Stakeholder

Learning objectives

After completing this unit, you will be able to:

1. Explain social capital theory and distinguish structural, relational, and cognitive dimensions
2. Apply stakeholder salience analysis (power, legitimacy, urgency) to identify and prioritise stakeholders
3. Select appropriate engagement levels using the IAP2 spectrum based on stakeholder attributes
4. Design coalition-building strategies using network analysis and second-order thinking

Latticework check-in

Opening reflection

Network effects and second-order thinking — how does engaging stakeholder A affect stakeholder B?

Stakeholder management is never about managing individual relationships in isolation. Every interaction ripples through the network. Second-order thinking helps us anticipate those ripple effects.

Social capital theory

In brief

It is not what you know,
it is who you know.

• Gaining membership to exclusive clubs requires inside contacts
• Attractive jobs are usually won by those with friends in high places
• Friends and family constitute the final safety net if one falls hard

The core intuition guiding social capital research is that the goodwill that others have toward us is a valuable resource. Adler & Kwon (2002)

History

The concept of social capital has been relatively independently introduced by scholars from various disciplines at different times.

Seminal works particularly originate from

• Coleman (1988) on the topic of education and utilisation of human capital
• Putnam (2000) on social participation
• Bourdieu (1986) on the relationship between economic, cultural, and social capital
• Burt (2018) on social networks

Since the 1990s the concept of social capital found its way into organizational and management sciences to explain e.g.

• value creation in intrafirm networks (Tsai & Ghoshal, 1998),
• creation of intellectual capital (Nahapiet & Ghoshal, 1998),
• productivity of R&D teams (Reagans & Zuckerman, 2001),
• project performance (Di Vincenzo & Mascia, 2012), and
• business-IT alignment (Wagner et al., 2014).

Definitions

Social capital is defined by its function. It is not a single entity, but a variety of different entities having two characteristics in common: They all consist of some aspect of social structure, and they facilitate certain actions of individuals who are within the structure. Like other forms of capital, social capital is productive, making possible the achievement of certain ends that would not be attainable in its absence Coleman (1988, p. 98)

… features of social organizations such as networks, norms, and social trust that facilitate coordination and cooperation for mutual benefits Putnam (1993, p. 67)

---

… the aggregate of the actual or potential resources which are linked to possession of a durable network of more or less institutionalized relationships of mutual acquaintance or recognition Bourdieu (1986, p. 21)

… the sum of the actual and potential resources embedded within, available through, and derived from the network of relationships possessed by an individual or a social unit. Social capital thus comprises both the network and the assets that may be mobilized through that network. Nahapiet & Ghoshal (1998, p. 243)

Similarities and distinctions

The definitions of social capital share some similarities and distinctions:

• There is an emphasis on the structure of social relations (networks)
• Social capital is seen as a resource for action (individual goal achievement)
• The level of analysis stems from macro-level (e.g., societies) to meso/micro-level (e.g., organizations and groups)
• The causal structure of social capital is conceived differently
  
  • Networks as source of social capital; social capital is a result of network embeddedness (e.g., Bourdieu, 1986; Coleman, 1988).
  • The network of relations is equivalent to social capital (Nahapiet & Ghoshal, 1998; e.g., Putnam, 1993).

Strong vs. weak ties

Coleman (1988) argues that cohesion, that is to say the strength of the relationship between actors, is the source of social capital (strong ties)

• Cohesion facilitates the creation of social norms, trust and sanctions within networks, which safeguard against opportunistic behavior
• Cohesion enables coordination and increases willingness of actors to engage in knowledge exchange (bonding)

Burt (2018) posits that social capital rather emerges from opportunities to bridge disconnections or non-equivalencies separating non-redundant sources of information (structural holes)

• Structural holes (i.e. ‘weak ties’) provide the opportunity to get access to diverse sets of perspectives, skills, or resources.
• Social capital emerges from structurally favorable positions between different group of actors (bridging)

This strong/weak tie distinction maps directly onto stakeholder engagement: bonding ties for core allies, bridging ties for new stakeholder access.

Structure, cognition, and relation

Figure 1: Social capital in the creation of intellectual capital (Nahapiet & Ghoshal, 1998, p. 251)

Structural dimension

The structural dimension reflects “the overall pattern of connections between actors” (Nahapiet & Ghoshal, 1998, p. 244) — the possibilities of actors to interact with others (‘physical’ ties)

Relational dimension

The relational dimension “relates to the nature and quality of the relationships among team members” (Robert Jr et al., 2008, p. 319) — the relational strength of ties (trust, respect, norms, identification)

Cognitive dimension

The cognitive dimension refers to “those resources providing shared representations, interpretations, and systems of meaning among parties” (Nahapiet & Ghoshal, 1998, p. 244) — the ability to communicate and effectively access resources

Value

The ultimate value of a given form of social capital is context-dependent (Adler & Kwon, 2002).

Strong ties
Effective search for novel information
(competitive rivalry, certain tasks, individual contribution)

Weak ties
Effective transfer of information and tacit knowledge
(collective goals, uncertain tasks, group contribution)

The value is further dependent on the availability of complementary resources (e.g., combination capability)

Opportunity, motivation, and ability

Figure 2: The conceptual model of social capital according to Adler & Kwon (2002, p. 23)

Opportunities

The social network creates opportunities for social capital transactions to leverage external resources (bridging) and to act together (bonding) (Adler & Kwon, 2002).

Motivation

Contact’s motivation determines the share of potential resources. Motivation reflects the willingness to define and act on collective goals caused by shared interests, common identity, and commitment to the common good (Adler & Kwon, 2002).

Ability

If social relations are mobilized is contingent on resources that enables actors to mobilize their social relations (e.g. shared representations, interpretations, and systems of meaning) (Adler & Kwon, 2002).

According to Adler & Kwon (2002) conceptual model, context plays a critical role in determining the value of social capital. They propose that the value of social capital is not universal or fixed but rather contingent on specific contextual factors. This contextual perspective is significant because it challenges simplistic views that social capital is universally beneficial. Instead, Adler and Kwon emphasize that the value of social capital is situational and dependent on these contextual factors, which helps explain why similar network structures or relationships might yield different outcomes in different settings.

Application: CIO & TMT relationships

Leadership in modern organizations extends far beyond formal authority. As you develop in your leadership journey, consider these key insights:

• Recognize that power is multifaceted — while formal authority is limited, effective leaders cultivate diverse sources of power—both personal (expertise, track record, effort) and positional (relevance, centrality, visibility).
• Embrace productive politics — politics isn’t inherently negative but rather “power in action.” Skilled leaders engage in organizational politics functionally, using influence techniques to navigate interdependencies and resolve conflicts constructively.
• Manage organizational seams — pay particular attention to the interfaces between departments and units, as these are where political conflicts often emerge. Your ability to reduce friction at these seams directly impacts organizational effectiveness.
• Invest strategically in social capital — your network is a critical resource. Understand that the value of relationships is context-dependent—sometimes strong, cohesive ties are beneficial; other times, weak ties that bridge structural holes provide greater advantage.
  • Apply the opportunity-motivation-ability framework from Adler and Kwon to develop relationships that provide access to resources, information, and support across organizational boundaries.
  • Create alignment through shared values. Use your influence to foster a common vision that can overcome the natural political tensions arising from diversity and interdependence.

Remember that effective leadership requires constant attention to dependencies and relationships. As you progress, continuously reevaluate your sources of power, nurture your network, and adapt your political strategies to changing contexts. In the end, your effectiveness will be judged not by your formal position but by your ability to exercise influence across organizational boundaries.

Stakeholder identification & salience

Who is a stakeholder?

A stakeholder is any group or individual who can affect or is affected by the achievement of the organization’s objectives. Freeman (1984, p. 46)

This definition is deliberately broad — it forces leaders to look beyond the obvious (shareholders, employees, customers) to include all groups that have a stake in the organization’s actions and outcomes.

The stakeholder concept challenges the shareholder primacy view that the organization’s only obligation is to maximize returns for owners. Instead, stakeholder theory argues that long-term organizational success depends on managing relationships with multiple groups whose interests may diverge. This makes stakeholder management a leadership skill, not just a communication exercise.

For digital leaders, the stakeholder landscape is particularly complex: digital transformation affects employees, customers, suppliers, regulators, communities, and entire industries — often in ways that are difficult to predict.

Stakeholder salience

Not all stakeholders are equally important at any given time. Mitchell et al. (1997) proposed the stakeholder salience model based on three attributes:

• Power — the stakeholder’s ability to influence the organization (coercive, utilitarian, or normative)
• Legitimacy — the perceived appropriateness of the stakeholder’s claim or relationship
• Urgency — the degree to which the stakeholder’s claim demands immediate attention (time-sensitivity and criticality)

The three attributes combine to create seven stakeholder types:

1. Dormant (power only) — have power but no legitimate claim or urgent need; potential threat if activated
2. Discretionary (legitimacy only) — have legitimate claims but no power or urgency; often recipients of philanthropy
3. Demanding (urgency only) — make urgent claims but lack power and legitimacy; can be disruptive but are easily dismissed
4. Dominant (power + legitimacy) — have both power and legitimate claims; the stakeholders that formal governance structures typically address
5. Dangerous (power + urgency) — have power and urgency but may lack legitimacy; can resort to coercive tactics
6. Dependent (legitimacy + urgency) — have legitimate and urgent claims but depend on others to act on their behalf
7. Definitive (all three) — have power, legitimacy, and urgency; demand and deserve immediate managerial attention

The model is dynamic: stakeholder salience changes over time as attributes are gained or lost. A dormant stakeholder can become definitive if they gain legitimacy and urgency (e.g., a regulator that begins investigating the company).

Stakeholder mapping exercise

Think of a digital transformation initiative (e.g., implementing AI-driven customer service in a bank).

For this scenario:

1. Identify at least 6 stakeholders using the broad definition (Freeman, 1984)
2. Assess each stakeholder’s power, legitimacy, and urgency
3. Classify each stakeholder using the salience model (dormant, discretionary, demanding, dominant, dangerous, dependent, or definitive)

Interest-influence mapping

The 2×2 matrix

A complementary tool to the salience model: map stakeholders on interest (how much they care) × influence (how much they can affect outcomes):

	Low influence	High influence
High interest	Keep informed — regular updates, transparent communication	Manage closely — active engagement, involve in decisions
Low interest	Monitor — minimal effort, watch for changes	Keep satisfied — address concerns proactively, don’t overwhelm

The interest-influence matrix is widely used in practice because of its simplicity. It translates stakeholder analysis into concrete engagement strategies. However, it has limitations:

• It is a static snapshot — stakeholder positions change over time, especially during crises or organizational transitions
• It does not capture network dynamics — a low-influence stakeholder who is closely connected to a high-influence stakeholder may be more important than they appear
• It can oversimplify — the binary high/low categorization misses nuances

This is where social capital theory enriches the picture: network analysis reveals how stakeholders are connected, showing indirect influence paths that the 2×2 matrix misses. A stakeholder with low direct influence but high centrality in the network (a “bridge” in Burt’s terms) may be critical for building coalitions.

IAP2 engagement spectrum

Five levels of engagement

The International Association for Public Participation (IAP2) defines a spectrum of engagement that describes increasing levels of stakeholder involvement:

Level	Promise to stakeholders	Leader behavior
Inform	“We will keep you informed”	One-way communication; provide balanced, objective information
Consult	“We will listen to you”	Two-way communication; seek feedback on analysis, alternatives, decisions
Involve	“We will work with you”	Active participation; ensure concerns are reflected in alternatives
Collaborate	“We will partner with you”	Shared decision-making; incorporate advice and recommendations
Empower	“We will implement what you decide”	Delegation of decision authority; stakeholders have final say

The IAP2 spectrum helps leaders make deliberate choices about how deeply to engage different stakeholders. Not every stakeholder needs to be empowered — and empowering the wrong stakeholders can paralyze decision-making. Conversely, only informing a stakeholder who expects to be consulted creates frustration and resistance.

The key insight: the engagement level should match the stakeholder’s salience, interest, and influence:

• Definitive stakeholders (high power, legitimacy, urgency) typically need to be collaborated with or empowered
• Dominant stakeholders (high power, legitimacy) usually need to be involved or collaborated with
• Dependent stakeholders (high legitimacy, urgency) need to be consulted or involved
• Dormant or discretionary stakeholders may only need to be informed

Managing conflicting stakeholder demands — when different groups expect different engagement levels — is one of the hardest leadership challenges. Prioritization requires the judgment and political skill we discussed in Unit 6.

Matching engagement to stakeholder salience

The engagement level should match the stakeholder’s salience:

Higher engagement needed:

• Definitive stakeholders (all three attributes)
• Stakeholders with veto power
• Groups whose buy-in is critical for implementation
• Internal champions and change agents

Lower engagement sufficient:

• Dormant stakeholders (power only)
• Discretionary stakeholders (legitimacy only)
• Groups with low interest and low influence
• Stakeholders who are adequately represented by others

The challenge arises when stakeholders expect a higher level of engagement than you plan to provide. A labor union that expects to be collaborated with but is only consulted will feel disrespected and may become oppositional. A board member who expects to be informed but is asked to collaborate on details may feel their time is wasted.

Getting this calibration right requires stakeholder empathy — the ability to see the situation from each stakeholder’s perspective and anticipate their expectations. This connects to emotional intelligence (Unit 2) and, ultimately, to storytelling (Unit 9): different stakeholders need different narratives.

Coalition building & political navigation

Coalitions as change mechanism

Coalitions are a mechanism for achieving change without unilateral authority — connecting directly to Unit 6’s lateral leadership content.

A coalition is a temporary alliance of stakeholders who share a common interest or goal and pool their resources to achieve it.

Key principles of coalition building:

• Identify potential allies and blockers using the stakeholder map — who shares your objectives? Who opposes them? Who is undecided?
• Start with easy wins — build momentum by first engaging stakeholders who are predisposed to support you
• Sequence carefully — each new ally makes the next one easier to recruit. Build a critical mass of support before approaching skeptics.
• Use reciprocity as currency — coalitions run on mutual benefit. Understand what each ally needs and find ways to create value for them (connecting to social capital’s relational dimension).

Coalition building is where stakeholder management, social capital theory, and political navigation converge. The stakeholder map tells you who to engage. Social capital theory tells you through whom to reach them (leveraging structural holes and bridging ties). Political navigation (Unit 6) tells you how to exercise influence.

Effective coalition builders think several moves ahead — this is second-order thinking applied to political strategy. “If I engage stakeholder A first, how will that affect my ability to engage stakeholder B? What signal does it send to stakeholder C?”

Stakeholder network analysis

Beyond the 2×2 map

Static stakeholder maps are useful starting points, but they miss the network dynamics that often determine outcomes.

Key question: “Who connects whom? Where are the bridges and bottlenecks?”

Using social capital concepts to analyze stakeholder networks:

• Centrality — which stakeholders are most connected? They are likely the most influential, even if they lack formal authority
• Structural holes — where are the gaps between stakeholder groups? Bridging these gaps creates opportunities for influence
• Clusters — which stakeholders form tight-knit groups? These clusters may act as blocks in coalition dynamics

Stakeholder network analysis connects social capital theory directly to practical leadership action:

• A leader who identifies a structural hole between two important stakeholder groups can position themselves as a bridge, gaining influence by connecting otherwise disconnected parties
• A leader who identifies a central connector — a person with ties to many different stakeholder groups — can leverage that person’s network position to amplify their message
• A leader who identifies dense clusters of opposition can develop targeted strategies for each cluster rather than treating all opponents as a monolithic group

This is the practical payoff of the social capital theory we studied earlier: it provides not just a theoretical framework but a diagnostic tool for real stakeholder challenges.

Stakeholder mapping exercise

Case exercise

Scenario: Your company is launching a digital transformation initiative — migrating core business processes to a cloud-based platform. You are the project leader.

In small groups:

1. Identify stakeholders using the broad definition (Freeman, 1984) (aim for at least 8)
2. Map interest × influence for each stakeholder
3. Propose engagement strategies per stakeholder group (using the IAP2 spectrum)
4. Identify coalition opportunities — which stakeholders can you align? In what sequence?

Latticework update

New models added to your latticework:

• Stakeholder salience (power × legitimacy × urgency)
• Engagement spectrum as situational tool
• Coalition logic and second-order stakeholder effects

Literature

Adler, P. S., & Kwon, S.-W. (2002). Social capital: Prospects for a new concept. Academy of Management Review, 27(1), 17–40.

Bourdieu, P. (1986). The forms of capital. In The sociology of economic life (pp. 78–92). Routledge.

Burt, R. S. (2018). Structural holes. In Social stratification (pp. 659–663). Routledge.

Coleman, J. S. (1988). Social capital in the creation of human capital. American Journal of Sociology, 94, S95–S120.

Di Vincenzo, F., & Mascia, D. (2012). Social capital in project-based organizations: Its role, structure, and impact on project performance. International Journal of Project Management, 30(1), 5–14.

Freeman, R. E. (1984). Strategic management: A stakeholder approach. Pitman.

Mitchell, R. K., Agle, B. R., & Wood, D. J. (1997). Toward a theory of stakeholder identification and salience: Defining the principle of who and what really counts. Academy of Management Review, 22(4), 853–886.

Nahapiet, J., & Ghoshal, S. (1998). Social capital, intellectual capital, and the organizational advantage. Academy of Management Review, 23(2), 242–266.

Putnam, R. D. (1993). The prosperous community. The American Prospect, 4(13), 35–42.

Putnam, R. D. (2000). Bowling alone: America’s declining social capital. In Culture and politics: A reader (pp. 223–234). Springer.

Reagans, R., & Zuckerman, E. W. (2001). Networks, diversity, and productivity: The social capital of corporate r&d teams. Organization Science, 12(4), 502–517.

Robert Jr, L. P., Dennis, A. R., & Ahuja, M. K. (2008). Social capital and knowledge integration in digitally enabled teams. Information Systems Research, 19(3), 314–334.

Tsai, W., & Ghoshal, S. (1998). Social capital and value creation: The role of intrafirm networks. Academy of Management Journal, 41(4), 464–476.

Wagner, H.-T., Beimborn, D., & Weitzel, T. (2014). How social capital among information technology and business units drives operational alignment and IT business value. Journal of Management Information Systems, 31(1), 241–272.