Challenge of Conflicting Stakeholders Interests in Management
The establishment of every organization and venture comes with the objectives and goals that need to be achieved in due time. Hah and Freeman (2014) state that every venture has stakeholders with whom the goals of the organizations are aligned with their interests. All stakeholders have their personal interests at heart and most revolve around increasing their wealth in a firm (Robbins, & Coutler, 2015). Profits are what drives the firms' management to strive harder and reach their targets, any diversion of focus brings in the conflict of interest between the management and stakeholders.
When enterprises are established the entrepreneur has one goal in mind, to make as much profit as possible. Management however has been diversified over time thus including other aspects that are healthy for the growth of an organization. The advantages of going beyond profit maximization is that stakeholders and the firm will benefit. The image and reputation of the organization also improves thus attracting more stakeholders towards it, making people want to be affiliated to the brand. It also gives a firm a niche above other competitive firms that are only focused towards profits (Kinicki, Williams, Scott-Ladd & Perry, 2014).
The disadvantages of going beyond profit maximization are increase in cost when undertaking management processes, sometimes people forget the main objective and focus more on the side shows leading to the downfall of corporations. Management as a whole has the provision for an organization to not just be focused towards profits but rather look at the external environment as well because these elements are the pillars of success of any establishment. A thorough analysis needs to be conducted to weigh on the best activities to be carried in reference to reaching out to the external environment (Hah & Freeman, 2014)
Shareholder and Stakeholder Theory
A better understanding of who a stakeholder and shareholder is and the co-existing relationship
In respect to the shareholder theory, Milton Friedman states that the main goal of any business establishment is to make profits. This means that the management of any firm is a helping hand of the shareholders in running the processes to their benefit and thus are both morally and legally obligated to serve the interests of the shareholders. Under this theory the only exception is conformity to the basic rules of the society, both those embodied in law as well as ethical custom. The stakeholders theory on the other hand conflicts with the fore mentioned shareholder theory as it states that a firm owes a responsibility not only to the shareholders but a wider group of stakeholders (Robbins, & Coutler, 2015). In reference to the stakeholder theory, a stakeholder is defined as any individual or people who can affect and be affected by the actions taken by an organization, ranging from employees, customers, competitors as well as the wider surrounding community.
According to Edward Freeman, the theorist behind the stakeholder theory brought in the element of corporate social responsibility which in itself is a concept that recognizes responsibilities of corporations globally in the business world (Horisch, Freeman, & Schaltegger, 2014). These corporate responsibilities range from legal, economic, philanthropic as well as ethical considerations. Most corporations, firms and organizations tend to use the corporate social responsibility as the pillar of their corporate strategy, but in real sense most of them tend to use CSR for their selfish interests of increasing sales and improving profit margins through improvement of reputation and image in the eyes of the stakeholders. Despite this drawback there are a few genuine cases whereby firms through management go beyond using CSR as a means of public relations and reach out to the stakeholders.
Stakeholders have an influence in the direction any organization would take (Mok, Shen, & Yang, 2015). Stakeholders have reservations on the aspect that only the shareholders are to benefit from a venture or an organization. According to Kinicki, et al. (2014), there is a connection between stakeholders and the systems theory, in that the systems theory emphasizes the external links that are part of every organization. Thus organizations described as open systems are part of a much larger network rather than as an independent self-standing entities. Meaning that every organization is part of a system and thus when problems arise there is need for every member or stakeholder in the network to give a helping hand. Organizational theory expounded by Bourne, (2016) as written by Katz and Kahn, is also drawn from the same concept of the systems theory with respect to external environmental elements.
Management is the administration of an organization ranging from a government body, non-profit to business with the aim of achieving defined objectives. The managers have the mandate to oversee the direction in which an organization takes inclusive of the decisions made. Good quality managers are essential for the success of any firm (Robbins, & Coutler, 2015). Organizations which have put the social interests of stakeholders as one of their sole objectives seem to be favored more by people and enjoy better reputation and improved image compared to those organizations that only focus on profits.
How managers get to deal with issues of conflict of interests.
Sanlam South Africa is a public company with focus on offering financial services. It was established in 1918 with the original aim of being a life insurance company, before diversifying into a financial services firm. Sanlam grew into personal finance, emerging markets, investments and Santam business clusters. According to the Sanlam website, the firm's vision is, to be a world leader in client-centered wealth creation, management alongside protection. And to play a niche role in wealth and investment management in specific developed markets. Sanlam adheres to values, which include acting with integrity, increasing shareholder profits through superior performance and innovation.
The stakeholders of Sanlam include employees, surrounding communities in which Sanlam enterprise operates, customers. Stakeholders benefit from the firm's empowerment deals and focus towards sustainability initiatives alongside corporate social investments (Mitchell, et al., 2016). The firm allocates resources coupled with plans with the aim of governing the business in a sustainable way in the end benefiting all stakeholders. Among the pillars used by Sanlam in sustainability are, the development of its people, sustainable governance, preservation of natural environment, products and services that will drive towards a prosperous society (Matos, & Silvertre, 2013).
Solving conflicts through the use of Mintzberg's Management Roles
Stakeholders in an array of ways often have conflict of interest in regard to organizations. Sanlam is not spared of any conflicts that arise from its stakeholders, for instance, employees may demand to have a pay rise in relation to their long hours of work. Expanding the firm into a regional and multinational organization, meaning employees had to work extra hard in their respective descriptive duties failure to which a new set of employees from other regions could easily take up their positions (Galuppo, et al. 2014). Customers complaining as a result of poor services being rendered.
At one point the service delivery of Sanlam went so low until customers logged complaints, forcing the management to intervene. The manager in the situation of customers complaining over poor services comes out as a leader. Leadership skills are essential for managers in order to assist the team reach the organizationts objectives. Liaison is also important in this situation. Communication is vital in linking the internal and external stakeholders. In the case of customers managers ought to effectively communicate with employees in order to improve on the services rendered. These two roles are key to manager as it allows them in providing vital information, they also lie towards the interpersonal aspect of a manager (Marques, & Mintzberg, 2015).
Monitoring in management allows the managers to seek out both internal and external information as well as process it in respect to the organization as well as the industry. In this case the manager should be able to monitor the employees as well as customers in reference to productivity and well-being respectively (Bourne, 2016). Acting as a disseminator comes in where employees are at the verge of losing their jobs with the shift in the production or change of business. The manager needs to fully communicate useful information to the stakeholders who in this case are the employees (Robbins, & Coutler, 2015).
On another aspect the manager should also embrace the decisional role which involves the use of information. The manager comes in as a negotiator in the situation where employees are complaining of low wages paid. He/she needs to use his or her negotiating skills in order to come up with a win-win situation before it escalates into a crisis (Phi, Dredge, & Whitford, 2014).
For every organization to flourish and succeed it has to put into consideration the roles played by both the shareholders and stakeholders. In as much as the main objective of most business ventures is to gain more profits for the shareholders, there is need to look at the stakeholders as a more equally important audience that tend to influence the direction any firm takes in regard to its success story. Stakeholders have much to offer when it comes to both internal and external environment analysis. Managers must embrace their interpersonal, decisional, and informational roles to solve conflicts amicably.
Bourne, L. (2016). Stakeholder relationship management: a maturity model for organizational implementation. CRC Press
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Robbins, S. P. & Coutler, M. A. (13th Ed) (2015). Management. Pearson
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