A party that has an interest in a company and can either affect or be affected by the business.
Show
What Is a Stakeholder?A stakeholder is an individual or group that has a legitimate interest in a company, organization, or business; the Stanford Research Institute defines stakeholders as “those groups without whose support the organization would cease to exist. Stakeholders can affect or be affected by the actions (or inactions) of a business, and they can exist both within and outside of a business. The impact of a business on its stakeholders is a bit like the effect of dropping a stone into a pond. The decisions and actions of the business have a ripple effect that can extend beyond the pond and even reach those who are standing far away on the shore. Internal StakeholdersInternal stakeholders are groups or people who work directly within the business, such as managers, employees, and owners. Managers and employees want to earn high wages and keep their jobs, so they have a vested interest in the financial health and success of the business. Owners want to maximize the profit the business makes as compensation for the risks they take in owning or running a business. Figure 1. The picture shows the typical stakeholders of a company. The stakeholders are divided into internal and external stakeholders. External StakeholdersExternal stakeholders are groups outside a business or people who don’t work inside the business but are affected in some way by the decisions and actions of the business. Examples of external stakeholders are customers, suppliers, creditors, the local community, society, and the government. Customers want the business to produce quality products at reasonable prices. Shareholders have an interest in business operations since they are counting on the business to remain profitable and provide a return on their investment in the business. Creditors that supply financial capital, raw materials, and services to the business want to be paid on time and in full. Federal, state, and local governments need businesses to thrive in order to pay taxes that support government services such as education, police, and fire protection. The local community has a stake in the business because it provides jobs, which generate economic activity within the community. Society as a whole (as well as the local community) is concerned about the impact that business operations have on the environment in terms of noise, air, and water pollution. Society also has an interest in the business with regard to the safety of the goods and services produced by the business. Suppliers need the business to continue to buy their products in order to maintain their own profitability and long-term financial health. Check Your UnderstandingAnswer the question(s) below to see how well you understand the topics covered above. This short quiz does not count toward your grade in the class, and you can retake it an unlimited number of times. Use this quiz to check your understanding and decide whether to (1) study the previous section further or (2) move on to the next section. Select your languageSuggested languages for you: Find the appropriate balance of competing claims by various groups of stakeholders." - Warren G. Bennis All businesses have a variety of stakeholders. As a result, it is important to understand how the organisation impacts stakeholders and how stakeholders may impact the organisation. This can be understood through stakeholder analysis. Let's take a look. Stakeholder DefinitionStakeholders are parties that have an interest in the organisation. These parties can be either affected by or affect the organisation. The group of stakeholders generally include employees, owners, governments, customers, investors and suppliers communities Stakeholders do not all have the same interest, therefore it is important to understand each of them individually. Customers' interests may be to buy good quality products at affordable prices. While the interest of employees is to get a higher salary and sustain their employment. What are the types of stakeholders?There are two main types of stakeholders which are either internal or external. It is important to understand each of the stakeholder groups to be aware of their interests and the effect they may have on the organisation. Internal stakeholdersInternal stakeholders are those who have a direct relationship with the company. As they are a party working inside the organisation or are the company executives. Their key role is to perform in the organisation effectively so that the company or a project gains value. The internal stakeholders' interests are usually to gain benefits from the project or a company. Employees - The main interest comes from employment income, security and safety. These stakeholders affect the company or a project through their quality of work. Owners - The main interest of this stakeholder party is to reach the organizational goals most effectively and efficiently and maximise the company's profits. Executives affect the company or a project in regards to how well they're managing the company or a project. External stakeholdersExternal stakeholders do not work with the company directly but are affected or have an effect on the organisation or a project. These stakeholders are interested in the company or a project. Governments - These stakeholders' best interest is to collect taxes and benefit from the increased GDP. Governments can affect the company by implementing new regulations and imposing taxes on products or services that the company produces. Customers - The main interest for customers is to buy the best quality product or service at the lowest price. If customers are satisfied with the service they might have a positive impact on the company by leaving a positive review, for example. On the other hand, negative reviews can damage a company's reputation. Investors - Investors are interested in a company or a project that can grow and bring more value in the future. Investors have an impact on the company as their investments can give the company more finances to grow. Suppliers - This external stakeholder party is crucial to the company as they supply products or essential parts that the company needs. They have the interest to gain profit from the company by supplying goods. They can positively impact the company if they supply resources of good quality and affordable price. On the other hand, if organizations if suppliers produce goods at a bad quality and high price it can have a negative impact on the company. Communities - This party is interested in the organization that creates employment, community spirit does not pollute the environment. Communities can have a positive effect on the organization if they positively talk about the business. However, if this stakeholder party does the opposite it may damage the company's image. What is the stakeholder analysis?Stakeholder analysis is an important aspect a company should undertake before the beginning of any project as it helps to understand stakeholders. This analysis is often used in project management. The stakeholders are grouping them based on their levels, participation, interest and influence on the project. This analysis is usually presented in the stakeholder's analysis matrix. Why is stakeholder analysis important?Stakeholders usually have different needs which might overlap or contradict one another. Stakeholder analysis helps managers identify and manage potential conflicts of interest to make the best decisions. They group stakeholders according to the level of influence (power) and interest using analysis matrices. What is a stakeholder matrix example?The stakeholder matrix is the representation of stakeholders analysis in the visual format (see Figure 1 below). This matrix allocates stakeholders in terms of their level of power and interest that they have in the organization or a project. These assist business managers to be aware of the level of importance of each stakeholder group. This is the example:
The stakeholder matrix will assist the business managers in deciding to which stakeholders they should invest the most time and effort. Organizations should put the most time and effort into the stakeholders who have high power and interest (also called key players) in the organization or a project. For instance, this can include managers ensuring that all main stakeholders such as customers needs are met and that they are satisfied with the project or the organization. What is the stakeholder management process?The stakeholder management process (see Figure 2 below) is aimed to improve the organization's relationships with stakeholders. As well as organize, monitor and manage stakeholders in an effective way. The stakeholder management process follows five steps. Which are:
1. IdentifyAt this step, the stakeholders that have an interest in the company or a particular project are identified. Stakeholders can be internal and external, they can have positive or negative interest in the company or a project. Additionally, its crucial to identify each stakeholder's needs and expectations in regards to a company or a project. 2. AnalysisAt this stage, the stakeholders are analyzed in great detail. The analysis may include:
3. PlanAt this stage business managers should plan how to effectively manage and engage with the stakeholders so that they add value to the project or a company and fulfill their expectations. 4. EngageTo get the most value from the stakeholders business managers should keep them engaged throughout the project. This can be done by motivating them by stating how the outcomes of the project successfully will fulfill stakeholders' needs and expectations. Additionally, trust between stakeholders and the organization must be built to get the most value from the stakeholders. 5. MonitorDuring the execution stage, stakeholders' engagement and level of participation in the project or organization should be monitored. This way business managers will be aware if stakeholders need additional assistance. As well as if stakeholders are on target reaching set goals. Stakeholder - Key takeaways
Frequently Asked Questions about StakeholderA company understand the needs of stakeholders by performing stakeholders analysis before the beginning of the project. Stakeholders usually have different needs which might overlap or contradict one another. Stakeholder analysis helps managers identify and manage potential conflicts of interest to make the best decisions. They group stakeholders according to the level of influence (power) and interest using analysis matrices. To get the most value from the stakeholders business managers should keep them engaged throughout the project. This can be done by motivating them by stating how the outcomes of the project successfully will fulfill stakeholders' needs and expectations. Additionally, trust between stakeholders and the organization must be built to get the most value from the stakeholders. Two types of stakeholders include 1) internal: employees and owners. 2) External: Governments, customers, investors, suppliers and communities. There are five phases of the stakeholder management process. They are identified as 1) Identity 2) Analysis 3) Plan 4) Engage 5) Monitor. Final Stakeholder Quiz
Question What are the stakeholders? Show answer Answer Stakeholders are parties that have an interest in the company. This party can be either affected or affect the organisation. Show question
Question Why is it important to understand each stakeholder? Show answer Answer It is crucial to understand each stakeholder individually. Because each stakeholder has different interests, expectations and involvement in the organisation. Therefore,
by understanding each stakeholder organisations can adjust their management process and the level of time and effort they invest in each stakeholder. Show question
Question What are the types of stakeholders? Show answer Answer Two types of stakeholders include 1) internal: employees and owners. 2) External: Governments, customers, investors, suppliers and communities. Show question
Question What are the key differences between external and internal stakeholders? Show answer Answer The key differences between these two stakeholder types are that internal stakeholders are directly involved in the organisation or its project. While the
external stakeholders are outside of the organisation but are affected or have an effect on the organisation or a project. As well as have some level of interest in the company. Show question
Question What effect do governments have on the organisation or a project? Show answer Answer Governments can have a significant impact on the organisation as they have the power to set rules and regulations. For example, governments can set a high tax
on products that the company produces which results in the spending more of the company's budget. Show question
Question What is the stakeholder analysis? Show answer Answer Stakeholder analysis examines and groups stakeholders based on their key features. That includes stakeholders levels of participation, interest and influence they have on the project or a
company. Show question
Question In what format the stakeholder analysis is presented best? Show answer Answer The stakeholder analysis can be presented best in the stakeholder’s matrix that groups each stakeholder based on their levels of power and interest they have in the
company or a project. Show question
Question Why stakeholder analysis is important? Show answer Answer The stakeholder analysis is important because it helps to identify stakeholders needs and adjust the management process to get the most value out of them. The analysis presented in
the matrix will help business managers to determine to what stakeholders they should allocate the most time and resources. Show question
Question How are the most important stakeholders named on the stakeholder matrix? Show answer Answer On the matrix grid, the key stakeholders are identified as the ones who have a lot of power and interest in the company or a project. They are called
Players. Show question
Question What is the stakeholder management process? Show answer Answer The stakeholder management process is the step by step guidance that aims to improve the organisation’s relationships with Stakeholders. As well as organise, monitor and manage
stakeholders in an effective way. Show question
Question What are the key steps of the stakeholder management process? Show answer Answer There are five key steps of the stakeholder management process. identified as 1) Identity 2) Analyse 3) Plan 4) Engage 5) Monitor. Show question
Question What is the role of the step called ‘Engage’ in the stakeholder’s management process? Show answer Answer The key role of the ‘Engage’ step is to get the most value from the stakeholders by keeping them engaged throughout the project. This can be
done by communicating to stakeholders how the outcomes of the successful project will fulfil their expectations. Show question
Question Which of these are internal stakeholder? Show answer
Question Which of these are internal stakeholders? Show answer
Question Internal stakeholders do not work with the company directly but are affected or have an effect on the organisation or a project. Show answer
Question They have a direct relationship with the company. As they are a party working inside the organisation or are the company executives. Who are they? Show answer
Question Which of these are external stakeholders? Show answer
Question Which of these are external stakeholders? Show answer
Question Which of these are external stakeholders? Show answer
Question What is the first step of the stakeholder management process? Show answer
Question What is the last step of the stakeholder management process? Show answer
Question This external stakeholder party is crucial to the company as they supply products or essential parts that the company needs. Who is it? Show answer
Question This party is interested in the organization that creates employment, community spirit does not pollute the environment. Who is it? Show answer
Question The main interest for this party is to buy the best quality product or service at the lowest price. Who is it? Show answer
Question This stakeholder's best interest is to collect taxes and benefit from the increased GDP. Who is it? Show answer
Question The main interest of this stakeholder party is to reach the organizational goals most effectively and efficiently and maximise the company's profits. Who it is? Show answer
Question Stakeholder analysis helps managers identify and manage potential conflicts of interest to make the best ___. Show answer
Question This stakeholder is interested in a company or a project that can grow and bring more value in the future. Who is it? Show answer Discover the right content for your subjectsNo need to cheat if you have everything you need to succeed! Packed into one app!Study PlanBe perfectly prepared on time with an individual plan. QuizzesTest your knowledge with gamified quizzes. FlashcardsCreate and find flashcards in record time. NotesCreate beautiful notes faster than ever before. Study SetsHave all your study materials in one place. DocumentsUpload unlimited documents and save them online. Study AnalyticsIdentify your study strength and weaknesses. Weekly GoalsSet individual study goals and earn points reaching them. Smart RemindersStop procrastinating with our study reminders. RewardsEarn points, unlock badges and level up while studying. Magic MarkerCreate flashcards in notes completely automatically. Smart FormattingCreate the most beautiful study materials using our templates. Sign up to highlight and take notes. It’s 100% free. This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Privacy & Cookies Policy How can a stakeholder be affected?The activities of a business will affect all stakeholders but some might be more affected than others. For example, if a retail business makes the decision to expand by opening a new store, this will have an impact on all the different stakeholders.
What is a stakeholder in a company?Stakeholders encompass all individuals or groups who have a vested interest in the performance of the business. It is vital that organisations build healthy and balanced relationships with their stakeholders, as their level of authenticity is determined by how well they meet their stakeholders' demands.
How do employees influence and affect the business decisions and their activities?Employees play a large role in whether a business meets its aims and objectives. Employees can affect the business directly, eg by refusing to work or not working as well as they should. Hard-working employees would increase sales, however employees could also ask for wage increases, which would increase costs.
Which group is classified as a stakeholder?In business, a stakeholder is any individual, group, or party that has an interest in an organization and the outcomes of its actions. Common examples of stakeholders include employees, customers, shareholders, suppliers, communities, and governments.
|