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Conflict Between Stakeholders

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224 views5 pages

Conflict Between Stakeholders

Uploaded by

Amelie Schroeijers
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© © All Rights Reserved
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Conflict between stakeholders

Conflict between stakeholders (AO2)

"There is no greater enemy of effective thinking than divided interest."


- John Dewey, How We Think (1910)

Different stakeholder groups have different interests, which can


conflict. Conflict refers to the mutually exclusive and incompatible interests of
different stakeholder groups. If this is not managed, it often leads to protracted
disagreements, disputed and arguments in the workplace.
Examples of possible conflict between different stakeholders’ interests include:
• Employees demand higher wages, which raises production costs so can reduce the
amount of profits from which shareholders receive dividend payments.
• Similarly, senior managers and directors may demand large bonuses for their work,
but this may also reduce the profits available to distribute to the company’s
shareholders.
• Shareholders may demand regular and higher dividend payments, but this may
result in less retained profits (see Unit 3.2) available for production and marketing
managers to improve their functional roles.
• Customers may want lower prices, but this reduced the firm’s profit margin so can
upset the company’s shareholders.
• Employers may want greater efficiency and productivity gains by investing in new
technologies, but this might create job losses for employees.
• The local community want demand businesses operate in a socially responsible way
and create jobs in the local area, although this can create congestion and noise and
air pollution in the local area, thereby upsetting other members of the community.

Night flights can be convenient for customers, but noisy for local residents living near
airports

Hence, it can be extremely challenging to satisfy the diversified interests of all


stakeholder groups.
Nevertheless, there can be possible areas of mutual benefits between stakeholders’
interests. For example:
• Business expansion can generate more profits for shareholders, whilst creating more
jobs in the local community. Business growth can also generate more tax revenues
for the government. Suppliers also benefit from more orders.
• Customers want value for money, with competitive prices and good quality products.
This does not necessarily cause a conflict with managers and directors as
businesses that create value for money are most likely to sustain profits in the long
term, generating a healthy return on investment for shareholders.
• Improved financial rewards for all employees will cost more, but can result in a more
motivated, loyal and productive workforce. Ultimately, resolving the potential conflict
in interest between employees and employers can lead to improved efficiency and
higher profits.

In reality, it is likely that stakeholder conflict is likely to exist at least to some extent
(especially for large organizations) due to the varying interests of the different
stakeholder groups.
Satisfying the interests of stakeholders is therefore a particularly difficult balancing
act of striving to meet the complex and competing interests of all stakeholder groups.
Watch this short news report about stakeholder conflict at Uber and Lyft in California, USA.
Identify the various needs of Uber and Lyft and how these might conflict with their drivers.
The video clip highlights the legal dispute between Uber and Lyft with some of their ride-
sharing drivers in California. The drivers claim to be denied of employment entitlements such
as a minimum wage, healthcare provision, and paid (holiday) leave. Uber and Lyft want to
protect their profit margins by avoiding the high costs of employment perks and entitlements.
By contrast, their drivers have safety needs, such as job security and other employment
entitlements.

Case Study - Stakeholder conflict at The Virgin Group


"Clients do not come first. Employees come first. If you take care of your employees,
they will take care of the clients."
- Sir Richard Branson (b.1950), Co-founder the Virgin Group
Many people and businesses argue that customers are the most important
stakeholder group and that their needs must be met in order for the business to
succeed. They argue that the customer is always right, even if / when they are wrong.
Sir Richard Branson (b.1950), founder of the Virgin Group, strongly believes that
stakeholder conflict need not exist by placing the interests of employees first. He
argues that by doing so, employees will look after the company's customers, which
will ultimately bring value to shareholders (stockholders).
Watch this short video featuring Sir Richard Branson, who talks about why he thinks
this is so important for his business (and any business). Thank you to Rebecca
Graham, from Chester International School in the UK, for suggesting and sharing this
video link:
The Virgin Group consists of more than 400 different companies that operate in
different industries. According to Sir Richard Branson, the company's ethos is based
on delivering exceptional customer service by first looking after their employees.
Extension task - Stakeholder mapping
A common tool used by managers to resolve stakeholder conflict is stakeholder mapping.
Whilst this tool is not explicitly featured in the guide, please note the following statement:
"A recurring topic throughout the business management syllabus is stakeholders, their
differing viewpoints, conflicting
objectives and how they are affected by change. Considering the differing perspectives of
stakeholder groups allows students to gain a greater understanding of issues as diverse as
financial accounts and workforce participation." (page 8).
Stakeholder mapping is part of the stakeholder analysis process. It considers the differing
perspectives of stakeholder groups by categorising stakeholders into four quadrants, based on
their level of power (or influence) and their level of interest. Read more about stakeholder
mapping by clicking the link here.
Key concept - Change
Use example to explain why change can often bring about conflict amongst different
stakeholder groups.
Business Management Toolkit - Hofstede's cultural dimensions
Examine how the corporate culture in an organization of your choice has been
influenced by different stakeholder groups.
You may wish to refer to Hofstede's cultural dimensions (HL only) prior to
answering this question.
Watch this 11-minute video to recap your knowledge and understanding of internal
and external stakeholders, their objectives, and managing stakeholder conflicts.
After watching the video, have a go at the Review Questions below for this section of
the IB Business Management syllabus.

Note that resolving stakeholder conflict is no longer in the syllabus, although it may seem
logical to understand how managers might go about resolving conflict between stakeholders.
Click the icon below to read about this (although not explicit in the guide, it can help students
to consolidate their understanding of this topic).
ATL Activity – People Problems: Role Play
"Great things in business are never done by one person. They're done by a team of people."
- Steve Jobs (1955 - 2011), Co-founder of Apple
Consider the four "people problems" below and take turns to role play the characters
and to observe how the conflict worsens or gets resolved.
People problem 1: Unfair dismissal?
The school principal publicly humiliates a teacher in the staffroom. The teacher
storms out of the school in tears and wants the backing of her trade union to sue the
school for constructive dismissal. The union representative meets with the principal.
Should the principal fight the case or reach a settlement?
People problem 2: The failing employee?
Lisa was one of the top salespeople at Tours Corp. However, she has recently been
late for work and has not been meeting her sales targets. Ellie, the sales manager,
wants Lisa sacked (fired) from her job but Ryan, the marketing director, disagrees.
What should they do?
People problem 3: Sexual harassment?
Debbie has complained that Nial, her line manager, has been sexually harassing her
over the past three months. Nial denies the charges and claims that Debbie is simply
incompetent. What should the business do?
People problem 4: A case of grievance?
Edd has been accused of stealing from his employers. His boss claims that a witness
saw the incident. The boss says that he is willing to forgive Edd if he accepts a whole
week’s wages to be deducted to pay for the stolen goods. Edd is adamant of his
innocence. What should he do?
Reflections
What did you learn about conflict and conflict resolution from being part of and/or
observing these role plays?

Key terms
• Arbitration is a method of conflict resolution used to resolve stakeholder conflict by
considering the perspectives of all parties involved in the dispute. All stakeholder
groups in conflict agree to accept the decision or judgement of the arbitrator.
• Compromise is a method of conflict resolution that involves stakeholders
deliberately making considerations for other stakeholders, despite their differences.
• Conciliation is a method of conflict resolution that involves using a third party to
align the incompatible interests of different stakeholder groups. Conciliators support
both parties in a dispute to better understand each other’s interests and needs,
which can help to resolve stakeholder conflicts.
• Conflict refers to the mutually exclusive and incompatible interests of different
stakeholder groups.
• Pressure groups are organizations consisting of like-minded individuals who come
together for a common cause or concern.
• Share ownership schemes are a method of conflict resolution that enables workers
to purchase shares in the company at a discounted price, thereby granting them part
ownership of the business and aligning their interest in the firm’s financial
performance and success.
• Worker participation (or industrial democracy) is a method of conflict resolution
that involves employees having a direct say in how things are done in the workplace.
This enables workers to have some degree of decision-making power, which can
help to minimise potential conflict between employees and employers.

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