The Marshall and Vera Lea Rinker Welcome Center is a US$7.634 million budgeted new building that was opened in August 2016 to house various administrative and student-related functions at Stetson University in Florida. Al Allen, the University’s Vice President of Facilities Management, was the point person entrusted with not only completing the project on time and on budget but also ensuring that the building received external certification that validated its sustainability standards. Allen’s task was not an easy one because he had to address the often-conflicting demands of the project’s stakeholders, many of whom, although well meaning, had no knowledge of how the building’s architectural details related to sustainability. Freeman’s [1] idea of stakeholders affecting an organization’s actions come into play in this case. This paper examines Allen’s path as the project leader and the choices that he confronts via the lens of stakeholder theory as it impacts a sustainability initiative. As a result of engaging in the analysis of this case, the reader should have a fine-grained perspective on how organizations confront the trade-offs between the financial and the sustainability sides of a decision, particularly when these sides may not be completely convergent.

KEY MESSAGE

Students will be able to apply Freeman’s [1] stakeholder theory as a means of valuing the important role of environmental sustainability while balancing the needs of different stakeholders involved in a decision. Within the context of the case, they will become familiar with two of the most popular certification bodies involved with sustainable or green building design and understand the value of building sustainable construction. The resulting case analysis will enable students to identify stakeholders in a decision-making context and explain how to effectively lead the stakeholders to incorporate sustainability as one of the crucial elements in the desired outcome.

CASE EXAMINATION

The Decision

Al Allen, Vice President of Facilities Management at Stetson University in Florida, was responsible for initiating and managing new projects as well as shepherding the University toward becoming carbon neutral. In 2012, as part of a regular capital additions plan, a new building was envisaged to house the University’s welcome center and various student services. A major donor was John Rinker, President of the Marshall and Vera Lea Rinker Foundation. As the principal liaison between the University and the Foundation, Allen recalled that what essentially sealed the deal on the donation was his promise to John Rinker that the University would build

“an iconic, sustainable building that would last 100 years” [2].

Budgeted at US$7.634 million, the 28,000 square feet Marshall and Vera Lea Rinker Welcome Center (the Rinker Center) was the University’s most expensive and one of its largest physical structures. But to Allen, the Rinker Center presented a different challenge. It was the proposed home to several critical and yet disparate university activities. Among the activities expected to be housed were admissions and enrollment management, bursar, financial planning, and career development where upcoming graduates could hone their interviewing skills and meet with employer representatives. The heads of each of these activities had very specific ideas on what their work space and ambient surroundings should look like. As a case in point, the career development staff wanted a space that would present a corporate “feel” to the employer representatives, while the bursar’s office, given the significantly high foot traffic of students paying bills, emphasized ease of entry and exit. Early in the project, Allen held a formal meeting with the prospective tenants of the building as well as with various other internal stakeholders. The stakeholders indicated their expectations of the project at these meetings (Exhibit S1).

While the stakeholders to the building were unequivocal in their support of the University’s sustainability mandate, there were two conflicting factors that came into play. One was an understandable ignorance of the specifics of the University’s environmental stewardship plan, more specifically the one-to-one relationship between their everyday activities and their effect on the University’s quest toward carbon neutrality. The second was each stakeholder’s need to have a workspace best suited to facilitate their work. As a case in point, Joel Bauman, the University’s Vice President of Admissions, articulated what he wanted from the Rinker Center:

“We know from past surveys (both internally and nationwide) that the campus visit is the most important indicator of the likeliness to enroll. The feedback we got about Griffith Hall (that was used as the admissions office till recently) was that it had the ambience of the waiting parlor of a funeral hall! First impressions matter, so much so that we may not be someone’s first choice prior to their visit, but the lure of the campus changes that in our favor. The campus visit creates the most excitement. We have to have a “wow” space! I recall that the first architectural design called for a traditional building, much like the other buildings that we have on campus. There was a strong push back from many of us to make the building more modern and aesthetically appealing. The second design from the architects captured that. To me sustainability in itself is not a strong selling point because I seldom hear that from prospective students and their parents. It’s not a deal clincher in my mind as much as aesthetics is” [3].

While the university had made substantial capital improvements to many of its 94 buildings on campus since it formulated its sustainability plan in 2011, the Rinker Center was the first new construction project. In addition, Allen recalled his promise to the donor about building something that would last for 100 years. Allen realized that he had to manage the sometimes-conflicting expectations of the Rinker Center’s stakeholders (and tenants) in a way that would bring the project on time, on budget, and in keeping with the university’s sustainability mandate.

The Context

Freeman [1] defines a stakeholder as “any group or individual who can affect or is affected by the achievement of the organization’s objectives.” While arguably, Freeman’s development of the stakeholder concept, which had its genesis in Dodd’s work [4], was a rejoinder to the dominant stockholder primacy model adhered to by for-profit US corporations [5], and it has application to organizations of any kind. A not-for-profit educational institution (like Stetson University) has myriad stakeholders much like a for-profit company such as Apple. For example, just as Apple has suppliers, customers, and employees as stakeholders, so does a not-for-profit educational institution. Those who supply capital and operational inputs have a stake in such an institution as do the faculty and non-faculty employees. Freeman [1] posits that managing the expectations of an organization’s stakeholders paves the path for organizational legitimacy. An organization that, say, pushes profitability at the expense of ethical treatment of its employees and suppliers is likely, over the long run, to face a hostile society that could impose costs in the form of sanctions and adverse publicity that results in lost customers. The challenge that Freeman identified along with others who subsequently added to the stakeholder idea [6, 7] was that stakeholders have competing demands. As a case in point, employees expect higher wages and suppliers require price increases, while customers want lower prices and shareholders want higher profits. Organizations are faced with the need to prioritize these conflicting demands and seek solutions that balance these needs.

The Rinker Center project had external and internal stakeholders. Key among the external stakeholders was the Rinker foundation, which had contributed the bulk of the funding for the building. Given that the foundation had signed off on the project, Allen had the arguably easier job of simply having to balance the needs of the internal stakeholders (the tenants of the building) to complete the project. However, this was not so. A major constraint that Allen faced was that, while the University’s Board of Trustees had signed off on a US$7.634 million project, the project estimates from the building contractor came in at least 15% above that. Allen knew that he had to make major cuts. In doing so, could he effectively balance the various stakeholders’ interest in the Rinker Center? If so, how would he be able to prioritize the needs of these stakeholders? Awareness of stakeholders’ expectations and the ability to manage them are likely key elements in any sustainability-focused endeavors.

Baron argues that some stakeholders’ “stake,” such as employee rights, is protected by law [8]. The majority of “stakes,” however, are “protected by a relationship of mutual advantage” (p. 659). Managing such stakeholders and their stakes requires careful appraisal of the exchange. Central to this process is knowing the specific expectation of each stakeholder and the knowledge that a careful balancing act is often the best path forward.

Allen faced two decision points related to stakeholder management. The first had to do with a broader set of stakeholders, and the second had a more restricted canvas.

Allen’s first task was to decide on the specific certification that would meet the needs of the Rinker Center’s stakeholders. While the University’s Board of Trustees had not indicated the specific kind of external certification that the Rinker Center had to strive for, the University’s “Environmental Stewardship Plan” indicated LEED certification as a key element of the overall plan. Allen believed that, as the University’s facilities expert, he had the flexibility to choose the certification standard, as long as he had a sound rationale for his decision.

The second task related to making building-related decisions that would bring the Rinker Center’s cost in line with the approved amount. In doing this, Allen realized that he had to strike the right trade-off between the expectations of those stakeholders who pushed for the visual appeal of the building and those whose primary focus was on ensuring that the building met environmental sustainability standards.

Stetson University

Stetson University, founded in 1883, is a private liberal arts university located in DeLand in Central Florida. The University has an enrollment of 4,330 students (3,084 undergraduate and 1,246 graduate students) in its four schools in 2017. Its 175-acre campus just off Interstate 4 is listed on the National Register of Historic Places as one of the Florida’s oldest collection of education-related buildings. Deland Hall, which houses the key administrative functions, was built in 1884 and is the oldest continuously used education building in the state of Florida [9].

As a reflection of the University’s early and strong commitment to sustainability, the University took advantage of an opportunity to purchase and rebuild a savings and loan building in 2003 using green building practices. The resulting building, the Lynn Business Center, was Florida’s first green building certified by LEED [10]. The American College & University Presidents’ Climate Commitment (ACUPCC) was launched in December 2006 to encourage American institutions of higher education to embody and institutionalize sustainable thinking [11]. The Stetson University was one of the early signatories to ACUPCC’s compact, coming on board in June 2007. As a signatory [10], Stetson developed and ratified an “Environmental Stewardship Plan” (Exhibit S2 describes key aspects of the plan).

While the overarching goal of the plan was to become carbon neutral by 2050, it also contained action plans related to various aspects of conservation, including water and energy. To strengthen its commitment to sustainability, the university entered a contract with Cenergistic, a consultancy that was a leader in behavioral-focused energy conservation [10].

Sustainability Certification Options

Green building or sustainable construction is the design and processes used when constructing physical structures that are environmentally responsible and efficient in the use of resources throughout the lifetime of the building. Currently, green building’s growth rate is rapidly outpacing that of conventional construction and is anticipated to be among the fastest growing industries worldwide [12].Virtually every state in the US now mandates that all state-funded construction of new or existing construction should be designed to meet LEED standards. At the forefront of this sustainable building movement are US colleges and universities [13]. Of the US$53.71 billion spent on US green building design in 2015, educational construction came in third with 14.1% behind commercial (21.2%) and nonbuilding miscellaneous (17.25%) [12].

The swift growth in green building constructions stems from the realization of many organizations that green building has significant benefits that contribute to their bottom line, and thus consumers are demanding new construction and remodels that incorporate green building materials and practices. On average, green building costs <2% more than conventional construction and results in up to 20% lower maintenance costs. Studies indicate that green building also leads to improved worker productivity and reduced worker absenteeism and turnover. In addition, green construction generates higher sales prices on commercial real estate and occupancy and rental rates on leased space [14].

To assist in the process of green construction, several certification systems have been developed by different nonprofits that promote sustainability in buildings’ design, construction, and operation. The United States Green Building Council (USGBC) developed the first such certification program in 1998 named Leadership in Energy and Environmental Design, commonly known by its LEED acronym. In turn, in 2005, the Green Building Initiative (GBI) launched a competitive certification system called Green Globes. Overall, these two certification systems are the most commonly used in green construction and are very similar in nature. In both systems, projects obtain points by implementing environmentally friendly, green building practices. Each system rewards practices that significantly reduce or eliminate negative impacts on the environment and building occupants. Projects receive points based on performance in several categories and can earn one of the four designations, indicating the degree or level of sustainability achieved in the construction process. Although LEED has fewer categories than Green Globes, the two systems have significant overlap in terms of available points awarded during the construction process. For example, 85% of the points available in the LEED system are addressed in the Green Globes system [15].

However, several points of differentiation exist that may impact stakeholder interest. In particular, significant differences exist in terms of ease-of-use, time, and cost to complete the certification process. Green Globes offers a much simpler methodology with a user-friendly interactive guide used to assess and integrate green building principles. Past green building certification data indicate that Green Globes certification takes less time to complete and costs one-third to one-half of a comparable LEED certification [16]. In addition, LEED requires minimum performance level in many of its categories such as energy use and indoor air quality before any points are awarded. Similar actions earn points toward certification in Green Globes contributing to lower time and cost requirements. Some argue the differences in these factors result in a higher and more rigorous level of environmental sustainability when using the LEED system in the construction process [17]. In fact, LEED certification is the most recognized and most implemented system in the US. USGBC is considered the single most influential advocate for green building, credited with convincing many corporate leaders of the social, environmental, and economic benefits [16]. From a marketing perspective, LEED definitely has the most cachet. Overall, the decision of which certification to implement comes down to stakeholder interest in the different aspects of the building design, construction, and operation. Potential users should consider the needs and wants of their stakeholders to evaluate each system and select the one that provides the optimal point allocation needed to acquire the desired level of certification. Exhibit S3 compares the two certification systems on several dimensions.

External Certification

One of the first decisions Allen had to make dealt with external certification. While the 2003 Lynn Business Center was LEED certified, Allen leaned toward Green Globes for the Rinker Center. His rationale was simple. The Green Globes certification process was regionally handled, and the process was expected to be both faster and more sensitive to local needs than the national process that LEED adopted. As Allen said,

“if we were up north (of the United States), we would be concerned about heating. Here, (in Florida) our main concern is heat and humidity. We wanted someone who better understands our local conditions than someone from, say, New York, which is whom we would get if we went the LEED route. Our goal was to go for two Green Globes” [2].

In Allen’s estimation, the cost of the Rinker Center went up by about US$500,000 because of the decision to build it using sustainability norms as mandated by the Green Globes certification process (he stated that the cost would go up even more if he pursued LEED certification). The controls alone—for water, cooling, and electricity—cost an additional US$100,000 [2]. In addition, factors such as solar panels, tinted windows, and a 50-year lasting shingle roof, largely accounted for the additional cost. Allen was a strong believer that without the firm commitment of the University’s Board of Trustees and the principal donor (John Rinker), the additional cost to make the building sustainable would have been a deal breaker.

Key Trade-offs

As the project began to take shape, Allen realized that certain trade-offs had to be made to stay within budget. While his team had worked with the architects and the general contractor to develop a budget for the Rinker Center, the length of time between conception and execution had affected it adversely. Advances in building construction (particularly with a sustainability focus) had ushered in new products and processes that cost more than those originally budgeted for. A key trade-off that elicited conflicting views among the Center’s stakeholders involved esthetics versus environmental stewardship. Allen was reminded of the University’s Vice President of Admissions, Joel Bauman’s comment about the importance of esthetics in marketing to prospective students and their parents:

“Creating excitement during campus visits (by prospective students and their parents) is an important factor in the enrollment decision. We have to have a “wow” space to do that. Aesthetics, more than anything else, is the deal clincher” [3].

At the same time, Robert Huth, the University’s CFO and member of the Board of Trustees, kept reiterating to Allen the importance of coming in under budget while ensuring adherence to the Environmental Stewardship Plan:

“In every meeting I had with Al, I repeated the same thing over and over again: we have a responsibility to both John Rinker and to the Stetson Board of Trustees. We promised John that we would build a sustainable building. But it was also important that we be fiscally responsible in bringing it within budget” [18].

To Allen, the proposed staircase joining the first and the second floors was a singular example of this tension. In the original plan, the artistically pleasing stairwell cost US$250,000. However, at this point in the construction, more efficient (because of a specific tint) windows came on the market that minimized energy loss but added costs of about US$125,000. Challenged to stay within budget, he wanted to do away with the ornate stairwell and instead use the savings to upgrade the windows. To him, what the project gave up on esthetics, it made up on energy efficiency. But, not all stakeholders saw it that way. Those Rinker Center tenants who interfaced more frequently with non-university personnel saw the staircase as a showcase necessary to uphold the image of the university. For example, Joel Bowman did not see it as an esthetics versus environmental stewardship argument. He saw it as a commitment on the part of the University to build a structure that was visually appealing [3]. Allen’s team had to demonstrate to the holdouts the positive impact that the upgraded windows would have on the Rinker Center’s Green Globes certification to convince them to support the change.

A second trade-off also involved the same interplay of esthetics versus environmental stewardship. The original building plan had identified an Italian supplier of tiles at US$7 per square feet as the vendor of choice. The Italian design appealed to the esthetically inclined stakeholders. Upon closer inspection, although, it struck Allen’s team that sourcing tiles from Italy would have an adverse effect on the building’s carbon footprint because of the significant transportation involved. The team, instead, wanted to source a local, Florida tile supplier. To the team, the Florida supplier would not only minimize the carbon footprint but also would save money because of its US$2 per square feet cost. Once again, Allen’s team diligently persuaded the recalcitrant stakeholders by pointing out the carbon footprint impact of sourcing from Italy.

Sustainability and Stakeholder Interest

Sustainability is typically a flashpoint for an organization’s stakeholders. While an organization’s efforts to become, say, carbon neutral by a certain time, will meet the needs of some stakeholders (employees, for example, and also the communities where the organization operates), it could go against the interests of others who may oppose it (such as shareholders who may baulk at supporting initiatives that do not appear to them to have a palpable financial payback).

In the case of the Rinker Center, what is at stake is an organization’s (the University) push to build an environmentally friendly building that has an external validation in the form of certification by a well-known body. This push, though, is impacted by the sometimes-conflicting demands of the stakeholders involved. Here, the relevant stakeholders are all internal players—internal to the University. There are other stakeholders involved here, but the internal ones are those who would directly impact the decision. These stakeholders are from the various university units who would be the future tenants of the new building. Each stakeholder approaches this project with specific expectations, as explained in Exhibit S1. These expectations run the gamut from functionality to esthetics to environmental stewardship. For example, the head of the Bursar’s office wants a functional space that would enable students to complete their financial transactions easily. One could argue that the Bursar’s office approaches this project essentially from a functionality perspective. In contrast, the admissions office wants an esthetically pleasing building (the “wow” aspect) that will help to market the University to potential students and their parents. It is quite likely that only Allen’s team (and the University’s Board of Trustees) emphasizes the environmental stewardship perspective, while the other stakeholders arguably put environmental stewardship below functionality in terms of their preference. This tension is examined specifically via two trade-offs that Allen’s team faced. Neither of the two trade-offs—the stairwell issue and the Italian tile issue—involved functionality. Both, however, involved the underlying tension between esthetics (the primary demand of most of the stakeholders) and environmental stewardship (the domain of Allen’s team). It is important to understand though that this trade-off and the resulting tension came largely because of financial issues. The stairwell costs US$250,000 and the budget would not allow for both an expensive stairwell and energy efficient windows. In the second case, cost was a relevant issue. The Italian tile costs US$7 per square feet vs. US$2 for its Florida counterpart.

WRAP-UP AND TAKEAWAYS

It is not unusual for stakeholders to have a very narrow perspective. It could be rooted in their self-interest (like employees wanting higher wages), but it could also be an outcome of their ignorance of the big picture. The challenge in such situations is for the leaders to communicate in rational terms the presence of trade-offs and the relevant factors that should be taken into consideration in approaching these trade-offs. By keeping in mind his mandate from Bob Huth (that of building a sustainable building within the allotted budget) throughout the process, Allen succeeded in completing the project that met its objectives. In all his encounters with the building’s internal stakeholders, his single-mindedness in meeting both the donor’s and the Board of Trustees’ goals was the espalier against which all trade-offs were measured. His success was largely because the (sometimes) recalcitrant internal stakeholders saw the singularity of his purpose that was devoid of any personal gain, rather, a purpose that stubbornly pushed forward the institution’s agenda.

Tapscott and Ticoll [19] refer to the current organizational milieu as the “age of transparency” (p. xi). Their thesis is that legitimacy comes from being open to scrutiny by stakeholders. While one could argue that sustainability-focused projects come with inherent legitimacy, stakeholder management is the key to unlocking their success.

For-profit organizations differ from their not-for-profit counterparts in that, while the former have residual claimants, the latter do not [20]. For example, the shareholders of Apple have residual claims to Apple’s profits. In the dominant shareholder primacy model [21] followed in the US, residual claimants are arguably the “first among equals” among all stakeholders. If the Rinker project was to be undertaken by, say, Apple, Allen’s path would likely be quite different, in that, the expectations of Apple’s shareholders would be paramount. The “first among equals” argument may not apply as emphatically in the case of a not-for-profit educational institution that does not have any residual claimants. This means that the path of a project leader such as Al Allen in such a type of organization is informed by the constant need to meet and address the often-conflicting demands of stakeholders, each of whom sees themselves as equal to the others. This case illustrates that, while the path is manageable, it is not always easy.

CASE STUDY QUESTIONS

  1. Examine Al Allen’s rationale for pursuing Green Globes certification instead of LEED. Are his reasons valid or was he simply pursuing the easier and more doable alternative? Do you think green buildings attract students and interest to a university?

  2. There are two instances of tensions or trade-offs that Allen’s team faced: the stairwell and the tile issue. He viewed it as a choice between esthetics and environmental stewardship and opted for the latter. Is framing the issue in such terms the right way to go?

  3. Does the stakeholder concept even apply in situations such as this? In other words, should a project manager, for example, even consider internal stakeholders? How important is the organization’s overall mandate in such matters?

AUTHOR CONTRIBUTIONS

All authors are responsible for the conception of the work, the analysis and interpretation, and drafting of the article.

The authors thank Al Allen, Joel Bauman, and Robert Huth for providing information and assistance to write this case.

FUNDING

No funding was received to write this case.

COMPETING INTERESTS

The authors have declared that no competing interests exist.

SUPPLEMENTARY MATERIALS

Teaching notes.

Exhibit S1. Stakeholder expectations map.

Exhibit S2. Stetson University: highlights of environmental stewardship plan.

Exhibit S3. Distinct features between Green Globes and LEED certification.

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