Companies increasingly need to engage a wide range of stakeholders, but managers often underestimate the complexity of the task.
In this article, the authors review various streams of research suggesting that although companies are increasingly under pressure to manage conflicting or difficult-to-reconcile stakeholder demands, managers are still largely behind the curve in recognizing, justifying and developing the capabilities to do so. In contrast to primary stakeholders such as customers, suppliers and shareholders, secondary stakeholders are often difficult to identify beforehand, or they may not be willing or able to engage, negotiate, compromise or clearly articulate their positions — a phenomenon the authors refer to as stakeholder ambiguity.
Citing examples involving companies such as Monsanto, Conoco-Philips, Texaco and the French oil company Perenco, the authors present research indicating that managers are often ill-prepared to deal with the idiosyncratic and context-specific nature of stakeholder ambiguity and typically revert to formulaic decision-making frameworks, such as discounted cash flow and cost-benefit analysis, which misrepresent the challenges. Some research indicates that stakeholder ambiguity may actually erode the competitive advantage of large multinationals. Although such companies possess significant competencies, technological capabilities and economies of scale, they may be at a disadvantage when trying to determine and align the interests of secondary stakeholders.