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We've been talking about stakeholder strategy.
And while we've spent some good time focusing on an organization's key
primary stakeholders, I wanna focus now
on what we would describe as an organization's secondary stakeholders.
And let me begin by illustrating with an example.
So you may have heard of the company Uber.
This is one of these new economy sharing economy startups.
Through the use of technology, it essentially allows non-professional
drivers to essentially act as a taxi service for you and me.
And it's driven by an app on a smartphone, and you can look and
see if there's a driver in your area.
You can call him, and the transaction all takes place electronically.
So Uber's experienced phenomenal growth.
They're one of these new, high-tech,
new economy startups that's grown quite rapidly.
But in the course of their expansion, they've experienced some challenges.
So there have been some municipalities, some cities
who have blocked Uber from being able to come in and operate in that city.
There are concerns about, is it always safe?
Are the drivers well trained, etc?
So, there are some sort of government or
regulatory institutions that have raised questions about Uber.
And in some cities, they simply haven't been allowed to operate yet.
In addition, there's some sort of objections being raised in certain
cities by the entrenched, already pre-existing taxi drivers.
And they may be unionized.
And so there may be the unions that organize the labor for those professional
drivers, for taxis and limo services that have a problem with Uber coming in.
Because Uber's able to sort of price lower or more effectively and
steal some customers from those existing taxi companies.
So, the point is here's an example of a company who has experienced,
they've formulated a strategy.
They're executing on their strategy, but
they're running into some problems not from so much their customers, etc.
But they're running into challenges that arise from these secondary stakeholders.
So that's what I wanna talk about is the way that secondary stakeholders can bring
to bear sort of institutional pressures on a business organization.
These various stakeholders, oftentimes they're secondary ones,
can bring pressure to bear on a firm.
And that can dramatically influence the strategy and performance of a firm.
So, therefore, under the umbrella of kind of stakeholder management,
there's a couple of key questions that you need to ask.
Cuz first of all,
can we predict when these secondary stakeholders might take action against us?
And when and under what conditions might these actions or protests or
influence, when might that be effective?
And how can and should we, as a business organization,
adopt a certain strategic approach?
Or how can we adapt to these strategies, these threats,
these opportunities that are coming in from these secondary stakeholders.
2:55
First of all, it's worth understanding that institutionalized pressure like that
typically emanates from active, oftentimes organized groups of stakeholders.
It could be advocacy groups or unions or governments or
nongovernmental organizations.
And the reason why you can't ignore this is that these secondary stakeholders can
really have a dramatic influence on the competitive environment.
Just ask Uber.
I recently returned from a trip to Vancouver, Canada.
And at least at this point, Uber hasn't been allowed to operate there, and so
it dramatically impacts their strategic choices as a business organization.
And these pressures can pose significant threats and opportunities for firms.
Now this kind of pressure can come from, again,
from the media, sort of surrounding any sort of negative press coverage.
So this can be the media highlighting unintended use of a business
organization's products or corporate misconduct or some sort of social or
religious issue or an environmental issue.
There's a long list of things that can be considered controversial.
And as the media highlights those things, all of a sudden that can apply pressure to
the firm to change its strategy or respond in some way.
Similarly, governments can have a big influence.
This is through legislation or regulators.
I mean, this can involve trade policies and tariffs.
It can involve environmental policy,
fees and permits and standards, that sort of thing.
It can involve tax policy or anti-trust statutes.
So governmental or regulatory actors are kind of secondary stakeholders,
but they can have a big influence on the strategy and
sort of the operational outcomes for a firm.
Similarly, non-governmental organizations can have an impact.
This can be sort of regulatory activism,
like the Sierra Club bringing action on environmental issues.
It could be labor strikes coming from labor unions.
It could be any kind of protest or boycott coming from some sort of grass roots or
NGO or kind of activist organization.
And look, sometimes that institutional pressure, that negative pressure
on a firm, a business firm and its strategy, can be unfair.
I mean, oftentimes it can be, simply large organizations get targeted for
all sorts of things.
So, there are certainly situations in which that institutional pressure from
secondary stakeholders might be thought of as unfair or unreasonable,
and it's just a targeting activity.
But the important thing for you to keep in mind is that oftentimes this
kind of institutionalized pressure from secondary stakeholders could also be
a signal of a larger stakeholder management issue that's real.
And so that's the thing that you need to worry about.
In other words, political actors might have some sort of self
interested motive to act against a business organization.
But it also might be a signal of some deeper underlying problems.
Stakeholders may act or call for
action from a firm in response to either some type of normative conflict.
This is the conflict with the norms or the beliefs or the purpose or
the mission of a firm.
Or stakeholders might act in response to some sort of distributional conflict.
This arises from some type of market failure.
It could be abuse of market power.
Or it could be a number of other things that the firm is doing,
taking advantage of information asymmetries, etc.
So these are the kinds of things that if this is the source of the secondary
stakeholder action that you're experiencing as a business organization.
That may be a signal that we need to rethink how we're managing those
different stakeholder interests.
Michael LenoxSenior Associate Dean and Chief Strategy Officer
Jared HarrisSamuel L. Slover Research Chair in Business Administration
