Role of Stakeholders in HRD

Outline

This article describes stakeholders, their role in HRD. It also explains the role and nature of learning and development in HRD. By using the example of Amway, which is a global multilevel or direct marketing company, the role of stakeholders in an organization and stakeholders make a significant effect on the organization’s success. It is also focusing on the new practices of learning and development for the new era.

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Introduction

Studies and reports have given prominence to stakeholders which helped to realize the importance of stakeholders apart from the company. The success of an organization is closely linked with its stakeholder relationship. The best definition of stakeholder is given by Freeman as “Any group or individual who can affect or [be] affected by the achievement of organizations objectives.” (All About Stakeholders – Part 1: Relevant to ACCA Qualification Paper 1. 2008, p.44). This definition shows that stakeholders are bi-directional i.e. they can affect and be affected by the organization. The stakeholders include shareholders, management, employers, trade unions, customers, suppliers, and communities. The numbers of stakeholders depend upon the organizations. Large and complex organizations have more stakeholders. They can be categorized into three major groups like internal, connected, and external stakeholders. Managers and employees are the internal stakeholders who are situated with the company and affect the day-to-day affairs of the organization. Shareholders, suppliers, customers, are the connected stakeholders who invest or have dealings with the business. Some stakeholders do not have any direct relationship with the firm but can influence it in some way. They include government, pressure groups, local councils, neighbors, and the surrounding community.

Stakeholder Power: Four Gates of Engagement: Stakeholder commitment is an important aspect and a theory regarding this area has been formulated by Steven Walker and Jeffery Marr. According to them, organizations should be proactive in their approach to relationships with potential stakeholders. Awareness, admiration, knowledge, and action are the four tests that measure this commitment. So when each gate is passed, the relationship becomes stronger resulting in an Action relationship. A company with many stakeholders has the possibility of higher conflict than a firm with few stakeholders.

Stakeholder Management Capability (SMC) is another approach developed by Freeman for stakeholder management. SMC provides a three-level approach by which an organization can address its stakeholders. The three levels are Rational Level in which a company simply identifies its stakeholders; Process Level in which the organization collects data and information about the stakeholders through developed processes and procedures; Transactional Level in which managers interact with the stakeholders to form relationships. (Worthington 2009)

Mendelow framework helps to understand the influence of each stakeholder over an organization’s objectives and strategy. The framework helps to know which stakeholders can influence more by estimating their individual power and interest in the organization’s affairs. So the stakeholder with a high combination of power and interest influences moreover objectives. Power of the stakeholder is the ability to influence i.e. how much they can and interest shows the stakeholder’s willingness i.e. how much they care. It can be expressed in the form of an equation by:

  • Influence = Power * Interest

It is very hard to find out the stakeholder’s power and interest. (All About Stakeholders – Part 1: Relevant to ACCA Qualification Paper 1. 2008).

Stakeholders in the learning and development process

Stakeholders can participate in the learning and development process and make a substantial effect on the future of the organization. Because the stakeholders are the important constituents of an organization and their contribution will make a significant effect on the organizational culture.

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Importance of learning and development in an organization

An organization’s valuable asset is its employees. Knowledge, creativity, and passion make people different from physical assets. The term learning and development has its origin from the three words like training and development, employee development, and human resource development which are widely used both in the past and present. Rosemary Harrison has defined the purpose of Learning and Development as “The primary purpose of learning and development as an organizational process is to aid collective progress through the collaborative and expert stimulation and facilitation of learning and knowledge that support business goals, develop individual potential, and respect and build on diversity.” (Harrison P.7).

Nature and role of learning and development within the organization

An organization is working in a dynamic environment. It is influenced by internal and external factors of the environment in which it works. An organization’s success lies in how much it is capable to face those challenges.

The nature and role of learning and development can be described as below:

  1. Learning and development can accelerate the growth of the company
  2. Learning and development help to identify the main internal and external factors that control the change within the organization
  3. It can contribute to the growth of the organization and learning traditions in times of change
  4. It helps to identify the existing structures and systems and different ways of delivering learning.
  5. Learning and development helps to identify how to start and keep programs within the organization

The result in the learning and development used in several areas such as range of criteria, including a budget, the marketplace, individual goals, the organization’s strategy, and legal requirements. (Develop Strategy and plan for learning and development. 2001).

Organizational Learning

Organizational learning means that an organization adapts to its changing situation by improving its existing approaches and processes thus leading to new goals. Learning is embedded within the organization and it means that learning is a regular part of an organization’s daily work practiced in all levels of the organization including personnel, work unit, and organizational levels. Through learning, we can solve problems in the beginning stage itself. There is a sharing of knowledge throughout the organization. The main benefits of organizational learning are: it enhances the value of the customers, develops new businesses, reduces waste and costs, increases performance and productivity for fulfilling the social responsibilities. (Dwarakanath).

Learning organization

It is a concept that changed many organizations in a revolutionary way. The experiment of learning organization became a success in companies like Shell, Ford, Harley Davison, Herman Miller, and Federal Express (Revealed from the empirical study by the Centre for organizational learning under Peter Senge -1993)

“Organizations where people continually expand their capacity to create the results they truly desire, where new and expansive patterns of thinking are nurtured, where collective aspiration is set free, and where people are continually learning to learn together.” (Farago and Skyrme 1995).

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Thus the learning organization has the following features:

  1. Adaptive nature – They will adapt the change to whatever happening in the environment
  2. Continuous improvement through learning
  3. Development of collective learning and individual learning in the organization.
  4. Using the learning process for further progress of the organization. (Farago and Skyrme 1995).

The role of stakeholders in the learning and development process can be described with an example of Amway, a pioneer in the direct marketing sector. This will help us to understand how an organization will use its stakeholders in the learning and development process.

AMWAY

Amway is a pioneer company in the direct marketing sector. Started in the year of 1959, today Amway has become a global business. Amway’s customers and employees are spread around the world. Amway is producing, marketing, and distributing consumer products which include Personnel care, Skincare, Consumer durables, Nutrition and wellness, Catalogue items, and home care items. Amway is running its business through ABOs (Amway Business Owners). And ABO acts as a link with the customers and the company.

Stakeholders of Amway

Since it is a direct marketing company, the stakeholders have an important role in shaping the company’s success.

Here there are some internal, connected and external stakeholders. Employees, ABOs, Amway head office, Regional offices are becoming the internal stakeholders. They have a stake in running the business. The customers, suppliers, and other vested parties like banks and other financial institutions are the connected stakeholders. The public, community partners, Government, are the external stakeholders. Now we can look at how these stakeholders affect Amway.

Internal stakeholders

These stakeholders create value within the organization. Amway gives the opportunity of being self-reliant to the ABOs. ABOs operate independently and develop direct supply channels by meeting their friends and customers. ABOs sign a contract to work within the rules of conduct and code of ethics of Amway. So if ABOs do not conduct business it will badly affect the company.

Connected stakeholders

Consumers can affect the business of Amway. The marketing technique of Amway is the ever-growing link with the customers. It gives more emphasis on mouth-to-mouth publicity. Thus the product must have the ability to create an everlasting impression on the customers and he will become the connecting link with other customers. Thus Amway’s focus is to produce superior quality products and create a brand value to the products. Likewise, suppliers have also played a major part in Amway’s success in producing superior quality products. “Suppliers must produce quality goods that Amway ABOs can sell with confidence. The goods should offer value for money and provide guarantees that they will meet Amway standards. Suppliers may contribute to the design and appearance of Amway products.” (How Stakeholders Affect Amway: The Supply Chain. 2009).

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Supply chain: Amway mainly depends on its own supply chain to satisfy the needs of the customers. So it is the duty of the supply chain to give feedback from the customers which helps for future changes in the service and products offered. Also, the suppliers should produce quality goods to enhance the standard of Amway.

Expectations of Amway’s stakeholders: The Amway global HQ/Amway Europe expects a good return on investment, staffs expect fair wages and good working conditions, and consumers expect high-quality products and value for money.

Amway is using several new strategies to adapt to the changes in changing marketing environment. Amway ensures the participation of stakeholders through new technologies like e-commerce and web-based business. Any stakeholders can retrieve the data they want.

Amway was started in America. Now it is operating in different countries. Its success proves that how it adapts to the changes when it crosses national boundaries. Amway tried to understand the environment of each country and adapt to the changes successfully. The strong relationship with its stakeholders is the success secret of the company. “The buzzwords for business in the 21st century are Think Globally, Act Locally. Amway has been doing just that for over 40 years. With operations in more than 80 countries and territories, and products tailored for local regulations and preferences, Amway is one of the largest local companies in the world.” (Amway Business Profile. 2005).

Learning and development for the new era

Today the concept of the learning and development process has changed a lot. The classroom type of learning and development activities are changed with the emergence of a new concept of the learning organization, knowledge management, business process reengineering, etc. But the core concept of learning and development doesn’t change, i.e. – helping the people to adopt the changes which are occurring in the environment. As per a recent study by the Aberdeen Group, participation from the stakeholders in the learning process is very important in organizational success. The study is conducted among top companies regarding the learning and development process which is conducted among companies that are using the learning and development process for their organizational success. Aberdeen classifies them as the ‘best of class’ group. The study found that there are some unique strategies followed by these organizations. They are:

  1. Using learning to find out some specific organizational defects as well as gaps in the operation of the organization.
  2. Ensure more participation from stakeholders through the learning process.
  3. Helps an individual to focus his own personal development by integrating learning.

As per a previous study, by the Aberdeen Group, Most HRD people find out that it is essential to integrate the learning and development process with talent management. “Aberdeen’s Best-in-Class organizations look toward learning and development to align their workforces with business objectives. The most common means to achieve alignment is tying learning programs directly to individual development plans, which allows workers a clear line of sight into what they need to achieve success. This is especially critical in the retention and development of those employees that the organization deems as ‘high potential.” (Learning and Development Trends for the New Year. 2009)

Other means for aligning objectives are linking development plans to individual career paths and measuring learning against the organization’s objectives.

Nowadays, companies include all their stakeholders in the learning process and benefit through it. By integrating learning and individual goals, companies can be managed effectively.

Trade unions as stakeholders

In case there is a trade union within an organization, then that body is definitely a stakeholder with regard to human resources development. According to an article titled “Trade Unions are stakeholders of development: this is an often ignored and sometimes disputed fact, surely as a result of ignorance of present social realities….” (Trade unions are development stakeholders. 2003).

This could be because of the fact that unions do not have an everyday presence with regard to the day-to-day operations of the company. In most cases, their role comes up when there is a pay revision or a major change within the organizational setup. This could happen in instances like downsizing, layoffs, mergers/acquisitions, or any other activity that have a direct bearing on the employees of the company. If the union is strong within the company, it can have a strong influence on how the workers are treated. A trade union while protecting the rights of the employees should also cooperate with the management for achieving the aims of the organization. Trade unions can exist solely within a single company, it can be on the basis of a particular profession or trade, or it can be formed on a national level. For example, the Trade Union Congress TUC in Britain is an example of a national-level union. “TUC membership now stands at 58 unions, representing nearly six and a half million people.” (Britain’s Unions. 2009).

The extent to which a trade union can be considered a stakeholder will depend on its activity within a company, profession, or industry. A good trade union should be engaged in the welfare of the employees in the following ways. The more the involvement, the more of a stakeholder it becomes.

Compensation: The trade union can play a major role in the fixing of salary, bonuses, and other benefits that a company offers to its employees. If the union feels that the company is making good profits and that the employees deserve more, they can step in and help to increase the benefits to its members.

Health issues: If the work or job involves risk or hazard, the union can ensure that precautions are taken by the management for the safety of the workers. A responsible company will definitely take such precautions on its own without any outside prompting. If a union feels that the health of workers is not properly safeguarded, then it can step in and force the company to bring in safety measures.

Cooperation with the management: As mentioned earlier, unions have a balance between workers’ welfare and responsibility towards the success of the company. This can include directing the workers to do their work in a responsible manner and also encourage them to take part in training and development programs. For example, “The UK trade unions are recognized by the UK government as being key partners in the promotion and success of VET and other skills training and development opportunities in the workplace.” (Increasing Adult Participation in Training. 2005). VET here stands for vocational education and training. This training is beneficial to the worker and the company since it helps to hone the working skills and knowledge. Employees can also get better salaries or better opportunities in other companies.

Mediation in industrial disputes: In many instances, the demands of the employees and the response of the companies may not match and will result in disputes and lawsuits. A trade union can step in and help to solve the problem in an amicable way that is acceptable to all parties concerned. It can also help in disputes over employment law issues and other related policies which workers have with the government.

Recruitment and selection: Trade unions can play a role in helping the company to recruit and select new employees. It can give its own opinions and responses with regard to individual applicants. It can also give suggestions as to the employment of minority status employees.

Corporate social responsibility: CSR is an important area where many companies are taking an active interest. But the cooperation of employees is necessary for CSR policies to be effective and trade unions can influence them to cooperate with the management in this regard.

Industrial atmosphere: Trade unions, especially the national and regional ones can play a part in overall peace and harmony in the industrial sector. This is a very important responsibility and will contribute to the development of the economy, the business sector, individual businesses, and the welfare of the workers.

Engaging in the above activities in a responsible way will increase the value of the union and help it to become a major stakeholder within the organization and the industry.

Conclusion

People are the power of the organization. Stakeholders, whoever it may be, customers, employees, trade unions, government, local community, can make an important change in an organizational environment. Thus these stakeholders should participate in the learning and development activities; thus the organization will get the ability to face new challenges in the environment.

References

All About Stakeholders – Part 1: Relevant to ACCA Qualification Paper 1. (2008). [online]. P.44. Web.

All About Stakeholders – Part 1: Relevant to ACCA Qualification Paper 1. (2008). [online]. Web.

Amway Business Profile. (2005 ). [online]. Amway. Web.

Amway: Stakeholders. (2009). [online]. The Times 100. Web.

Britain’s Unions. (2009). [online]. Tuc. Web.

Develop Strategy and plan for learning and development. (2001). [online]. Web.

DWARAKANATH P., and MALA M. Effective Learning and Development Programs – Best Practices [online]. 2009. Web.

FARAGO, John., and SKYRME, David. (1995). The Learning Organization. [online]. David Skyrme associates. Web.

Harrison, Rosemary. Learning and Development. Chartered Institute of Personnel and Development. P.7.

How Stakeholders Affect Amway: The Supply Chain. (2009). [online]. The Times 100. Web.

Increasing Adult Participation in Training: The Role of Trade Unions in Workplace Learning. (2005). [online]. Web.

Learning and Development Trends for the New Year: Aligning Objectives. (2009). [online]. Elearning. Web.

Trade unions are development stakeholders. (2003). [online]. P.1. Web.

WORTHINGTON, Jan. (2009). Stakeholders and their affect on organisation operations. [online]. Ezinearticle. Web.

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