Learn about the stakeholder theory to know much about it

A newer approach to consideration of objectives is Stakeholder Theory which suggests that company has responsibility to maintain an equitable.

They also have to maintain working balance among the claims of the interested groups, i.e. stockholders, employees, customers, suppliers, vendors, and the public. The theory maintains that the objectives of the firm should be derived by balancing the conflicting claims of the various ‘stakeholders’. The firm has a responsibility to all these and must structure its objectives to give each a measure of satisfaction. In this context the ideas of Abraham Maslow seem relevant, that is, that managers have a hierarchy of goals or motives, and once managers have achieved one goal, e.g. x per cent profits, then they will turn to satisfy other goals, e.g. improved working conditions for employees. Another related approach to the ‘stakeholder’ theory is suggesting that organizations do not have objectives.

Objective of company for business:

They suggest a company’s objectives are in reality a consensus of objectives of the participants which have been negotiated. They suggest that in large companies the task of decision making is distribute throughout the company. These companies have five main goals: sales, production, inventory, market share and profit. These are target areas for managers who are aiming to achieve their particular goal. Managers therefore bargain among themselves and eventually this conflict will be resolve by compromise. The goals achieved by the organization may only then be satisfactory. This theory may be said to bring into the decision making process social as well as economic variables. Today’s leaders face increased challenges due to globalization, information technology, and industry consolidation. Additionally, the loss of public trust due to accounting scandals and ethical misconduct has created a hostile marketplace. They must navigate their organizations through these turbulent times by leading.


Affects on organization:

The external environment affects an organization’s access to resources. Customers, distributors, unions, competitors, suppliers and the government are important outside stakeholders who can influence organizations to act in ways. By applying leadership and management principles, the leader can plan for interruptions in resources. In the global environment, supplies of inputs can be obtain not just from domestic sources but from any country in the world. Council on Library states, “Because external environmental factors and management’s tone affect organization’s ability to meet its objectives. It is important that management understand the importance of these elements. Meeting the conflicting demands of different stakeholders is the responsibility of a firm’s leadership. This is no easy feat balancing the needs of internal stakeholders with the needs of external stakeholders. It is also aligning the needs of these conflicting constituents with the mission and goals of the organization.

The mission statement is the outward face to external stakeholders. Managers create a set of goals to measure organizational effectiveness. They must make sure that the official goals and operative goals work together to enhance effectiveness. Effectively managing stakeholder expectations requires the leader to identify the information needs of the various stakeholders.

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