Strategic Alignment

Strategic alignment is the process of bringing an organization’s actions toward its various business activities in line with its planned objectives. The ability of most organizations to achieve their strategic goals by ensuring employee cooperation and engagement and stakeholder participation improves with comprehensive strategic alignment.

As corporate reputation is reflective of collective stakeholder judgments made over time about an organization’s communications and actions, the perceptions created among stakeholders greatly affect reputation. Researchers posit that it is important for organizations to achieve alignment in the judgments and perceptions of various stakeholder groups for achieving commonality of the corporate image that helps build corporate reputation. This creates a need to engage with stakeholders and manage their perceptions. Notwithstanding the authenticity of this finding, several studies have pointed to difficulty in maintaining consistency in messages to various stakeholders while building corporate reputation.

This entry discusses the differing expectations of various groups of stakeholders; how an organization can align these expectations to its vision, mission, and values; and the impact of such strategic alignment on corporate reputation.

Stakeholder Expectations

Corporate reputation is frequently defined as the overall perceptual representation of a company based on its overall appeal created through opinions, associations, and information cues generated in the minds of stakeholders. This implies that the value judgments about an organization made by groups of stakeholders affect its corporate reputation and it is imperative for organizations to explore ways and means of influencing the perceptions of internal and external stakeholders and securing their support.

Stakeholders are defined as groups or individuals who can affect or can be affected by the actions of the organization. Their roles within an organization typically include setting expectations, experiencing effects, evaluating outcomes, and acting on the evaluations. A number of studies analyze the factors that affect stakeholders’ perceptions about organizations.

Stakeholders can be divided into two broad groups—internal and external. Employees, investors, and suppliers constitute the internal group. Customers, regulators, and community form the external group that provides the organization with the legitimacy to operate. Each group performs a major role in the growth of business. Employees form the talent pool and help in business functioning and operations, customers aid in patronage and revenue, suppliers provide resources, the community gives the sanction to operate, and investors provide financial support.

In general, alignment with internal stakeholders is achieved by communicating the core business model, purpose, and values of the organization and ensuring that there is a fit. In terms of external stakeholders, the organization’s level of engagement with the external environment decides the extent of stakeholders’ strength of affiliation.

Existing research proves that organizations can create a competitive advantage by building trust and strong relationships with internal and external stakeholders, which in turn helps meet their expectations and secure support. The focus on moving further than mere meeting of stakeholder needs and exhibiting the organization’s strong commitment to stakeholder well-being not only raises trust levels but also creates a bonding that contributes to a positive organizational image.

Alignment With Stakeholders

Stakeholder alignment, or the organization’s actions toward its stakeholders, is effective only when it meets the expectations of stakeholders. Organizations endeavor to meet stakeholder expectations, create favorable effects and outcomes, and, if necessary, alter outcomes to align them with stakeholders’ requirements. If this is not done, stakeholders may demonstrate negative reactions through proxy resolutions and withholding or restricting the use of resources, affecting revenues and, ultimately, reputation.

Each stakeholder group has the potential to build or disrupt corporate reputation. For example, negative attitudes among employees can be transferred to the customers’ experience of the organization’s products or services through employee behaviors.

The process to be followed for stakeholder alignment varies with each stakeholder group. This is because each group has a particular stake in the organization. For example, investors, whose stake is financial, want to understand the organization’s strategy and operations to safeguard their stake. For alignment with this group, the organization needs to provide regular and timely financial information, ensuring investor confidence in the business model and future prospects.

Employees realize that their prospects are tied to those of the organization. They need validation of the direction of their efforts and recognition of the same. For strategic alignment, the communication of organizational goals and objectives to this critical stakeholder group needs to be clear and consistent. Subsequently, this will lead to increased motivation levels and a heightened sense of belongingness.

Customers as a group are interested in obtaining quality products and services, and they invariably compare the products and services delivered with the organization’s brand promises. To align with this group, there has to be communication of product and service distinctiveness, satisfactory handling of grievances, and creation and maintenance of a favorable customer experience.

An organization’s relationships with its suppliers are more long-lasting and productive when suppliers perceive the advantages of remaining associated with the organization. Organizations hence project the tangible and intangible benefits of continued supplier association.

The literature on stakeholder relationship building also emphasizes the relational, rather than the transactional, nature of the exchange between an organization and its stakeholders. These exchanges in organizations that have succeeded in creating value transcend mere transaction-based exchanges and move toward continuous cooperation, collaboration, and networking with stakeholders.

Creating Convergence

Strategic alignment can also be made possible by using the stakeholder salience model to understand the immediate importance to be accorded to various groups based on the three attributes of power, legitimacy, and urgency. Whether stakeholders have the power (authority) to influence decisions, possess legitimacy (legal right) in their claim, and have a highly urgent (immediate) current appeal are pertinent questions to be asked. Stakeholders who possess any one of these attributes are referred to as latent, those who possess two are referred to as expectant, and those who possess all three are referred to as definitive. Understanding the attributes and linking them to types of stakeholder behavior enables better management of relationships.

As is the case with stakeholder relationships, stakeholder salience positions change and evolve over time, and it is possible to see shifts in the levels of power, legitimacy, and urgency of various groups. Enhanced strategic alignment stems from the ability of the organization to carefully monitor these shifts and restructure its interactions with stakeholder groups. Important parameters for gauging stakeholder behavior and expectations can be roughly categorized as a history of relationships, the level of interaction and information sharing, trust, and stakeholders’ potential to learn, which form the basis of subsequent offerings to them.

Research validates that efforts made toward better stakeholder management in terms of attitudes, structures, and processes that consider the legitimate interests of all stakeholders lead to superior corporate performance. Undoubtedly, addressing the requirements of diverse stakeholder groups is a balancing act. At any given point in time, however, convergence of all stakeholder interests is rare. Differing sets of expectations make varied and sometimes conflicting demands on the organization. Contradictions in stakeholder expectations may signal conflicting or inconsistent messages from the organization, which may endanger its credibility and reputation. It is a huge task to communicate and balance their expectations with a sense of unity.

Organizations that are successful in creating shared value among stakeholders are able to unify and strengthen the perceptions of each group. Research documents the tangible benefits of creating alignment between stakeholders’ values and their behavior and expectations. For instance, if an organization can align the values of the employees with the expectations of customers, it will influence employees’ behavior with customers and create a common perception of the organization in the minds of employees and customers.

The process of strategic alignment begins with the organization’s vision statement. Corporate values are normally reflected in the vision statement, which guides employees toward a common target and reassures stakeholders of company intent. A narrowly defined vision statement with a short-term focus is limited and raises questions about the organization’s long-term goals. A well-defined vision statement, while considering the macro issues, also presents flexibility in approach and helps in the preparation of a mission statement that managers can use to navigate changes in environment.

Ensuring that the organizational vision is understood and shared by all internal and external stakeholders is crucial for strategic alignment to succeed. This can be done in various ways. A strong internal communication system that reinforces the vision statement and a performance evaluation system that rewards adherence to it prove effective in aligning employees’ expectations with the organization’s values. For external stakeholders, reminding them about the core values and vision of the organization in their routine dealings serves to strongly embed the same in their expectations. Standards of acceptable and unacceptable quality of products and services and norms of behavior, when clearly communicated and demonstrated over a period of time, help reinforce their acceptance among all stakeholders.

Researchers posit that the mission statement can also be used effectively to build trust with internal and external stakeholders. Organizations use mission statements to express their identity and their distinctive enduring characteristics. Additionally, a mission statement that shows consistency of organizational values with those of society at large easily secures the support of external stakeholders.

Goodwill created in the market through presentation of identity attributes or publicly trading on the organization’s good name is another method of shaping perceptions. In sum, the stakeholder analysis helps organizations create frames for persuasion where beliefs are matched through a process of sharing identity, disclosing attributes, and generating emotional connection. Only credible, attractive, and powerful companies are able to create a strategy for connecting with stakeholders.

Impact on Reputation

As discussed earlier, the very concept of corporate reputation implies that bringing about convergence in perceptions is important to create a consistent image about the organization among its various stakeholder groups, ultimately creating positive reputational capital.

Several studies have proven the strong positive link between stakeholder-specific activities and corporate reputation. Activities focused on customer satisfaction, such as developing a customer orientation, emphasizing quality of products and services, and providing value for money, are shown to have a positive impact on corporate reputation. Similarly, conducting training and development programs for employees and employee satisfaction studies has been shown to be associated with higher reputation scores. The association between positive financial performance, valued by investors, and overall corporate reputation has also been established.

Thus, activities that strategically align the expectations of various stakeholder groups with one another and with the overall vision, mission, and values of the organization are closely linked with increased reputational capital.