Chapter 2
Managing Public Issues and
Stakeholder Relationships
McGraw-Hill/Irwin
Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.
Ch. 2: Key Learning Objectives
 Evaluating public issues and their significance to the
modern corporation
 Applying available tools or techniques to scan an
organization’s multiple environments
 Describing the steps in the issue management process and
determining how to make the process most effective
 Identifying who is responsible for managing public issues
and the skills required to do so effectively
 Understanding how business can build collaborative
relationships with stakeholders through engagement,
dialogue, and network-building
 Identifying the benefits of stakeholder engagement to the
business firm
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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
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Public Issues:
Performance-Expectations Gap
 Discrepancy between what stakeholders expect and
what an organization is actually doing
 Important to identify emergent expectations as early
as possible
 Doing so can gain the company competitive advantage
 Failure to understand stakeholder concerns and to
respond appropriately will:
 Cause the performance–expectations gap to grow
 The larger the gap, the greater the risk of stakeholder
backlash or missing a major business opportunity
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Figure 2.1 The Performance-Expectations Gap
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Environmental Analysis
and Intelligence
 Environmental analysis
A method managers use to gather information about
external issues and trends, so they can 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
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Figure 2.2 Eight Strategic Radar Screens
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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
 Numerous ethical issues arise in acquisition and use of
information gathered through competitive intelligence,
public affairs managers must be keenly aware of these
issues
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The Issue Management Process
1. Identify Issue

Anticipating emerging concerns, or “horizon” issues
2. Analyze Issue

Evaluating the issue; coming to an understanding of how it will
evolve and how it will affect the organization
3. Generate Options

Evaluating action options, involves complex judgments that take
into account “non-quantifiable” factors like the company’s
reputation
4. Take Action

Once option is chosen, must design and implement it
5. Evaluate Results

Must assess results of the program and make adjustments as
needed
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Figure 2.3 The Issue Management Process
The process continuously cycles back to the beginning and repeats
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Organizing for Effective Issue Management
 Which part of the organization is mobilized to address a
particular emerging issue often depends on the nature
of the issue itself

A corporation’s issue management activities are usually linked to
both the board of directors and to 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
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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
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Drivers of Stakeholder Engagement
 Stakeholder engagement is, at its core, a relationship
 The participation of a business organization and at least
one stakeholder organization is necessary, by definition,
to constitute engagement
 Engagement is most likely when both the company and
its stakeholders both have an urgent and important goal,
the motivation to participate, and the organizational
capacity to engage with one another
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Making Engagement Work Effectively
 In stakeholder dialogue, a business and its stakeholders
come together for face-to-face conversations about issues
of common concern
 Corporations sometimes encounter public issues that they
can address effectively only by working collaboratively with
other businesses and concerned persons and
organizations in stakeholder networks
 Engaging with stakeholders benefits businesses by
bringing in expertise, enhancing legitimacy, and generating
creative solutions to common problems
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