Role of Leader in Stakeholder Theory for Concise - myassignmenthelp

Question: Discuss about theRole of Leader in Stakeholder Theory for Concise Structure. Answer: Introduction Any business requires a clear concise structure and planning for it to flourish. The identification of what it is that proves to be important for the success of a business is as important as tuning the business. A number of scholars and academicians have argued over whether it is the shareholders and the business owners who hold more importance or power or whether it is the stakeholders. Edward Freeman is an American Academic who is regarded as the father of the stakeholder theory. His theory suggests that every single stakeholder in a business is as powerful and influential as the owners and shareholders of a firm. It is therefore necessary to give importance and pay heed to the needs, inputs and opinions of every single one of the stakeholders. There are also a number of definitions of which can be called as a stakeholder of a company. It suggests that a managers duty is to balance the shareholders financial interests against the interests of other stakeholders such as employees, customers and the local community, even if it reduces shareholder returns(Smith, 2003). The most commonly accepted definition is the one that says that any individual or group of individuals, who have an interest in the business or are directly affected by it, can be regarded as the stakeholders of that particular company. It is efficient because stakeholders that are treated well tend to reciprocate with positive attitudes and behaviors towards the organization(Harrison, 2015). Why it is necessary to understand this is because this article aims to understand what role the leaders in a company play in regards to the stakeholder theory. Previous literature has led to a lack of appreciation of the range of organization/stakeholder relations that can occur and the extent to which such relations change over time(Friedman, 2002). It is a widely known fact that the leaders of a company are one of the most important parts of it. They are the ones who are responsible for the success and failure of a company. A leader has to have a certain set of qualities to be able to make their company grow. In addition the leaders of an organization hold a very pivotal and influential position in the structure of an organization. Marketing managers must realize that serving stakeholders sometimes requires sacrificing maximum profits to mitigate outcomes that would inflict major damage on other stakeholders, especially society(Laczniak, 2012). Their role is imperative, indispensable and influences the overall behavior, role and work ethic of the rest of the management in a company. The leaders also determine the kind of work environment a company has and whether or not it shall be able to cope up with a number of risks associated with running a business organization. Role of Leaders The importance of leadership, as mentioned above, is crucial to the existence, development and progress of a business organization. Therefore, it is safe to day that a strong leadership shall take the business to higher level of achievement and vice versa. One can also say that the role of Leaders in a business organization is very similar to that of a catalyst in a chemical reaction. The leaders of a business push, guide, motivate, provide direction and lead the firm. Their role is to make sure that the business runs smoothly without any problems. The leaders of a business organization also have a great input in its decision making. As a business leader one has to face a number of situations where the leaders need to make some very important decisions that are directly influential to the business itself and on some case scenarios even those who shall be affected by the business processes. Today, the leaders and owners of a business are not only responsible for the generation of profits of a business. Their sole responsibility is not just limited to the generation of more and more revenue for the business owners. In today's world, businesses have evolved and so has their management. The leaders are now responsible for a number of things involving taking care of all stakeholders such as the employees, the customers, business partners, and even the social, cultural and environmental implications of their business. Businesses are becoming more and more evolved these days. They have entered an era where the running of a business organization entails social, cultural and environmental responsibilities. Keeping this in mind, the role of the leaders of these business organizations has also evolved exponentially. One cannot just run a business by only taking care about the generation of profits and revenue. The stakeholder theory has also made the importance of all involved parties more evident. Business leaders now need to take into consideration the effects of their decisions on all stakeholders. One of the most neglected and overlooked group of individuals that also formed a very important part of the stakeholders is the employees. The employees-boss relationship has evolved over the years. A number of unions have been formed which work for the rights of the employees ensuring fair wages a safe environment to work in and employee benefits from time to time. Such things were ignored in the past as the employees worked over time to earn their salaries which barely accounted to anything substantiate. However, as the dynamics have evolved, so have certain scenarios. All of this does require the leaders of a business organization realizing the implications of their ways of doing the business and making changes accordingly. Customers are another very important group of people that are affected by a business. In today's world, customers have become more and more aware due to the advent of internet and social media. The customers today want value for money. If a business is unable to provide that, the customers can and do give negative feedbacks which can result in major loss for a company. The role of a company's leaders is to realize the importance of their customer base and provide them with products and services which they want. All of this also has to be done at an effective cost. As there is a lot of competition on the market, the customer has a large number of choices at their disposal. It is important that business leaders realize how they can improve the quality of their products and services and satisfy their customers. This shall prove to be of great importance for the success and progress of a business. Similarly, the interest of suppliers and finances also must be taken into account by the le aders of a particular business. Trying to earn the most profits for oneself by ignoring all others is not only wrong but also extremely short sighted. Government bodies, political groups as well as communities also form significant part of stakeholder groups. Realizing their impact and influence is as important as anything. Governments have great influences on business whether it be in terms of taxes, or rolling out new policies that may affect manufacturing or production. Here again, the role of effective leaders is imperative. A smart leader shall be able to comply with the government regulations while still taking care of running the business smoothly. Political groups and communities are sometimes opposed to certain practices that businesses indulge themselves in. A simple example could be the use of genuine leather or real fur for the making of garments. A business might have to face some drastic backlash if the community it is selling its products to is opposed to the idea of torturing animals for making clothes. Therefore, a business leader needs to take into account the feelings, sentiments and needs of all stakeholders inv olved or affected in business organization. A fairly new concept of corporate social responsibility has also emerged in the recent years. Corporate Social Responsibility or CSR is a corporations initiative to assess and take responsibility for the companys effects on environmental and social wellbeing(Anonymous, 2016). Sustainability isn't just important for people and the planet, but also is vital for business success(Post, 2017). As more people are becoming aware of the condition of the planet, businesses have had to make some significant changes in the way they function. In such scenarios, the importance of the role of effective leaders is being realized. A number of companies such as coca cola and Levi's amongst many others have invested a huge amount of money into changing the way of doing their business. Example references This would not have been possible without effective leaders taking charge of their businesses, realizing that they do have certain responsibilities towards their communities and the environment as well. Risk Analysis In any business, there are a number of risks involved. Depending on the organization, risks are broadly categorized in a variety of ways(Patel, 2016). These can ne external, coming from entities outside the business organization such as competitors, government bodies customers etc. Or these can be internal. Internal risks are generated due to improve leadership and chaotic functioning of a business. In any case, it is important to identify, analyze and correct the causes of these risks, in order to ensure the smooth functioning of the business. Internal risks are as harmful for a business as external ones. With effective leadership however, these risk can be identified fairly early in the process for management and can be corrected well in time. Internal risks can be categorized into three types. These include risks due to human, technology and physical conditions. The human behavior is a complex study and it cannot be confined to a set of rules or regulations. Businesses that have a large number of people often have to face situations where in the business as a whole is at a risk due to tensions or disagreement between two stakeholders. Therefore, some companies have special human resources department which deals with behavioral issues and ensures it does not put business organizations into situations of high risks. Technological risks arise due to problems in technological equipments. Machines have a tendency to stop working and softwares tend to get bugged all the time. Businesses which rely heavily on technology for their overall functioning are at a higher risk than those who do not. However, such risks can be handled and most of the times have more advantages than disadvantages. Physical risks arise due to the loss of or damage to an organization's assets in any form. This could be a natural calamity leading to destruction of infrastructure, selling of property due to have losses incurred or any other risk arising due to physical aspects of running a business. The fact is, a risk management culture must be built from the top down as well as the bottom up(Gunderson, 2013). Risk Analysis is an extensive study that entails the identification, classification and analysis of the various types of risks to any business. It provides solutions as to how these risks can be avoided in the first place and also how they can be solved. Role of internal competition In any organization, there is always some amount of competition involved within its own structure. Often, businesses can be so focused on negotiating perceived threats in the greater business environment that they fail to identify factors within the company which could threaten its success(Anonymous, Risks in business: Internal and external pressures, 2013). Internal competition can prevail amongst different divisions in a business, different teams working on a single project an even competition between individuals. While healthy competition is always encouraged as it is necessary to keep the employees in an organization motivated, extremity can result in potential risks and threats to the business. Competition should also be healthy. It must be seen as a way of pushing oneself to perform netter instead of undermining the progress of others. This applies to business organizations facing both external as well as internal competition. While external competition makes a business assess itself and come up with ways to do better than others in the markets, internal competition is seen as being associated with a greater risk. In a scenario where a business is facing external competition from its peers, the whole organization comes together to improve itself and outperform the others. However, in cases where there is internal competition, a business may lead towards its doom. While healthy competition encourage s the employees to give their best and do better than before, sometimes situations can get ugly. Two employees working in the same organization can be facing severe competition from each other in order to get bonuses and promotion. One of them may try to undermine the work of the other, take under credit or intentionally destroy or manipulate the work of the other. The employee might get a promotion and a bonus as well, but it is the business that might lose a client because the deadline wasn't met. Overall, it is the organization that will have to face the loss at the end of the day. There are two major reasons for internal competition. Excessive comparison of employees against one another is the f irst reason. Another reason is that these people who are pit against each other are socially and physically proximate. Regularly compared to each other, employees may sometimes develop feelings of jealousy and instead of trying to better themselves; they might try to undermining and sabotage each other's work. In such case scenarios, the role of internal control is important. It is the internal management who needs to ensure that no such activities happen that might increase internal risks for a business. In addition, internal control must also ensure that such a scenario never arises in the first place where employees feel the need to sabotage each other. N the end, it is the business organization as a whole which will have to suffer the risks generated due to ugly competitions between employees, project teams or divisions. Conclusion Businesses need effective leaders to ensure success and overall progress in the market. The role of Leaders and effective management is pivotal in defending the fate of a business organization. Companies already suffer from a great deal of external competition. While external competition drives the need to excel, internal competition should be handled carefully. References Anonymous. (2016, october 6). Best Corporate Social Responsibility Activities by Top Brands. Retrieved october 10, 2017, from echoVME: https://www.echovme.in/blog/corporate-social-responsibility-activities-top-brands/ Anonymous. (2013, March 26). Risks in business: Internal and external pressures. Retrieved October 12, 2017, from KPMG: https://home.kpmg.com/xx/en/home/insights/2013/07/business-risks-internal-external-pressures.html Friedman, A. L. (2002). Developing Stakeholder Theory. Journal of Management Studies , 121. Gunderson, C. (2013, november 21). BankThink Strong Risk Management Begins (and Ends) with Strong Leadership. Retrieved october 12, 2017, from American Banker: https://www.americanbanker.com/opinion/strong-risk-management-begins-and-ends-with-strong-leadership Harrison, J. S. (2015). Stakeholder Theory As an Ethical Approach to Effective Management: applying the theory to multiple contexts. REVIEW Of BUSINESS MANAGEMENT , 858-869. Laczniak, G. R. (2012). Stakeholder Theory and Marketing: Moving from a Firm-Centric to a Societal Perspective. Journal of Public Policy Marketing , 284-292. Patel, N. (2016, January 20). A Risk Managers Role in Strategic Leadership. Retrieved October 9, 2017, from ncsu: https://erm.ncsu.edu/library/article/risk-manager-strategic-leadership Post, J. (2017, April 3). What is Corporate Social Responsibility? Retrieved October 11, 2017, from Business New Daily: https://www.businessnewsdaily.com/4679-corporate-social-responsibility.html Smith, H. J. (2003, July 15). The Shareholders vs. Stakeholders Debate. Retrieved October 10, 2017, from MIT Sloan Review: https://sloanreview.mit.edu/article/the-shareholders-vs-stakeholders-debate/