Abstract

Stakeholder needs cannot be fully fulfilled by a single model, especially those that are purely transactional and fail to consider changes in relationships over time. Situational stakeholder leadership seeks to utilize the strengths of a broad range of leadership models that adapt to the organizational life cycle and seek to fully engage all levels of stakeholders. To follow is a comprehensive model for addressing stakeholder needs from an organizational leadership perspective.

Critical Needs Model

Organizational results can be severely impacted when leaders hold to personal, unproven beliefs that lack sufficient foundation for broad application (Brewer & Schwandt, 1997). This in turn affects a variety of internal and external stakeholder groups. A critical component of effective leadership is the pursuit of personal growth strategies, as well as challenging personal belief structures. Personal development provides leaders a larger toolbox from which to draw, and varied and effective ethical solutions to organizational challenges instill confidence and loyalty in followers. "In order to help maintain the long-term success of the firm and ultimately of capitalism and democracy, it is therefore incumbent upon corporate leaders to earn the confidence and loyalty of their followers and the esteem of society at large" (Aronson, 2001, p.246).

Leaders, to be fully effective, must recognize the critical needs of stakeholders and respond to them (either affirmatively or negatively) regardless of the number of stakeholders, variety of demands, or operating environment. They must also create an organizational culture that is aligned with satisfying primary stakeholder interests, and tries to constantly improve itself, such as a learning organization. This highlights the need of a model for addressing stakeholder demands through active leadership. This paper introduces the concept of situation stakeholder leadership (SSL), a multifaceted approach to ensuring stakeholder interests are addressed through all stages of the organizational life cycle.

Assessing the Criticality and Significance of Stakeholder Needs

According to Tan, Pan & Lim (2005), "stakeholder theory posits that an organization encompasses a sophisticated network of stakeholders operating within the broader framework of the host society that provides the necessary market infrastructure for its business activities" (p.38). Freeman (1994) provides the following definition of a stakeholder: "A stakeholder in an organization is any group or individual who can affect or is affected by the achievement of the organization's objectives" (p.46). Primary stakeholders include "shareholders, investors, employees, customers, and suppliers" (Jawahar & McLaughlin?, 2001, para.19). Secondary stakeholders include regulators and markets (Tan et al., 2005), and tertiary stakeholders the general public.

Jawahar & McLaughlin? (2001) state, "a corporation's survival and continuing success depends upon the ability of its management to create sufficient wealth, value, or satisfaction for all primary stakeholder groups" (para.3). However, needs cannot be satisfied until they are first understood. Leaders, in considering organizational strategy, must also focus on strategic alignment with stakeholder demands. While no organization can fully satisfy all stakeholders, a balance should be achieved to ensure some level of satisfaction (Jawahar & McLaughlin?, 2001). Stakeholder management is a critical tool for ensuring proper corporate social performance (CSP) based on stated organizational principles. Jawahar & McLaughlin? (2001) state, "CSP is defined as an organization's configuration of principles of social responsibility, processes of social responsiveness, and observable outcomes as they relate to the firm's societal relationships" (para.8).

Some organizations are reluctant to act in the interests of various stakeholders because of perceived costs outweighing any benefit. Whether these costs are direct, such as environmentally friendly capital equipment purchases, or indirect, such as creating a community outreach program, corporate social responsibility can take a back seat to meeting quarterly goals. However, these short term views can be more costly to the organization and endanger its longevity. "Acting with social responsibility in business can imply financial cost, but does not necessarily mean a neglect of return on investment, budget considerations, employee compensation, or market competitiveness" (Aronson, 2001, p.244).

A critical and often overlooked component of the critical needs of stakeholders is organizational responsiveness throughout various stages of its lifecycle. As an organization matures its relationship to its stakeholders changes (Jawahar & McLaughlin?, 2001). In discussing the decline & transition stage of an organization, Jawahar & McLaughlin? (2001) state, "Attention to employees and suppliers most likely will be reduced to accommodation, and the organization, in an effort to cut costs and stabilize stock prices, will entertain and sometimes implement extreme cost-cutting measures, including downsizing, outsourcing, or reducing the diversity of operations" (para.72). This stands in sharp contrast to the start-up phase when every relationship can affect the future of the organization. Leaders must recognize the tendency to devalue certain stakeholder groups in the fullness of time and respond accordingly.

A Situational Model of Stakeholder Leadership

Theorists suggest four primary models for addressing stakeholder needs: proaction, accommodation, defense, and reaction (Jawahar & McLaughlin?, 2001). Proaction implies anticipating stakeholder needs and actively aligning organizational response in advance. Accommodation, by contrast, may provide a high level of responsiveness, but does not anticipate needs. A defense strategy allows for only the minimum level of stakeholder satisfaction as is legally required, and reaction is an adversarial state where the organization actively resists the interests of a stakeholder group.

On face value, proaction would certainly appear to be the preferred model for satisfying stakeholders. Organizational leaders drive followers to act in three ways: "(a) the directive mode of influence (ranging from directive to participatory), (b) the transactional mode of influence, and (c) the transformational mode of influence" (Aronson, 2001, p.249). Bass (2000) recognizes that although the proactive traits representative of transformational leadership is a preferred model, sometimes circumstances dictate that a leader resort to transactional methods in order to meet the immediate demands of an organization. However, limiting the range of theoretical leadership responses to stakeholder demands to one or two models (transformational and transactional) does not reflect the true range of options organizational leaders actually employ.

Jawahar & McLaughlin? (2001) address the concept of stakeholder management as a preferred model for addressing stakeholder demands, but the term management usually implies a transactional relationship. A more appropriate term would be stakeholder leadership, allowing for a broader range of leadership styles.

Situational stakeholder leadership (SSL) takes the concept of stakeholder management further by allowing organizational leaders the ability to accept responsibility for leading primary, secondary stakeholders utilizing a broad range of leadership styles. SSL derives a number of positive outcomes. First, the leader takes responsibility for meeting external stakeholder needs, and thus broadens his level of influence over all stakeholders. This provides the organization a greater degree of leverage with secondary and tertiary stakeholder groups and coordination with the primary groups. Second, the leader adapts his leadership style to the needs of the organization at any given point in time. The leadership methodology is then aligned with stakeholder demands, regardless of the number and nature of stakeholders or the value that the organization places on them as a function of time, familiarity and organizational maturity. Finally, SSL gives leaders the responsibility to educate and mentor all stakeholders, contributing to the creation of a learning organization. This provides the organization the broadest range of solutions to stakeholder demands.

The CLIMB model developed by Bergmann (1999) describes five outstanding leadership strategies that can be applied to the stakeholder relationship under SSL:

• Create a compelling future
• Let the customer drive the organization
• Involve every mind
• Manage work horizontally
• Build personal credibility

These five strategies, when applied to both internal and external stakeholders, result in12 imperatives of SSL:

• Act morally and ethically
• Appreciate and recognize the contribution and achievements of others
• Constantly train and coach
• Demonstrate a strong sense of purpose and mission
• Effectively communicate vision and methodology
• Establish and maintain trust and respect
• Instill pride in association with the organization
• Develop a compelling vision of the future
• Show compassion
• Solicit alternative solutions
• Solicit and appreciate the values and beliefs of others
• Speak and act optimistically and enthusiastically without doubt or reservation

Acting morally and ethically is imperative if an organization is to organizational survival. Organizational leaders must be active players in creating and sustaining an ethical environment. "CEOs are obliged to set a moral example for organizational members and to demarcate the constant striving for increased profits from those activities which may be detrimental to the values of society in general" (Aronson, 2001, p.247).

Socrates wrote that ethics was the search for the good life in which one's actions are in accord with the truth (Bass, 1990a). "Unfortunately, principles of self-regulation and codes of conduct are often in conflict with the avoidance of costs and the maintenance of one's own competitive edge" (p.906). Under SSL, advocating moral and ethical behavior goes beyond lip service. Leaders must serve as an example and provide stakeholders compelling reasons for their continued support, contribute to an environment where ethical and moral dilemmas are minimized, and act immediately, consistently and with fairness.

In order to appreciate and recognize the contributions and achievements of internal stakeholders, organizational leaders must do more than measure performance outcomes. Processes carry as much significance as outcomes, especially in an era of corporate social responsibility, and so there must be recognition of work ethic, the meeting of obligations to one's self, family, community and organization, and interaction with all stakeholder groups. Organizational leaders must celebrate accomplishments and reinforce the positive behavior that contributes to individual and organizational success.

The business environment creates a constant stream of informational input. In order to maximize the effectiveness of how data is assimilated and used, it becomes imperative to constantly train and coach. Bass (1990a) writes, "Coaching is likely to work well if the subordinate can identify with the coach and the coach provides a good model, if the coach and the subordinate are open and trusting with each other, if both accept responsibilities fully, and if the subordinate is provided with suitable rewards and recognition for his of her improvement" (p.834). Training and coaching not only provides internal stakeholders with useful tools for operating effectively within an organization, but also defines the operating environment, and demonstrates consistency and continuity. There is a mutual mentoring component in the relationship between leaders and stakeholders. Leaders must ensure that stakeholders understand the relationship between the organization, the operating environment, and the stakeholders themselves that the three are properly aligned. Leaders must also solicit the knowledge possessed by stakeholders that benefits the organization. Communication is a critical component in both understanding and setting stakeholder expectations.

A leader must demonstrate a strong sense of purpose and mission not just through rhetoric, but through specific, measurable acts that reinforces the concept of leadership authenticity (Henderson & Brookhart, 1996). By first effectively communicating a vision and explaining methodologies, stakeholders are better able to determine if words and deeds are married and inseparable. One way to establish and maintain trust and respect of stakeholders is to never over promise. Whenever there is a change in organizational culture, stakeholders expend some level of emotional capital. Misleading statements, even if unintentional, also spends that capital at a high rate. Leading stakeholders must conserve emotional capital.

There are numerous factors that instill pride in belonging to a family, team, or organization. The first is the success of the organization. Stakeholders want to be a part of a winning team. The next is success within the organization. Stakeholders want to feel that they have a part in creating that success, and so individual and team recognition becomes critical. A final, yet equally-critical component is that the organization exhibit easily identifiable characteristics that stakeholders can point to and say with pride that they are a part of that culture. Amgen stakeholders, for example, are associated with the largest pharmaceutical company in the world and on the leading edge of cancer medicine. Southwest Airlines stakeholders are associated with one of the most-consistently profitable airlines in the world. These characteristics are not created by leadership decree, but through an integration of all of the components of situational stakeholder leadership into the culture and through constant nurturing. It is important to note, however, that as desirable as collaborative efforts are, a blind focus on cooperative decision-making and goal alignment could lead to the suppression of tensions, which are necessary for the systematic monitoring and critiquing of collective decisions (Tan et al., 2005, para.21). Leaders must share their vision with stakeholders. Presidency Ronald Reagan created a compelling vision of the future. Using phrases such as "shining city on a hill," he created through words a compelling image of the future for the U.S. that stakeholders could internalize. Standing in front of the Berlin Wall and imploring Chairman Gorbachev to tear it down, he created a vision for a reunified Germany that soon after came to pass. High performance athletes utilize visualization to give them a competitive advantage, a lesson that should not be ignored just because the discussion centers on business.

Showing compassion should be a simple task, but it is not. Compassion requires empathy, thoughtfulness, and a charitable nature. Leaders must consider that stakeholders are providers for families, partners in a marriage, mentors of children, and leaders within communities. Stakeholders are human beings and the entire human being must be considered at all times. An effective leader will constantly solicit alternative solutions from stakeholders. One reason to do so is that some stakeholders are closer to the problem, and typically spend a great deal of their time thinking about it. Often, stakeholders will reason through a perceived problem and develop viable alternatives. Leaders must be cognizant of this. It is critical that stakeholders know their solutions will be given serious consideration, and there must be a track record of implementing employee suggestions with proper recognition given. Soliciting and appreciating the values and beliefs of others is especially critical in multi-cultural societies where stakeholder demands will vary greatly.

Leaders must speak and act optimistically and enthusiastically without doubt or reservation. There is nothing more likely to let air out of the balloon than the pinpoint of doubt. Speaking and acting with conviction instills confidence in stakeholders and provides the foundation necessary for inspiration. While it is entirely normal to feel doubt and reservation, expressing those feelings to stakeholders will quickly poison the environment and makes any subsequent recovery a much more challenging proposition.

Promoting Continual Organizational Growth and Learning

Leaders must leverage the expert knowledge of various stakeholders by sharing the organization's objectives and challenges and the strategies for success. Efforts must be made to foster creativity, risk-taking, innovation, and experimentation to keep the organization in a constant learning state. Individual stakeholders and stakeholder groups have different developmental needs, and thus require individualized mentoring and coaching. Learning organizations make education and training a daily practice within organization, and the introduction of new learning approaches must be rewarded.

SSL incorporates Bass' (2000) Full Range of Leadership model, addressing the benefits of leaders creating and maintaining learning organizations. Leaders must consult with stakeholders and identify the components missing and changes required to exist as a learning organization. Leaders must also share with stakeholders the leadership style that is needed to achieve these ends, and engage in mentoring and coaching. Leaders must carefully give and receive feedback, maintain open communication, listen carefully, and maintain trust. Leaders must act in a consultative manner with stakeholders and communicate their vision to each level of stakeholder group. It is also important for the leader to act as a symbol of organizational culture.

Conclusion

Situational stakeholder leadership moves beyond passive or transactional stakeholder management and utilizes a broad range of leadership styles to address the varying needs of stakeholders and the organization through its life cycle. SSL mandates leadership responsibility for meeting external stakeholder needs, utilization of adaptive leadership styles to meet those needs, and the responsibility to educate and mentor all stakeholders.

Leaders engaged in SSL act morally and ethically, appreciate and recognize the contribution and achievements of others, constantly train and coach, demonstrate a strong sense of purpose and mission, effectively communicate vision and methodology, establish and maintain trust and respect, instill pride in association with the organization, develop a compelling vision of the future, show compassion, solicit alternative solutions, solicit and appreciate the values and beliefs of others, and speak and act optimistically and enthusiastically without doubt or reservation to stakeholders.

SSL creates and maintains learning organizations by making education and training a daily practice, engaging in stakeholder consultation, and maintaining open communication, high levels of trust, and the sharing of the leader's vision with every level of stakeholder. Stakeholder needs cannot be fully fulfilled by a single model, especially those that are purely transactional and fail to consider changes in relationships over time. SSL seeks to utilize the strengths of a broad range of leadership models that adapt to the organizational life cycle and seek to fully engage stakeholders and gain their commitment.

References

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