Stakeholder Expectations in the Corporate and Social Sectors
Daft (2013) identified nine distinct groups of stakeholders that have an interest in an organization’s outcomes: owners and stockholders, employees, customers, creditors, management, government, unions, community members, and suppliers. Most of these stakeholder groups hold at least some sway over every organization’s operations, whether it aims to earn money for its owners (business) or achieve social impact (nonprofit and government).
Comparing for-Profit and Nonprofit Organizations
Business organizations have traditionally been seen as having primary accountability to the financial interests of their owners or shareholders. However, recent shifts in emphasis toward customer satisfaction, sustainability, and ethics clearly demonstrate the power that other stakeholders wield. Some approaches to performance assessment, including the balanced scorecard (BSC), consciously seek to balance the interests of multiple stakeholder groups—most notably, owners, employees, and customers. The interests of one group often conflict rather directly with those of other groups.
According to Daft (2013), “Managers in nonprofit organizations . . . deal with many diverse stakeholders and must market their services to attract not only clients (customers) but also volunteers and donors” (p. 13). In seeking to implement the BSC, a nonprofit must grapple with the issue of identifying who its customer is. As Niven (2008) has noted, “In [the nonprofit and public] sectors, different groups design the service, pay for the service, and ultimately benefit from the service” (p. 34). Vokurka (2000), applying total quality management principles to a nonprofit setting, recognized that a local church differs from other kinds of organizations in that “the customers are also the major resources of the organization” (p. 23). Given these complexities, it is indeed possible that nonprofit managers need to pay more attention to their various stakeholders than their counterparts in the corporate world.
Evaluating a Government Agency’s Effectiveness
A local public agency, such as a police department, has significant responsibilities to several stakeholder groups—most notably, residents and businesses located in the community, department employees, and local and state government. The interests of each group should be considered in assessing the department’s effectiveness.
Daft (2013) discussed four approaches to measuring effectiveness, with orientation toward goals, resources, internal processes, and strategic constituents. Two of these approaches are quite inadequate to the task of evaluating a government agency. The resource-based approach is focused on inputs, but a public agency must be evaluated with respect to outputs. Similarly, an internal process approach, being focused on “internal organizational health and efficiency” (Daft, 2013, p. 144), fails to have the necessary orientation toward public needs.
The remaining two approaches hold promise of viability. If there is sufficient consensus as to the mission and operating goals of the department, a goal-based approach could be useful. More likely, though, criteria for success would vary in the eyes of different stakeholder groups. This implies a need to employ the strategic constituents approach—consciously seeking to attend to the needs and concerns of groups with significant and legitimate interests in the department’s effectiveness. Regardless of the approach chosen, effectiveness should be measured in multiple dimensions. The balanced scorecard, initially designed for the corporate world, is an example of a multifaceted organizational performance tool that has been applied usefully to the realm of government (Niven, 2008).
Daft, R. L. (2013). Understanding the theory & design of organizations (11th ed.). Cengage Learning.
Niven, P. R. (2008). Balanced scorecard step-by-step for government and nonprofit agencies (2nd ed.). Hoboken, NJ: John Wiley & Sons. Retrieved from http://ezproxy.liberty.edu:2048/login?url=http://site.ebrary.com/lib/liberty/Doc?id=10296392
Vokurka, R. J. (2000). The applicability of total quality management principles to church management: A case study. Journal of Ministry Marketing & Management, 5(2), 21–33.