Predicting how stakeholders will try to influence your businessIn April 1999 in an article for the Academy of Management Review, entitled Stakeholder Influence Stategies, Jeff Frooman set out to review the strategies that stakeholders use to influence businesses. He pointed to three questions that we need to answer about stakeholders in order to develop engagement strategies for managing them.
- Who are they?
- What do they want?
- How are they going to try to get it?
By 1990, 60 percent of the public was aware of the issue and the call for a boycott (Frooman 1999, pg 195). In the same year StarKist, Bumblebee and Chicken of the Sea agreed to stop purchasing, processing and selling tuna caught using purse seine nets. The stakeholder action led to the Dolphin Safe tuna label and according to the Earth Island Institute 90% of the world's tuna canners are now dolphin-safe. On their website StarKist make the following statement
"StarKist is committed to defending the dolphins. We are proud to be the first company to adopt a dolphin-safe policy in April 1990. We condemn the use of indiscriminate fishing methods that trap dolphins, whales, and other marine life along with the intended catch of fish. All StarKist tuna is labeled with a special 'Dolphin Safe' logo." source Our Natural resources | StarkistOrganizations/firms need resources and "a firm's need for resources provides opportunities for others to gain control over it." (Frooman, 1999, pg 196).
Frooman describes the two ways in which stakeholders can attempt to influence a firm:
- Witholding resources
- Controlling how resource can be used. For example attaching conditions to resource usage.
a. Striking - withhold labour
b. Cancel loans/financial backing - withold finance
c. Boycott - withhold revenue & bookings
a. In the StarKist example, StarKist insisted all of their suppliers stopped using purse seine nets.
b. Other conditions could be around quality, licensing, process or technology, for example a food retailer stipulating that their suppliers use certain growing methods.
Frooman refers to the first as "Withholding strategies" and the second as "Usage strategies". Stakeholders that are not dependent on the firm are able to "walk-away". The ability to end the relationship is necessary for a withholding strategy to be successful. Stakeholders that are dependent on the organization - they need the organization for certain resources - are less able to walk-away and will tend to use a usage strategy.
Pathways of stakeholder influenceThe success of either method is impacted by the level of dependence between the firm and the stakeholder. Frooman creates a Typology of Influence Strategies to illustrate the relationship between a stakeholder's dependence on a firm and the method of influence a stakeholder will use.
Typology of Influence Strategies adapted from Frooman (1999, pg 200).
A stakeholder wields real power when they are not dependent on the firm, but the firm is dependent on them. In these instances a stakeholder can directly withhold their custom, patronage, labour, finance etc. If they are dependent on the firm, but the firm is also dependent on them they can still directly influence the firm using usage strategies.
If a firm is not dependent on a stakeholder, then that stakeholder can only influence successfully via an indirect strategy.
Direct and indirect strategies that stakeholders use to influenceWhen a firm is not dependent on a stakeholder that stakeholder can access another source of "indirect" power through relationships with others who supply resources to a firm (Frooman, p198).
Direct strategies are used by the stakeholder itself to influence the firm. Frooman notes that stakeholders who boycotted StarKist were using a direct strategy - they withheld their custom.
Indirect strategies use an ally to influence the firm, Earth Island Institute used a video to communicate with StarKist consumers allying with them to influence. Trade Unions use their alliances with employees to influence firms. Grassroots lobbying uses the general public to lobby government officials. Since Frooman's article was published online tools have added to the communication channels that stakeholders can use to indirectly influence companies and other stakeholders for example: online petition sites, social media, video and photo sharing sites and so on.
Frooman's research provides a useful model, which can be used to assess the likely method that a stakeholder will use to influence a firm. The business can use this prediction to create a stakeholder engagement strategy accordingly. Frooman's Typology of Influence Strategies can be usefully combined with other stakeholder analysis techniques. For example, the power/interest matrix reveals which stakeholders are most important to manage and used with Frooman's typology could reveal how those key stakeholders will attempt to influence the business.
Stakeholder influence references and further readingFrooman, Jeff, 1999. Stakeholder Influence Strategies. The Academy of Management Review, Vol. 24, No. 2 (Apr., 1999), pp. 191-205. Available through: JSTORhttps://www.jstor.org [Accessed 25 November 2014].
The Tuna Boycott Which Led To The "Dolphin Safe" Tuna Label, , European Cetacean Bycatch Campaign. [online] Available at: https://www.eurocbc.org/page322.html [Accessed 25 November 2014].
Our Natural resources, 2014, Starkist. [online] Available at: https://www.starkist.com/about-starkist/our-natural-resources [Accessed 25 November 2014].
Dolphin Safe Tuna, Earth Island Institute. [online] Available at: https://www.earthisland.org/dolphinSafeTuna/consumer/ [Accessed 26 November 2014].