Download Stakeholder Relationship Management and Public Sector Governance

BUSI 525 Marketing: Individual Assignment
Stakeholder Relationship Management
in Modern Public Sector Governance
Fa Niemi
MBA 31
23 May 2007
Stakeholder Relationship Management in Modern Public Sector Governance
Executive Summary
Once considered large impersonal bureaucracies delivering poor-quality low-value
services, the modern public sector has the opportunity to improve governance by
renovating its mission and image through revitalized service delivery and the adoption of
private sector practices. The new practices include using marketing tools to segment,
target, and position offerings within stakeholder markets. Additionally, the four Ps of
marketing, product, price, place, and promotion can be used to re-focus public sector
performance on stakeholder needs.
The public sector, like the private sector, should be
moving away from an individual transaction approach to offerings. Instead, using a mix
of tools and techniques to support a relationship-marketing strategy, this “emphasises
building stronger relationships between the organisation and all its stakeholder markets.”
(Christopher, Payne & Ballantyne, 2002, p. 79). Within this new paradigm, both the
public sector and the complex market network of individuals and organisations it serves,
each interaction provides an opportunity to strengthen the stakeholder relationship.
Table of Contents
Executive Summary ....................................................................................................................... 2
Table of Contents .......................................................................................................................... 2
Introduction .................................................................................................................................... 3
Barriers to Developing Stakeholder Relationships .................................................................... 3
Organisational structure............................................................................................................ 3
Incongruent marketing communications ............................................................................... 4
Strategies for Improving Relationship Management ................................................................ 5
Re-orientation towards service delivery ................................................................................. 5
Breaking down functional silos ............................................................................................... 6
Relationship Marketing ............................................................................................................. 6
Recommendations & Conclusion ................................................................................................ 7
Reference ......................................................................................................................................... 8
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Stakeholder Relationship Management in Modern Public Sector Governance
Introduction
The public sector performs most successfully when it delivers services at an appropriate
level of quality for an acceptable value to stakeholders such as citizens, businesses,
taxpayers, and voters. This perception of success depends on both stakeholders’ opinion
about the government in general and impressions from personal interactions with public
institutions. According to Chapman and Cowdell (1998), John Major’s The Citizen’s
Charter in the UK and similar government policies on free market modelled reform
emphasise themes such as “a desire to improve the quality of public services.” They
continue that this focus on quality improvement is an example of societal marketing defined
as, “aiming to create long-term customer satisfaction and welfare as a key business
strategy.” The authors conclude that in the public sector, societal marketing manifests as
a desire to satisfy stakeholder needs through service offerings.
Barriers to Developing Stakeholder Relationships
The challenges in overlaying private sector practices in an attempt to improve public
sector societal marketing are many including, defining the markets, shaping the offerings,
and developing constructive stakeholder relationships. The public sector, as a collection
of public service providers, operates within a number of complex and varied markets
such as intra-governmental, consumer, and societal. Furthermore, the offerings, usually
services, can be ephemeral and “often take the form of intangible benefits – benefits
which cannot be stored or even easily quantified.” (Cowell, 1984).
Organisational structure
Traditionally, the public sector has not delivered an integrated message to stakeholders
because it uses a variety of channels to deliver information about service offerings and
the organisational objectives from many different functional units. Public affairs, public
relations, or public information officers manage some of the channels including media
relations and external websites. Additionally, human resources staff generally
communicates similar information to potential and current employees through
recruitment and yet other divisions such as customer services, administration, and
operations are responsible for communicating and providing service offering to still more
groups of stakeholders through other channels including call centres and supporting
documentation. “As so many different parts of the organisation are involved [in
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Stakeholder Relationship Management in Modern Public Sector Governance
stakeholder management], the various stakeholder groups are frequently managed in an
uncoordinated, disparate manner.” (Christopher, Payne & Ballantyne, 2002, p. 77).
Moreover, public sector organisations are typically structured by units based on function,
functional silos, working in isolation from other units with little or no communication or
cross-functional collaboration. Functional silos frequently define unique goals, mission
and direction apart from the other units and the organisation as a whole. “As Emshoff
and Freeman (1979) have noted, functionally based organisations typically place too
much resource emphasis on highly visible stakeholders such as their customers, and too
little emphasis on other special interest groups whose management falls outside specific
functional boundaries.” (Payne, Ballantyne & Christopher, 2005, p861).
Incongruent marketing communications
Conventionally, service organisations have restricted their stakeholder communication to
a one-way push or pull from service provider to recipient. Information is offered on a
website, policies and procedures are published in governmental tomes, and press releases
are sent to media outlets. For stakeholders seeking information, automated voice
systems offer standard responses to questions. Gradually public sector entities are
moving away from mass communication to more customised and interactive models.
Call centres are being established to handle constituent questions, websites offer
feedback mechanisms, and liaisons visit community groups to solicit conversations with
stakeholders. The intent is to move away from self-interested communication to more
mutually beneficial interactions with stakeholders. According to Varey and Ballantyne
(2005) this shift in perspective to incorporate the stakeholder interests in the goals of
communication requires a model accommodating “the idea of a ‘market’ as a socially
constructed network of relationships where interactions have economic consequences.”
The implication is that a dialogue between public sector organisations and stakeholders
includes tangible financial benefits as well as the intangible benefits from improved
customer service.
Regrettably, the public sector, like other service offering organisations has suffered from
poor quality service delivery, not only caused from within a functional unit, but also from
passing from one unit into another. The service, along with the stakeholder
communication can be disrupted between silos, providing a poor service experience and
inconsistent organisational message to customers. “All too often, companies fail to
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integrate their various communications channels. The result is a hodgepodge of
communications to consumers.” (Kotler & Armstrong, 2006, p. 429-30). The authors
continue that this dilemma can be remedied in part with integrated marketing
communication, “under which a company carefully integrates and coordinates its many
communications channels to deliver a clear, consistent, and compelling message about
the organisation and its products.”
Strategies for Improving Relationship Management
The public sector can use a mix of marketing relationships ranging from discrete
transactional exchanges, interactive encounters and a network of interactions
compromising long-term relationships benefiting both the organisation and stakeholders.
Re-orientation towards service delivery
In a public service organisation, whether providing legal, counselling, or IT services;
employees are the key to success. Frontline workers, an integral part of the service
offering, communicate a marketing message in each customer interaction. Whether it is
the preferred message and it is communicated appropriately can be influenced by several
factors, including human resources practices like training, marketing influences such as
reinforced and consistent communication of organisational goals, and operational
practices, which encourage employee empowerment and job satisfaction.
Moreover, both frontline employees and organisations as a whole have many tools
available to aid in service delivery efforts. “When a public-sector agency considers the
wants, needs, problems, and preferences of citizens in developing and delivering
programs and services, its needs are served and its performance improves.” (Kotler &
Lee, 2007, p. 1). The marketing mix four Ps enable these organisations to focus on
matching services to needs. Starting with the first P, Product, the public sector needs to
consider what services are offered to customers and how those offering affect other
stakeholders including regulatory bodies, community groups, and civil servants.
Continuing with the second P, Price, there often seems little discretionary control over
setting the prices for fees in government, but there are many opportunities to influence
the fee-setting process. Organisations can analyse the effectiveness of current pricesetting strategies for both public and intra-governmental fees to make recommendations
about future policies. Potentially the most influential of the Ps are Place and Promotion.
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As public sector organisations develop relationships with stakeholders, the distribution
channels for services will become increasingly important. According the Kotler and Lee
(2007, p. 2) a mix of channels including new technologies such as websites and kiosks
will need to be available to reach more customers. Along with the enhanced delivery
channels, promotion can be used to inform, educate and persuade stakeholders. All of
this effort, though, takes coordination.
Breaking down functional silos
Starting with a common purpose and vision is the first step to bridging gaps and unifying
organisational areas. Re-structuring units by offerings can better meet customer and
other stakeholders’ needs. According to Lovelock and Wirtz (2007, p. 449), “an
organisation that is recognised as a service leader offers its customers superior value and
quality.” It does so through coordinated marketing, human resources, and operations
efforts. Initially, a unified marketing message communicates not only offerings to
customers, but establishes the character, values, and vision of the organisation to
stakeholders. Subsequently, human resource managers are better able to recruit and
retain talented employees because of the appeal of the organisation. Finally, operations
improve both the quality and value of offerings through employee innovation and
stakeholder support. Ideally, with cross-functional collaboration between functional
areas, the cycle continues and the relationship between organisation and stakeholders
strengthens.
Relationship Marketing
To improve service delivery the public sector must extend the definition of stakeholders
from service recipients to include all entities and organisations effected by its behaviour.
It can then transcend the short-term focus of the current customer engaged in the
current transaction and look beyond to a continuum of transactions and interactions that
make up the long-term relationship. “Relationship-based approaches to marketing offer
a reformist stakeholder agenda with an emphasis on stakeholder collaboration beyond
the immediacy of market transactions.” (Payne, Ballantyne & Christopher, 2005, p856).
One such approach is the Six Markets Stakeholder Model developed by Christopher, Payne
and Ballantyne (2002, pp 80-107).
Under the model, the authors’ recommend segmenting the stakeholders into six markets
for marketing management, customer, referral, supplier/alliance, influence, recruitment,
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and internal. Of particular interest to the public sector as potential areas of service
delivery improvement are recruitment and internal markets comprised of potential and
current employees respectively.
In the public service sector, where the quality of individual customer service interactions
define the success of governance overall, recruiting, retaining, and training frontline
employees is a priority. Organisations can use a variety of recruitment techniques
including promoting a brand or governmental identity, matching candidates to
organisational culture, or psychometric profiles. The recruitment process is expensive
and mistakes can be even costlier, so it is important to invest in good practices that yield
good results. In service organisations, well-placed qualified employees are pivotal to
performance and success. “To attract and retain the highest quality recruits – those who
share the organisations’ values and will contribute significantly to its future success –
firms have to market themselves to potential employees, or the recruitment market.”
(Christopher, Payne & Ballantyne, 2002, p. 101)
Once high quality candidates are hired, the organisation must support their continued
development and success. In the public sector where hierarchical organisational
structures prevail, emphasis is often placed on functional duties over business priorities
or stakeholder needs. “Internal marketing should ensure that all staff ‘live the brand’ by
representing the organisation as well as possible, whether face-to-face, over the phone,
by mail or electronically.” (Christopher, Payne & Ballantyne, 2002, p. 107). One method
of supporting internal marketing is by flipping the organisation chart upside, emphasising
the importance of frontline staff communicating the organisation message and ensuring
quality service delivery with the support of (not in support of) other divisions and senior
management.
Recommendations & Conclusion
Public sector governance can be improved by introducing stakeholder relationship
marketing to improve service offering quality and customer service delivery.
Organisations that encourage employees to ‘think globally, but act locally’ will
communicate a consistent message to stakeholders while providing higher quality
services that better meet customer needs. Employees will no longer focus on the
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customer and the transaction of the moment, but will consider their individual service
delivery in terms of how their actions will influence future customer experiences.
There are many tools available for increasing customer value in service offerings.
Organisations can use models such as the six markets to define and manage stakeholder
relationships. With stakeholder feedback mechanisms in place, organisations can also
analyse problem areas by reviewing cross-functional workflows, service delivery
processes, flowcharts of service offerings, or monitor the quality of service, all from a
customer perspective. With all of the private sector marketing tools and techniques
available to the public sector, the opportunities for improvement are many, but the key is
focussing on the public; “the only real magic in marketing is a citizen-oriented
approach.” (Kotler & Lee, 2007, p. 5).
Reference
Chapman, D. & Cowdell, T. (1998). New Public Sector Marketing. London: Financial Times
Pitman Publishing.
Christopher, M., Payne, A. & Ballantyne, D. (2002). Relationship Marketing: Creating
Stakeholder Value. Oxford: Elsevier Butterworth-Heinemann.
Cowell, D. (1984). The Marketing of Services. London: Heinemann.
Kotler, P. & Armstrong, G. (2006). Principles of Marketing (11th Edition). Upper Saddle
River, NJ: Pearson Prentice Hall.
Kotler, P. & Lee, N. (Spring 2007). Marketing in the Public Sector: the final frontier:
government agencies can use the four Ps – product, price, place, and promotion –
and other marketing techniques to transform their communication with the public
and improve their performance. The Public Manager, 36.1, pp 12 – 18.
Lovelock, C. & Wirtz, J. (2007). Services Marketing: People, Technology, Strategy (6th Edition).
Upper Saddle River, NJ: Pearson Prentice Hall.
Payne, A., Ballantyne, D. & Christopher, M. (2005). A stakeholder approach to
relationship marketing strategy: the development and use of the “six markets”
model. European Journal of Marketing, 39, pp 855 – 871.
Varey, R. & Ballantyne, D. (2005). Relationship Marketing and the Challenge of
Dialogical Interaction. Journal of Relationship Marketing, Vol. 4 No. 3/4, pp 11 – 28.
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