UNIVERSITY OF NAIROBI
MSC HUMAN RESOURCE MANAGEMENT
NAME: PHYLLIS NORAH NYAIDHO
REG. NO.: D64/71259/2014

DHR 554: ORGANIZATIONAL DEVELOPMENT AND CHANGE
ASSIGNMENT: ORGANIZATION STAKEHOLDERS AND CHANGE

ORGANIZATION STAKEHOLDERS AND CHANGE

DEFINITIONS
Organization
This is a social arrangement for achieving controlled performance in pursuit of collective goals. (Buchanan and Huczynski, 2004)

Another definition is that an organization is a group of people brought together for the purpose of achieving certain objectives. As the basic unit of an organization is the role rather than the person in it the organization is maintained in existence, sometimes over a long period of time, despite many changes (Statt, 1991)

Stakeholders
These are individuals or group of people who have an interest, claim or stake in the organization in what and does and in how well it performs.
In general stakeholders are motivated to participate in an organization if they receive inducements that exceed the value of contributions they are required to make.
Inducements are rewards such as money, power, the support of beliefs or values, and organizational status. Contributions are the skills, knowledge, and expertise that organizations require of their members during task performance (Edward Freeman, 2010)

There are two main groups of organizational stakeholders: i. Inside stakeholders ii. Outside stakeholders

Inside Stakeholders i. Shareholders ii. Managers iii. Workforce

Outside Stakeholders i. Customers ii. Suppliers iii. Government iv. Unions v. Community vi. General Public vii. Competitors

STAKEHOLDER | CONTRIBUTION | INDUCEMENTS | INTERNAL | | | Shareholders | Money & Capital | Dividends and stock appreciation | Managers | Skills & Expertise | Salaries, bonuses, status, power | Workforce | Skills & Expertise | Wages, bonus, security, promotion | EXTERNAL | | | Customers | Revenue from purchase of goods | Quality & price of goods and services | Suppliers | High quality inputs | Revenue from purchase of inputs | Government | Rules governing good business practices | Free & fair competition | Unions | Free and Fair collective bargaining | Equitable share of inducements | Community | Social & economic infrastructure | Revenue, taxes, Quality of Life, employment, environmental improvements | General Public | Customer loyalty & reputation | National Pride |

Change
This is the act, process, or result of altering or modifying (Wikipedia Free Encyclopedia)
Organization change is a process in which an organization optimizes performance as it works toward becoming its ideal state (Jones 2004)

Why Organizational Change? Organizational change occurs as a reaction to an ever-changing environment or as a response to a current crisis situation. On the other hand, a more proactive viewpoint is that it is triggered by a progressive manage

Change can either be internal or external. Both the internal and external change have drivers and they are as follows:

Internal Change * Shareholders * Customers * Employees * Suppliers

External Change * Government * Competitors * Consumer advocates * Special Interest groups * Media

Managerial View of the firm ENVIRONMENT

SHAREHOLDER/OWNERS

CUSTOMERS
SUPPLIERS

Corporation and its managers

EMPLOYEES

ENVIRONMENT
Change has occurred in each of the relationships in the figure above. Such changes are internal to the conceptual system that the managerial view represents. Internal change requires us to constantly reassess current objectives and policies in light of new demands by groups that we are used to dealing with such as customers, employees and their unions, stockholders and suppliers. Internal change requires action but it does not directly challenge our conceptual map of the world (R. Edward Freeman, 2010)
Shareholders
No longer can management assume that the primary concern of those who own shares of stock is return on investment. The 1960’s were a ripe period for owners who wanted not only returns, but control as well. Thus the Wall Street rule, “if you don’t like the managers, sell the stock” was turned on its head to, “if you don’t like the management, buy enough stock to throw the bums out”

The Wall Street journal is full of news on mergers, takeovers and white nights. The CEO who only worries about paying dividends to stakeholders or increasing the value of their equity by earnings per share and stock price increase, is sure to be a prime candidate for unemployment through takeover Of course if the P/E is high enough the chances of takeover will be greatly diminished, and we see that some CEOs have emphasized the P/E ration at the expense of making needed investments for the future.
The dilemma is the well known trade off between short term results and long term health by, concentrating in the short term, in the form of managing the P/E ratio the CEO maintains a margin of safety from takeovers, However, by doing so the company becomes vulnerable to competitive attacks, rapid declines and eventual takeover bids, negating the very margin of safety provided by high P/E ratios.

The relationship with owners has changed in second way. In 1969, Ralph Nader announced the formation of campaign GM, a group which bought two shares of General Motors stock and intended to wage a proxy fight on social issues including the need for public transportation, and the rights of women and minorities and on business issues such as product design for safety and emissions control.

Customers
For many years American businesses were dominant at home and their technology was dominant worldwide. That dominance has ended. Customers have many more choices today, and their view of U.S products has changed in both consumer and industrial products. Made in Japan has set new standards of quality, and where these standards have been ignored the customer relationships have changed dramatically. Customers tend to move to higher quality products at affordable rates and lack of the two can mean trouble for a company that doesn’t deliver

Employees
Employees are the key to achieving or not achieving a successful change process in any organization and their input when it comes to the change is very important as they are the drivers of the change. That employee’s embrace change is important for the organization especially if the change is urgent as they help facilitate in its implementation. If the employees are not all in then there is a risk that the change process will not be achieved and if the change is necessary for the firm’s survival the firm would not be able to sustain it in the future.
Suppliers
These are people who sell either services or products to a company in order for the company to achieve its overall business strategy. In the case of a monopolistic supplier they influence internal changes within the organization in terms of when to supply and quantity to supply. They can also influence change by price adjustments which affect the selling price of goods produced and this will in turn make organizations use new trade marketing activities to attract and retain customers.

Government
The recent past has seen an increase in the awareness of the role of the government in the business enterprise so much so that public officials have been elected on the promise of curtailing this role and seeking a return to “free enterprise.” The business government relationship has been founded on the principles of the “watchdog” i.e. it is the legitimate role of the government to regulate business in the public interest and to enforce strict anti-trust laws to insure adherence to market principles. In addition the congress and the courts have always played a role, at least indirectly in shaping the strategies and policies of the modern corporation.
While business has always had to contend with government in some form or other current perceptions of its pervasive influence require a close examination
Some critics argue that government intervention has real social benefits that would not have occurred without government actions. Thus, clean air and water, safer automobiles, and a general increase in the standard of living are attributed in part to government action

Competitors
Competitors are healthy in the business environment and stir up competition based on quality, pricing, new products and this in the long run is good for the customers as they get the best as companies compete for the larger market share.

Companies have competitive strategies and this include introduction o9f new products to the market, better quality products and favourable pricing which would cause an organization in the same industry to “up their game” so that they are not struck out based on their ability to not keep up with changing times and economy.

Consumer advocates
Consumer advocacy refers to actions taken by individuals or groups to promote and protect the interests of the buying public. Historically, consumer advocates have assumed a somewhat adversarial role in exposing unfair business practices or unsafe products that threaten the welfare of the general public. Consumer advocates use tactics like publicity, boycotts, letter-writing campaigns, and lawsuits to raise awareness of issues affecting consumers and to counteract the financial and political power of the organizations they target.

Periods of vocal consumer advocacy around the turn of the twentieth century and in the late 1960s have left a legacy of federal legislation and agencies intended to protect consumers in the United States. The rights of consumers have expanded to include product safety, the legitimacy of advertising claims, the satisfactory resolution of grievances, and a say in government decisions. In the early days of industry, companies could afford to ignore consumers' wishes because there was so much demand for their goods and services. As a result, they were often able to command high prices for products of poor quality.

Special Interest groups
There is a more general phenomenon that underlies the shifts in the business environment engendered by government, foreign competition, consumer advocates, and environmentalists that is the concern with special interest groups or social interest groups or single issue politics. The idea behind SIGs is that a group or individuals can use the political process to further a position on a particular issue such as women’s rights, working hours, overtime payments and salary increments. The problem which SIGs represent for the manager when it comes to change is that one can never be sure that an ad hoc group will not form to oppose the company on any particular issue.

Media
This can either be print media, social media and electronic media. The media can either enhance an organization’s reputation or diminish an organizations reputation by highlighting either positive or negative aspects of the organization in terms of their goods and services, goodwill, employee relations etc and this in turn drives change in how the organizations operate.

POWER/ INTEREST GRID FOR STAKEHOLDERS DEGREE OF INFLUENCE ON CHANGE

KEY TO POWER/ INTEREST GRID * High power, high interest (Category D): these are key players in organizations and are often involved in managing the organization and its future. Key players include senior staff: directors and chief executives of organizations. Hence key players will often have responsibility for major decision making in the organization. Successful decision making is likely to result in good pay and bonuses. Equally, poor decision making can result in loss of employment and the need to account publicly for poor decisions. * High power, low interest (Category C): these stakeholders should be kept satisfied. Good examples of stakeholders who must be kept satisfied are the institutional shareholders. Category C stakeholders such as investors and regulatory authorities will remain compliant and not exert power, while they continue to receive acceptable returns on their investment and are pleased with the organization’s management and activities. * Low power, high interest (Category B): these include individual employees and small shareholders. However, due to their low power they are unable to exert significant power influence the organization and its actions. In contrast, their high level of interest in the organizations means that they can voice their concerns if that interest is not being considered in a suitable manner. * Low power, low interest (Category A): these are those in whom the organization need only invest minimal effort. However, Category A stakeholders should not be ignored as they may acquire a stake in the organization by becoming for example a customer, supplier, competitor or shareholder, which will mean an increased level of interest and/or power.
Forces for change include: i. Nature of work; this encompasses structures, processes and practices of how work is done within an organization. ii. Technology; advancements in technology with reference to changing times and creation of a competitive advantage iii. Economic Shock; recession, boom and inflation are all examples of economic shocks that can influence change in an organization iv. Competition; use of competitive strategies can also be a change force as it serves a wakeup call for organizations to change their work processes in light of new products produced by competitors, reduced prices of products and increased quality v. Social Trends; these are based on the changing times and also customer tastes and preferences that come and go with the values of a given society vi. World politics; the current terror attacks various country across the world determines the change in production and services offered and also the reduction or extinction of organizations based on degree of reduced risk or peace vii. Legislation; this can either be an introduction or a removal of rules and regulations governing business practices within a particular industry and this affects the organization as it is required to make changes in line with the new set regulations.

Relevant to my case study I will be looking at the force of legislation and how it affected various individuals or groups of shareholders

CASE STUDY: BRITISH AMERICAN TOBACCO (K) LTD ON TOBACCO CONTROL LEGISLATION
Tobacco Control Legislation
The Tobacco Control Act, 2007 is the principal law governing tobacco control in Kenya. This comprehensive law defines keys terms and covers topics including, but not limited to, restrictions on public smoking; tobacco advertising, promotion and sponsorship; and packaging and labeling of tobacco products. Other topics addressed by the law include: public education and information campaigns; sales to minors; and enforcement of the law. The Tobacco Control Act, 2007 grants powers, including implementation and enforcement authority, to individuals appointed under the Public Health Act. The Traffic Act provides a definition of “public service vehicle,” incorporated by the Tobacco Control Act with regards to smoke free provisions.

1. Smoke Free Places: In Kenya, smoking is prohibited in public places and workplaces except in specially designated smoking areas. It is unclear whether smoking is prohibited in most means of public transport, including trains, buses, taxis, and aircraft. Smoking is allowed in public transportation facilities, such as train and bus stations, in specially designated areas. 2. Tobacco Advertising, Promotion and Sponsorship: The law prohibits virtually all forms of advertising, promotion and sponsorship of tobacco products. Although financial contributions by the tobacco industry are restricted but not banned, the publicity of any financial contributions is prohibited. 3. Tobacco Packaging and Labeling: Health warnings must cover 30 percent of the front and 50 percent of the back of the package and must be displayed in English and Kiswahili languages. Currently, text-only warnings are required, although the Ministry of Health may issue pictorial warning requirements.

CASE STUDY ANALYSIS
The change in legislation has led to a change from the normal way of doing business and to a totally new way of doing business and BAT has to think outside the box when it comes to alternative ways of advertisement. The following is an analysis of how the new legislations affected the stakeholders both internal and external.

Shareholders;
The new legislation banning tobacco advertisement, promotion and sponsorship of all forms affected the shareholders as it reduced their presence in the market which makes it difficult to attract new customers as they cannot make themselves visible in the market as they did in past. Obviously this was not good for the organization as its overall mission was to expand as much as they could to increase profit levels
Managers:
In the case of BAT the marketing department had to re-think their whole marketing strategy which was minimized and not much was left in regards to creating awareness about their product portfolio, new products to be launched in the market among others. Also there was an increase in the production cost that arose from the new packaging and labeling requirement and this meant creating a budget for this new alterations.

Workforce:
Some of the marketing staff was laid off from the ban on advertisements, sponsorships and promotions as their roles in the organizations were rendered redundant especially those of the promotions women and men as the new law was non tolerant to direct marketing of cigarettes.

Customers:
Communication between BAT customers and the company was drastically reduced as they had no means of creating awareness of new products launched into the market.

Suppliers:
Suppliers are partners who offer BAT both products and services. Marketing agencies that used to provide their marketing services such s SCAN GROUP and MOMENTUM were affected by the new laws as they are not allowed by law to advertise on print media, electronic media, and social media or even carry out any sponsorship events on behalf of the company. That has reduced their income from offering the above services.

Government:
Due to the reduced market presence of cigarettes BAT has not be able to grow as fast as they had envisioned and therefore their profits have not been as sky-rocketing as they had imagined. This has led to lower tax payments as sales have also plummeted in addition to company growth.

Unions:
Unions came in to protect the staff members whose jobs were rendered redundant by making sure that BAT would compensate the staff members well and fairly based on the agreed terms stipulated on their working contracts.

Community:
Through the introduction of the new packaging and labeling law users are made aware of the side effects of smoking and they know what health risks they have opened themselves up to. Also by creating designated smoking areas in public places, work places and public service vehicles the non smokers are not affected by second hand smoking and this protects the community from unwanted and avoidable health risks.
Smokers are not all

Competitors:
The new tobacco laws put BAT and other cigarette companies on a level playing field as they are regulated with the same laws and are required to conduct business in the same way with no unfair advantage given to other organizations in the same industry.

Consumer Advocates:
These look at overall consumer protection and ensure that the companies provide products of good quality and in line with the government rules and regulations by ensuring that the products are safe for consumption. An example is KEBS which is a government body that ensures that companies deliver to consumer’s quality products they promised from the get go and they do this by taking random samples through quality checks.

Media:
The media have also lost in regards to income creation as they were not able to advertise on behalf of the BAT and make money from TV adverts, Radio Adverts, News Papers among others

REFERENCES: * John P. Kotter, Leading Change (2012) * R. Edward Freeman, Strategic Management: A Stakeholders Approach (2010) * Rosabeth M. Kanter, The Challenge of Organizational Change: How leaders companies experience it and leaders guide it (2003) * Johnson G. and Scholes K., Exploring Corporate Strategy, 5th EDN, Prentice Hall Europe (1999) * Tobacco Control Act 2007 * Traffic Act (as amended)