Stakeholder types and management in business: a guide
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Every company relies on its goals and objectives to succeed and has an advantage over competitors. Stakeholders are an integral element in impeding or promoting the success of a company and its growth. The prosperity of a business is highly dependent on how proactive its leaders are in managing the expectations of the different types of stakeholders. In the article, we explore the different types of stakeholders, learn about their management and the importance of stakeholder management.
Examples of stakeholder types in business
Before looking at different types of stakeholders, it's important to know the difference between stakeholders and shareholders in a business. Shareholders own part of a company and have an interest in the performance and appreciation of the stock. They are stakeholders with no long-term perspective of the company. Stakeholders are parties with an interest in the company's success. They either affect or be affected by the operations, objectives and policies of the company. A business stakeholder is an individual, group or organisation that can lose or gain due to the outcome of a company's actions.
The two main stakeholder types are internal and external stakeholders. Internal stakeholders are directly part of the business operations, for example, employees, owners and managers. External stakeholders are groups and individuals with no direct affiliation with the business. Examples of these stakeholders are communities, shareholders, creditors and government. Whether an external or an internal stakeholder, their contribution and opinion is paramount to the success or failure of a company. Below is a review of stakeholder types:
Customers expect the business to provide high-quality and efficient products and services at a reasonable price. The availability of a company's products impacts them directly, hence the need for businesses to make conscious efforts to meet consumers' needs. Poor quality or services can harm sales and the customer's perception and reliability of their brand, which can affect a customer's decision to buy from them or their rivals. A customer can also affect the sales and marketing strategies of a company and has a direct financial influence on revenue and profit.
Employees are crucial stakeholders, as the company relies on them to deliver quality products and services. Unhappy employees may impact how loyal they are and their productivity levels. Their interest is in job security, a healthy and safe working environment and earning a fair salary. They rely on the executives' decisions, so offering attractive terms and conditions can help retain top talent.
Employees who get benefit packages, such as being shareholders, getting training and professional development, have the motivation to ensure the entity's success. Executives are employees with an interest in making decisions that impact the operations and the future of the company.
They are individuals or groups who invest capital and expect returns. Stakeholders are investors who own stock in a business and have an equity interest. They rely on the success of the enterprise as they expect the capital to grow. Stakeholders with more stock may have the power to make decisions in strategies, staffing and finances. Building strong relationships with stakeholders increases their desire to continue investing in the company. Owners of small businesses or start-ups are primary stakeholders and investors.
Their interest is in profits and the growth of the entity. They are responsible for the success of the enterprise, as their actions and strategies influence employees and consumers. Lenders are investors who lend services, property or capital to a company and rely on the success of the business. Their interest is in getting back their money plus profits in time. Making payments in time to the creditor is crucial in cementing a solid relationship because companies depend on the availability of funds to expand and improve operations.
Suppliers, distributors and partners
They are, in most cases, enterprises, or individuals that partner with a particular business to sell goods or services for revenue generation. Their interest is in revenues and the safety of the goods, as it can directly impact their reputation and sales. These individuals or groups can partner with several businesses at one time to increase their revenue.
Companies that launch in an area impact the community in job creation, health and safety and economic development. The opinions of people living in a corporation's location can affect the entity's reputation and influence it to adhere to state and environmental regulations. The relationship between a company and the community influences their choice to embrace products or services and contribute to the company's revenue. Corporate social responsibility initiatives are popular in building relationships and the reputation of companies both in the local and international communities.
It collects different taxes from the business like sales tax, payroll tax and income tax. The government enforces labour laws and ensures that companies adhere to safe working conditions for employees. It drafts rules and regulations and enforces them to protect consumers and the community. A company builds a positive relationship with the government and other stakeholders by following the statutes.
They are external stakeholders who compete with other organisations for the same opportunities in a similar market. Strong competition nurtures innovation and improvement of products and services. Quality products and services attract and retain customers, thus increasing business revenue.
They are legal representatives of employees in a company. Their interest is to secure fair salaries, get benefits and have adequate working conditions for employees. They earn union dues to intervene and negotiate on behalf of the employee where need be. Their satisfaction and those of employees affect the productivity of a company.
What is stakeholder management?
It is the process of nurturing beneficial relationships between the business and stakeholders and focuses on trust, integrity and customer satisfaction. It requires the stakeholders' engagement to elicit views, needs and ideas about a project or program. In stakeholders' analysis, a business identifies and assesses the influence and importance of all parties that impact the company's achievements.
Managing the interest of stakeholders is vital for any company, as they have the power to block company decisions or let the business run successfully. Some of the benefits include:
Reduce the risk of negative influence: Meeting stakeholders' expectations and keeping them happy lessens the risk and effects of dissatisfaction.
Provide expertise: Some stakeholders may have knowledge of current processes or historical matters, which can aid a company in decision making.
Competitive advantage: Effective engagement cement loyalty and can give you an upper edge over competitors and boost corporate reputation.
Increase the probability of success: Transparency in a project makes stakeholders feel included, and corporate win their support in a particular project or a decision.
Stakeholder management tips
If you are thinking of applying for a role in business, here are some important tips to consider in stakeholder management:
Identify and manage expectations
The expectations of every stakeholder vary based on their interest. Successful organisations understand what each stakeholder expects from a project and consider each of those expectations. Inform the stakeholders how a project will go and update them on the progress. Working towards fulfilling stakeholders' interests makes the parties happy and leads to business success.
Prioritise and understand stakeholders
Understand the stakeholders' personalities, feelings, motivations and the effects a business or project has on them. After managing the expectations, analyse their roles, influence, power and importance. Have a list of high impact and low-impact stakeholders and nurture good relationships with those whose impact is high.
A business carries out different projects, and with each comes diverse goals. Understand the stakeholders' goals and make them understand your goals. Frame any changes that may be necessary to match the needs and goals of the company and stakeholders' interests. Find ways to connect with them to reduce uncertainty and build trust.
Ask for assistance
Reach for assistance to fulfil the business's goals and deliver what the stakeholders need. Work with them and learn more about them by conducting surveys or requesting feedback. You can also listen to stakeholders and focus groups that are willing to share their thoughts.
Have regular consultation
Open up dialogue to communicate the impact of corporate action and the reasons behind them. Understand the channels that will reach different groups and schedule regular meetings to communicate in a direct, timely and truthful manner with the stakeholders. Consider their time and ask for follow-up meetings at the end to continue discussing issues that may arise.
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