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Strategic Management andCorporate Public Affairs

Business and Society: Ethics and Stakeholder Management, 7e • Carroll & BuchholtzCopyright ©2009 by South-Western, a division of Cengage Learning.  All rights reserved

Prepared by Deborah BakerTexas Christian University

Chapter 5

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1. Describe the concept of corporate public policy and relate it to strategic management.

2. Articulate the four major strategy levels and explain enterprise-level strategy.

3. Explain corporate social performance reporting.

4. Identify the major activities of public affairs departments.

5. Highlight key trends with respect to the public affairs function.

6. Link public affairs with the strategic management function.

7. indicate how public affairs may be incorporated into every manager’s job.

Chapter 5 Learning Outcomes

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Chapter 5 Outline

The Concept of Corporate Public Policy Four Key Strategy Levels The Strategic Management Process Public Affairs Public Affairs as a Part of Strategic Management The Corporate Public Affairs Function Today Important Public Affairs Concepts Today Public Affairs Strategy Incorporating Public Affairs Thinking into All Managers’ Jobs Future of Corporate Public Affairs in the Twenty-First Century Summary Key Terms Discussion Questions

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Introduction to Chapter 5

The chapter provides a broad overview of how social, ethical, and public issues fit into the general strategic management process of the organization.

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The Concept of Corporate Public Policy

Corporate public policy is a firm’s posture, stance,

strategy or position regarding the public,

social, global, and ethical aspects of stakeholders and

corporate functioning

Corporate public policy is a firm’s posture, stance,

strategy or position regarding the public,

social, global, and ethical aspects of stakeholders and

corporate functioning

AIDS inWorkplace

Affirmative Action

Sexual harassment

Product safety

Employee privacy

EnvironmentalSustainability

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Corporate Public Policy and Strategic Management

StrategicManagement

refers to the overall management process that focuses on positioning the firm relative to its market environment

Corporate Public Policy

the part of the strategic management process that focuses specifically on the public, ethical, and stakeholder issues the firm faces

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Relationship of Ethics to Strategic Management

For business ethics to have meaning it must be linked to business strategy because the linkage permits management issues to be addressed in ethical terms.

The concept of corporate public policy and the linkage between strategic management and ethics can be better understood in terms of:

1. Four key strategy levels

2. Steps in the strategic management process

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Four Key Strategy Levels

Corporate-Level StrategyCorporate-Level Strategy

Business-Level StrategyBusiness-Level Strategy

Functional-Level StrategyFunctional-Level Strategy

Enterprise-Level StrategyEnterprise-Level Strategy

“What business(es) are we in or should be in?”

“What business(es) are we in or should be in?”

“How should we compete in a given business or industry?”

“How should we compete in a given business or industry?”

“How should a firm integratesubfunctional activities and relate

them to its functional areas?”

“How should a firm integratesubfunctional activities and relate

them to its functional areas?”

“What is the role of the organization in society?”“What is the role of the

organization in society?”

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The Hierarchy of Strategy Levels

Corporate-Level StrategyCorporate-Level Strategy

Business-Level StrategyBusiness-Level Strategy

Functional-Level StrategyFunctional-Level Strategy

Enterprise-Level StrategyEnterprise-Level Strategy

Feedback

Figure 5-1

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Emphasis on Enterprise-Level Strategy

Key Questions

What is the role of our organization in society?

How is our organization perceived by our stakeholders?

What principles or values does our organization represent?

What obligations do we have to society at large, including the world?

What are the broad implications for our current mix of businesses and allocation of resources?

http://www.microsoft.com/about/corporatecitizenship/citizenship/default.mspx@

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Emphasis on Enterprise-Level Strategy

Manifestations of Enterprise-Level Thinking

Codes of ethics Codes of conduct Mission statements Values statements Corporate creeds Vision statements Policy-oriented codes and statements

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Emphasis on Enterprise-Level Strategy

Johnson & Johnson Credo

We are responsible to our doctors, nurses, and all others who use our products and services.

We are responsible to our employees.

We are responsible to our communities.

We are responsible to our stockholders.

Figure 5-3

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Importance of Core Values

Alcoa’s Core Values

1. Integrity

2. Safety and health

3. Quality of work

4. Treatment of people

5. Accountability

6. Profitability

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Importance of Core Values

Herman Miller’s Core Values

• Inclusiveness & Diversity

• Supplier Diversity

• Design

• Innovation

• The Environment

• Operational Excellence

• Technology

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Enterprise-Level Strategic Thinking

Establishment of committees:• Public policy/issues• Ethics• Governance• Social audit• Corporate philanthropy• Corporate citizenship• Ad hoc committees

Public affairs office

Identification/analysis of social or public issues

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The Strategic Management Process

1. Goal formulation

2. Strategy formulation

3. Strategy evaluation

4. Strategy implementation

5. Strategic control

6. Environmental analysis

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Strategic Management Process and Corporate Public Policy

Figure 5-4

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Components of Strategy Formulation

Figure 5-5

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Corporate/Society Intersections

1. Generic social issues

2. Value chain social impacts

3. Social dimensions of competitive context

Responsive CSR

Strategic CSR

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Strategic Integration of Business and Society

1. Identify the points of intersection.

2. Choose which social issues to address.

3. Create a corporate social agenda.

4. Integrate inside-out and outside-in practices.

5. Create a social dimension to the value proposition.

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Social Auditing and Performance Reporting

Three Essential Steps

1. Set standards against which performance may be compared

2. Compare actual performance with planned performance

3. Take corrective action to bring actual and planned performance into alignment

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Development of the Social Audit

Social Audit

A systematic attempt to identify, measure, monitor, and evaluate an organization’s performance with respect to its socialefforts, goals, and programs.

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The Social Audit

Figure 5-6

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Drivers for Social Performance Reports

Expectations from societal andpublic interests groups

Globalization

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Global Reporting Initiative

GlobalReportingInitiative

Established in 1997 with the mission of developing globally applicable guidelines for reporting on the economic, environmental, and socialperformance of corporations, governments, and non-governmental organizations.

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Public Affairs

Embraces… Corporate public policy Issues and crisis management Governmental relations Corporate communications

Public Affairs

The management processes that focus on the formalization and institutionalization of corporate public policy.

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Public Affairs Management: Relationships

Strategic Management ProcessStrategic Management Process

Corporate Public Policy

Corporate Public Policy

Issues Management

Issues Management

Crisis Management

Crisis Management

Public Affairs ManagementPart of

which is

Enterprise-Level StrategyEnterprise-Level Strategy Environmental AnalysisEnvironmental Analysis

Figure 5-7

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The Corporate Public Affairs Function Today

1. The growing magnitude and impact of government

2. The changing nature of the political system

3. The recognition by business that it was being outflanked by interests counter to its own

4. The need to be more active in politics outside thetraditional community-related aspects

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PAC’s Definition of Public Affairs

Public Affairs(from PAC)

The management function responsible for interpreting the corporation’s non-commercial environment and managing the corporation’s response to that environment.

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Public Affairs Activities

Figure 5-8

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Influence on Corporate Strategy

Identifies/prioritizes public policy issues

Comments on strategic and business plans for sensitivity to emerging political/social trends

Provides forecast of political/social trends

Implements the strategic and business planning process

Is represented on corporate planning committee

Public Affairs…Public Affairs…

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Important Public Affairs Concepts

Looking out and looking in

Buffering and bridging

Tools and techniques

The use of ethical guidelines

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Looking Out and Looking In

The public affairs function serves as a window:

Looking out, the organization can observe the changing environment.

Looking in, the stakeholders in that environment can observe, try to understand, and interact with the organization.

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Buffering and Bridging

Two types of corporate public affairs activities:

1. Activities that “buffer” the organization from the social

and political environment

2. Activities that “bridge” the organization with that environment

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Tools and Techniques

Environmental monitoring/scanning Working with the grassroots Constituency building Issue advertising Lobbying Political action committees Corporate social audits Web activism Coalitions and alliances Community investment Stakeholder management

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Ethical Guidelines for Public Affairs

Figure 5-9

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International Public Affairs

The international dimension of public affairs is expanding:

Companies expanding into new markets

Changes in sales in existing markets

Changes in CEO priorities

Changes in regulatory burden

Acquisition of new business units

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Competencies for International Public Affairs

Development of intercultural competenceDevelopment of intercultural competence

Knowing the impact of societal factors on public affairsKnowing the impact of societal factors on public affairs

Understanding local public policy institutions and processesUnderstanding local public policy institutions and processes

Nation state-specific applications of PA functionsNation state-specific applications of PA functions

Language skillsLanguage skills

Understanding global business ethicsUnderstanding global business ethics

Managing international consultants, alliances, and issue partnersManaging international consultants, alliances, and issue partners

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Public Affairs Strategy

Best corporate social performance• Institution oriented• Collaborative/problem-solving strategy

Worst corporate social performance• Independent economic franchise• Individual/adversarial external affairs strategy

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Miles’s Model of Corporate Social Performance

Figure 5-10

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More Initiatives in Public Relations Strategy

Integrating public affairs into corporate strategic planning Using strategic management audits for public affairs Building a balanced performance scorecard for public

affairs Managing the corporation’s reputation Using core competencies to manage performance Respond to industry differences Issue life cycle challenges

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Public Affairs Thinking

Make public affairs truly relevant

Make public affairs truly relevant

Develop a sense of ownership of success

Develop a sense of ownership of success

Make it easy for operating managers

Make it easy for operating managers

Show how public affairsmakes a difference

Show how public affairsmakes a difference

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The Future of Public Affairs

1. Public affairs can help to develop value-based enterprises

2. Public affairs executives can assert themselves as thought leaders

3. Public affairs specialists have the opportunity to seek alternative arenas of resolution globally and domestically

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Strategic management processes

Corporate public policy Corporate public affairs Strategic management Enterprise-level strategy Corporate-level strategy Business-level strategy Core values Value shift Social audit Social performance report

Global Reporting Initiative Public affairs Public affairs management Issues and crisis

management Public affairs departments Public affairs Public affairs strategy Collaborative/problem-

solving strategy Individual/adversarial

external affairs strategy

Selected Key Terms