Stakeholder Management at Wal-Mart - Case Study Example

Stakeholder Engagement: Case Study of Wal-Mart Name: Course: Institution: Tutor: Date: Executive Summary The following report provides a critical evaluation of the significance of stakeholder engagement as part of Management Framework for Business Projects. The report draws heavily from the course text and other sources to present a discussion on stakeholder engagement with the international retailer, Wal-Mart, as a case study. The first part of the report is a brief discussion of the concept of stakeholder engagement, the second part is a review of Wal-Mart’s approach to stakeholder engagement, and the third part is a critical evaluation of the company’s approach. The report ends with recommendations on how Wal-Mart can improve its stakeholder engagement process. In summary, the report finds that Wal-Mart has adopted a proactive approach in its stakeholder engagement process. Through this approach, the company has cultivated long-term relationship with its stakeholders, a factor that is responsible for Wal-Mart’s market dominance. Table of Contents Executive Summary 2 Table of Contents 3 Introduction 4 Purpose, Audience and Choice of the Topic 5 Organization Background 5 An Outline of Wal-Mart’s Stakeholder Engagement Approach 5 Analysis of Wal-Mart’s Stakeholder Engagement Approach using the MFBP Theory 8 Strengths and Weakness of Wal-Mart’s Stakeholder Engagement Approach 9 Conclusion 10 Recommendations 10 Introduction Stakeholder engagement is a common term in organizational management. When broken down to the component words, stakeholder refers to any entity or individual who is potentially affected by a project or who can influence the outcomes of a project (Zwikael & Smyrk, p. 112). As whole, stakeholder engagement refers to the involvement of entities impacted by the project or with an impact on a project in the decision making both as a management strategy and as an ethical requirement (Maak 2007). Zwikael & Smyrk (2011, p.114) thus define stakeholder engagement as “programs that seek to involve stakeholders in ways that increase a project’s attractiveness, not only to them, but ultimately to the funder.” Freeman (2010) claim that for organizations to create and sustain value, they must engage stakeholders drawing in all the affected parties and not just the major ones. Freeman (p. 25) also conceptualizes stakeholders as part of the external business environment. Zwikael and Smyrk (p.114) capture the important of stakeholder engagement by saying that organizations can no longer choose whether to engage with stakeholders or not: the only decision they need to make is how to successfully engage stakeholders. The authors add that meaningful stakeholder engagement occurs when organizations, aware of their interactions with the society, choose to establish relations with stakeholders as a means of managing those interactions. Through stakeholder engagement, organizations can either choose to identify new opportunities or mitigate risks (Zwikael & Smyrk, p. 113). Purpose, Audience and Choice of the Topic This report provides an appraisal of Wal-Mart’s stakeholder engagement process. This report is not necessarily meant for use as basis for implementing policies but will contribute to the understanding of the concept of stakeholder engagement. Organization Background Wal-Mart is a private retailer based in the United States. The company offers a wide range of retail products and services from food and clothing to car tires and pharmacy prescriptions. Wal-Mart has thousands of stores across the world, which together with high profits has made it the largest retailer in the world (Hayden et al 2002). The company is unique in that it has successfully managed to take advantage of economic globalization to put the interests of stakeholders above all other business interests. An Outline of Wal-Mart’s Stakeholder Engagement Approach Ever since its inception, Wal-Mart has sought to have a proactive and open relationship with its stakeholders including employees, customers, supplies and the government. At Wal-Mart, good stakeholder relationships are fundamental to the company’s core business. These relationships have been evolving to meet the changing needs of different stakeholder groups (Wal-Mart 2012). When Wal-Mart began a global expansion program in the 1970s, it launched an innovative stakeholder engagement program in which the company’s staff proactively engages stakeholders on the delivery of essential services (Hayden et al 2002). Wal-Mart’s successful proactive stakeholder engagement has led to a number of partnerships that have benefitted the local communities including contribution to charity organizations. Moreover, Wal-Mart has established key engagement plans for NGO stakeholders, customers, suppliers, academic leaders, investors, and the media (Wal-Mart 2012). As a result of these engagements, Wal-Mart has successfully improved its service delivery and grown dramatically to dominate the global retail industry. The development of meaningful relations with stakeholders has added value to Wal-Mart’s business operations by: reducing business constraints; allowing the company to plan for the future; enhancing opportunities and minimizing risks and allowing the company to understand critics and respond to criticism (Hayden et al 2002). Additionally, Wal-Mart’s stakeholder engagement approach has enabled the organization to assure stakeholders that they are on top of issues and essential for solving key business problems (Wal-Mart 2012). Basically, Wal-Mart’s proactive stakeholder engagement process can be analyzed using Zwikael and Smyrk (p. 118) five-step process or Jeffrey’s (p. 9) seven-step process. These processes are intrinsically similar only that Jeffrey’s model has two extra steps for trust building and consultations which are addressed stakeholder engagement implementation step in Zwikael and Smyrk’s (2011) model. a. Stakeholder identification: This step involving identifying major stakeholders in light of the objectives of the project (Zwikael and Smyrk, p. 118). Stakeholders who are likely to be impacted negatively by the project should be given priority. Wal-Mart identifies its stakeholders as associates, customers, shareholders, academic leaders, government, nongovernmental organizations (NGOs), customers and even competitors (Wal-Mart 2010) b. Stakeholder analysis. This involves understanding the nature of interest that stakeholders have on the project and also determining the best strategies for engaging them. In this stage, a stakeholder register is created depicting results of analysis and an outline of proposed form of engagement for each stakeholder (Zwikael and Smyrk, p. 121). For Wal-Mart, consumers, scholars, governments have all different interests that cannot be addressed with one generalized strategy. For instance, consumer engagement in cutting down carbon emissions pertains to use of recyclable bags and green products. c. Stakeholder engagement planning. This step involves detailed planning of stakeholder engagement using the stakeholder register. Engagement processes are broken down and plotted on the Gantt chart and communication is harmonized (Zwikael and Smyrk, p. 124). For Wal-Mart, this stage involves planning timed activities such as World earth day activities and planning for an integrated communication strategy. d. Stakeholder engagement implementation. This step is the actualization of the plans. Zwikael and Smyrk (p. 124-125) writes that it is undertaken in three main steps namely; communication plan, programmes of special engagement and involvement of stakeholders in conduct of the project. For Wal-Mart, this stage is evident in communication and customer involvement activities through the mywalmart.com site and the monthly associate magazine among other channels. e. Stakeholder engagement monitoring. For the success of the engagement plan, the process has to be monitored on its effectiveness in meeting set objectives and the desired impact n stakeholders (Zwikael and Smyrk p. 125). For Wal-Mart, monitoring and evaluation are ensured constantly to meet the evolving needs of the market and changing trends in the industry. Analysis of Wal-Mart’s Stakeholder Engagement Approach using the MFBP Theory Wal-Mart has taken a proactive approach to stakeholder management and an interactive stakeholder engagement program. This approach is based on the consideration that effective stakeholder engagement contributes directly to the bottom line and has a long term impact on the company’s business strategies. Essentially, engagement with stakeholders has the possibility of securing a wide range of benefits to an organization; from securing an organization’s license to operate to gathering information about improved product performance (Freeman p. 23). However, Zwikael and Smyrk (p. 17) state that through the input-outcome model, the core benefits of stakeholder engagement should be the realization of target outcomes that are consciously set at the onset and other desirable effects resulting from the project. The process should be regarded as a key business planning process that requires adequate analysis, implementation, reporting, evaluation and follow-up. As Wal-Mart’s case shows, an ideal stakeholder engagement process should be iterative ad flexible, allowing for the engagement to benefit from diligent planning and execution (Hayden et al 2007). For Wal-Mart, stakeholder engagement can lead the realization of a wide array of benefits identified at the onset of every project undertaken. Part of the planning for stakeholder engagement involves clustering of issues raised by stakeholders so as to avoid redundant activities. By clustering issues, it is easier to meet all stakeholder requirements (Zwikael & Smyrk p. 138). Zwikael and Smyrk (p. 126-127) assert that when deliberating on the appropriate stakeholder engagement approach, it is imperative to determine the shared values and needs of different stakeholder which are grouped into clusters. Each cluster is then named afresh to give the impression of the general idea of the issues covered in the particular cluster. Such a framework can be very helpful in addressing the relevant issues through engagement. Clustering thus in effect aids in clearer articulation of issues critical in stakeholder engagement. According to Maak (p. 338), building trust with stakeholders and being transparent about the motivations of stakeholders and the organizations can significantly help in achieving engagement objectives. Further, clustering highlights the motivations for stakeholders. Strengths and Weakness of Wal-Mart’s Stakeholder Engagement Approach While there are numerous challenges associated with Wal-Mart’s stakeholder engagement approach, these challenges are trivial compared to the risks of failing to engage stakeholder in a strategic and timely manner. For organizations looking to actively manage their reputations and brand names, knowing how to engage stakeholders effectively is a critical business function (Jeffrey p. 8). One of the most important strengths of Wal-Mart’s engagement approach is that it enables the company to focus on issues that matter most and also meet its legal and ethical obligations such as commitment to International Labour Organizations requirements (Wal-Mart 2012). Another important strength is that the approach enables the company to engage the right stakeholders by considering the stakeholder’s expertise, level of influence and willingness to engage and impact on the organization’s business objectives (Hayden et al 2002). Conclusion Stakeholder engagement is an essential aspect of any business process. The process helps businesses develop good relations with their stakeholders and to align stakeholder interests with company objectives and strategic values. An investigation of Wal-Mart’s stakeholder engagement shows that the retail giant has adopted a proactive approach through which it consistently engages stakeholders in evaluating business processes. Undeniably, stakeholder engagement is increasingly becoming a mainstream business practice and central to policy decision making. It is being used as a means to obtain enhanced community support, improve communications and gather useful data and information for sustainable decision making. The potential spin-offs from effective engagement include enhanced business processes and improvement in quality and sustainability of strategic competencies. Recommendations Although Wal-Mart has developed one of the most innovative and effective stakeholder engagement approaches, the following recommendations can help enhance the effectiveness and efficiency of this approach: i. Engage empowered representatives: it is imperative that the Wal-Mart engages representatives who are capable of taking decisions on behalf of stakeholders facilitated by a contract on transfer of power. Macdonald (p. 184) this approach suits projects and organizations with very many stakeholders and meeting their specific needs might be costly. Such a strategy will allow the firm to reach out to all its stakeholders who include farmers in third world countries. ii. Manage expectations: it is essential that Wal-Mart makes it certain that all parties to the engagement process have realistic ambitions and agree on clear outcomes of the engagement process (Macdonald p. 184). This specifically pertains to the past cases where employees and lobby groups have strongly opposed downsizing by the firm despite financial sense to do so. Stakeholders perspectives should be used to form basis for decision making but the responsibility of the decision should rest with the company. iii. Provide adequate funds: the company should devote enough resources (time, personnel and money) to ensure a successful stakeholder engagement process. Zwikael & Smyrk (p. 139) say that many firms are motivated by perceived or implied outcomes of a project. In the same manner, stakeholder engagement should be driven by target outcomes. For Wal-Mart to realize the benefits, it must be willing to commit resources to projects and stakeholder engagement processes be driven by target outcomes. References Freeman, R 2010, Strategic management: a stakeholder approach, Cambridge University Press, London. Hayden, H, Seung, L., Kate, M & Mike, P 2002, Wal-Mart: Staying on top of the fortune 500, viewed 30th Oct. 2012 from, Jeffrey, N 2009, Stakeholder engagement: A road map to meaningful engagement. #2 in the Doughty Centre ‘How to do Corporate Responsibility’ Series, Doughty Centre, Cranfield School of Management. Maak, T 2007, ‘Responsible leadership, stakeholder engagement, and the emergence of social capital’, Journal of Business Ethics, vol. 74, no. 4, pp. 329–343 Macdonald, T. 2008, Global stakeholder democracy: power and representation beyond liberal states: power and representation beyond liberal states, Oxford University Press, London. Wal-Mart 2012, Stakeholder engagement. Viewed 30th Oct. 2012, 2012 from, Zwikael, O and Smyrk, J 2011, Project management for the creation of organizational value. Springer, London. Read More