Balance in Managing External Constituencies

In the book “Organizational Culture and Leadership,” Schein states that long-term growth is influenced by and dependent upon external adaptations and balance between needs and demands of the stakeholders. The author underlines that “all organizations are sociotechnical systems in which the manner of external adaptation and the solution of internal integration problems are interdependent.”

Similar ideas are expressed by Collins and Porras who consider that the appropriate objective of any organization is not to serve any one of its stakeholder groups to the exclusion of any other, but rather to serve all of the stakeholders by increasing their ability to pursue their own objectives more efficiently and effectively. In other words, the overriding purpose of an organization ought to be to serve the interests of all its stakeholders, not just its citizens.

They portray this process as an “interdependent balance between responsibility to customers, employees, society.” Similar to Schein, Collins and Porras see a stakeholder as any group or individual who is affected by or who can affect the future of an organization. It is difficult to balance these groups because stakeholders of one group come from different backgrounds, and the task of the organization is to articulate the needs and requirements of everyone.

Today’s complex processes demand cross-functional inputs from the full array of significant stakeholders, and the best way to gain their input is to bring them together in a common meeting. By having key stakeholders working together to identify and articulate requirements, the organization should develop requirements that are likely to define deliverables that satisfy customer needs and wants. “Balance” implies going to the midpoint, fifty-fifty, half, and half. A visionary company doesn’t seek a balance between short-term and long-term objectives.”

The balance in managing external constituencies can be achieved by effective communication of corporate strategy and provide a boost to shareholder value. Enhanced shareholder value is based on a positive stakeholder’s view of the company’s overall strategy and strategic direction. This perception is shaped, in part at least, by corporate strategy communications that are specific, timely, and open. Similar to Schein, Collins, and Porras underline that the importance of strategic communications appears to be of special importance. While the financial community is interested in a company’s candid appraisal of past performance and disappointments, they may be more sensitive to information about strategic intentions that will allow them to make judgments about future corporate prospects.

Schein states that: “If strong subcultures have formed and one or more of them are strongly tied to outside constituencies that hold different assumptions, the existing culture is further weakened.” According to Collins and Porras, balance is achieved through open, timely, accurate, and specific information provided to key stakeholders as part of a well-planned corporate program. Balance is concerned with the management of relationships between a company and all of its relevant publics. It could be argued that the global flotation floundered largely as a consequence of the mismanagement of relationships between the company and the investor community, industry analysts, the financial media, and other key corporate constituencies.

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