What Is a Stakeholder?
A stakeholder is anyone who has an interest in the success or failure of a business. This includes shareholders, employees, customers, suppliers, creditors, and even the community in which the company is located.
Types of Stakeholders
There are two primary types of stakeholders:
Internal Stakeholder
An internal stakeholder is directly involved with the company, such as an employee or shareholder. These individuals are vested in seeing the company succeed since their livelihoods depend on it.
External Stakeholder
An external stakeholder is not directly involved with the company but is still interested in its success or failure. For example, a creditor would be an external stakeholder since the company owes them money.
The government would also be considered an external stakeholder as it regulates businesses and collects taxes.
Examples of Stakeholders
There are many different types of stakeholders, but some of the most common include the following:
Employees
Employees are the most critical stakeholders in a company. They are the ones who produce the goods or services that generate revenue. Without them, there would be no business.
Employees are internal stakeholders.
Board Members
Board members are responsible for ensuring the company is run legally and ethically. They are also tasked with ensuring that shareholders’ interests are considered.
Board members are internal stakeholders.
Shareholders
Shareholders are the owners of a company. They have a vested interest in seeing the company succeed as they stand to make a profit from it.
Shareholders are internal stakeholders.
Customers
Customers are also critical to a company's success. They are the ones who purchase the products or services that generate revenue. Without customers, a business would quickly go out of business.
Customers are external stakeholders.
Investors
Investors provide a company's capital to grow and expand its operations. Their primary interest is seeing their investment's value increase over time.
Investors are external stakeholders.
Suppliers
Suppliers provide a company's raw materials or components to produce its products or services. They have a vested interest in seeing the company succeed since it ensures they will continue receiving business.
Suppliers are external stakeholders.
Creditors
Creditors are owed money by the company and have a vested interest in seeing it succeed so it can be paid back.
Creditors are external stakeholders.
Labor Union
Labor unions represent the interests of workers and often have a seat at the table when it comes to decisions affecting employees.
Labor unions are external stakeholders.
Communities
The community in which a business is located also has a stake in its success. A thriving business can provide jobs and tax revenue, while a failing company can lead to increased crime and blight.
Communities are external stakeholders.
Government
The government also has a stake in the success of businesses since it collects taxes and regulates them.
The government is an external stakeholder.
Stakeholders vs Shareholders
It is important to note that shareholders are a type of stakeholder, but not all stakeholders are shareholders.
A shareholder owns shares in a company and thus has a financial interest in its success. Other stakeholders, such as employees or customers, may not have a financial interest but are still vested in the company's success or failure.
Financial Interest vs Vested Interest
While shareholders and stakeholders have a vested interest in the company, they differ in financial interests.
Shareholders have a direct financial interest in the company since they own shares, while other stakeholders do not. This means that shareholders are more likely to be concerned with decisions that affect the bottom line, such as cost-cutting measures that may impact employees.
On the other hand, other stakeholders may be more concerned with decisions that affect them directly, such as changes to employee benefits.
Importance of Stakeholders
Stakeholders play an essential role in a company's success or failure. Internal stakeholders, such as employees, provide the labor necessary to produce goods or services. Business operations would grind to a halt without them.
External stakeholders, such as customers, provide a company's revenue to stay afloat. A business that fails to satisfy its customers will quickly go out of business.
Ultimately, all stakeholders are vested in the company and its success. This is why companies need to manage their relationships with stakeholders effectively.
Stakeholder Management
Stakeholder management is identifying, analyzing, prioritizing, and engaging with stakeholders. The goal of stakeholder management is to ensure that all stakeholders have their needs met and that they are satisfied with the outcome of the project or initiative.
Stakeholder Identification
The first step in stakeholder management is to identify who the stakeholders are. This can be done by looking at who will be affected by the project or initiative.
For example, if a company plans to launch a new product, the stakeholders would include employees, customers, suppliers, and shareholders. The company needs to identify its interests and concerns to stay on good terms with all these groups.
Stakeholder Analysis
Once all the stakeholders have been identified, the next step is to analyze their needs. This can be done by conducting interviews, surveys, or focus groups.
The goal is to understand what each stakeholder group wants from the project or initiative. For example, employees might be concerned about job security, while customers might be worried about product quality.
Stakeholder Prioritization
After the needs of all the stakeholder groups have been analyzed, the next step is to prioritize them. This is necessary because not all stakeholders will be equally crucial to the success of the project or initiative.
For example, a project developing a new product might be more concerned with satisfying customers than employees. In this case, the customer would be a higher-priority stakeholder group.
Stakeholder Engagement
Engage with stakeholders as soon as their needs are known. This can be done through meetings, emails, or phone calls.
Listening to the needs of the stakeholders and addressing their concerns is essential to maintaining a good relationship with them. If a company ignores the needs of its stakeholders, it risks losing their support.
The Bottom Line
Stakeholders are individuals or groups that have an interest in the success or failure of a company. They can be either internal, such as employees, or external, such as customers.
Stakeholders play an essential role in a company's success because they provide the labor or revenue necessary for business operations.
To stay on good terms with all its stakeholders, a company must manage its relationships with them effectively. This involves identifying, analyzing, and engaging with stakeholders.
Listening to their needs and addressing their concerns is essential to maintaining a good relationship with them.
FAQs
1. Who is the most important stakeholder?
There is no definitive answer to this question, as it depends on a company's or project's specific goals.
2. What is the difference between stakeholders and shareholders?
The main difference between stakeholders and shareholders is that shareholders own a stake in the company, while stakeholders do not. Shareholders have a financial interest in the company and its success, while stakeholders have a non-financial interest.
For example, customers are considered stakeholders because they can influence a company's success through their buying behavior. However, they are not shareholders because they do not own a stake in the company.
3. What type of stakeholders are shareholders?
Shareholders are a type of external stakeholders. Individuals or groups own a stake in the company and have a financial interest in its success.
4. How can a company gauge the satisfaction of its stakeholders?
There are a few ways to gauge the satisfaction of stakeholders. This can be done through surveys, interviews, or focus groups.
Another way to gauge satisfaction is to track changes in behavior. For example, if a company notices that its customer satisfaction ratings have declined, it can conclude that its stakeholders are unhappy with recent changes.
5. What happens if a company does not manage its stakeholders effectively?
If a company does not manage its stakeholders effectively, it risks losing its support. This can lead to financial losses and damage to the company's reputation.
For example, if a company ignores the needs of its employees, it might go on strike. This would disrupt business operations and could result in lost revenue.
