Essay About Stakeholder Approach And Recent Work

A Stakeholder Approach To Strategic Management
Essay Preview: A Stakeholder Approach To Strategic Management
Report this essay
Darden Graduate School of Business Administration
University of Virginia
Working Paper No. 01-02
A Stakeholder Approach to Strategic Management
R. Edward Freeman
John McVea
This paper can be downloaded without charge from the
Social Science Research Network Electronic Paper Collection at:
A Stakeholder Approach to Strategic Management
R. Edward Freeman
John McVea
The Darden School
University of Virginia
Forthcoming in M. Hitt, E. Freeman, and J. Harrison (eds.)
Handbook of Strategic Management, Oxford: Blackwell
Publishing.
INTRODUCTION
The purpose of this chapter is to outline the development of the idea of
“stakeholder management” as it has come to be applied in strategic management. We
begin by developing a brief history of the concept. We then suggest that traditionally the
stakeholder approach to strategic management has several related characteristics that
serve as distinguishing features. We review recent work on stakeholder theory and
suggest how stakeholder management has affected the practice of management. We end
by suggesting further research questions.
A HISTORY OF A STAKEHOLDER APPROACH TO STRATEGIC
MANAGEMENT
A stakeholder approach to strategy emerged in the mid-1980s. One focal point in
this movement was the publication of R. Edward Freemans Strategic Management- A
Stakeholder Approach in 1984. Building on the process work of Ian Mitroff and Richard
Mason, and James Emshoff [ For statements of these views see Mason and
Mitroff,(1982) and Emshoff (1978)]. The impetus behind stakeholder management was
to try and build a framework that was responsive to the concerns of managers who were
being buffeted by unprecedented levels of environmental turbulence and change.
Traditional strategy frameworks were neither helping managers develop new strategic
directions nor were they helping them understand how to create new opportunities in the
midst of so much change. As Freeman observed “[O]ur current theories are inconsistent
with both the quantity and kinds of change that are occurring in the business environment
of the 1980sA new conceptual framework is needed.”[Freeman, 1984, pg. 5] A
stakeholder approach was a response to this challenge. An obvious play on the word
“stockholder”, the approach sought to broaden the concept of strategic management
beyond its traditional economic roots, by defining stakeholders as “any group or
individual who is affected by or can affect the achievement of an organizations
objectives”. The purpose of stakeholder management was to devise methods to manage
the myriad groups and relationships that resulted in a strategic fashion. While the
stakeholder framework had roots in a number of academic fields, its heart lay in the
clinical studies of management practitioners that were carried out over ten years through
the Busch Center, the Wharton Applied Research Center, and the Managerial and
Behavioral Science Center, all at The Wharton School, University of Pennsylvania by a
host of researchers.
While the 1980s provided an environment that demonstrated the power of a
stakeholder approach, the idea was not entirely new. The use of the term stakeholder
grew out of the pioneering work at Stanford Research Institute (now SRI International) in
the 1960s. SRIs work, in turn, was heavily influenced by concepts that were developed
in the planning department of Lockheed and these ideas were further developed through
the work of Igor Ansoff and Robert Stewart. From the start the stakeholder approach
grew out of management practice. 1
1 Recently, Mr. Giles Slinger has revisited the early history of the idea of stakeholders.
Through more extensive interviews, and the examination of a number of historical
documents, Slinger rewrites the history as told in Freeman (1984). The essential
SRI argued that managers needed to understand the concerns of shareholders,
employees, customers, suppliers, lenders and society, in order to develop objectives that
stakeholders would support. This support was necessary for long term success. Therefore,
management should actively explore its relationships with all stakeholders in order to
develop business strategies.
For the most part these developments had a relatively small impact on the
management theories of the time. However, fragments of the stakeholder concept
survived and