Understanding the stakeholders of a business is a concept every professional should master
Have you ever heard someone at work refer to a group of people as “stakeholders?” This word pops up quite frequently; in fact, it becomes quite the buzzword when it comes to things like project meetings, business road mapping, and strategy planning. But what are stakeholders, and why should you care so much about what they want?
The answer to that question can be found in the words of this article. Here, we'll shed some light on the definition of stakeholder and the different types of stakeholders, and provide some real-world examples that punctuate their influence on organizations worldwide.
Stakeholders include anyone with a vested interest in business operations and can include internal and external people, extending beyond the conventional boundaries of shareholders and employees. Stakeholders play a major role in shaping, influencing, and affecting a company's decisions and actions and, therefore, can have a substantial impact on organizational reputations - and even the bottom line. It's critical to build a solid understanding of your stakeholders to ensure business success.
Who are the 5 main stakeholders in a business?
Basically speaking, anyone can be a stakeholder as long as they have an interest in operational outcomes. The confusing part is that stakeholders can be internal to the business or external – covering a wide range of individuals and groups, including:
Government and regulatory bodies
Employees – Of course, it stands to reason that the employees of a business are invested in the outcome of the company. As an employee, your job is to use your skills, time, and qualifications to make the company successful. You play a crucial part in the overall productivity of the company and whether the company can get its products to customers. You're also pivotal in creating a good company culture.
Shareholders – As the financial pillar of a company, shareholders are the company's backbone. Depending on how many shares a shareholder owns, they can hold sway over decision-making through voting rights. Those votes impact strategy, including mergers, acquisitions, and changes in leadership – as long as the changes maximize profits.
Customers – Customers are the driving force, the heartbeat, of a successful business. In the land of stakeholders, customers play pivotal roles through the decisions they make surrounding products and preferences, and can have a great impact on business through positive or negative feedback, influencing sales, revenue, and even market perception.
Suppliers – Every company needs external help from suppliers, whether that's someone who will provide a widget to finalize a product before it goes to market or someone who provides the cables necessary to connect all the computers to the company network. In essence, suppliers are the unsung heroes of business success. Without them working in the background, companies would go belly-up pretty quickly.
- Government and regulatory bodies – Under the umbrella of a stakeholder who can greatly impact the operational success of a business come the government and regulatory agencies who pass the rules that organizations must follow. These compliance initiatives can touch everything from ethical business practices to fair labor and environmental standards.
Identifying and managing stakeholders
The best way to identify all of a company's stakeholders is to get involved in some brainstorming sessions, to determine who has an interest in the company doing well. Start by seeking feedback from employees, customers, and executive leaders to uncover hidden stakeholders and understand their concerns. Then, dive deeper into things like industry trends and perform competitor analyses to find out who may be vested in the business.
Once you have a list of stakeholders, create a stakeholder map. Similar to a vision board, a stakeholder map is used to categorize people and entities into groups based on their influence and interest in the organization. This map will be especially helpful if you're in a leadership role, because you can then prioritize efforts based on stakeholders who need immediate attention and mitigate risks by anticipating challenges and conflicts based on what you know stakeholders demand.
This map also lets you know how stakeholders relate to each other. Generally, a stakeholder map is broken into four quadrants that identify the stakeholder's interest in the company versus how much influence the stakeholder has over decision-making rights. You may learn that some stakeholders have a high influence over the course of business but a low interest in organizational outcomes. Conversely, other stakeholders may possess a low influence but be highly interested in operational excellence. Here are some examples. :
High influence, low interest: Government regulatory bodies often fit into this category. They have significant influence due to their authority, but their interest may be primarily in ensuring legal compliance rather than active involvement. Understanding this helps in proactively managing compliance and regulatory issues.
Low influence, high interest: Local community groups near a manufacturing plant may have a high interest in environmental impacts but relatively low influence. Engaging with them to address concerns can help to prevent potential disputes and improve community relations.
Minimal influence and interest: Some minor suppliers or peripheral stakeholders may fall into this quadrant. They have little impact on the organization's success, and their interest is minimal. While they may not require significant attention, it's essential to maintain basic relationships to ensure smooth operations.
This type of knowledge lets you know who requires simple monitoring and who demands constant information, allowing you to prioritize your engagement activities.
Real-life stakeholder examples
It doesn't matter if you sell fish supplies in a local brick-and-mortar store or own a multinational conglomerate; you will have stakeholders. Each stakeholder type plays a unique role in shaping companies and industries. Here are some real-world examples:
Tech: In the technology sector, stakeholders include shareholders, employees, customers, regulatory authorities, and even ethical hackers who uncover vulnerabilities.
Healthcare: In healthcare, stakeholders encompass patients, healthcare providers, pharmaceutical companies, insurers, and government agencies, impacting patient care, drug development, and policy.
Automotive industry: Automotive industry stakeholders range from manufacturers and suppliers to dealerships, environmental agencies, and consumers. Their interests intertwine in areas such as safety, sustainability, and market demand.
Environmental conservation: In environmental conservation, stakeholders include environmental NGOs, governments, and local communities and are highly involved in things like climate change and sustainable resource management.
Entertainment: The entertainment industry involves stakeholders such as producers, actors, distributors, audiences, and film rating organizations that shape content creation, distribution, and cultural impact.
While the word “stakeholders” gets tossed around like it's nothing, the concept behind the word can be the difference between a successful and a failing business. When you recognize the importance of stakeholders, you can help to shape the destiny of your business and also your own career.
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