Leadership on Point

Stakeholders and Change Management

October 26, 2011 Dr. Johnny Magwood - Guest Author

Stakeholders and Change Management, Leadership, Leadership Development, Richard Levin & Associates

Effective Business Positioning with External Stakeholders

Business executives and connected advocacy groups are both focused on the benefits and risks encountered by an organization’s business decisions.  As both entities measure and manage organizational benefits and risks, proponents of theoretical stakeholder’s viewpoint postulated that the long-term sustainability of the firm is ultimately based on relationships (Vachani, 2006).  Experts, in the field of stakeholder theory, speculate several important leadership factors that should be embraced by today’s executives, i.e.; noteworthy participations outside the professional arena and boundaries of job responsibilities; confronting institutional mindset both inside and outside the firm to think and behave in the communities’ or region’s favor; and maintaining a creative and constructive connection with the external social and philanthropic environments (Welter & Egmon, 2006).  Welter and Egmon suggested, “Building the continuous process of change readiness on deeply held, sustainable principles”.   Unfortunately, some leaders’ inability to accept their social responsibility may be a result of historical factors that influence their behaviors; whereas, previously learned behaviors, formal training, and orders from superiors are often established to confront current and future business predicaments, skirmishes, and opportunities.

Relevant business issues and controversies routinely center on the following: leaders may question the expectations of stakeholders (advocates and adversaries) and their economic interests, particularly those who do not harbor capital investments; managers’ feel obligated to give exclusive attention to investors versus promoting social responsibility (Goodpaster & Atkinson, 1992).  As Goodpaster and Atkinson posited, “the total net utility of a society cannot be [a] common good…because it is the good of no one and is shared by no one”.  However, transformational leadership theory suggests that leaders influence stakeholders by demonstrating behaviors that meet the firm needs and lifts both leaders and stakeholders to a higher level of motivation and ethics.  Some of our best leaders, those with external social understanding, tend to have the capacity to interact with stakeholders by recognizing the interest of community-oriented partners to facilitate their business objectives.


Change Management toward Stakeholder Appreciation

Organizational change is never easy; in fact some organizations never pursue necessary change; nonetheless, change is achievable – if even by force.  The following ideals provide a high-level approach to creating and influencing change: top executives should have change management as a business foresight and; therefore, constantly plan for change.  Planning for change creates a readiness environment and establishes change management guardrails and controls.  Change management must be process oriented; demonstrating organizational connectivity and relationships.  An organization’s vision and mission must be structured and premeditated to seamlessly guide the firm to make adjustments as internal and external changes materialize (Kerber & Buono, 2005).  Top executives must be laser focused to determine when a frozen organizational state exists and when internal and external business dynamics and environments are unfavorable.  Judicious executives must be capable of identifying the need to “rebalance” their organizations.  In such instances, top leaders’ role is to become change agents.


Written by Dr. Johnny D. Magwood, vice president customer experience & chief customer officer, Northeast Utilities Service Company.