Transcript No Slide Title

Measuring the
Business Value of
Stakeholder Relationships
Toronto, Vancouver, Calgary
June, 2001
Topics
• Overview of Research Project
• Definitions and Assumptions
• Key Benefits
• Proposed Stakeholder Model
Research Partners
• Canadian Institute of Chartered
Accountants
• Haub Program in Business and
Sustainability, York University
• Centre for Innovation in
Management, Simon Fraser
University
Research Program
• Phase One - review existing
research, develop model and
measures
• Phase Two - case study research
with 6 Canadian companies
• Completion by March 2002
Research Questions
• How do stakeholder relationships
create business value?
• What organizational attributes
help to create positive stakeholder
relationships?
• What measures are most useful
in assessing the quality of
stakeholder relationships?
Defining Stakeholders
• Individuals or groups who can
affect, or who are affected by,
a firm’s actions
• Primary stakeholders shareholders, employees,
customers, suppliers,
communities
Defining Relationships
• Relationships are mutually defined
and negotiated
• strong relationships add to the
stability, adaptability and
coherence of the larger unit
• strong relationships provide access
to information and resources
• strong relationships have high
levels of social capital
What is Social Capital?
“the stock of active connections
among people: the trust, mutual
understanding and shared values and
behaviors that bind the members of
human networks and communities and
make cooperative action possible.”
Cohen and Prusak, 2000
Dimensions of Social Capital
1. Network (structural dimension)
2. Trust, norms and reciprocity
(relational dimension)
3. Shared language and
mutual understanding
(cognitive dimension)
Nahapiet and Ghoshal, 1998
Network
Trust, Norms & Reciprocity
• Individuals and organizations draw
on their social capital with others in
their network who they trust
• Trust = integrity, competence and
benevolence
• Shared norms and reciprocity
builds trust
Mutual Understanding
• Shared language, mental models/
paradigms
• For collaboration, extends to
shared goals and aligned values
Benefits
• Shareholder risk reduction
• Innovation
• Employee recruitment and retention
• New markets and opportunities
• Enhanced reputation and
brand value
• Social license to operate
• Sustained business partnerships
Shareholder Risk
• Lower costs (time and money)
of monitoring internal practises
and contracts
• Lower advertising spending
• Avoidance of excessive
compensation claims
• Avoidance of physical damage
to property
Innovation
“It doesn’t matter how good the
market research is, how bright the
management team is, it is the quality
of relationships among all people
in the organization that has an
enormous bearing on the quality
of decisions and their execution.”
Jeff Mooney, Chairman and CEO,
A &W Food Services
Innovation (cont.)
• Ability to access to new ideas and
information; ability of employees to
work collaboratively to create value
• Supply chain, partners,
universities, associations
• Access to technical info, new
ideas, competitive intelligence
Recruitment and Retention
• Ability to recruit and retain high
quality employees
• Low turnover rates, reduced
severance costs, hiring and
training expenses, retention of
valuable organizational knowledge
New Market Opportunities
• Ability to identify and take
advantage of new markets
• Supply chain partners in distant
locations, cross boundary networks
with non-traditional groups
• Access to global market
intelligence, referrals to local
contractors and resources
Reputation and Brand Value
• Ability to establish strong
emotional connection with
customers
• Customers, suppliers, investors,
opinion leaders
• Positive widespread mention,
word of mouth, commentary
Social License to Operate
• Ability to manage social risk and
make valuable contribution to
community
• Local government, community
leaders, NGOs, regulators
• Faster permitting, grace period
during crisis, favorable
interpretation of regulation
Partnerships and Alliances
• Ability to understand and respond
quickly to changing partner
requirements
• Supplies and services obtained at
lower cost and more quickly
• Crises handled more effectively
Stakeholder Model