In a crisis situation, the top management’s attention is directed toward stakeholders whose needs are urgent and critical. As such in these crucial and decisive moments, the role and influence of stakeholders not impacted directly by the crisis gets pushed aside. These overlooked stakeholders sometimes hold the power to influence the outcome of a crisis or the reputation of the organization. In such a situation an assessment of the asymmetries inherent in the stakeholder dynamics can prove valuable in the successful resolution of a crisis. This evaluation process nonetheless require complex deliberations since stakeholder salience must be recalibrated around the issue the organization is facing, the stakeholder attributes, the stakeholder’s influence on the issue, and the organization’s locus of control. A closer examination of these aspects can provide key insights needed expeditiously to develop an organization’s issue-specific strategies to resolve the crisis.
Some Points to Consider:
- Stakeholder Attributes
- Stakeholder’s Influence on the Issue
- Organization’s Locus of Control
Stakeholder/Stakeholder Group Attributes
It is well established that all stakeholders possess some measure of power, legitimacy and urgency and thus the ability to influence the operations of an organization or its good name During a crisis, the question of stakeholder salience-the principle of “Who or What Really Counts[1],” becomes pivotal and the order in which priority must be assigned to competing stakeholder claims-must go beyond the stakeholder group’s discernible power and legitimacy. What is arguable, though, is the extent (the limits) of power, the duration of the power and the context. While stakeholder attributes such as urgency makes it self-evident that needs of these stakeholders take precedence during a crisis, new power dynamics emerge as stakeholders perceived less important become more powerful depending on the issue faced by the organization. And, therefore, these subtle swings in the power dynamics must be re-evaluated. Whereas it is hard to overlook stakeholders with recognizable power, whether it is economic power (gained through ownership of resources), authoritative power (acquired through a formal position), or political power (attained by occupying a political seat or public office in a government organization or agency), the less powerful stakeholder groups and its impact can be less discernible.
During a crisis situation, the top management‘s attention must also be directed toward understanding the source of these stakeholder’s power and the extent to which they can harm or hurt the organization and its good name if their claims are not met or are delayed. For e.g. if there’s a plane crash, trade or professional association’s negative claim about the plane crash could have as much of a debilitating impact on the reputation of the organization and its profitability as a report issued by a government agency. Another instance could be if there are demonstrations against an organization or a cause, these demonstrators may or may not have legitimacy, and if their cause is hijacked by groups with hostile intent, then it can create a crisis of massive proportions and these protesters who did not have power or legitimacy have now acquired considerable bargaining power and the ability to harm the operations and/or the reputation of an organization. The decision-makers must then also examine these stakeholder attributes to gain a complete picture of the crisis situation.
Stakeholder Influence on the Issue—Claimants versus Influencers
Stakeholders such as government organizations or agencies have legal claims on an organization with no reciprocal claims on them by the organization. Such stakeholder groups have the power to influence an organization without a reciprocal impact on them. Trade or professional associations, similarly, can have moral claims on an organization but are not influenced by an organization as they do not have anything at stake. Such stakeholder groups or influencers have the power to influence an organization without being impacted by it. When interacting with influencers, it is important to remember that they are not exposed to the same level of risk as the involuntary risk bearers[2]–the employees, investors, suppliers, and distributors, to name a few. They have invested-capital, talent, or other resources—in the organization and are, therefore, susceptible to risk. These stakeholder groups or claimants have a definite stake. It thus becomes important to distinguish between the claimants and the influencers to ascertain the mix of influence or power and the level of risk being undertaken by each of the stakeholder groups. When engaging with claimants clearly their claims must supersede those of voluntary risk bearers or influencers. during a crisis. This evidently creates a paradox and necessitates that top management attune stakeholder salience based on stakeholder influence on the issue in addition to stakeholder attributes.
Organization’s Locus of Control
A key characteristic of organization-stakeholder relationships is interdependence. These interdependencies creates moral obligations and an expectations of fairness and justice[3]. However, these interdependent relationships are seldom symmetrical. The asymmetries observed in the organization-stakeholder relationships are, for one, due to an unequal dependence of one group on the other for their preferred outcomes. Understandably more power accrues to the group which is less dependent on the other. Internal stakeholders, for example, employees have a higher degree of dependence on an organization than vice-versa due to financial considerations. Also the organization’s actions have a far greater impact on employees than employees’ action on the organization. This indicates that the organization’s locus of control is greater in respect to stakeholders whose dependence is more than its own. During a crisis, the stakeholder groups who have a greater degree of dependence on the organization than the organization on them, the stakeholder groups are more likely to have an accommodative or a pro-organizational stance. In contrast, in the case of external stakeholders such as customers or government agencies, the organization is more dependent on them than vice-versa. In such cases, the organization is in a slightly disadvantageous position because the organization’s locus of control is diminished as more power is concentrated with the customers or the government. During a crisis situation, these stakeholders are more likely to take an antagonistic stance. So, the top management must prioritize the claims/interests of the stakeholders based on its locus of control over these stakeholder groups. The important takeaway is that the locus of control of an organization during a crisis depends upon the level of dependence of the organization on the stakeholder for the preferred outcome and if the preferred outcome is jointly controlled or are more independently controlled.
Having a clear idea of the variables that create asymmetries in stakeholder relations can prove helpful for the top management in recalibrating stakeholder salience during a crisis situation and contracting the decision-making process.
[1] Mitchell, R., Agle, B., & Wood, D. (1997). Toward a Theory of Stakeholder Identification and Salience:Defining the Principle of Who and What Really Counts. The Academy of Management Review, 22 (4), 853-886. DOI:10.2307/259247
[2] Max B. E. Clarkson. (1995). A Stakeholder Framework for Analyzing and Evaluating Corporate Social Performance. The Academy of Management Review, 20(1), 92–117. https://doi.org/10.2307/258888
[3] Bosse, D., & Coughlan, R.,(2015). Stakeholder Relationship Bonds. Journal of Management Studies. 53 (7), 1197-1222. https://doi.org/10.1111/joms.12182
