What is a Stakeholder?
Depending on the size and scope of your project, there can be many different stakeholders to consider. It’s essential to understand who your project stakeholders are and their level of importance so that you can prioritise them accordingly.
Stakeholders are individuals or groups interested in a company’s actions and can impact its success. They can be internal or external, ranging from customers to communities and governments.
What is a Stakeholder?
A stakeholder is any individual, group, or entity with a vested interest or concern in a business or organisation’s activities, operations, and outcomes. Stakeholders can include shareholders, customers, employees, suppliers, government agencies, competitors, and others directly or indirectly affected by the entity’s actions and decisions.
|Types of Stakeholders
Definition of a Stakeholder
A stakeholder is any person or group with a vested interest in the outcome of a project. The term is often used in business to describe a company’s shareholders, customers and employees. But it can also be applied to groups or individuals who have an indirect relationship with a business. These include creditors, local communities, government agencies and labour unions.
The stakeholder concept is based on the principle that all individuals and organisations have a right to participate in projects that affect them. Companies have realised that engaging with stakeholders improves their image, increases sales and reduces litigation risks.
For example, a call centre manager overseeing the implementation of a customer relationship management software project might consider senior managers, a telecommunications vendor and a trade association as stakeholders. These entities might have a direct interest in the success of that implementation. Still, their relationship with the company is less direct than those of the project manager and the software developer.
What is a Stakeholder in Business?
In business, a stakeholder refers to any individual, group, or entity with an interest or concern in a company or organisation’s operations, activities, and outcomes. Stakeholders can be both internal and external to the business and can include various parties such as:
- Shareholders/Investors: These are individuals or entities that own shares or equity in the company. They are often concerned with the company’s financial performance and its ability to provide a return on their investment.
- Customers are essential stakeholders who purchase the company’s products or services. They are interested in these offerings’ quality, pricing, and availability.
- Employees: Employees are a crucial internal stakeholder group. They are concerned with job security, fair wages, working conditions, and opportunities for career growth within the company.
- Suppliers: Suppliers provide the company with the necessary goods or services and are usually interested in the company’s stability and ability to pay for their products or services.
- Government and Regulatory Authorities: Government agencies and regulatory bodies often have a stake in ensuring that the company complies with laws and regulations related to taxation, environmental standards, labour practices, etc.
- Competitors: Competing businesses may be interested in monitoring their rivals’ activities. They are stakeholders in the sense that they can be affected by the actions and strategies of their competitors.
- Local Communities: Companies can impact the communities in which they operate, and residents may be stakeholders concerned with issues like environmental impact, job creation, and corporate social responsibility.
- Non-Governmental Organisations (NGOs): NGOs may take an interest in a company’s activities, especially if they relate to social or environmental issues, and they can advocate for changes in business practices.
- Lenders and Creditors: Banks and other financial institutions that provide loans or credit to the company have a stake in its financial stability and ability to repay debts.
- Trade Unions: If employees are unionised, the trade unions represent the interests of the workers and may be stakeholders in negotiations related to labour conditions and wages.
- Media and Public Opinion: The media and public perception can significantly impact a company’s reputation and success, and managing the perception of these stakeholders is often crucial.
Remember that effective stakeholder management involves balancing the sometimes conflicting interests of these groups while working towards the company’s goals and objectives.
Why Are Stakeholders Important in Business?
Stakeholders are crucial in business because they directly influence and are influenced by a company’s operations and decisions. They play a pivotal role in shaping a company’s success, as their interests encompass financial investments, product quality, employee welfare, legal compliance, environmental impact, and overall reputation. Engaging and managing stakeholders effectively is vital for fostering trust, ensuring long-term sustainability, and aligning the company’s objectives with the expectations and needs of various interested parties.
Types of Stakeholder
Stakeholders are individuals or groups that get directly or indirectly affected by a project that’s underway. They can be internal or external to the business sponsoring the project and range from customers, shareholders, communities and suppliers to governments.
Employees are a common type of internal stakeholder for businesses. They are interested in the company’s success as it directly impacts their wages and other benefits. Business owners are another type of internal stakeholder because they take risks and put up their capital to run a business with the hope of maximum profit.
Suppliers and vendors are also a common type of external stakeholder. They rely on a company to buy their products and services for revenue generation. The government can be a secondary stakeholder because it collects taxes from employees and companies through corporate taxation and receives economic benefits from the company’s performance. Investors and shareholders are also stakeholders because they own a portion of the company’s stock and get financial gains from its performance.
Relationships with Stakeholders
Regardless of who you work with, remember that stakeholders are people. Always use a human name when referring to them, and if they have provided feedback, don’t just use their job title. This will help you build trust with them, especially if there’s any disagreement.
Stakeholders include anyone who has a vested interest in how your business operates. These are internal stakeholders, typically engaging in economic transactions with the company. This can include stockholders who actively participate in the business, shareholders who have passive ownership, and employees and suppliers who rely on the business for their income.
It’s essential to remember that stakeholders can have very different opinions and priorities, so it’s essential to be transparent and open with them. It’s also important to ask for their feedback and share progress often, as this will keep them engaged with the project. If they feel they need to be addressed, it will likely affect their trust in the team and cause a lack of cooperation.
Stakeholders are a vital part of a project’s success. They have a vested interest in the decisions made by an organisation, project or company and can make or break the business.
To keep stakeholders engaged, it is essential to clearly understand their expectations and how the project can benefit them. However, it can be challenging to identify and prioritise stakeholder needs.
For example, a project might want to spend less time talking to those who don’t care about the results or those who might not be able to help them achieve their goals. Using the power-interest matrix can help identify such “time sink” priorities.
Similarly, stakeholders with a high level of urgency but low levels of power can be overlooked if their interests are not aligned with those of the organisation. This can lead to conflict between the organisation and the stakeholders, which might cause a lack of engagement or even termination of the project.
Stakeholders – Other useful links from our Knowledge Centre:
How to Manage Business Finances Correctly and Efficiently
Unlocking Business Potential: Strategies for Long-term Success
The Impact of Sustainability on Ecommerce Businesses
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