The Corporation and Internal Stakeholders

Chapter FourThe Corporation and Internal StakeholdersValue-Based Moral Dimensions of Leadership. Strategy, Structure, Culture, And Self-Regulation

Copyright 2003 by South-Western, a division of Thomson Learning

Chapter TopicsStakeholder management and value-based organizational systemsA 10-step assessment of value-based organizational systems and stakeholdersLeadership and strategyCulture, structure, and systemsCorporate self-regulation: Challenges and issues


Stakeholder Management and Value-Based Organizational SystemsAn organizations enacted purpose, values, and mission are central to its internal alignment and external market effectiveness.The stakeholders management approach argues that organizations succeed in market and nonmarket environments through open dialogue and a duty to assist stakeholders.The digital information technology revolution has increased pressure on industries and corporations to question to what extent ethical and stakeholder value-based management principles and practices still work.


Stakeholder Management and Value-Based Organizational SystemsThe visionary built-to-last companies are premier institutions, widely admired by their peers, and having a long track record of making a significant impact on the world around them. Not all organizations have the characteristics of built-to-last companies, nor would all companies agree with or support some of the ideologies, products, and strategies of visionary firms.Phillip MorrisThe concept of creative destruction.


Stakeholder Management and Value-Based Organizational SystemsInternal organizations are composed of systems and stakeholders, regardless of the nature of external environments.An interesting concept, and counterpart to the creative destruction argument is creative reconstruction.Dot-com survivorsThe internal dimensions of an organization are illustrated in the diagnostic contingency model in Figure 4.1.


Stakeholder Management and Value-Based Organizational SystemsThe purpose and core ideology of organizations are modeled by its leaders and embedded in its enterprise strategy.The culture of a company is at the center spoke of the wheel of transformation.The vision and strategy, people, systems, structure, technology, and nature of work comprise the internal operations of the organization.Stakeholder management theory, states that an organization should treat its internal & external stakeholders ethically to be effective with its marketplace communities.


Stakeholder Management and Value-Based Organizational SystemsFrom a stakeholder management perspective, it is the role of an organizations leaders, with the support of each professional, to ensure that the integration and market effectiveness of a company is based on the types of relationship and values that embody trust, collaboration, and a win-win goal for stakeholders and stockholders.


A 10-Step, Value-Based Stakeholder Management AssessmentA stakeholder management approach that is value-based is argued to be more effective in implementing organizational change programs that include ethics and compliance training.There are many stakeholder management audits and assessment frameworks. Companies can use management, human resources, and ethics consultants to design and deliver these types of assessments.


A 10-Step, Value-Based Stakeholder Management AssessmentThe 10-step assessment is as follows:Determine the problem or opportunity and gain top leader supportReview and develop the vision, mission, values, and ethics codeUse a value-based stakeholder readiness checklistDevelop performance and responsibility measures and get feedbackIdentify stakeholder level of responsiveness and responsibility in the corporate strategyDetermine the organization's systems alignmentConduct baseline and gap analysis between current and desired future statesCreate benchmarksDevelop summary report with recommendationsReview results


Leadership And StrategyLeadership is a shared process, although the values and behaviors of company founders and CEOs often frame and set the cultural tone for the organizations.A starting point for identifying a leaders values is the vision and mission statement of a company.


Leadership And StrategyFrom a stakeholder management, value-based assessment, a CEO and other organizational leaders would demonstrate the following skills:Define and lead the social and ethical, as well as the competitive, mission of organizationsBuild and sustain relationships with stakeholdersTalk with stakeholders, showing interest and concern for others need beyond the economic and utilitarian dimensionsDemonstrate collaborations and trust in shared decision making and strategy sessionsShow awareness and concerns for employees and other stakeholders in the policies and practices of the company


Leadership And StrategyAn emerging body of literature and practice describes leadership from a deeper spiritual and value-based perspective.Theological and philosophical literature has helped redefine leadership to include new concepts and vocabulary that capture the human and spiritual domains from which business leaders already work.


Leadership And StrategyLeadership styles:ManipulatorBureaucraticProfessionalTransformingSeven symptoms of the failure of ethical leadership:Ethical blindnessEthical mutenessEthical incoherenceEthical paralysisEthical hypocrisyEthical schizophreniaEthical complacency


Leadership And StrategyStrategy influences the goals and objectives of the company and its stakeholders.Sets the overall direction of business activitiesReflects and models activities that management values and prioritizesSets the tone and tenor of business activities and transactions inside the organization


Leadership And StrategyCorporations formulate at least four levels of strategies:EnterpriseCorporateBusinessFunctionalThe strategy management process involves:Formulating goalsFormulating strategiesImplementing strategiesControlling strategiesEvaluating strategiesAnalyzing the environment


Culture, Structure, and SystemsA corporations culture is the shared values and meanings its members hold in common, which are articulated and practiced by an organizations leaders.Organizational cultures are:Visible and invisibleFormal and informalOrganizational cultures can be studied by:ObservationListening to and interacting with peopleOther ways


Culture, Structure, and SystemsSigns of cultures in trouble or weak cultures include:An inward focusA short-term focusMorale and motivational problemsEmotional outburstsFragmentation and inconsistencyClashes among subculturesIngrown subculturesDominance of subculture valuesNo clear values or beliefsMany beliefsDifferent beliefsDestructive or disruptive cultural heroesDisorganized or disruptive daily routines


Corporate Self-Regulation: Challenges And IssuesEstablishing codes of ethical and legal conduct, implementing stakeholder management assessments, and enacting ethics programs can help a company financially and morally.Ethics codesValue statements that define an organizationOmbudspersons and peer review programsTo manage the legal and moral aspects of potentially problematic activitiesEthics programsAnother method for handling moral questions


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The Corporation and Internal Stakeholders