Stakeholders are the people and groups that have an interest in your business. Traditionally, shareholders or owners have been the primary stakeholder of a business. In the early 21st century, though, other groups have become more vocally involved in holding companies to a higher social and environmental standard.

To understand the impact of stakeholders, you need to know who they are and how they relate to your business. Along with owners, customers, communities, employees, business partners and suppliers are key groups. Customers expect you to operate a business honestly and fairly while also offering a value-oriented solution.

Communities expect companies to get involved and to give back. Employees expect a fair working environment. Business partners and suppliers expect you to manage your business relationships with high integrity and responsibility.

• What are the Impacts of a Stakeholder on your Business?
• Why Stakeholders are Important to a Business?
• How do External Stakeholders Influence a Business?
• What are the Advantages of Stakeholders?
• Who are the Most Important Stakeholders in a Business?
• Who are External Stakeholders in a Business?
• What are Examples of Stakeholders?
• Why do we Need Stakeholder Engagement?
• How Can Stakeholders Influence Financial Performance?
• How Are Stakeholders Affected by Business Decisions?
• Positive And Negative Effects of Stakeholders
• Types of Stakeholders in a Business
• What is Stakeholder Impact Analysis?
• What is The Role of Employees as Stakeholders?
• What Important Stakeholders Will You Need to be Successful?
• Which Stakeholders Are Most Important to a Business?
• What Power do Stakeholders Have?
• What Are The 4 Types of Stakeholders?
• Why is it Important to Keep Stakeholders Happy?
• Why Are Stakeholders More Important Than Shareholders?
• How do Stakeholders Impact an Organization?
• How do we engage stakeholders?

What are the Impacts of a Stakeholder on your Business?

Financial Impact

Companies are still in business to make money. However, the financial interests of your owners, partners or shareholders have been tempered a bit to create a greater balance with social responsibilities. Still, part of your role as company leader is to make wise decisions that improve revenue, minimize costs and produce a positive bottom line.

Read Also: How to Start a Boating Business

The greater involvement of other stakeholders, though, has had uncertain effects on the bottom line of companies. Showing a financial return on investment from socially and environmentally responsible behaviors is difficult. It costs money to manage waste and recycling programs that are good for the environment.

However, companies that do take other stakeholder interests into account understand the negative publicity that comes from unethical decision-making in the information age.

Social Impact

The Internet and mobile technology have given greater power to social and consumer watch groups and the public at-large. If you operate without integrity in customer marketing, sales and service, you will get called on it. Non-customer friendly actions simply don’t make long-term sense in the early 21st century.

Communities, a separate entity from customers, also expect you to participate in community activities and to share a bit of the wealth with the people that provide your income. One of the advantages a local business has over large chains is the connection with the community. Leave this aside and you lose that personal touch.

Operations Impact

Employees have become a much more involved stakeholder group. In general, employees expect to be valued as a key asset and expect to be able to work in a non-discriminatory work environment. Failure to provide an equal opportunity workplace can lead to lawsuits and low employee morale.

Suppliers expect to be paid on time and expect that you will keep them in the loop on important business activity that relates to their relationship with your company. As a simple example, using supplies or resale products in a way that is bad for the environment or socially irresponsible impacts the suppliers or your partners as well.

Consider Your Shareholders

Company owners usually have a strong voice in the direction your company takes. In a partnership, each owner-partner has a financial interest in the profit potential of the business.

Commonly, owners participate in the daily operation of the business or vote on critical decisions. In a corporate set-up, shareholders own a piece of the company. They also vote on major company decisions and serve as a source of financial accountability driving company leaders to make logical decisions.

Customers and Community

In the long run, your ability to meet the needs of your customers and community is key to success. Customers provide the revenue and cash flow that your business needs to operate and ultimately earn a profit. You must understand customer wants and needs and meet them on an ongoing basis.

Community leaders and activists also hold your company accountable to act with social and environmental responsibility. This means that if you don’t participate in community activities and give to charities, you could face negative public sentiment and backlash.

Your Employees of Every Rank

In the early 21st century, companies tend to place greater value on the contributions employees make to business operations. If you operate a service-based business, your employees provide the consistent service that helps you attract and retain customers.

Motivating your employees with fair compensation, proper training and empowerment helps you deliver a better customer experience. Empowering employees at all levels to make more decisions and take on more responsibilities not only makes them feel valued, but it can also improve your efficiency in responding to customer needs.

Your Business Partners

Business partners and suppliers can also significantly influence your business. Partners are companies that you collaborate within joint ventures or shared investment opportunities. Suppliers are companies you rely on for key resources used inside your company and for products to resell. If you have strong, trusting relationships with key suppliers, you can normally negotiate more reasonable costs and get more efficient replenishment when your inventory runs low.

Why Stakeholders are Important to a Business?

Stakeholders give your business practical and financial support. Stakeholders are people interested in your company, ranging from employees to loyal customers and investors. They broaden the pool of people who care about the well-being of your company, making you less alone in your entrepreneurial work.

At its best, the relationship between a business and its stakeholders is symbiotic and healthy. At its worst, this relationship hinges on conflicting demands and interests and makes decision-making stressful and slow.

Community

A successful relationship between a business and its stakeholders is built on working together towards common goals. Employees depend on your business for their livelihoods. And if you treat them well, they’ll be engaged as a team and a family to go above and beyond their job requirements to further the best interests of your company.

If your business provides a product or service that genuinely improves the quality of your customers’ lives, they’re likely to go to bat for you as well, spreading the word about your offerings because they genuinely want your business to do well.

Investors have a financial stake in your company and they certainly want a financial return, but if your interests are aligned and they genuinely care about the work you do, their relationship with your business can go far beyond the desire to make money.

Financial Benefits

A business with an engaged community of stakeholders will reap financial benefits from these relationships. Employees who care about their work and see it as more than a job will give their best and act as ambassadors for your brand. Customers who believe in your company and your offerings will support you with their long-term business.

Vendors who see your business as more than just a sales opportunity will go the extra mile to make sure you have the materials you need to make sales and generate revenue, and they may even extend flexible terms if they know you’re struggling financially. Engaged stakeholder investors will help you out with working capital and funds for expansion projects.

Successful Stakeholder Relationships

Successful relationships with stakeholders are essential to your company’s success. However, it takes hard work and vision to build these strong liaisons. Whenever possible, work on aligning the interests of your business with those of your stakeholders. Treat your employees well and pay them fairly, so they’ll work towards your mutual success.

Create the highest quality products you can, so your customers will go the extra mile to help you keep providing them. Cultivate relationships with investors who are more interested in long-term viability than short-term dividends.

How do External Stakeholders Influence 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 Stakeholders

Internal 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.

External Stakeholders

External 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.

The 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.

What are the Advantages of Stakeholders?

Business is about relationships, both good and bad. Successful organizations must be constantly aware of who will help move the organization forward, and those who will hold the organization back. Creating a stakeholder map that outlines who will be an ally or foe can be one of the most effective tools for making short-term decisions and meeting long-term goals.

But do you know why a comprehensive stakeholder engagement plan benefits your business?

1. Education

Communicating directly with a stakeholder allows you to learn not only their perspective, but can provide new insights on a product or issue to help you gain a competitive advantage. Be sure to include diverse perspectives in your outreach to ensure you are hearing from all angles. You never know what you may learn!

2. Effective Decision Making

The education gleaned from the fresh perspectives described above may change your mind on an issue and allow you to make a more informed decision. Or better yet, hearing from your stakeholders may reinforce a decision you’ve already made. It never hurts to consider a problem from a different approach, and an informed decision should always be the goal.

3. Trust

When you reach out to stakeholders, you are letting them know you value their perspective. This collaborative approach helps build trust and goodwill toward you and your organization. This can be especially useful if you’re working in the wake of a crisis; rebuilding trust can be a long, arduous process, but it starts with making sure all of your stakeholders feel like they have a seat at the table.

4. Cost Savings

Engaging with stakeholders can ultimately save time and money. Data shows that companies who engage stakeholders improve their chances of finishing a project on time and on budget. That savings can come from the elimination of roadblocks, and the mitigation of surprises that can slow your organization’s process.

5. Risk Management

Groups and individuals may help you identify potential risks before they become threats to your project or organization. Preventing these threats also eliminates the harm (budgetary and otherwise!) they can bring.

6. Accountability

In the end, engaging with groups and individuals is key to improving accountability within your own organization as well as with external audiences. Transparency is important – be clear about the outcomes you are hoping to achieve and the steps you are taking along on the way. Don’t forget to follow up with your stakeholders to let them know how you are doing!

Who are the Most Important Stakeholders in a Business?

The CEO and his or her executive team have to satisfy and balance the demands of various parties. Sometimes these demands are in conflict and one has to be prioritized over another. So what is the pecking order among the company’s stakeholders? When it comes to the crunch whose needs should be met first? Here is a suggested order of preference.

1. Customers. Peter Drucker defined the purpose of a company as this; to create customers. Without customers the company cannot survive so in almost all situations the customer needs have to come first. The customer can always to choose to take his business to a competitor so it is essential that we continue to innovate, to offer good products and good value for money.

2. Employees. The employees are the ones who create and deliver the products or services that the customers consume. If we lose or antagonize our best employees then customer service will suffer so we need to look after them. If we want to attract and retain top talent at all levels then we have to offer terms and conditions that are attractive.

3. Shareholders. The shareholders own the company. They might well have put forward the seed capital which we need to get started so their needs are important. Ultimately the board, acting on behalf of the shareholders, can replace the CEO and the executive team. However, provided we are broadly on plan in terms of revenues and profit the shareholders are generally satisfied and will leave us alone. They will only take action when things are going badly wrong so we do not need to always act to please them.

4. Suppliers, distributors and other business partners. We need to collaborate with our partners to run the business. Many have essential skills that we lack. It is best to build good long-term relationships. However, the partners also have their own agendas and most can be replaced if they underperform or a better partner appears.

5. The local community. We want to be a good citizen with healthy links to the local community. We want to be seen as a responsible employer who is providing a good place to work. This is important but is clearly a lower priority than those above.

6. National Government and regulatory authorities.  These are less important stakeholders but we want to keep on the right side of them. We want to be compliant with regulations and avoid disputes and prosecutions.

This order of priority will help us to resolve conflicts. E.g.

• Should we hire cheaper staff to maximize profit even it if means poorer customer service? No; we should hire the best people we can afford in order to deliver better customer service. It might hurt profit in the short term but should deliver better growth and profits long term.
• Should we arrange things so as to minimize corporation tax and thereby increase profit? The answer clearly is yes. The shareholders outrank the national government in priority.
• Should we lay off staff if we are in serious financial difficulty? If it is necessary for survival then we have to take the difficult step of making employees redundant. We cannot serve the customers if we cannot survive.

Difficulties surface when we alter the priority list, e.g. when we put the shareholders first and milk the business of profits. Or when the employees are seen as more important than the customers. We sometimes see this in some offices where staff are too busy with their own affairs to look after the customer.

A big problem arises if item 2 on the list above is split and becomes 2a senior executives and 2b ordinary employees. This can lead to a situation where the executive team puts its own requirements first – especially in terms of bonus, stock options and other monetary rewards. We have seen recent examples of how divisive and provocative this can be.

We want staff at all levels from the lowest to the most senior to act as a team, to be motivated and well rewarded – but not overpaid. If we overpay then we increase our cost base unnecessarily and put at risk price competitiveness in the marketplace and profitability. 

It is essential to strike the right balance between the needs of the different stakeholders, but some are more important than others. If we can be clear about priorities in advance then it will help us to resolve the tricky conflicts that will arise sooner or later.

Who are External Stakeholders in a Business?

External stakeholders, unlike internal stakeholders, do not have a direct relationship with the company. Instead, an external stakeholder is normally a person or organization affected by the operations of the business. When a company goes over the allowable limit of carbon emissions, for example, the town in which the company is located is considered an external stakeholder because it is affected by the increased pollution.

Conversely, external stakeholders may also sometimes have a direct effect on a company without a clear link to it. The government, for example, is an external stakeholder. When the government initiates policy changes on carbon emissions, the decision affects the business operations of any entity with increased levels of carbon.

What are Examples of Stakeholders?

Let us now analyze the most common example of stakeholders and look at the unique needs that each of them typically has. The goal is to put yourself in the shoes of each type of stakeholder and see things from their point of view.

1. Customers

Stake: Product/service quality and value

Many would argue that businesses exist to serve their customers. Customers are actually stakeholders of a business, in that they are impacted by the quality of service/products and their value. For example, passengers traveling on an airplane literally have their lives in the company’s hands when flying with the airline.

2. Employees

Stake: Employment income and safety

Employees have a direct stake in the company in that they earn an income to support themselves, along with other benefits (both monetary and non-monetary). Depending on the nature of the business, employees may also have a health and safety interest (for example, in the industries of transportation, mining, oil and gas, construction, etc.).

3. Investors

Stake: Financial returns

Investors include both shareholders and debtholders. Shareholders invest capital in the business and expect to earn a certain rate of return on that invested capital. Investors are commonly concerned with the concept of shareholder value. Lumped in with this group are all other providers of capital, such as lenders and potential acquirers. All shareholders are inherently stakeholders, but stakeholders are not inherently shareholders.

4. Suppliers and Vendors

Stake: Revenues and safety

Suppliers and vendors sell goods and/or services to a business and rely on it for revenue generation and on-going income. In many industries, suppliers also have their health and safety on the line, as they may be directly involved in the company’s operations.

5. Communities

Stake: Health, safety, economic development

Communities are major stakeholders in large businesses located in them. They are impacted by a wide range of things, including job creation, economic development, health, and safety. When a big company enters or exits a small community, there is an immediate and significant impact on employment, incomes, and spending in the area. With some industries, there is a potential health impact, too, as companies may alter the environment.

6. Governments

Stake: Taxes and GDP

Governments can also be considered a major stakeholder in a business, as they collect taxes from the company (corporate income taxes), as well as from all the people it employs (payroll taxes) and from other spending the company incurs (sales taxes). Governments benefit from the overall Gross Domestic Product (GDP) that companies contribute to.

Why do we Need Stakeholder Engagement?

Engaging with stakeholders is crucial to the success of any organisation. To succeed, an organisation must have a clear vision derived from a robust strategic planning process, and an effective strategic plan or marketing plan can only come from stakeholder engagement.

Our consulting team work with organisations with a diverse range of stakeholders. Key stakeholder opinions and insights are incredibly valuable in the early stages of the planning and development processes . Robust consultation adds insight into the operating environment, the marketplace, trends, user / customer need, and growth opportunities, as well as to a vision of the organisation’s future.

Effective engagement helps translate stakeholder needs into organisational goals and creates the basis of effective strategy development. Discovering the point of consensus or shared motivation helps a group of stakeholders to arrive at a decision and ensures an investment in a meaningful outcome. Indeed, without internal alignment you cannot build an effective strategy or implement change.

Stakeholders can differ depending on the business or organisation. They can include employees, customers, suppliers, shareholders, regulatory or government agencies, boards of directors, and business owners. Each has a unique perspective about what it will take for the organisation to succeed.

For example, internal stakeholders, like employees, know the strengths and weaknesses of the organisation from the ground up and have first-hand knowledge of what it takes to deliver. External stakeholders will have a different, but equally valuable, perspective about how the organisation and its operations impact them.

A shared understanding is essential to building a cohesive vision for the future. We bring value to the strategic and marketing planning process by implementing an active consultation and engagement process and providing an open forum for discussion and debate. We help to align, impartially and objectively, an organisation around a common vision and make recommendations on how the future ambition can be best achieved.

How Can Stakeholders Influence Financial Performance?

• When a firm performs well (above average for its industry), good stakeholder relations help sustain it for a longer period of time. Employees may work harder, or customers will buy more products or pay more for them.
• When a firm performs poorly, good stakeholder relations help it bounce back faster. For example, textile producer Malden Mills experienced a financial crisis in 1995 following an industrial accident. It recovered in less than one year, an accomplishment the CEO credited to support from employees, suppliers, customers, and the community.
• Stakeholder relations are unique in their ability to help firms bounce back. Other competencies such as technological expertise are context-specific and can lock firms into bad patterns as well as good ones. But, stakeholder relations are effective across contexts and versatile enough to support a variety of strategies.
• Stakeholder relations don’t lead to persistently higher performance levels over time; for that, successful firms must rely on other competencies like technological expertise.

How Are Stakeholders Affected by Business Decisions?

All stakeholder groups have an impact on a business, but some will have more impact than others, giving them more power and influence on the activities of the business:

Stakeholder	Impact on business activity
Shareholders and owners	Owners have the most impact, as they make decisions about the activities of the business and provide funding to enable it to start up and grow. Shareholders influence the objectives of the business.
Managers	Managers make some recommendations and decisions that influence the business’ activity.
Employees	Employees may have a limited amount of influence on business decisions. However, they can also affect the business directly, eg by refusing to work or not working as well as they should.
Customers	Customers buy products and services and give feedback to businesses on how to improve them. Customers are also able to influence others by recommending the business to friends or by warning them against using the business.
Suppliers	Suppliers can have a significant impact on a business if there are any changes in the quality of the goods they supply or the reliability of their deliveries.
Local community	If a business affects a large number of local residents negatively, they may protest or object through the local council. They can also support businesses by buying products and services.
Pressure groups	Pressure groups can improve working conditions for employees and help them to get fair pay. They can also try to influence customers’ opinions of a business.
Government	Governments can pass new laws, change tax levels or amend levels of government spending in ways that affect the business, eg by providing increased grants or funding.

Positive And Negative Effects of Stakeholders

The positive and negative effects of stakeholders must be understood and managed in order for companies to navigate in the business world. In general terms, a stakeholder is any individual who has an interest in the success or failure of a business.

Traditionally, individuals with a vested concern about how the company is run are considered stakeholders. This includes owners, shareholders or members (in the case of limited liability companies or LLCs), and investors in the company.

In addition, employees who depend on the business for their livelihood, suppliers who have entered into agreements with the company and partners who rely on the company to fulfill contractual obligations are looked upon as stakeholders.

However, a stakeholder’s interest in a business need not only be defined monetarily or by ownership shares in a corporation. It can include parties that interact with a company and share common concerns and interests.

Thus, religious groups and political parties can be considered stakeholders if the position taken by a company can affect their membership favorably or adversely. This is also true of media companies whose subscribers depend on news about the business to make financial or lifestyle decisions.

Positive Effects of Stakeholders

Businesses tend to value stakeholders because of the unique benefits they can bring to the way a company is managed, by the expertise their workforce provides or the ability of individuals to generate capital investments to secure the long-term growth of the business. The two most common advantages include:

• Business experience. Stakeholders are often individuals that a company hopes to attract who have displayed an ability to successfully manage other businesses or have developed important relationships. Typically, these individuals are found on a company’s board of directors, where they do not necessarily play a role in the day-to-day operations of a business but provide a “big picture” view of things, set plans in order for long-term success, and help the company’s management team avoid costly mistakes.
• Business acumen. Companies want to attract individuals who can provide guidance when matters get a little sticky. Whereas board members are looking ahead three or five years down the road, sometimes a company needs someone who knows how to deal with a situation happening in the here and now. Perhaps an opportunity arises that could be extremely beneficial to the company but certain matters have to be handled delicately. A level of expertise is required to do this.

Negative Effects of Stakeholders

Just as important as stakeholders can be to the success of a business, they can often impact operations for a variety of reasons:

• Looking out for number one. Perhaps it’s only human nature for people to often place their own interests above those of the business they claim to support. Whenever the issues of money and power intersect, even the best-intentioned individuals can make or force decisions that protect their own pocketbooks or their standing with their own constituents.
• Standing in the way of progress. People are often wary of change, and in today’s business climate, change is happening at a breathtaking pace. Communication and technological advances are radically affecting relationships between individuals, companies and even countries. For instance, labor and management are often at conflict on key issues, from the impact of globalization on workers’ rights to the effect of automation on jobs traditionally performed by human workers.
• Fearing Failure. Factors that can contribute to a party interfering with a business’ operation out of a fear that things will not work out is an issue. This is caused by a lack of effective communication in which parties are not kept abreast of developments, creating a lack of control over key decisions, or limiting the responsibilities and power of interests used in exerting a large amount of influence.

Managing stakeholders can be every bit as important to the success of a business as wisely managing its assets. Proactively engaging stakeholders can prevent problems before they occur.

Types of Stakeholders in a Business

Every business and organization has its stakeholders. These stakeholders are individuals or groups of persons who have some interest or stake in the business and generally work for the success of the organization or business.

1. Owners

The owners of any business are the first set of stakeholders. They contribute capital or equity and have a say in the running of the business. They may be a few as in the case of a partnership, or very large in number, as in the case of a joint stock company.

Persons having a share in the equity of a company are known as shareholders. Owners expect the business to run smoothly and efficiently and yield good return on equity. Such shareholders would be different from the company, which by itself will be a separate legal entity.

Communication between the owners themselves, and also between the company and the shareholders, therefore, assumes relevance.

2. Employees

The next group of stakeholders in any business is its employees. These employees may be of any cadre and may carry out managerial, supervisory or other functions. They draw remuneration for the contribution they make to the functioning of the company or business.

Nowadays such employees also own a share in the company, which further enhances their stake in the business. Employees generally expect reasonable reward and incentive systems, career progression and job satisfaction.

In large organizations and businesses, the number of such employees is very large and they are spread out across numerous regions and functions. The process of communication will have to effectively reach all of them.

3. Customers

Business exists for the sake of its customers. It is the customers who keep the business going. Customers obtain their products and services from the business establishments, and as such are interested in their progress.

In that sense, for every business organization, customers are an important group of stakeholders. Business organizations make conscious efforts to relate to customers and meet their needs and expectations.

Customers expect the business to provide efficient and high-quality products and services. In general, meeting the customers’ needs is an extremely important area of concern for ensuring the success of any business.

4. Community

The community within which a business operates can be considered as another set of stakeholders. Good organizations and sound businesses are considered an asset to any community. Besides meeting the expectations of the other categories of stakeholders, these organizations often contribute in terms of various welfare programs.

They maintain gardens, parks and fountains, establish schools and temples, run orphanages and old age homes, and generally take up activities for the good of the community. Communication between the business organization and the community, of which it is a part, also assumes significance.

5. Communication Needs of Any Business Organization

There are people and agencies beyond the stakeholders, and an organization or a business will have to communicate with all those sections of people on an ongoing basis for a variety of reasons. The dimensions of business communication would therefore cover the following:

Stakeholders

The process of communication should, as we have already discussed, effectively cover all the stakeholders, viz., owners, employees, customers and the community. Employees and customers are particularly relevant in any organization and a wide variety of methods, types, channels and strategies will have to be adopted to effectively address their communication needs.

6. Government

Every business, in some way or the other, comes within the ambit of government agencies. These government agencies may be national or central, provincial or state, or even local in nature. Quite often, every business will have to comply with various governmental rules and regulations.

Inadequate compliance and reporting could result in penalties and other problems. Every business has to respect the law of the land. Communication between any business organization and the government has to be recognized.

7. Trade Organizations

Every business generally has certain affiliations or memberships with a trade organization or an association. It may be functional or geographical in nature. Such organizations generally work with the larger interests of the profession or its members in mind. Communication with this segment becomes necessary.

8. Competitors

There may be various players who operate in the market. There are often occasions for them to communicate with each other. Notwithstanding the competitive nature, different players may arrive at some understanding to respond to the customers.

There may even be occasions when there is a clash of interest that needs to be sorted out. For different reasons, a business organization may have to communicate with its competitors and other operators in the market.

9. Press and Media

Businesses also often face the need for communicating or interacting with press, television and other media. It may be for the purpose of advertisement or announcement or clarification or image building.

For larger organizations, press relations and media contact is an essential function that needs careful attention. There is considerable literature on ‘Business Communication’ and ‘Business Management’ discussing this important area.

10. Consumer Fora

Another section which businesses will have to deal with relates to varied consumer organizations, consumer courts and consumer lobbies. Some businesses like banks will also have to deal with ombudsmen.

While some of the more important or major sections with which a business organization generally interacts are described above, there could be a host of other agencies as well. These would include supervising agencies, employment agencies, courts and judicial organs, international bodies, financial institutions and at times religious and charitable institutions.

Communication thus plays a very vital role in modern day business organizations. In fact, the very effectiveness of a business depends upon its ability to communicate effectively with all the sections with whom it interacts.

What is Stakeholder Impact Analysis?

Stakeholder Impact Analysis is thoughts, beliefs, needs, feedback, etc., communicated by individuals defined as stakeholders for any given impact area. 

Principally, social sector stakeholders are the target beneficiaries of an intervention. However, in general terms, a stakeholder is any individual or entity that stands to be affected (positively or negatively) by the activities undertaken by an organization.

Stakeholder impact analysis uses analytical tools and techniques to quantify and analyze the effect of business decisions on the stakeholders of the business. It is a key task for the management of a company. It is used to formulate business strategy and Corporate Strategy

Corporate Strategy focuses on how to manage resources, risk and return across a firm, as opposed to looking at competitive advantages in business strategy and make production, distribution, and final sales-related decisions. Common frameworks used to evaluate stakeholder impact analyses include the following:

1. Mendelow’s Power-Interest Grid
2. Bourne and Kasprczyk Stakeholder Circle
3. Murray-Webster Simon 3D Cube

What is The Role of Employees as Stakeholders?

Considering your employees as stakeholders can also benefit your company in the form of improved morale and performance.

Employee Compensation Issues

Employees are primarily affected as stakeholders in terms of their economic well-being. Employees share a common concern regarding how much and how often they are paid by the company. The decisions of management that affect these concerns are especially important for these stakeholders.

Whether the business owner decides to offer benefits and other compensatory packages to employees also affects employees in this sense. Therefore, the continued economic health of the company is of utmost importance to the employee.

Employee Job Security

Employees are also affected by your business decisions on the basis of how those decisions affect their job security. If you continually make risky business decisions that harm the bottom line of the company, this may be putting the job security of the employees at risk.

This could cause employees to take an interest in your decisions and possibly jump ship if they sense that you’re doing things that will hurt the company in the long run. Employees need long-term job security and stability to thrive, in most cases.

Corporate Culture and Internal Stakeholders

Employee job satisfaction and fulfillment are also tied to your decisions as a business owner. The way that an employee perceives of himself within the company is tied to his pay and sense of job security, but it is also tied to other factors such as business culture.

The culture that you create for your company will have an impact on the socialization of the employee and how he perceives himself as part of the organization. Employees who feel that they are a part of a larger and more important purpose that they share with other employees are more likely to feel this sense of satisfaction.

Profit Sharing and Stock Options

Employees who are offered benefits packages that include stock options have an additional stake in the company and its finances. As shareholders, employees are stakeholders affected by your business decisions in the way that the decisions affect your company’s bottom line or profitability.

Offering employees these types of benefits in which they too have a stake in the company’s financial well-being can serve as a source of motivation and can inspire innovation among employees.

What Important Stakeholders Will You Need to be Successful?

It is critical that in the project start-up phase you uncover who exactly your stakeholders are. Think about who will be impacted by the outcome of your project and who can exert influence on it as well.

Correctly identifying your stakeholders is absolutely crucial because otherwise it’ll be much more difficult to try and develop a strong relationship with them.

It’s important to look outside company walls and consider who your external stakeholders are; conducting interviews with project participants will allow you to uncover even more.

Making a basic list of possible stakeholders, like the one below, is always a great start.

• Project manager
• Project team
• Senior, functional and resource managers
• Company staff
• Suppliers and sponsors
• Product users
• Shareholders
• The community
• Government agencies

Which Stakeholders Are Most Important to a Business?

Here is a suggested order of preference.

1. Customers. Peter Drucker defined the purpose of a company as this; to create customers. Without customers, the company cannot survive so in almost all situations the customer needs have to come first. The customer can always to choose to take his business to a competitor so it is essential that we continue to innovate, to offer good products and good value for money.

2. Employees. The employees are the ones who create and deliver the products or services that the customers consume. If we lose or antagonize our best employees then customer service will suffer so we need to look after them. If we want to attract and retain top talent at all levels then we have to offer terms and conditions that are attractive.

3. Shareholders. The shareholders own the company. They might well have put forward the seed capital which we need to get started so their needs are important. Ultimately the board, acting on behalf of the shareholders, can replace the CEO and the executive team. However, provided we are broadly on plan in terms of revenues and profit the shareholders are generally satisfied and will leave us alone. They will only take action when things are going badly wrong so we do not need to always act to please them.

4. Suppliers, distributors, and other business partners. We need to collaborate with our partners to run the business. Many have essential skills that we lack. It is best to build good long-term relationships. However, the partners also have their own agendas and most can be replaced if they underperform or a better partner appears.

5. The local community. We want to be good citizens with healthy links to the local community. We want to be seen as responsible employers who is providing a good place to work. This is important but is clearly a lower priority than those above.

6. National Government and regulatory authorities.  These are less important stakeholders but we want to keep on the right side of them. We want to be compliant with regulations and avoid disputes and prosecutions.

This order of priority will help us to resolve conflicts.

What Power do Stakeholders Have?

Stakeholders have 5 different kinds of power: voting power, economic power, political power, legal power, and informational power.

1. Voting Power– means that the stakeholder has a legitimate right to cast a vote. Shareholders typically have voting power proportionate to the percentage of the company’s stock they own.

They typically have an opportunity to vote on major decisions like mergers and acquisitions, the composition of the board of directors, and other issues that may come before the annual meeting. (Shareholder voting power is NOT the same as voting power exercised by citizens).

2. Economic Power– suppliers, customers, employees, and other stakeholders have economic power within the company. Suppliers can withhold supplies or refuse to fill orders if a company fails to meet its contractual responsibilities. Customers may refuse to buy a company’s products/services if the company acts improperly.

They can boycott products if they believe the goods are too expensive, poorly made, or unsafe. Employees can refuse to work under certain conditions, a form of economic power known as a strike or slowdown. Economic power depends on how well organized a stakeholder group is.

3. Political Power -governments exercise political power through legislation, regulations, or lawsuits. While government agencies act directly, other stakeholders use their political power indirectly by urging government to use its powers by passing new laws or enacting regulations. Citizens may vote for candidates that support their views with respect to government laws and regulations affecting business.

4. Legal Power -Stakeholders have legal power when they bring suit against a company for damages, based on harm caused by the firm. For instance, lawsuits brought by customers for damages caused by defective products, brought by employees for damages caused by workplace injury, or brought by environmentalists for damages caused by pollution or harm to species or habitat.

5. Informational Power – stakeholders have informational power when they have access to valuable data, fact, or details and are able to bring their own information and perspectives

What Are The 4 Types of Stakeholders?

Let’s look at each of those in a bit more detail.

Users as Stakeholders

Users are the stakeholder-type of people who will use the products of your project or programme. 

They are the beneficiaries of the outputs. 

They could be customers who are a very important group of stakeholders or another internal department. 

For example, in the case of delivering a new software package for your Sales team, the stakeholders would be the Sales team.

Governance as Stakeholders

These are people or groups of people who have an interest in how things are managed on the project or programme. 

For example, management boards or steering groups would fall into this category, as they usually have the job to monitor the quality of the project as it develops and to provide advice and guidance throughout its course.

In this group of governance, stakeholders belong to auditors, regulators, and health and safety executives.

Influencers as Stakeholders

Influencers are the people who have the power to influence decisions and the ability to change the direction of a certain project or programme. 

In the group of influencers as stakeholders belong to trade unions and lobby groups as they are known for having the capability to impact a project’s track and protect and improve the outcome.

Providers as Stakeholders

As you would expect, suppliers and vendors fall into this category. More specifically, a supplier’s job is to supply a company. In addition, the group of providers can cover a larger number of profiles also including business partners, temporary contractors, catering staff, and anyone else who provides resources to the project or program.

Why is it Important to Keep Stakeholders Happy?

Stakeholders are pivotal to the success of a project or business. Whether your stakeholders are internal or external, every good leader knows the importance of keeping them engaged and satisfied.

Whether internal or external, all of the projects that you manage have stakeholders. One of the main reasons projects fail is because the deliverables were not what the customer wanted or they did not meet the customer’s needs. To ensure project success, it helps that you know all of the key stakeholders on your project, how they prefer to communicate, what their needs are, and what the acceptable end results are. 

Engaging stakeholders during—and especially at the beginning of—your project will help reduce and uncover risks and increase their “buy-in.” When stakeholders are adequately engaged, their influence spreads far and wide.

Why Are Stakeholders More Important Than Shareholders?

The Shareholders vs. Stakeholders debate is not new. It’s something corporations around the world discuss during their strategy meetings year after year. While strategy experts might define it in various different flavors, it simply suggests that the success or failure of any organization is not just measured by what it does for their shareholders; but it is measured by the satisfaction of all engaged stakeholders.

In a broader sense, stakeholders include shareholders and investors alongside employees, business partners, customers and the government who collectively contribute to an organizations’ success.

Shareholders have a discrete focus on profitability while responsibility is the buzzword for other stakeholders. When profitability and responsibility go together, that’s when organizations are able to achieve their goals and vision.

Here are a few suggested ways to keep your stakeholders happy

1. Keeping your Shareholders Happy

Shareholders are critical to any organization as they have the power to direct the company’s strategic planning and management. An informed shareholder is the best visionary, planner and evaluator an organization can count on.

Involving them constantly by offering continuous feedback on planned strategies, keeping performance in-line with expectations, discussing innovative philosophies and providing insight into day-to-day working helps them stay connected financially, if not physically.

2. Keeping your Employees Happy

The foot soldiers in any organization directly impact the execution of the strategic plan and growth initiatives laid out for them. A few unhappy employees could easily derail the growth trajectory of any establishment. It is extremely necessary to keep your employees happy.

Attractive benefits, including free lunches, events, gatherings, career progression plans, appealing office culture, flexible vacation time-off programs and motivation through awards and rewards programs are some critical contributors to employee satisfaction.

3. Keeping your Customers and Partners Happy

Can you think of a successful organization without customers? Well, the answer is NO. They are a critical aspect of any organizations’ success. Engaging customers by organizing customer-centric events, collecting timely feedback on your performance, offering exceptional customer service and constantly exploring ways to outperform on their expectations will ensure that your customers and partners will always hold your hand when you need them to.

4. Keeping your Local Community Happy

While constantly growing your business and achieving new goals, it is crucial to maintain a strong bonding with your local community. They might not directly influence your growth but definitely are one of the pillars for an organizations ‘ strong foundation.

Working with NGOs and government agencies through collaborative community programs, annual donation campaigns, sponsoring local schools and colleges are some time-tested methods that have proven to be exceptionally helpful in shaping an organization’s brand value.

How do Stakeholders Impact an Organization?

Stakeholders are people or groups that are affected by your company’s operations. Shareholders or owners are a commonly recognized stakeholder group. However, you also need to consider how your customers, community, employees and business partners impact your business.

A well-rounded approach that shows that includes an understanding of stakeholder influence normally increases your long-term viability and success.

Consider Your Shareholders

Company owners usually have a strong voice in the direction your company takes. In a partnership, each owner-partner has a financial interest in the profit potential of the business.

Commonly, owners participate in the daily operation of the business or vote on critical decisions. In a corporate set-up, shareholders own a piece of the company. They also vote on major company decisions and serve as a source of financial accountability driving company leaders to make logical decisions.

Customers and Community

In the long run, your ability to meet the needs of your customers and community is key to success. Customers provide the revenue and cash flow that your business needs to operate and ultimately earn a profit. You must understand customer wants and needs and meet them on an ongoing basis.

Community leaders and activists also hold your company accountable to act with social and environmental responsibility. This means that if you don’t participate in community activities and give to charities, you could face negative public sentiment and backlash.

Your Employees of Every Rank

In the early 21st century, companies tend to place greater value on the contributions employees make to business operations. If you operate a service-based business, your employees provide the consistent service that helps you attract and retain customers.

Motivating your employees with fair compensation, proper training and empowerment helps you deliver a better customer experience. Empowering employees at all levels to make more decisions and take on more responsibilities not only makes them feel valued, but it can also improve your efficiency in responding to customer needs.

Your Business Partners

Business partners and suppliers can also significantly influence your business. Partners are companies that you collaborate within joint ventures or shared investment opportunities. Suppliers are companies you rely on for key resources used inside your company and for products to resell.

If you have strong, trusting relationships with key suppliers, you can normally negotiate more reasonable costs and get more efficient replenishment when your inventory runs low.

How do we engage stakeholders?

In our experience, to build and support ongoing engagement in the strategic and marketing planning and implementation processes, there are three important things to remember:

1. Clear, consistent communication
For a project to be successful all parties need to have a clear understanding of the process and the objectives. Information needs to be shared in a purposeful and consistent way throughout each stage of the project. Internal and external stakeholders need to understand the vision and the part they individually play in meeting the organisation’s goals.

2. Outline the engagement required from stakeholders.
Map out the process along with key milestones where stakeholder engagement will be needed and why it is valuable. Arrange a series of interactive engagements where stakeholders can be included in discussion and debate. Greater understanding leads to greater ownership so consistently reinforce shared ideas and common goals, and give feedback throughout the process.

3. Build the project around the engagement
Many projects can fail to live up to their potential because the stakeholder engagement was not recognised as an integral part of the process. Stakeholder engagement, from the outset, helps build involvement and a sense of continuation to a new future.

Read Also: Complete Business Solution

Allow adequate time and planning to include all relevant parties and to allow them to discuss, understand and internalise each project milestone or step in the process. Stakeholders who do not understand the plan have a difficult time remaining engaged and moving in the desired direction later.

The benefits of stakeholder engagement

• It offers those who will affect or be affected by the outcomes a chance to voice their opinions
• It ensures that an organisation has greater clarity and a shared vision amongst its key influencers
• It enables an organisation to identify who its key stakeholders are and understand the relationship they have with the organisation
• It brings people together to pool knowledge, experience, and expertise to co-create solutions
• It helps build collaborative partnerships and new relationships that generate value
• It can identify strategies to gain competitive advantage
• It helps to reduce the level of risk within an organisation and improves governance

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Conclusion

Your business’s success depends on the actions of numerous stakeholders. Because stakeholders affect the business so greatly, the business has an ethical responsibility to consider how it affects them. A mutually beneficial relationship with all stakeholders will generate goodwill toward a small business, which will lead to lasting success.