Primary vs. secondary stakeholders (definitions and FAQs)
By Indeed Editorial Team
Published 14 November 2022
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
The operations of an organisation impact many different parties, including employees, consumers, partners and stakeholders. There are two types of stakeholders that have authority within an organisation, which are primary stakeholders and secondary stakeholders. Understanding the differences between these two stakeholder types enables you to recognise where power and influence lie within an organisation. In this article, we compare primary vs. secondary stakeholders, share examples of each and answer other key questions.
What are primary vs. secondary stakeholders?
Here's a comparative guide to primary vs. secondary stakeholders:
What is a primary stakeholder?
A primary stakeholder is a body involved with the monetary transactions of an organisation. This includes individuals, groups or other entities with financial influence. Due to their financial involvement, primary stakeholders hold a vested interest in the activities of the organisation. They rely on the organisation for financial security and often use the organisation as a source of income, whether that's a single source or one of many streams of income.
As such, primary stakeholders gain their name because they're the bodies that have a tangible financial effect on the organisation. Their actions affect the organisation on a daily basis, making them a primary concern for the organisation as a whole. One important component of primary stakeholders is that they don't hold equal weight within the organisation. Some primary stakeholders have more influence and input than others. This influence may also fluctuate depending on various circumstances.
What is a secondary stakeholder?
A secondary stakeholder is a body involved in the social transactions of an organisation. Like primary transactions, this includes individuals, groups and other entities. Secondary stakeholders don't typically concern themselves with an organisation's financial activities. This means the definition of a secondary stakeholder is broader than that of primary stakeholders, as there isn't a singular type of social involvement that the term pertains to.
Secondary stakeholders don't possess as much of a vested interest in an organisation as primary stakeholders. An organisation doesn't rely on secondary stakeholders, but the secondary stakeholders still influence the organisation to an extent. This includes influencing the reputation of the organisation and helping to instil a particular public image. The level of power a secondary stakeholder possesses corresponds to their level of social investment.
Examples of primary stakeholders
Here are some examples of primary stakeholders:
Employees are a type of internal primary stakeholder. They receive financial compensation directly from the organisation in exchange for agreed work. It's a key aim for organisations to meet the expectations of employees, as the employees keep the organisation operating as normal. Expectations vary between employees and extend beyond financial compensation. Other expectations include career advancement and skill development.
Beneficiaries are another type of internal primary stakeholder. The term 'beneficiary' refers to any individual the organisation serves directly. For example, students are beneficiaries of schools. Beneficiaries typically exist within non-commercial sectors, meaning they usually work with public bodies or charities rather than businesses. An organisation focuses on meeting the needs of beneficiaries. When these needs aren't met, they may face calls for restructuring or overhauls.
Customers are a type of external primary stakeholder. Their purchasing of deliverables such as goods or services directly corresponds to the success of an organisation, but they don't directly work for the organisation. Organisations have an interest in satisfying customers, as it improves their chances of retaining customer loyalty. This creates a reliable revenue stream to reinvest in further business activities, such as developing new products.
Suppliers are a type of external primary stakeholder. They supply the organisation with necessary deliverables, which are usually products but sometimes services, depending on the nature of the organisation. Suppliers are primary stakeholders because they stand to gain financially by conducting business with the organisation. This prompts the organisation to maintain a fruitful and mutually beneficial relationship with suppliers so that the partnership continues.
Lenders are another type of external primary stakeholder. They're seen as a primary stakeholder because their financial support directly helps an organisation continue to trade. Without the lender, the organisation may not be able to operate at the same level. Lenders have a vested interest in organisations because they benefit from them financially by charging interest on any loaned money. It's in the organisation's interest to pay this money back on time to avoid incurring heavy fees.
Examples of secondary stakeholders
Here are some examples of secondary stakeholders:
Media groups address the organisation directly to appeal on behalf of primary stakeholders and other secondary stakeholders where necessary. They work alongside activist groups to influence the organisation and ensure that the organisation upholds its duties or operates lawfully. Media groups have a high degree of public influence, which is why it's in the organisation's interest to satisfy media groups and negate the risk of bad publicity.
Trade unions advocate for the rights of employees and beneficiaries within an organisation. They have expectations regarding the organisation, including how the organisation treats and values its employees. When union members find problems with this, the trade union mobilises a collective action, such as a strike, to force change. This is why it's in the organisation's interest to meet the expectations of trade unions and encourage open, collaborative partnerships.
The local government is a secondary stakeholder of organisations in various capacities. It ensures that the organisation meets legal obligations, such as upholding health and safety standards. It also ensures that the organisation fulfils its obligations to employees and beneficiaries. The government also makes decisions that influence how the organisation might operate, such as by introducing new policies or procedures. The local government may not always ask for input from organisations before doing this.
Platform influencers are a modern type of secondary stakeholder. They post their opinions and reviews of organisations online to sway public opinion. For example, a beauty influencer may post a review of a new lipstick product by a reputable brand. If the review is positive, it encourages others to go and purchase the lipstick for themselves. This is why many organisations seek partnerships with influencers to appeal to a contemporary audience on social media platforms.
What influence do these stakeholders have?
Here is a breakdown of the influence that these stakeholders wield:
Primary stakeholders hold substantial influence over an organisation. They influence the day-to-day operations of an organisation to the point where, without certain primary stakeholders, an organisation is unlikely to continue existing as it currently does. For example, without employees, an organisation doesn't run. Without investors, an organisation doesn't receive as much funding to approach new endeavours that may strengthen its position within the market.
Secondary stakeholders hold decent influence over an organisation, but not to the same degree as primary stakeholders. An organisation may continue to operate without the support of secondary stakeholders, but it's beneficial that the organisation continues to work with them. For example, an organisation may continue to sell products without the use of influencer reviews or media group representation, but it might reach a larger target audience by working alongside these secondary stakeholders.
What motivates these stakeholders?
These stakeholders have differing motivations, available below:
The motivation of a primary stakeholder is usually financial. Primary stakeholders invest in an organisation for personal good as opposed to social good. For example, employees usually agree to employment because it provides them with a source of income to support their living. Suppliers agree to a partnership with an organisation because it provides them with another revenue stream to continue trading.
The motivation of a secondary stakeholder is usually publicly-orientated. Secondary stakeholders invest in an organisation for social good as opposed to personal good. For example, trade unions exist to support the rights of employees within an organisation and ensure that the organisation meets employee needs. They don't exist to gain anything from it on a personal level. The local government exists to ensure the population they govern is happy, healthy and supported within the workplace.
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