Chapter 2

Chapter 2
Managing Public Issues and

Stakeholder Relationships
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McGraw-Hill without the prior written consent of McGraw-Hill Education.
Ch. 2: Key Learning Objectives
2-1 Identifying public issues and analyzing gaps between corporate
performance and stakeholder expectations.
2-2 Applying available tools or techniques to scan an organization’s
multiple environments and assessing stakeholder materiality.
2-3 Describing the steps in the issue management process and
determining how to make the process most effective.
2-4 Identifying the managerial skills required to respond to emerging
issues effectively.
2-5 Understanding how businesses can effectively engage with its
stakeholders, what drives this engagement, and the role social
media can play.
2-6 Recognizing the value of creating stakeholder dialogue and
networks.
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Public Issues
Public Issue: Any issue that is of

mutual concern to an
organization and one or more of
its stakeholders.
Stakeholder Expectations: A
mixture of people’s opinions,
attitudes, and beliefs about what
constitutes reasonable business
behavior.

Public Issues:
Performance-Expectations Gap
Failure to understand stakeholder

concerns and to respond
appropriately will:
• Permit the performance–expectations gap to
grow.
• The larger the gap, the greater the risk of
stakeholder backlash or of missing business
opportunity.
 Example:
Antibiotics in chicken.

The Performance-Expectations Gap
Figure 2.1
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Environmental Analysis and Intelligence
Environmental Analysis: A method managers use
to gather information about external issues and
trends
to develop an organizational strategy that

minimizes threats and takes advantage of new
opportunities.
Environmental Intelligence: the acquisition of

information gained from analyzing the multiple
environments affecting organizations.

Eight Strategic Radar Screens
Figure 2.2

Competitive Intelligence
The systematic and continuous process of gathering,
analyzing, and managing external information about the
organization’s competitors that can affect the
organization’s plans, decisions, and operations.
With the need to comply with all applicable laws, and to

follow the professional standards of fairness and honesty.

Stakeholder Materiality*
Copyright © McGraw-Hill Education. Permission required for reproduction or display. Figure 2.3
*Adaptation of an accounting term to prioritize the relevance of the stakeholders and their issues to the company.

The Issue Management Process 1
1.Identify Issue
• Anticipating emerging concerns, or “horizon” issues.
2.Analyze Issue
• Organizations must understand how the issue is likely to evolve, and
how it is likely to affect them.
3.Generate Options
• Requires complex judgments that incorporate ethical considerations
like the company’s reputation.
4.Take Action
• Once an option is chosen, the organization must design and
implement a plan of action.
5.Evaluate Results
• Must assess results of the program and make adjustments if
necessary.
The Issue Management Process 2
Figure 2.4

Organizing for Effective Issue Management
Part of the organization is mobilized to

address a particular emerging issue, it often
depends on the nature of the issue itself.
• Involve the board of directors and top
management levels.
Effective global leadership on public issues

requires three basic capabilities:
• Understanding of the changing business context.
• Ability to lead in the face of complexity.
• Connectedness: the ability to engage with
external stakeholders in dialogue and partnership.

Stages in the Business-Stakeholder Relationship
Over time, the nature of business’s relationship

with its stakeholders often evolve through a series
of stages.
• Inactive – Companies ignore stakeholder concerns.
• Reactive – Companies act only when forced to do so, and then
in a defensive manner.
• Proactive – Companies try to anticipate stakeholder concerns.
• Interactive –Companies actively engage stakeholders in an
ongoing relationship of mutual respect, openness, and trust.

Drivers of Stakeholder Engagement 1
Stakeholder engagement is, at its

core, a relationship.
The participation of a business
organization and at least one
stakeholder organization is
necessary.
Engagement: both the company
and its stakeholders have:
• An urgent and important goal.
• The motivation to participate.
• The organizational capacity to engage
with one another.

Drivers of Stakeholder Engagement 2
From Figure 2.5

Company Stakeholder(s)
Goal To improve corporate reputation; To change corporate behavior on

to earn a license to operate; an issue of concern.
to win approval of society.
Motivation Needs stakeholder involvement Governmental campaigns,

because of their expertise or protest perceived as inadequate
control of critical resources. to change corporate behavior.
Organizational Top leaders committed to Experienced staff;

capacity engagement; core group of activists committed
well-funded department of to dialogue with business.
external (stakeholder) affairs.

The Role of Social Media in
Stakeholder Engagement
Address public issues and engage stakeholders.
Identify and solve problems faster.
Share information better among their employees and
partners.
Bring customers’ ideas for new product designs to
market earlier.
Platforms to engage with multiple stakeholders,
communication has become faster and more effective.

Stakeholder Dialogue
Core interest and
concerns, Understandings
common and concerns of
definition of a all parties.
problem.
Business and its
Invent
Stakeholders
innovative
come to face-to-
solutions and
face
implement
conversations.
them.
→Example: Merck.

Stakeholder Networks
Addressing public issues by:

• working collaboratively with other
businesses, concerned persons and
organizations in stakeholder
networks.
Example: Nike.

The Benefits of Engagement
Stakeholder organizations bring a

number of distinct strengths:
• Alert companies to emerging issues.
• Give a firm access to information via
networking.
• Technical or scientific expertise in specific
areas.
• Better result in the eyes of the public.
• Meet the society’s expectations and
generate good solutions.
• Improve a company’s reputation.

End of
Main
Content
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consent of McGraw-Hill Education.

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Chapter 2

Managing Public Issues and

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Public Issue: Any issue that is of

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Failure to understand stakeholder

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Access the text alternative for these images.

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to develop an organizational strategy that

Environmental Intelligence: the acquisition of

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With the need to comply with all applicable laws, and to

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Access the text alternative for these images.

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Part of the organization is mobilized to

Effective global leadership on public issues

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Over time, the nature of business’s relationship

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Stakeholder engagement is, at its

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From Figure 2.5

Goal To improve corporate reputation; To change corporate behavior on

Motivation Needs stakeholder involvement Governmental campaigns,

Organizational Top leaders committed to Experienced staff;

Copyright ©2020 McGraw-Hill Education 2-15

Copyright ©2020 McGraw-Hill Education 2-16

Copyright ©2020 McGraw-Hill Education 2-17

Addressing public issues by:

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Stakeholder organizations bring a

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Because learning changes everything. ®

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