Corporate Governance: The international journal of business in society Stakeholder relationships:…

Corporate Governance: The international journal of business in society
Stakeholder relationships: the dialogue of engagement
David Foster, Jan Jonker,
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David Foster, Jan Jonker, (2005) “Stakeholder relationships: the dialogue of engagement”, Corporate Governance: The international
journal of business in society, Vol. 5 Issue: 5, pp.51-57, https://doi.org/10.1108/14720700510630059
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Stakeholder relationships: the dialogue of
engagement
David Foster and Jan Jonker
Abstract
Purpose – This paper seeks to analyse the nature of the communication process involving stakeholders
in a working relationship with organisations. While most research has been undertaken to identify who or
what these stakeholders are and what the patterns of relationships look like, very little attention has been
given to the ways in which the organisation actually engages with them.
Design/methodology/approach – The paper draws on qualitative research conducted into a
controversial issue concerning protected area management in Victoria, Australia, which was conducted
within a framework built around Habermas’ concept of communicative action.
Findings – The lessons learned from what Stake would call an ‘‘instrumental’’ case study, provided the
insight to clarify what form organisational communication with stakeholders should take if it is to result in
significant and positive outcomes. It is argued that the basis of any constructive engagement between
an organisation and its stakeholders should be communication that is linked to mutual understanding as
the basis of agreeable action. Finally the challenges of these findings for modern organisations are
addressed.
Originality/value – This paper provides useful information on the nature of the communication process
involving stakeholders in a working relationship with organisations.
Keywords Organizations, Social responsibility, Communications, Stakeholder analysis, Australia
Paper type Research paper
Introduction
The effect of stakeholder relationships on the ongoing success of organisations is now well
recognised and generally accepted by most scholars, even by many who subscribe to the
neo-classical, Friedmanite view of the firm. The latter scholars have recognised that even if
the primary raison d’eˆtre of a firm is to serve its shareholders, its success in doing so is likely
to be affected by stakeholders of one form or another (Foley, 2001). Every organisation must
therefore learn to engage with these stakeholders in some way.
Many organisations have interpreted this engagement as a form of ‘‘management’’ (read:
‘‘control’’) where there is an attempt to organise, structure and thus ‘‘manipulate’’ the
relationship in the belief that this will best serve their needs. Organisations adopting this
approach tend to make decisions on their own and then inform interested parties or
stakeholders of that decision via a variety of monologues. This leads to a one-sided form of
‘‘engagement’’ in which the organisation – setting the boundaries – remains firmly in control
of the communication process.
Other organisations have interpreted engagement differently. They have attempted to
become more involved in a two-way relationship in which the interests and concerns of both
parties are taken into consideration and decisions are made in the light of those – often
conflicting – interests and concerns. This does not mean that the interests of the focal
organisation are ignored or over-ridden. Rather, in the process of determining how to
achieve various objectives, these organisations acknowledge the existence of alternative
DOI 10.1108/14720700510630059 VOL. 5 NO. 5 2005, pp. 51-57, Q Emerald Group Publishing Limited, ISSN 1472-0701 j CORPORATE GOVERNANCE j PAGE 51
David Foster is based at the
Faculty of Business, University of
the Sunshine Coast,
Maroochydore, Australia.
Jan Jonker is Associate
Professor, Nijmegen School of
Management, Nijmegen
University, Nijmegen,
The Netherlands.
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perspectives and may even modify their behaviour to help accommodate them. Viewed from
the long-term perspective of the firm, this creates a solid basis for continuity.
Stakeholder engagement as a form of communication
A number of scholars (Bendell, 2000; Crane and Livesey, 2003) have suggested that the
essential building-block of stakeholder relationships is communication. However, the
approaches, methods and responsibilities entailed in genuine stakeholder communication
are not well understood. Neither are the implications for organisational action.
Crane and Livesey (2003) suggest that stakeholder relationships nowadays are
characterised by a complex array of shifting, ambiguous and contested interactions
between interested parties and within diverse organisations. This, they claim, ‘‘highlights the
central role of communication in constituting, managing and maintaining stakeholder
relationships’’ (Crane and Livesey, 2003).
Early scholars turned to a simple linear model of communication in which the stakeholders
were the ‘‘receivers’’ or ‘‘audiences’’ of messages sent by the organisation. The aim is to
persuade the audience about something perceived to be of value or interest to the focal
organisation. According to Crane and Livesey (2003), this placed the focus on the
information itself (‘‘a commodity that needed to be transmitted’’) rather than seeing
communication as ‘‘a social process that brought meaning to life through negotiation and
consensus’’ (Smircich and Stubbart, 1985).
Later applications of communication theory focused on the effects of messages on the
receiver with particular emphasis on ‘‘feedback’’ that was used by the sender to improve
and adjust their messages. The aim of this two-way form of communication was to ensure
that the receiver understood what the sender was attempting to transmit. It still involved a
strong element of persuasion and control by the sender.
In both instances, there was an assumption that the communicator (senior managers or
communication departments) could control the message in the sense that it could determine
how it was perceived by the audience. Grunig and Grunig (1992) call this ‘‘asymmetrical
dialogue’’ where the aim of the communication is to manipulate or persuade, even though it
may involve two-way interaction.
This form of dialogue ignores the fact that the dialogic nature of every act of communication
involves fundamental sense making. Whether recognised or not, stakeholders, like the
audience in any communication experience, take an active role in sense making within the
context that they find themselves:
Sense making is about such things as placement of items into a framework, comprehending,
redressing surprise, constructing meaning, interacting in pursuit of mutual understanding, and
patterning (Weick, 1995).
In particular, the remarks regarding ‘‘placement of items in a framework’’ and ‘‘constructing
meaning’’ are relevant here. The message is not passively received and ‘‘understood’’.
Rather, the stakeholder actively develops meaning, and this is created in terms of their
perspectives on the world in which they live and the concrete situation at hand. There is a
strong reflexive quality to this process. Thus, sense-making is an interpretative process that
is necessary ‘‘… for organizational members to understand and to share understandings
about such features of the organisation as what it is about, what it does well and poorly, what
the problems it faces are and how it should resolve them’’ (Feldman, 1989, quoted in Weick,
1995).
Grunig and Grunig (1992) suggest that ‘‘symmetrical dialogue’’ is a superior form of
communication where two-way communication is not simply designed to ensure that the
audience has received the message accurately or as intended. Rather, this form of
communication is where both parties are involved in a ‘‘conversation’’ (Andriof, 2001) where
information is exchanged and knowledge acquired. But this is more than information
gathering and responding. Cheney and Dionisopoulos (1989) develop this idea to suggest
that it involves a situation where the interests of both parties are represented in such a
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manner that can persuade and allow the other party to persuade. This ‘‘persuasion’’ is
essentially about sense making where the parties come to understand the situation from
each other’s perspective. Acknowledging the constitutive effects in communication opens
up the possibility of achieving mutual understanding and lays the groundwork for possible
agreement or joint problem solving.
However, stakeholder relationships are not simply about ensuring that we have a successful
debate where all parties are listened to. It is about the achievement of organisational goals
within a situation of increasing complexity and divergent values and interests. Within the
context of stakeholder relationships, any communication must therefore be action-oriented.
The issue involved is ‘‘enactment’’: the capability of the parties involved to act on cues
derived from the communication linked to the issue at stake. The actual realisation of mutual
needs and expectations can only come about in interaction within the context in which the
organisation and its stakeholders are operating. Besides the groundbreaking work of Weick
already quoted, the work of the German philosopher Habermas may help to ensure this link
between the dialogue and organisational action.
Communicative action
Habermas was critical of the so-called ‘‘philosophy of consciousness’’ underpinning the
work of philosophers such as Weber, Horkheimer and Lukacs (Best and Kelner, 1991;
Cahoone, 1996). In their attempts to interpret the way that society had developed and was
developing, those subscribing to this philosophy emphasised the role of instrumental reason
based on the goal rationality of science. Society has replaced the mysticism of
metaphysical-religious worldviews with the rationality of science. The human species can
now maintain itself through the triumph of scientific reason and the domination of nature.
While adhering to these tenets, philosophers like Weber recognised the consequential
‘‘subjectification’’ of humankind itself. They predicted the inevitability of the alienation and
loss of freedom that society would endure as the goal-rationality of scientism replaced the
value-rational judgements of individuals. They felt that scientific-technological rationality and
domination by a culture of experts and specialists would reduce the involvement of
individuals in political debates and controversial issues that affect their very lives.
Rather than accept the inevitability of this process with its ultimately pessimistic outcomes,
Habermas called for a fundamental rejection of the philosophy of consciousness and its
replacement with a new paradigm, namely that of ‘‘communicative rationality’’. While
recognising the potential that the domination of reason may have for the subjectification of
the individual, he attempted to reconstruct, rather than reject reason (Best and Kelner,
1991). In this way, he hoped to retain the values of the Enlightenment within the framework of
a democratic society. He wanted to make sure that the strengths of the scientific and
technological were integrated into a society in which individual freedoms and ideals are
maintained. This would avoid Max Weber’s concerns that society was heading into an ‘‘iron
cage of domination’’ in which meaning would be fragmented and freedom reduced through
the growth of bureaucratic – instrumental – rationality.
He recognised that the distinguishing feature of human beings is not our ability to utilise
language to represent phenomenon in the objective world nor our ability to express inner
feelings. It has been well known for years that animals such as chimpanzees can represent
(name) external phenomenon in ‘‘speech’’. What distinguishes human beings – besides
their unique capability to reflect on the world and themselves – is the communicative
character of interaction with the world outside oneself, based in particular on the use of
language. He maintains that this ideally implies ‘‘a common endeavour to achieve
consensus in a situation in which all participants are free to have their say’’ (Brand, 1990). In
turn, this creates the opportunity for a different form of rationality not based on scientism, but
one which is based on shared understanding and ‘‘compulsion-free’’ consensus.
Under the philosophy of consciousness, rationality and the quality of knowledge is
dependent on the quality of subject-object relations and the detailed and fragmented
observations thereof. Knowledge is dependent on the ‘‘correct’’ observation of an objective
reality that exists externally to the observer. This ‘‘objectivism’’ can be traced back to
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fundamental thinkers such as Descartes, with rationality acquiring a connotation where the
observer knows the measurable ‘‘properties’’ of an ‘‘object’’ that can be observed and
understood in the world outside the observer. The quality of knowledge is, in this world-view,
determined by strict obedience to methods and techniques that objectify what needs to be
understood.
In contrast, Habermas’ alternative philosophical paradigm recognises that knowledge is
fundamentally dependent on subject-subject relations. Knowledge is by definition a
‘‘construct’’ as agreed on by the parties involved, based on mutual understanding leading to
a shared form of sense. The process leading to this understanding can be characterised as
sense making. For him, rationality is ‘‘communicative rationality’’. Rationality and knowledge
are not the products of purely objective science and scientific endeavour. On the contrary,
rationality can emerge through the subject-subject discourse or dialogue leading to the
achievement of mutual understanding. It is only after the creation of mutual understanding
that action can be undertaken. Action is based on a process in which people perceive cues
in the (local) environment, interpret the meaning of those cues and externalise the
interpretation of those cues via concrete actions. The meaning of the term ‘‘action’’ in itself
can either refer to physical constructs (to do something literally), verbal constructs (to talk as
an act) or mental constructs (to think about a particular subject in a specific (new) manner).
These constructs are the drivers for individual or mutual (collective) behaviour. Meaning is
thus person(s)-bound and context-bound; this creates the foundation to act on. Therefore
meaning is always meaning-in-action linked to a specific local situation (Cramer et al., 2003).
Habermas draws a distinction between two forms of action, namely, strategic action and
communicative action. He argues that, based on the philosophy of consciousness, there is a
tendency for most people and organisations to engage in strategic action, which involves
the egoistic achievement of specific outcomes. Success is judged by ‘‘the efficiency of
influencing the decisions of rational opponents’’ (Habermas, 1982). In other words, there is
no need to reach understanding between those involved, but simply to influence the
decision of the other. This influence is not usually achieved via criticisable discourse through
language, but by ‘‘sanctions or gratifications, force or money’’ (Habermas, 1982).
This compares with communicative action that is oriented towards shared understanding
and in which language is used as a medium by which it is reached. This means that the
‘‘partners in interaction set out, and manage, to convince each other, so that their action is
coordinated on the basis of motivation through reason’’ (Brand, 1990). External sanctions or
gratifications are not involved.
These views can be linked to the individuality of firms based on classical liberal philosophy
(Crowther, 2002). In this, society is an artificial creation based on an aggregation of
individual self-interest. Put simply, societies exist to protect innate natural private rights.
There must be freedom of the individual to pursue his/her own ends ‘‘with the tacit
assumption that the maximisation of individual benefits would lead to the maximisation of
organisational benefits and also societal benefits’’ (Crowther, 2002). Classical liberal
economic theory ‘‘extended this view of society to the treatment of organisations as entities
in their own right with the freedom to pursue their own ends’’ (Crowther, 2002). So,
organisations pursue their own ends and engage in strategic action aimed at egoistic
success. In this view, they do not need to engage in social interaction based on shared
understanding as this is not necessary for society to continue to function.
An alternative view presented here is that organisations involve a coalition of interests
(stakeholders), and like the larger society of which it is a part, in order to achieve their ends
communicative action is required. This is an inter-subjective activity involving the
inter-subjective achievement of shared understanding. Habermas (1982) defines
communicative action as ‘‘that form of social interaction in which the plans of action of
different actors are co-ordinated through the exchange of communicative acts, that is,
through a use of language (or corresponding non-verbal expressions) oriented towards
reaching understanding’’. To reach understanding, those involved set out to convince each
other so that their action is coordinated on the basis of motivation through reason.
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The achievement of understanding does not deny that the parties have individual ends.
Rather, these are pursued under the condition of a communicatively produced
understanding of the given situation they face. Moreover, it suggests that these individual
ends are best pursued in this way.
Understanding is reached through the process of discourse involving criticisable claims
couched in language. While this may be a very political activity (Mouffe, 1993), at least a
temporary agreement can reached on the basis of rationality and reason. The latter is arrived
at through the inter-subjective analysis of criticisable validity claims within three different
‘‘worlds’’. These are the ‘‘objective world’’ which involve claims to truth about the existing
state of affairs, the ‘‘social world’’ involving claims to rightness, and the ‘‘personal world’’ in
which claims to sincerity or authenticity are considered. Under the philosophy of
consciousness, only the first ‘‘world’’ is considered to be part of any rational discussion.
The others are irrelevant.
But what makes these acts of speech result in action? It is the fact that a claim can be
‘‘warranted’’ or defended through discourse in one or all of the worlds that makes the listener
understand the request and engage in subsequent action. When a speech act is not based
on a criticisable validity claim the action coordinating effect is linked to the existence of either
sanctions or rewards. Because in the latter case actors are not motivated by reason, claims
that underlie action cannot be warranted. Therefore communicative action is the only sort of
action that can be said to allow a constructive dialogue and reasonable action. The sorts of
action that refer to simple imperatives are not concerned with communicative action, no
basis for agreement on the reasonableness of action can be found. Rather they are a form of
strategic action, aimed at achieving egoistic goals. Communication is irrelevant to any action
that does ensue from it.
Of particular importance is the fact that Habermas believes that communicative action
always involves reference to the three worlds, and that discussion can be based on any of
these aspects (and more than one). Hence for action to be based on communication (rather
than on directives, sanctions, incentives, etc.), rational discussion can and should occur in
either or all of these worlds. The consequence of this is that organisations have to engage in
a dialogic process within and beyond the boundaries of the organisation in order to engage
significant stakeholders. In the following section the consequences of this finding will be
elaborated more closely by means of an Australian case study.
Case study
The authors have investigated the nature of the communication process involved in a
particularly controversial issue concerning the introduction of the commercial delivery of
visitor services within protected areas in Victoria, Australia (Foster, 2000). In this case, while
the agency concerned had had extensive experience in ‘‘consultative’’ processes with
external stakeholders, the basis of its engagement was shown to be asymmetrical in nature.
Having made the decision to adopt the new strategy, the agency entered the consultation
phase determined to achieve its predetermined objectives. The strategy was presented as a
‘‘take-it-or-leave-it’’ proposal, with the aim being to ensure that perceived opposition would
be overcome. The agency had not recognised the constitutive aspects of communication
and found itself at the centre of a major fight over the ‘‘meaning’’ of its proposals. While the
proponents had seen it as a logical extension of previous policies, others saw it in terms of a
radical transformation of values inherent in the very act of managing protected natural areas.
The end result was that the agency had to withdraw its proposals and the agency itself was
almost wound up. This was certainly not what was originally intended.
Of particular interest from the perspective of this paper, is the fact that the communication
between stakeholders and the focal agency did involve consideration of issues that could be
identified as being linked to Habermas’ three ‘‘worlds’’. Through a detailed review of the
submissions received in the consultative process and letters to the editor in major daily
newspapers, the arguments were analysed and categorised. It was found that while a
number did refer to the ‘‘objective’’ world where the argument concerned the rationality of
the object itself (in this case the commercial delivery of visitor services), the majority were
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concerned with the other two ‘‘worlds’’. Many were concerned with the subject-subject
relations and the ‘‘social’’ world where the issues of fairness and rightness were raised.
Examples include concerns over the primacy of commercial interests compared with
ecological values and consideration of their prior claims of access to the area concerned.
Others focussed on the ‘‘personal’’ world where the sincerity of the proponents and their
authenticity were challenged. Examples of the latter are the fact that many saw the proposals
as the ‘‘thin edge of the wedge’’ or the beginning of ‘‘incremental creep’’ that would lead to
further unacceptable change.
Despite the existence of these fundamentally different dimensions on the nature of the
proposals or debate, the agency focussed entirely on the subject-object relations and the
‘‘objective’’ world. It wanted to assure the critics that the proposal would work both
economically and ecologically. Very little effort was expended trying to address issues of
fairness or trust that were the essence of the arguments in the other two worlds.
Conclusion
This primarily conceptual paper has attempted to enhance our understanding of the nature
of communication within the context of stakeholder relationships. Stakeholder theory
suggests that we need to engage with stakeholders as they have the power (in its various
forms) to influence the achievement of outcomes. This could be in the form of a battle plan or
via some other confrontationalist approach (Zineldin, 2002). This has been shown to be
unsuccessful in many situations, including the one described above. On the other hand,
Cheney and Christensen (2001) have argued that in Western democracies, on-going and
genuine two-way dialogue between organisations and their stakeholders provides the best
approach to the management of complex issues that characterise contemporary society. So,
organisations have to engage in a dialogic process within and beyond the boundaries of the
organisation in order to engage significant stakeholders. This process will not only lead to
more communication and interactions, but also finally to a ‘‘nexus of transactions’’. The
sphere of influence of the organisation thus becomes a dynamic space as new transactions
develop and change with new partners. In the end, the key to this emerging organisational
concept is managing the ‘‘transactivity’’ of the organisation (Jonker, 2003).
As stakeholders are not going to go away, then Habermas’ theory of communicative action
could point the way to an appropriate form of communication to characterise this two-way
dialogue and bring about understanding and ultimately the achievement of organisational
goals. It acknowledges the constitutive or sense-making aspects of human communication
and the fact that the sender is not in total control of the communicative act. Moreover, being
action-oriented, this approach to communication is compatible with the achievement of
organisational goals. If action is the desired outcome, then this is best achieved within a
framework of criticisable validity claims. Claims that can be ‘‘warranted’’ through discourse
are more likely to achieve stakeholder support than those that are simply imposed. Modern
organisations therefore need to recognise that any engagement with stakeholders will raise
a number of issues that appear to be outside the realm of ‘‘rationality’’ (as perceived by
them) and therefore irrelevant to the proposed action. However, if Habermas’ ideas are of
any value, then organisations need to think beyond the rationality of scientism and consider
the equally important issues surrounding the other ‘‘worlds’’. Indeed, as stakeholders of all
types are no longer willing to accept manipulation or control, then this may be the only form
of communication that will achieve acceptable outcomes for organisations.
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