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80 3: Influences on organisational culture ~ Part A Business organisational structure, governance and management

Clearly, each stakeholder group considers itself in some way a client of the organisation, thus broadening

the debate about organisation effectiveness.

5.6 Stakeholder mapping: power and interest

Mendelow suggests that stakeholders may be positioned on a matrix whose axes are power held and

likelihood of showing an interest in the organisation’s activities. These factors will help define the type of

relationship the organisation should seek with its stakeholders.

A B

C D

Level of interest

Power

Low

Low

High

High

(a) Key players are found in segment D: strategy must be acceptable to them, at least. An example

would be a major customer. These stakeholders may even participate in decision-making.

(b) Stakeholders in segment C must be treated with care. While often passive, they are capable of

moving to segment D. They should, therefore be kept satisfied. Large institutional shareholders

might fall into segment C.

(c) Stakeholders in segment B do not have great ability to influence strategy, but their views can be

important in influencing more powerful stakeholders, perhaps by lobbying. They should therefore

be kept informed. Community representatives and charities might fall into segment B.

(d) Minimal effort is expended on segment A.

A single stakeholder map is unlikely to be appropriate for all circumstances. In particular, stakeholders

may move from quadrant to quadrant when different potential future strategies are considered.

Stakeholder mapping is used to assess the significance of stakeholder groups. This in turn has

implications for the organisation.

(a) The framework of corporate governance should recognise stakeholders’ levels of interest and power.

(b) It may be appropriate to seek to reposition certain stakeholders and discourage others from

repositioning themselves, depending on their attitudes.

(c) Key blockers and facilitators of change must be identified.

Each of these groups has three basic choices.

x Loyalty. They can do as they are told.

x Exit. For example by selling their shares, or getting a new job.

x Voice. They can stay and try to change the system. Those who choose voice are those who can, to

varying degrees, influence the organisation. Influence implies a degree of power and willingness to

exercise it.

Existing structures and systems can channel stakeholder influence.

(a) They are the location of power, giving groups of people varying degrees of influence over strategic

choices.

(b) They are conduits of information, which shape strategic decisions.

(c) They limit choices or give some options priority over others. These may be physical or ethical

constraints over what is possible.

Part A Business organisational structure, governance and management ~ 3: Influences on organisational culture 81

(d) They embody culture.

(e) They determine the successful implementation of strategy.

(f) The firm has different degrees of dependency on various stakeholder groups. A company with a

cash flow crisis will be more beholden to its bankers than one with regular cash surpluses.

So, different stakeholders will have their own views as to strategy. As some stakeholders have negative

power, in other words power to impede or disrupt the decision, their likely response might be considered.

Every exam is likely to have at least one question on stakeholders. In an exam question, you might have to:

x Identify the stakeholders in the situation, or

x Identify what their particular interests are

5.7 The strategic value of stakeholders

The firm can make strategic gains from managing stakeholder relationships. This was highlighted by a

recent report by the Royal Society of Arts on Tomorrow's Company. Studies have revealed the following

correlations.

(a) A correlation between employee and customer loyalty (eg reduced staff turnover in service firms

generally results in more repeat business).

(b) Continuity and stability in relationships with employees, customers and suppliers is important in

enabling organisations to respond to certain types of change, necessary for business as a

sustained activity.

Responsibilities towards customers are mainly those of providing a product or service of a quality that

customers expect, and of dealing honestly and fairly with customers.

Responsibilities towards suppliers are expressed mainly in terms of trading relationships.

(a) The organisation's size could give it considerable power as a buyer. One ethical guideline might be

that the organisation should not use its power unscrupulously.

(b) Suppliers might rely on getting prompt payment in accordance with the terms of trade negotiated

with its customers.

(c) All information obtained from suppliers and potential suppliers should be kept confidential.

5.8 Measuring stakeholder satisfaction

We have already considered ways in which stakeholders may be classified and given some instances of

their probable interests. Measuring the success the organisation achieves in satisfying of stakeholder

interests is likely to be difficult, since many of their expectations relate to qualitative rather than

quantitative matters. It is, for example, difficult to measure good corporate citizenship. On the other hand,

some of the more important stakeholder groups do have fairly specific interests, the satisfaction of which

should be fairly amenable to measurement. Here are some examples of possible measures.

Stakeholder group Measure

Employees Staff turnover; pay and benefits relative to market rate; job vacancies

Government Pollution measures; promptness of filing annual returns; accident rate; energy

efficiency

Distributors Share of joint promotions paid for; rate of running out of inventory

Exam focus

point

82 3: Influences on organisational culture ~ Part A Business organisational structure, governance and management

Chapter Roundup

x Culture is 'the collective programming of the mind which distinguishes the members of one category of

people from another' (Hofstede). It may be identified as ways of behaving, and ways of understanding,

that are shared by a group of people.

x Elements of culture include:

– Observable behaviour

– Underlying values and beliefs which give meaning to the observable elements

– Hidden assumptions, which unconsciously shape values and beliefs

x Organisation culture is 'the way we do things round here'.

x Cultural values can be used to guide organisational processes without the need for tight control. They can

also be used to motivate employees, by emphasising the heroic dimension of the task. Culture can also be

used to drive change, although – since values are difficult to change, it can also be a powerful force for

preserving the status quo.

x Harrison classified four types of culture, to which Handy gave the names of Greek deities.

– Power culture (Zeus) is shaped by one individual

– Role culture (Apollo) is a bureaucratic culture shaped by rationality, rules and procedures

– Task culture (Athena) is shaped by a focus on outputs and results

– Existential or person culture (Dionysus) is shaped by the interests of individuals

x National culture influences organisation culture in various ways. One model of these effects is the

'Hofstede model' which describes four dimensions on which cultures differ:

– Power distance

– Uncertainty avoidance

– Individuality/collectivity

– Masculinity/femininity

x An informal organisation always exists alongside the formal one. This consists of social relationships,

informal communication networks, behavioural norms and power/influence structures, all of which may

'by-pass' formal organisational arrangements. This may be detrimental or beneficial to the organisation,

depending how it is managed.

x Stakeholders are those individuals or groups that, potentially, have an interest in what the organisation

does.

Part A Business organisational structure, governance and management ~ 3: Influences on organisational culture 83

Quick Quiz

1 What are the elements of culture?

2 'Bureaucracy' is another name for a:

A Power culture C Task culture

B Role culture D Existential culture

3 A project team is most likely to be a role culture. True or false?

4 According to Hofstede, the extent to which security, order and control are preferred to ambiguity and

change is called

A Masculinity C Power distance

B Individualism D Uncertainty avoidance

5 List the potential benefits of the informal organisation.

6 Which one of the following are examples of internal stakeholders?

A Shareholders C Suppliers

B Employees D Financiers

7 According to Mendelow's matrix, stakeholders in segment C (low interest, high power) should be kept

informed. Is this true or false?