Issues Management

Issues management refers to the process by which an organizational entity responds to stakeholder concerns about the organization’s activities or its relationship to the broader industry in which it is situated. How companies respond to stakeholder-driven issues constitutes the heart of corporate organizational communication. These issues derive from a set of fundamental dynamic forces that shape the relationship between society and a corporation. These forces include globalization, technology, the natural environment, societal expectations, and governmental regulation. In this entry, the concept of societal issues is examined, and alternative approaches to managing the organization’s response are discussed.

Issues management starts with an assessment of how these external forces are affecting a range of stakeholder groups. This analysis involves determining whether stakeholder groups have conceived of some kind of link between what the corporation does operationally and what it is known for being reputationally in relation to these external forces.

Effective stakeholder analysis is fundamental to effective issues management. The following four questions constitute the due diligence that must be accomplished as the corporation assesses whether an issue is likely to affect the firm or is already in play and affecting the firm:

1. Who are the relevant stakeholder groups?
2. What are their interests, and do these overlap or contradict the firm’s interests?
3. What kind of power does the stakeholder group hold?
4. How are coalitions likely to form?

Businesses take different approaches in dealing with stakeholders. They can be (a) inactive (ignoring the stakeholder), (b) reactive (responding only when necessary), (c) proactive (anticipatory), or (d) interactive (forming relationships).

This schema should not be seen as a worst-to-best trajectory. Depending on the issue and management’s strategic sense of what needs to be done, any of these four modes may be appropriate. More and more, however, the proactive and interactive modes have shown themselves to be instrumental to successful stakeholder management and, in turn, to issue response.

In the next sections, the concept of issues will be defined, the factors influencing their development will be identified, and a model of how issues go through cycles will be introduced.

Defining Issues

A societal issue can be defined as an external or internal factor, usually lasting over a mid- to long-range time frame, that could represent a serious obstacle to achieving an organization’s objective and cause damage to its reputation if not managed well. Conversely, if managed well, it could represent an opportunity to further an organization’s mission and enhance its reputation.

Issues can be seen as the causal link underlying the occurrence of an event. An event in itself does not constitute an issue. For example, the explosion of the BP oil rig in the Gulf of Mexico that occurred in 2010 affected how stakeholder groups perceived the company. But the explosion itself—an event that starts and ends within a distinct parameter of time—is not the issue. Instead, the underlying operational reasons for that explosion, whether it may have been inadequate oversight, lack of due diligence to ensure safety, or disregard for environmental risk, constitute the issues. Thus, the oil that seeped into the Gulf of Mexico for weeks and weeks was not in itself the issue.

Instead, concern for the environment, concern for marine and animal life, or the lack of accountability—depending on which stakeholder group we might focus on—would be the issue. Issues derive from assertions about causation—where someone or some group claims that a corporation is responsible for what has occurred. These claims may be inaccurate or contestable—and this is where stakeholder analysis and communication strategy become necessary as the company assesses how to respond.

By contrast to the situation facing BP in 2010 (and beyond), we can cite the way in which another issue was effectively managed by a range of companies over a long-term time range, resulting in enhanced reputation. That issue would be diversity. This term has come to be a code word for minority groups, including not just racial or ethnic categories but also those of sexual orientation. And for many years, “corporate America” was the subject of critiques and worse for what was seen as a lack of diversity in the workplace and in senior management.

However, over time, one corporation after another came to see how changing the composition of management and the workforce could create a differential advantage compared with competitors and attract better employees as well as enhance its reputation. When Microsoft publicly announced that same-sex partners would qualify for benefits and when mega corporations such as IBM, Intel, Pepsico, and Coca-Cola pronounced their commitment to inclusion, these words were backed up by deeds. By doing so, these and other corporations maintain an interactive communication strategy with the many stakeholder groups that share an active concern for this issue. As a result, a well-managed issue can have a positive impact for a firm as well as society.

Factors Influencing an Issue’s Development

Many societal issues develop over time. For example, concern over tobacco use took decades to be registered as a societal concern. In the not so distant past, tobacco use was allowed in public spaces, including college classrooms, restaurants, and public transportation. Today, these activities are effectively banned from public spaces (and increasingly private ones as well). In another example, for many years pharmaceutical companies and cosmetic companies tested products on animals until pressure came to bear on them to desist from (or fundamentally scale back) these actions.

The factors that influenced the development of these two societal issues link to the dynamic forces previously identified that impinge on corporate activities—globalization, technology, the natural environment, societal expectations, and governmental regulation. These forces affect how stakeholder groups perceive the actions of a corporate entity.

Issues arise when a stakeholder group voices concern about how a company or industry is affecting either (a) its conception of rights or (b) its perception of risk. The first factor is more abstract than the second, though the perception of risk is often a construct predicated on assumptions (fear) that are not necessarily tangible.

The critique of corporate lack of diversity is an example of how stakeholder groups felt their rights were being tamped down by corporate activity. Minorities objected to perceived (or actual) discrimination in the workplace. The movement against animal testing in the pharmaceutical and cosmetic industries is anchored around the conception of “animal rights.” Stakeholder groups pushing this issue have also affected a range of other industries, notably food production—how animals are raised for consumption and how restaurants source animals for consumption. Stakeholder groups have become more and more vocal about workers’ rights in developing countries. This is another example of an issue that is linked to the conception of rights being under threat as a result of corporate activity.

When stakeholder groups sense that a company or industry is placing them in some kind of peril of health or well-being, the perception of risk will foment another category of issues. These kinds of issues are linked to a term used in economics—externalities—to denote the unintended (or intended) consequences of business activities that force a third party to be responsible for the costs of these activities. Pollution in its many forms is a prime example of such a phenomenon. What we know about risk-based issues is that they evolve over time, mainly as a result of media coverage. And today, with the prevalence of social media, an array of communication channels are available to teach people about the risks they may be subjected to as a result of corporate activity.

When people perceive their well-being to be at risk, a series of factors come into play that can exacerbate their concern. This has been called “the outrage factor.”

The more of the following factors that can be associated with a perceived risk, the higher the degree of “outrage,” and with it a corresponding demand for accountability:

1. Imposed versus voluntary risk
2. Unfairly shared versus equitable risk/benefits
3. Risk beyond a person’s control versus controllable risk
4. Human-made versus nature-related risk
5. Risk linked to a recent catastrophe versus past or lesser risk
6. Risk associated with an exotic technology versus a familiar risk

Both the number and the seriousness of the “outrage factor” elements affect the public’s perception of risk. As noted, news coverage fuels the high-risk perception. Further influencing the perception of high risk, “bad news” is frequently believed and recalled more than “good news.” And compounding the challenge to many companies, expert assessment (when deployed to calm concerns) is often viewed with mistrust.

Certain companies or industries are prone to risk-based issues. Those having an inherent impact on the environment (energy) find themselves confronting such issues. Food production and agriculture are also targets because of concerns with safety in the supply chain as incidents of bacterial contamination become more common. Automobile manufacturers have to deal with risk-based issues constantly. Both rights-based and risk-based issues can be seen as developing in a patterned manner.

In the following model, four stages are associated with a heat metaphor:

1. In the first stage, there is a feeling of frustration or dissatisfaction—and those who share these feelings often communicate with one another or find a larger group that echoes their concern. The issue at this stage can be labeled as warm. In the past, it was challenging for organizations to discern where or how these concerns were registering. With the advent of social media and “big-data” analysis, it has become easier to analyze changes in the public temperament.
2. In the second stage, a name is coined to characterize the concern, and usually, this is done by an interest group. Recall the observation previously made about the ubiquity of smoking in public places just several decades past. People in proximity to smokers often bemoaned the odor left on their clothing or the coughing that came with being near smokers. But not until the label of “passive smoking” became commonplace did people (and the accompanying interest groups) persuade public policymakers to alter the rules about where and how people may smoke tobacco products (or how companies may sell them). This second stage can be termed simmering.
3. In the third stage, attitudes form and become crystallized, and the mainstream media gets interested; we can label the issue at this stage as hot. At this stage, corporate involvement becomes necessary, and by this stage, with attitudes hardening, it may be too late to effectively influence a range of concerned stakeholders.
4. In the fourth stage, solutions and responses are publicly exchanged in the public arena. Corporate involvement is required at this stage, and here, to the detriment of many organizations, late calls for public relations counsel can have limited effect. This is a reactive stakeholder response. In this stage, the heat metaphor takes us to the limit—the issue is boiling.

What often follows is a full-blown crisis or the entry of governmental regulation, something an industry or corporation would want to avoid.

Conclusion

One could assume that if a company had its own way, it would often remain inactive or at best reactive in response to stakeholder-driven issues. However, that option is less and less likely or even possible. Because companies operate in a societal context, the license to operate must be earned. Companies do not exist in an insulated environment. Rather, they exist in a socially mediated environment. Their existence is predicated on responding to a range of stakeholders from customers to suppliers, to community groups, to activist nongovernmental organizations, to employees, and others. Monitoring and managing emergent or current public issues has become a requirement for effective corporate governance. Many companies have learned the hard way that “too little, too late” has consequences. Ultimately, this effect will color how the firm is perceived by critical stakeholders and affect the firm’s reputation.