ERS Perspective: When will Stakeholders Act?

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Courtesy of ERS Global

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In recent conversation with clients, we're hearing increased awareness of the changing nature of risk to business operations. Today's risks include issues such as terrorism, sabotage, human capital, and water scarcity, and high performing companies are updating their risk profile with accurate intelligence on the magnitude of these new risks and the likelihood that they will impact their operations.

The most objective way to assess risk is with input from stakeholder groups. “Yikes”, some of you might say, “isn't that like sleeping with the enemy?” It is true that stakeholder activism remains a significant topic behind the closed doors of corporate boardrooms. However, it is becoming increasingly clear that the risks from closed door, no disclosure policies are greater than the risks from engaging key stakeholders, and significant business opportunities can arise during the process. As one business manager put it, it is important to avoid “navel-gazing”.

A central uncertainty in designing a stakeholder engagement process is predicting when a stakeholder group will act to influence a company's business practices. You would expect that if a group of people have a common interest that they'll naturally get together and fight for the common goal. According to Mancur Olson, the 20 th century guru of collective action theory, this is generally not the case. J ust because the group exists it does not mean they will mobilize on a particular issue.

Researchers at the University of Toronto recently explored the question of when groups act, and came up with a framework for predicting stakeholder group mobilization based on interests and/or identities. The researchers examined the “relationships” influence across stakeholder groups and found the motivation to act and actually mobilize often stems from groups that share the same identity. This is an interesting insight, as a group's identity is what produces a social reward for it's members - for example, getting recognized as part of a privileged group who is capable of making change.

To obtain more information, see the When Will Stakeholder Groups Act? An Interest- and Identity–based Model of Stakeholder Group Mobilization in the Academy of Management Review , Vol. 28, No. 2, 204-219. We also recommend checking out the collective action theory work of Olson, 1971, The Logic of Collective Action: Public Goods and the Theory of Groups . Cambridge , MA : Harvard University Press. Click the following link for a review of the book:


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