Factors In Appraisal Corporate Publics
Business exists for people. Thus, the first consideration in the strategic process is to recognize the individuals and groups who have an interest in the fate of the corporation and the extent and nature of their expectations.
Meaning of Corporate Public
The following groups generally constitute the interest-holders in business organizations:
1. Owners
2. Employees
3. Customers
4. Suppliers
5. Banking community and other lenders
6. Government
7. Community in which the company does business
8. Society at large
For the healthy growth of the organization, all eight groups must be served adequately. Of all the stakeholders, in the past corporations paid little attention to the communities in which they operated; today, however, the importance of service to community and to society is widely acknowledged. The community may force a company to refrain from activities that are detrimental to the environment. For example, the Boise Cascade Company was once denounced as harsh, stingy, socially insensitive, and considerably short of the highest ethical standards because of its unplanned land development. Community interests ultimately prevailed, forcing the company to either give up its land development activities or make proper arrangements for the disposal of waste and to introduce other environmental safeguards. Similarly, social concern may prevent a company from becoming involved in certain types of business. A publishing company responsive to community standards may refuse to publish pornographic material.
Johnson & Johnson exemplified responsible corporate behavior when it resolved the contingency created by the deaths of seven individuals who had consumed contaminated Tylenol capsules.2 Within a few days, the company instituted a total product recall at a cost of $50 million after taxes, despite the fact that the problem did not occur because of negligence on the part of the company. Subsequently, the company took the initiative to develop more effective packaging to prevent tampering in the future. The company's commitment to socially responsible behavior was reaffirmed when it quit producing capsules entirely after the tampering occurred again. Johnson & Johnson put the well-being of the customer ahead of profitability in resolving this tampering problem. In brief, the requirements and expectations of today's society must serve as basic ingredients in the development of strategy:
Though profit and efficiency must remain central values within the culture, they must be balanced by other values that help define the limits of activities designed to achieve those objectives and by values describing other important ethical and socially responsible behaviors. Without the integration of concerns about ethics and social responsibility at the very beginning of the marketing planning process, as well as throughout the process, the organizational culture may not provide the checks and balances needed to develop ethical and socially responsible marketing programs.3
Corporate Response to Different Publics
Historically, a business organization considered its sole purpose to be economic gain, concerning itself with other spheres of society only when required by law or self-interest or when motivated by philanthropy or charity. Charity was merely a celebration of a corporation's good fortune that it desired to share with "outsiders" or a display of pity for the unfortunate. Indirectly, of course, even this rather uninspired notion of charity gave the company a good name and thus served a public relations function.4 In slack times, a company reduced its activities in all areas, instituting both inside cost-cutting measures and the lowering of commitments to all publics other than stockholders. Such a perspective worked well until the mid-1960s; however, with economic prosperity almost assured, different stakeholders have begun to demand a more equitable deal from corporations.
Concern over environmental pollution by corporations, for example, has become a major issue in both the public and the private sector. Similarly, customers expect products to be wholesome; employees want opportunities for advancement and self-improvement; and the community hopes that a corporation would assume some of its concerns, such as unemployment among minorities. Society now expects business corporations to help in resolving social problems. In brief, the role of the corporation has shifted from that of an economic institution solely responsible to its stockholders to that of a multifaceted force owing its existence to different stakeholders to whom it must be accountable. As one of the most progressive institutions in the society, the corporation is expected to provide balanced prosperity in all fields. Two generations ago, the idea of a business being a party to a contract with society would have provoked an indignant snort from most businesspeople. Even 10 years ago, a business's contract with society was more likely material for a corporate president's speech to the stockholders than a basis for policy. It is a measure of how much the attitudes of middle-of-the-road businesspeople have changed that the notion of a social contract is now the basic assumption for their statements on the social responsibilities of a business. This new outlook extends the mission of the business beyond its primary obligation to owners.
In today's environment, corporate strategy must be developed not simply to enhance financial performance, but also to maximize performance across the board, delivering the highest gains to all stakeholders, or corporate publics. And companies are responding to changing times. As former chairman Waldron of Avon Products noted, "We have 40,000 employees and 1.3 million representatives.
. . . They have much deeper and more important stakes in our company than shareholders.'^
The "concept of stakeholders" is really an extension of the marketing concept, the central doctrine in marketing.
Marketing concept and the stakeholder concept are strongly related with a common root or core. Clearly, one commonality is that the stakeholder concept recognizes the consumer as a public with concerns central to the organization's purpose. Perhaps a further element of this common core is a realization of the importance of cooperative exchange with the consumer. In fact, all publics of an organization can be viewed in a cooperative vs. adversarial perspective. Cooperative strategies with labor, marketing channel members, etc., may result in eventual but not mutual symbiosis. For example, if a manufacturer cooperates with wholesalers, then these wholesalers may be more likely to cooperate with retailers. Similarly, retailers may then be more likely to treat the customer well. Consequently, the customer will be more loyal to certain brands, and this catalyzes the manufacturer to continue to be cooperative with channel members. This eventual, but not necessarily mutual, symbiosis may result in more long-run stability and evolutionary potential within the business system.6
One company that systematically and continuously examines and serves the interests of its stakeholders is Corning. It cooperates with labor, promotes diversity, and goes out of its way to improve the community. For example, the company's partnership with the glass workers' union promotes joint decision making. Worker teams determine job schedules and even factory design. All U.S. workers share a bonus based on point performance. All managers and salaried workers attend seminars to build sensitivity and support for women and African-American coworkers. A network of mentors helps minorities (i.e., African Americans, Asians, Hispanics, and women) with career planning. Corning acquires and rehabilitates commercial properties, then finds tenants (some minority-owned) at market rates to locate their business there. It works to attract new business to the region and has invested in the local infrastructure by building a Hilton hotel, a museum, and a city library.
More than the biggest employer in town, Corning plays benefactor, landlord, and social engineer. The company is half-owner of a racetrack and sponsors a professional golf tournament. Affordable housing, day care, new business development—it's doing all that, too. Corning is more directly involved in its community than most big U.S. corporations. . . . When a flood in 1972 put the town under 10 feet of water, the company paid area teenagers to rehabilitate damaged homes and appliances, then spent millions to build a new library and skating rink. But Corning's recent efforts have been more focused: They aim to turn a remote, insular town into a place that will appeal to the smart professionals Corning wants to attract—a place that offers social options for young singles, support for new families, and cultural diversity for minorities.
It's a strategy that often borders on corporate socialism. Corning bought the rundown bars—which "didn't fit with our objective,'' says one executive—as part of a block-long redevelopment of Market Street, the town's main commercial strip.
More important, Corning is working to create a region less dependent on its headquarters and 15 factories. . . . To help support the flagging local economy, Corning bought the Watkins Glen auto-racing track, which had slipped into bankruptcy. It rebuilt the facility, took in a managing partner, and last summer, saw the track host 200,000 visitors. Similarly, the company lobbied a supermarket chain to build an enormous new store. It persuaded United Parcel Service to locate a regional hub nearby.
In all, Corning expects its Corning Enterprises subsidiary, which spearheads community investments, to bring 200 new jobs to the Chemung River valley each year. It also wants to boost the number of tourists by 2% annually and attract four new businesses to town. Corning Enterprises funds its activities largely with rental income from real estate that it has purchased and rehabilitated.7
Corporate Publics: Analysis of Expectations
Although the expectations of different groups vary, in our society growth and improvement are the common expectations of any institution. But this broad view does not take into account the stakes of different groups within a business. For planning purposes, a clearer definition of each group's hopes is needed.
Exhibit 3-2 summarizes the factors against which the expectations of different groups can be measured. The broad categories shown here should be broken down into subcategories as far as possible. For example, in a community where juvenile delinquency is rampant, youth programs become an important area of corporate concern. One must be careful, however, not to make unrealistic or false assumptions about the expectations of different groups. Take owners, for example. Typically, 50 percent of earnings after taxes must be reinvested in the business to sustain normal growth, but the payout desired by the owners may render it difficult to finance growth. Thus, a balance must be struck between the payment of dividends and the plowing back of earnings. A vice president of finance for a chemical company with yearly sales over $100 million said in a conversation with the author:
While we do recognize the significance of retaining more money, we must consider the desires of our stockholders. They happen to be people who actually live on dividend payments. Thus, a part of long-term growth must be given up in order to maintain their short-term needs for regular dividend payments.
Apparently this company would not be correct in assuming that growth alone is the objective of its stockholders. Thus, it behooves the marketing strategist to gain clear insight into the demands of different corporate publics.
Who in the company should study stakeholders' expectations? This task constitutes a project in itself and should be assigned either to someone inside the company (such as a strategic planner, an assistant to the president, a director of public affairs, or a marketing researcher) or to a consultant hired for this purpose. When this analysis is first undertaken, it will be fairly difficult to specify stakeholders, designate their areas of concern, and make their expectations explicit. After the initial study is made, updating it from year to year should be fairly routine.
The groups that constitute the stakeholders of a business organization are usually the same from one business to another. Mainly they are the owners, employees, customers, suppliers, the banking community and other lenders, government, the immediate community, and society at large. The areas of concern of each group and their expectations, however, require surveying. As with any other
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