Stakeholders have a big impact on how businesses perform and succeed. They are people or groups with a strong interest in a company’s results. This includes everyone from the workers and people who put money into the business, to the people who supply it and the communities around it1. Managing these stakeholders well means dealing with different influences. It’s about making sure everyone’s priorities are met in a way that the business can keep making money and be sustainable for a long time1.
It’s very important to recognize and work well with the different roles stakeholders have. Businesses are now expected to care about more than just making as much money as possible for shareholders. They should also take care of the economic, social, and moral worries of all their stakeholders2.
Key Takeaways
- Stakeholders include internal and external groups pivotal to business success.
- Key roles encompass investors, employees, suppliers, and communities.
- Effective management balances various interests for sustained profitability.
- Stakeholder capitalism focuses on broader responsibilities, not just shareholder wealth.
- Successful engagement includes clear communication and conflict resolution.
Understanding Stakeholders in Business
Knowing who your stakeholders are is key to any business plan. These people or groups shape a company’s path with their needs and roles. They can be inside the company (like workers or managers) or outside (like customers or the community).
Definition and Importance
Stakeholders are folks or groups tied to a business’s performance and daily work. They matter because they can change or be changed by what a business does. People who work inside the company, such as employees, are called internal stakeholders3. Those not directly linked, like people living nearby, are called external stakeholders3. For example, buyers look for good quality without spending a lot, pushing companies to meet this expectation3
Internal vs. External Stakeholders
People inside a company are crucial to its main operations. This includes managers and owners, who help the business thrive3. Meanwhile, external stakeholders include a mix of people and groups. These are customers, suppliers, and community members who deal with the business from a distance3. Suppliers, for instance, count on companies to buy their products, which keeps them afloat3. And local communities value businesses for creating jobs and boosting the economy3.
Looking into stakeholder needs is vital at the start of any project and should continue as the project grows4. Businesses must communicate well to keep stakeholders interested, especially critical ones, who should hear from you daily4. By knowing what stakeholders want and spotting the main ones, companies can set their plans to benefit everyone involved.
What Is a Stakeholder
Stakeholders are vital to any organization due to their interests and levels of influence. They play a big role in the success or failure of a business. Recognizing their impact is crucial.
Key Characteristics
Every stakeholder brings something special to the table. Investors look for profits from their money, putting capital into the business5. For them, the success of the company is key.
Employees need their jobs for stability and benefits. Their life quality depends on how well the organization does5. Customers demand quality, affecting sales and how others see the company56.
Suppliers and vendors’ earnings depend on the business doing well. This highlights the importance of a good business relationship56. Communities gain from jobs and growth caused by the company’s activities56. Governments get taxes and economic growth, spotlighting their external stakeholder status.
Types of Interests and Influences
Stakeholders have different aims and impact levels on your business. Investors care most about how much money they make back. This shapes their goals and choices56.
Employees value stable jobs, benefits, and a safe workplace. This impacts how hard they work and their loyalty5. Customers prioritize value and quality, which drives sales56.
Suppliers need steady orders and prompt payments for their survival6. Communities benefit from business-led growth and safety projects, valuing development and well-being6. Governments focus on collecting taxes and encouraging economic activities, showcasing their wide-ranging business influence on society and economy56.
Internal Stakeholders: Critical Components
Internal stakeholders are the core of any company. They handle the ownership, money matters, how things are run, and big decisions that set the future path.
Owners and Investors
Owners and investors deeply care about the company thriving. They bring in the cash and guide the strategy. For instance, when venture capital firms back startups, they get a say in decisions7. Their money and advice help the company grow and succeed.
Employees
Employees are crucial in doing daily tasks and reaching company goals. Their hard work greatly affects the company’s success7. With changes like online work due to COVID-19, they’ve kept up, keeping the company strong8. Every person in the company plays a vital role.
Board of Directors and Managers
The board and management are key to good company leadership. They make sure the company stays true to its main principles9. They handle important duties such as being open and engaging, which builds trust. Their work keeps the company on track for success.
The Role of External Stakeholders
External stakeholders are key to a business’s success and its long-term survival. They influence the company from the outside, affecting its operations and rules.
Customers
Customers are vital since their choices affect the company’s profits10. To keep up, businesses must listen to their customers. They often use surveys, emails, and social media for this11.
By understanding what customers want, companies can make better products12. This helps a business stay liked and meet expectations.
Suppliers
Having good relationships with suppliers is crucial10. When companies and suppliers work well together, they ensure a steady flow of necessary materials11.
This cooperation keeps the business running smoothly. A dependable supply chain keeps production on track and maintains quality.
Communities and Governments
Getting along with local communities and governments matter a lot10. Communities expect companies to support social and environmental causes11.
Firms engage with locals through events and social media12. Also, following government rules is key to avoid legal problems10. Governments make laws for public well-being, so staying updated is necessary.
Stakeholders vs. Shareholders: Key Differences
It’s important to know the difference between stakeholders and shareholders. A stakeholder has an interest in a company, like employees, suppliers, or the community. Shareholders, however, own at least one share in a company. This gives them a financial interest in how well the company does13.
“Shareholders prioritize actions that increase share prices and dividends, while stakeholders focus on the long-term success and sustainability of the company”14.
Shareholders mainly look at the financial returns. They can be people, other companies, or institutions. They have the right to check the company’s financial records, vote on important matters, and even sue company directors if necessary14. Stakeholders, like employees and suppliers, care about more than just money. They care about the company’s overall well-being13
CEOs are a good example of stakeholders who make big decisions. They can also be shareholders if they own stock in the company13. Famous investors like Warren Buffett show us that buying shares early can lead to big rewards. Buffett bought six shares of CITGO when he was just 11 years old15.
Stakeholder Theory tells us that a company needs to take care of all its stakeholders to really succeed. This idea is part of CSR, or corporate social responsibility. CSR means companies think about how their choices affect everyone, not just their profits13. Yet, only 15% of employees feel their voice matters at work. This shows companies need to get better at listening to their stakeholders15.
Distinguishing between stakeholders and shareholders helps make smart business choices. While shareholders might look for quick financial wins, stakeholders are all about the company’s future well-being13. Success comes from understanding and respecting the needs of both groups.
Primary and Secondary Stakeholders
It’s vital to know the difference between primary and secondary stakeholders in business. This knowledge helps in deciding who gets priority and how to invest wisely. Primary stakeholders have a direct tie to the company. They are essential for its main goal and mission. Examples include employees, investors, and customers. They are important because they support the company with money, effort, and information16. These stakeholders often have formal agreements like contracts16.
Examples and Impact
Primary stakeholders like customers and employees have a big impact on a company’s path17. For example, investors are key as they influence financial choices and how resources are used17. Secondary stakeholders, such as government bodies and community groups, can affect a company’s image. They do this even if they’re not involved every day17. Since it’s easier to replace them if needed, their impact is less direct16.
Prioritizing Stakeholders
To prioritize stakeholders well, compare the aims of the primary ones to the company’s goals16. For companies, it’s crucial to recognize and leverage the true value they offer to primary stakeholders. This fosters strong bonds and loyalty16. Balancing the needs of both primary and secondary stakeholders is key for project managers to achieve success17.
Prioritizing stakeholders also means figuring out which ones need more focus, especially regarding investing. Primary stakeholders have a direct role and a big interest in the company’s success. This makes keeping them happy very important16. However, secondary stakeholders can become more involved and shift to primary roles as they get more engaged with the company’s work16.
Case Studies: Stakeholder Influence on Businesses
Looking at case studies shows how stakeholder influence molds business strategies and results. A study finds that 84% of companies think connecting with stakeholders is key to shaping business plans and making decisions18. For instance, shareholders have about 55% of the votes in public companies, giving them big control over important choices18.
In manufacturing, 73% of businesses see how stakeholders affect their long-term future and reputation18. Having internal folks like workers and bosses involved leads to 60% better business outcomes, proving their important part in achieving success18.
Also, focusing on stakeholder capitalism shows a big change. It’s now about creating value for society, not just profits for stockholders19. Groups like Black Lives Matter and Extinction Rebellion show the need for companies to serve many stakeholders. This includes workers, customers, suppliers, and communities19.
Companies that really listen to customers and use their views in making products see customer happiness jump by 20%18. This highlights how crucial customer stakeholders are to a business’s success and expansion.
Challenges in Stakeholder Management
Managing stakeholders effectively is tricky. It involves dealing with various opinions and needs, which can lead to disagreements and competition for resources. As someone leading a project, you need to be great at talking to people and making deals. You also have to be clever about meeting everyone’s needs while keeping the project on track.
Conflicts of Interest
Conflicts of interest are a big problem when managing stakeholders. People or groups often have different things they want to achieve, which can clash. This can make the project harder to complete20. For example, some may want to save money while others care more about their team’s happiness. This causes conflict20. Also, fighting over resources is usual and raises stress during the project20. To deal with these issues, you must be good at solving conflicts and communicating well.
Balancing Various Stakeholder Needs
Finding balance among stakeholders means more than just stopping conflicts. You need a full plan to make sure you listen to everyone21. It’s tough because you have to think about the project right now and the company’s future goals21. Stakeholder management isn’t straightforward and requires you to be flexible as project needs change21. Staying in touch with important stakeholders and gaining their trust through open communication is key20. Using tools like the Power and Interest Matrix helps figure out who needs the most attention and who doesn’t22.
Dealing with stakeholder relationships takes clear communication and working together wisely to avoid issues and keep the business steady. By understanding each stakeholder’s unique challenges and addressing them carefully, your efforts in managing stakeholders will improve, leading to successful projects.
Source Links
- Stakeholders – https://www.wallstreetprep.com/knowledge/stakeholders/
- Stakeholder – https://www.munich-business-school.de/en/l/business-studies-dictionary/stakeholder
- Business Stakeholders | Introduction to Business – https://courses.lumenlearning.com/suny-wmopen-introbusiness/chapter/business-stakeholders-2/
- What Is A Stakeholder Analysis? Everything You Need To Know – https://www.forbes.com/advisor/business/what-is-stakeholder-analysis/
- What Is a Stakeholder? Definitions, Types & Examples – https://www.projectmanager.com/blog/what-is-a-stakeholder
- Stakeholder – https://corporatefinanceinstitute.com/resources/accounting/stakeholder/
- What Are Stakeholders? Definition, Types, and Examples – https://www.investopedia.com/terms/s/stakeholder.asp
- Internal and External Stakeholders Roles & Responsibilities – https://maddevs.io/blog/internal-and-external-stakeholders-in-it/
- What is a Stakeholder? Definition, Types, Examples | TechTarget – https://www.techtarget.com/searchcio/definition/stakeholder
- External Stakeholders: What They Are and Why You Must Value Them – https://www.usemotion.com/blog/external-stakeholders
- Understanding External Stakeholders: A Brief Guide – https://simplystakeholders.com/external-stakeholders/
- Types of stakeholders and their role in the company | alva – https://www.alva-group.com/blog/types-of-stakeholders-and-their-role-in-the-company/
- Shareholder vs. Stakeholder: What’s the Difference? – https://www.investopedia.com/ask/answers/08/difference-between-a-shareholder-and-a-stakeholder.asp
- Stakeholder vs. Shareholder – https://corporatefinanceinstitute.com/resources/accounting/stakeholder-vs-shareholder/
- Shareholder vs. Stakeholder: What’s the Difference? [2024] • Asana – https://asana.com/resources/stakeholder-vs-shareholder
- How to identify (and manage) primary and secondary stakeholders – https://www.tascosslibrary.org.au/how-to/identify-and-manage-primary-and-secondary-stakeholders
- Primary vs Secondary Stakeholders: Learn the Difference – PM Column – https://www.pmcolumn.com/primary-vs-secondary-stakeholders/
- Stakeholder: How Stakeholders Influence Business Decision making – FasterCapital – https://fastercapital.com/content/Stakeholder–How-Stakeholders-Influence-Business-Decision-making.html
- What are the impacts of stakeholders on a business? | alva – https://www.alva-group.com/blog/what-are-the-impacts-of-stakeholders-on-a-business/
- How to Manage Common Stakeholder Issues and Challenges – https://www.lucidchart.com/blog/how-to-manage-common-stakeholder-issues-and-challenges
- Stakeholder management: challenges & trends – https://pmdgmidlothian.home.blog/stakeholder-management/stakeholder-management-challenges-trends/
- Key Challenges, Strategies and Steps for effective Stakeholder Management – https://medium.com/@mittal.pratyush/key-challenges-strategies-and-steps-for-effective-stakeholder-management-2be14ba5dda9