Setting corporate goals and measuring organizational effectiveness--a practical approach.

Shareholders, customers, suppliers, lenders, the community, government and regulatory agencies and employees--the stakeholders in an organization--are the ones entitled to anticipate the satisfaction of societal demands placed on the organization. Strategic planning has to take these into account in order to be able to plan how the demands can be met. Therefore, the stakeholders as such must be identified and placed in an order of priority. There are those without whom the organization could not exist and those who have a judicial position in relationships to the organization. It then becomes important to establish the criteria by which each will judge the organization's effectiveness. One way is to approach the stakeholder directly. Another is to use a deductive approach based on a literature survey or polling representatives. In practice a combination can be used. If this is done then the crucial effectiveness criteria for each stakeholder group can be identified. It is important, of course, to realize that not only can these criteria change, but also the determinants of stakeholder power can vary. They depend on what resources each group possesses, whether there are alternative stakeholders, what authority and influence is held. In turn the effectiveness will be influenced by the pressures brought to bear on the power of the stakeholder. These can progress from societal pressures to political issues to legislated requirement and, finally, to punitive action. Another way of regarding them is as moving from strategic to emerging to current. An appreciation of this will help environmental scanning.