders is also important because it will affect who and what counts in the activities (Mitchell et al. 1997). For this reasons, stakeholder analysis method has gained increasing position and attention on this field, particularly on the participatory methods (Prell et.al, 2009).

Stakeholders analysis is a procedure for gaining an understanding of the system by identifying the key actors or stakeholders and assessing their respective interest in the system (Grimble & Wellard, 1997). It refers to a range of tools or an approach for generating knowledge about stakeholder (Fu, et.al, 2011) and understanding the system based on their attributes, interrelationships, and respective interests to the issue and resources (Mushove & Vogel, 2005). Currently, stakeholder analysis is often used as an analytical tool to identify the differences point of view between the main actors who have conflicting interest and to create an alternative strategy in terms of promoting sustainable use of natural resources (Tanaka, 2006). 
Application of stakeholder analysis mostly address a similar set of questions (Weible, 2006); Who are the stakeholders to include in the analysis? What are the stakeholders’ interests and beliefs? Who controls critical resources? With whom do stakeholders form coalitions? What strategies and venues do stakeholders use to achieve their objectives? However, various stakeholder analysis method that have been developed in different fields leading to confusion of the concept and application (Reed, et.al. 2009). For a better understanding about the principle of Who and What really counts on the natural resources management, some scholars suggest that people should evaluate the actual and potential relationships among stakeholders systematically. The lack of a coherent methods to identify, classify, analyze, and manage a stakeholder is leads a lack of clarity and understanding of stakeholder interactions (Heidrich, et.al. 2009). 

The rise of “Stakeholder” concept

According to the R&D Management literature, the origin of “stakeholder” concept is rooted in the Stanford Research Institute (1963) publication. They were defined stakeholder as “those group without whose support the organization would cease to exist” Elias et.al (2001). The other primary and authoritative source of stakeholder concept and theory are from Freeman’s book; “Strategic Management: A Stakeholder Approach.” (Freeman, 1984). From the firm’s perspective, stakeholders can be initially classified into internal and external (Freeman, 1984). In the concern for environmental and societal issues, there is a further distinction between market stakeholders and non-market stakeholders. While market stakeholders are those who involved in typical market transactions with the focal firm (e.g., customers, suppliers, etc.), non-market stakeholder are interact with the firm outside of these transactions (e.g., special interest groups, communities, etc. (Martin, et.al. 2016).

Approaches of Stakeholder analysis then changed and widely used and implementing in the theory of corporation (Donaldson & Preston, 1995), corporate sustainability and CSR (Ayuso, et.al, 2014), policy and development (Brugha & Varvasovsky, 2000, Fu et.al, 2011), international case project (Aaltonen, 2011), natural resources management (Krupa, 2016), and so on. Perspectives on stakeholder theory have developed around three different approaches (Donaldson and Preston,1995; De Vita, et.al. 2016), namely: (i) descriptive approach, which is merely used to explain the characteristics of stakeholders (ii) normative approach, which is critically examines the functioning of these relationships with the aim of providing guidelines for successful coordination and/or implementation and (iii) instrumental approach, which is more empirical in nature, aiming to identify the connections that exist among stakeholders, and how these relations align to overall goals. 

Normative stakeholder approach proposes that managers should recognize and consider the priorities of a broad range of constituents not just the firm’s owners. There are Internal stakeholders - which are owners, customers, employees, and suppliers - and external stakeholders include consumer advocates and other special-interest groups (Fedorowichz, et.al, 2010). In contrast, the instrumental theory proposes that if managers do successfully balance stakeholder interests, managers should take into account the relative power, legitimacy, and urgency of stakeholders’ claims in order to assess the salience of different stakeholder groups (Mitchell et al. 1997).

Table 1. Different concept of stakeholder (Who) in stakeholder analysis
Type of Stakeholder
Stakeholder of organization
Individuals or groups that can affect or is affected by the achievement of the organization’s objectives
Freeman (1984, p 46)
Stakeholder of corporation
Persons or groups that have, or claim, ownership, rights, or interests in a corporation and its activities, past, present, or future
Clarkson, 1995, p 106
Stakeholder of natural resources management
Any group of people, organized or unorganized, who share a common interest or stake in a particular issue or system
Grimble & Wellard (1997, p 175)
Stakeholder of decision making
Actors who have an interest in the issue under considerations, who are affected by the issue, or who – because of their position – have or could have an active or passive influence on the decision-making and implementation process
Varvasovsky and brugha (2000, p 341)
stakeholders of a firm
individuals and constituencies that contribute, either voluntarily or involuntarily, to its wealth-creating capacity and activities, and who are therefore its potential beneficiaries and/or risk bearers
Post, Preston, & Sachs, 2002, p. 8
Ayuso, et.al. 2014

Stakeholder could be assigned to one of the stakeholder groups with their specific interest (Caniato, et.al. 2014), such as: (1) governmental authorities. i.e. government, policymakers, local and national authorities. Their interest are in regulation and law enforcement (2) private sector, i.e. services suppliers, technology provider, healthcare facilities, business, etc. Their interests are in economic and financial performances (3) academia (universities, education and training institutions, research centers, etc. Their interests are in research and innovation (4) civil society. i.e. Non-Government Organization (NGO’s), local community, and media. Their interests are in public awareness, project affected people, etc. (5) other stakeholders.

Considering the importance of decision-making process, there are the main categories of stakeholders (Palleto, et.al. 2015); (1) key stakeholders or definitive stakeholders, who are the main actors in the territory in terms of power and legitimacy. The key stakeholders should represent the main cultural, social, and economic interests of the community in order to have constructive dialogue and respective persons who enable the diffusion of new information. (2) primary stakeholders or expectant stakeholders, who are the beneficiaries of the plan with less power, and (3) legitimacy and secondary stakeholders or latent stakeholders who are the actors marginally involved in the issue. Krupa (2016) categorize stakeholder into three different criteria: (1) primary, (2) secondary, and (3) tertiary stakeholders.

Stakeholder theory is providing a suitable theoretical framework for analyzing the relationship between business and society. On the context of companies, Hill and Jones (1992) developed a “stakeholder-agency theory” and argued that managers should act as “agents” for stakeholders. To gather accurate information about the expectations of stakeholders, companies have to develop strategies for engaging with stakeholders and for understanding their needs and concerns. Study from Cordano, et.al (2004) demonstrates that variables, such as attitudes, can help us understand the complex relationships of those individuals embedded in stakeholder networks and as a result, help increase the success of stakeholder interactions. Attitude is a “tendencies to evaluate a particular entity, such as an action or an outcome, with some degree of favor or disfavor.”

Method and Techniques of Stakeholder Analysis

Social roles of actor groups are all important components of social networks and essential for creating the conditions of ecosystem dynamics, rapid change, and reorganization (Folke, et.al. 2005). Different agents/actors or team/actor groups – as well known as stakeholders - seem to play significant roles in mobilizing the social network. There are two methods that have been developed to characterize and classify stakeholder: first, top down “analytical categorizations” approach where stakeholder is classified by researchers based on their observation and theoretical perspectives. 
Second, bottom up “reconstructive methods” where stakeholder defined by stakeholder themselves (Reed, 2008). Stakeholder analysis requires some activities; (1) identification of the important stakeholders, (2) characterization of the stakeholders, (3) asses the stakeholder influence (4) identify controversies (5) Analyze effects of controversies on stakeholder network (Jepsen & Eskerod, 2009, Missionier& Fedida, 2014). The classes of stakeholders/stakeholder typology) can be identified by the possession or attributed possession of one or more of three relationship attributes: power, legitimacy, and urgency (Mitchell et.al, 1997).

Table 2. Stages of Stakeholder Analysis
Identification of the Important stakeholders
Top Down Approach: brainstorming (Bryson, 2004), generic stakeholder list, lesson learned report, special reports, etc

Bottom Up Approach: Stakeholder Survey (Buanes, et.al, 2004) snowball interview (Heidrich, et.al, 2009), face to face interview, dialogue, workshop, personal survey, FGD, public meeting, public hearing, etc.
·     Direct (affected by project) Stakeholder
·     Indirect (affected by project) Stakeholder
List of Stakeholder:
(1)   Institutional Stakeholders (state agencies, national and regional level)
(2)   Societal Stakeholders (local communities)
Caniato, et.al. 2014:
(1)   governmental authorities.
(2)   private sector,
(3)   academia
(4)   civil society.
(5) other stakeholders
Characterization of the stakeholders,
Aaltonen (2011):
·     Power-Interest Matrix
·     Stakeholder Mapping
·     Outline Tools
·     Role-Based stakeholder models
·     Etc.

Palleto, et.al. 2015:
(1)   Definitive stakeholders/key stakeholders
(2)   Expectant Stakeholders/primary stakeholders
(3)   Latent Stakeholders/legitimacy and secondary stakeholders
Krupa (2016):
(1) primary, (2) secondary, and (3) tertiary stakeholders
Asses the stakeholder influence
Brugha et.al, 2000:
(1)      Making an inventory of the actors who might have a role in decision making
(2)      Collecting information about them to gauge their importance
(3)      Quantification of the actors’ level of influence (high, medium and low) and their interest and support for a specific outcome
(4)      Assessment of their capacity and willingness to mobilize resources toward a particular goal
(5)      Mapping of actors (regarding the relationship, potential for developing alliances, and their relationship to desired outcomes.
Mitchell et.al, 1997:
Rank or Map of actors/stakeholders regarding the power, legitimacy, and urgency attributes.

Identify controversies
IFC-World Bank
·     What type of stakeholder engagement is mandated by law or other requirements?
·     Who will be adversely affected by potential environmental and social impacts in the project’s area of influence?
·     Who are the most vulnerable among the potentially impacted, and are special engagement efforts necessary?
·     At which stage of project development will stakeholders be most affected (e.g. procurement, construction, operations, decommissioning)?
·     What are the various interests of project stakeholders and what influence might this have on the project?

Analyze effects of controversies on stakeholder network
·     Which stakeholders might help to enhance the project design or reduce project costs?
·     Which stakeholders can best assist with the early scoping of issues and impacts?
·     Who strongly supports or opposes the changes that the project will bring and why?
·     Whose opposition could be detrimental to the success of the project?
·     Who is it critical to engage with first, and why?
·     What is the optimal sequence of engagement

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