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Make sure to comment on their description of stakeholder management as a best practice for corporate culture and social responsibility.
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As the organizational leader, in a dilemma such as Cummins faced in early 2002, I would apply and use the stakeholder management approach for planning and implementing collaborative relationships to achieve win-win outcomes among stakeholders. In the stakeholder management approach is based on another theory that argues that a subset of ethical principles can result in significant competitive advantages (Wiess, 2014). The stakeholder management approach has is applied via a series of questions known as the stakeholder analysis. The question or focus points are as follows:
1. Map stakeholder relationships.
2. Map stakeholder coalitions.
3. Assess the nature of each stakeholder’s responsibilities.
4. Assess the nature of each stakeholder’s power.
5. Construct a framework of stakeholder moral responsibilities and interests.
6. Develop specific strategies and tactics.
7. Monitor shifting coalitions.
In the order the steps appear, Cummins will have to appropriate map their stakeholders. In other words, who are the individuals or groups who can impact or is impacted by the actions, decisions, policies, practices, or goals of an organization? In the case study, Cummins stakeholders were identified as employees, suppliers, customers, governments, etc. (Berte & Vujovich). Second steps will be to map the stakeholder coalition. This body will consist of similar risks or interests as related to the issue with the organization. Cummins has to identify this body of stakeholders in order to address them similarly and display the same level of interest to fixing the situation. One example of a stakeholder coalition in the Cummins article was the head of maintenance at major fleet stating that she was environmentally conscience but not so far to as to interfere with the bottom-line of her company (Berte & Vujovich ). The third step will be to assess the nature of the stakeholder’s responsibilities by understanding the nature of the organizations (Cummins) duties concerning the stakeholder group. As stated in Cummins Coporate Values, the organization states to “Serve and improve the communities in which we live”( Berte & Vujovich ). This step brings focus to the purpose of the organization’s presences and responsibility. Fourth, in assessing the power of each stakeholder will scrutinize what each stakeholder has to gain or lose in a scenario. Weiss identifies eight types of stakeholder power to acknowledge during this step and those powers are as follows: voting power, political power, economic power, technological power, legal power, environmental power, cultural power and power over individuals. In the Cummins case, Caterpillar appears to utilize their power over individuals and groups by attempting to extend the EPA’s deadline by making a public claim that the new regulated technology has not been tested. In the planning process this step forces a deep dive of the potential adversity, where it may come from and how much of a fight will be needed to face either of the eight stakeholder powers. Fifth step in planning/implementing win-win outcomes will be to build a framework of stakeholder moral responsibilities and interests. This step begins to address the plans for each stakeholder identified in previous steps. With Cummins Engine division representing more than 50% of its 2001 sales (Berte & Vujovich), they organization had to determine whether or not they would begin to risk selling more expensive engines with the new EPA technology or join their competition and sell competitively priced engines that did not contain the new EPA technology. The sixth step of the stakeholder management approach will involve actual task of developing specific strategies and tactics. This step involves understanding the potential threat or cooperation the stakeholders may have to the organization and tailored strategies will be created by leaders of the organization. Cummins Engine Business president, Joe Loughrey, is tasked with determining how to address the inconsistent concerns or interests of their stakeholders. The seventh and final step in the stakeholder analysis will be to monitor shifting coalitions. This step in the process will be ongoing and will be the task of the organization’s leader and management team(s). The efforts in this step will vary based upon the actions of the stakeholders. This step may require modifications as the tracking continues over an undefined period of time.
This analysis will assist leaders and their management team(s) with focusing on the ethical actions and working through a tensional scenario that may challenge an organization to make decisions that may not be profitable to the organization but pleasing all stakeholders. The outcome will be ethical based and collaborative in working through the process.
Weiss, J. (2014). Business Ethics: A Stakeholder and Issues Management Approach. Sixth Edition. Berrett-Koehler Publishers.
Berte, E. & Vujovich, C. Balancing Stakeholder Interests and Corporate Values: A Cummins Strategic Decision.
It is clear from the article that management and stakeholders of Cummins is faced with a difficult decision that will affect the future of the organization. Per the article, the company is not financially able to make the decision to go ahead with the consent decree of the EPA to develop the technology that would lower emissions. The EPA seems to be putting pressure on the organization to take the lead in producing a better efficient engine that does not pollute the environment as much as the products that are on the market currently. The organization is also facing pressure from its competitors to take the penalty and continue to work on new technology to produce a better engine.
As the leader of the corporation, the first step I would be to meet with stakeholders to make everyone aware of the issue at hand. This would allow for all branches of the business to effectively communicate with each other and brainstorm on possible solutions. The next step would be to evaluate the financial strength of the company. This would be determined by the sales and revenue strength of the company. If the sales figures are showing a downward trend, the company might not be able to produce the new engine due to declining sales and revenue (Tekin, Erturk, & Tozan, 2015). Another step would be to form a focus group to analyze customer response to products already in the market. A favorable response could indicate that customers may be willing to pay more for better product. On the other hand, if the response is unfavorable and customers are not satisfied with existing products, the organization will have a real problem (Sanga, Tumbo, Mlozi, & Kilma, 2013). The customer is the top stakeholder for the organization because without the purchasing power of the customer, the organization couldn’t exist.
As the leader, I would evaluate both sides of the decision to ensure that the integrity of the organization was not being compromised by the decision. Every organization has an ethical responsibility to do everything within its power to protect the environment and the community. The community includes the people as well as the environment. The ethical issue that I would be faced with by not going along with my competitors would be the potential loss of jobs that could be lost due to having to cut back to find the revenue to produce the new product since the economy is struggling. As the leader, I would choose to delay and pay the penalty. This decision would be based on the financial strength of the organization and information analyzed from the focus groups. Also, having the R&D department to continue to find ways to improve the existing engines that the products being currently produced would meet EPA standards.
Sanga, C., Tumbo, S., Mlozi, M., & Kilima, F. (2013). Stakeholders’ Analysis using Value Chain Analysis: AHP in action. International Journal of Interdisciplinary Studies in Information Technology and Business, 1(2), 85-104.
Tekin, E. K., Erturk, A., & Tozan, H. (2015). Corporate Social Responsibility in Supply Chains. Supply Chain Manage.: Int. J, 14, 75-86.