Who Are Stakeholders?
Stakeholders are people or organizations that have a vested interest in your business’ future. This means that they have something to lose or gain depending on how your company does in the market. They can be either internal or external to the firm. A stakeholder is a key partner of an organization that is necessary for its success or failure. In many cases, the stakeholder’s involvement in the organization directly affects the survival and growth of the company, which makes it crucial to have a stakeholder management program in place.
What is Stakeholder Management?
Stakeholder Management is an approach to managing relationships with stakeholders that helps organizations transform into high performing organizations. Stakeholder management is an approach which identifies stakeholders of any organization and analyzes how each of them may impact the company’s activities. A stakeholder may be an owner of the firm or an outside person working for the company like a company consultant or supplier. The objectives of this strategy are to effectively analyse all the stakeholders who affect the company’s operations, make effective decisions about their role in its operations, and ensure that they are not negatively impacted by these new decisions.
Stakeholder management requires identifying stakeholder relationships across different levels like top executives, middle managers, teams, external suppliers and others. It is important to understand what each of these stakeholders expects from the organization, their priorities and concerns which could affect the company.
Steps for Stakeholder Analysis
After stakeholder management’s policy is in place, the next step is to ensure that risks are identified and controlled before they cause significant damage. It may be difficult to identify risks in stakeholder management if they remain hidden or dormant during long periods of time. The management team should therefore employ a risk assessment methodology which can be used while implementing policies and while doing regular reviews of all stakeholders involved in the company’s operations.
In order to manage risks, a risk analysis process is required. This process enumerates the risks of potential impact on the company and how it could be managed. In stakeholder management, a risk analysis will identify how new players or stakeholders can be introduced to the company’s operations and what their impact may be on it. If a new supplier which may offer cheaper prices is identified, the stakeholder management process will determine if this entity will impact other suppliers or if it can meet quality standards. The analysis will also determine if there are any unknown risks connected with the new player which may affect existing players within the organization.
Steps Recommended for Effective Risk Analysis
After the analysis is complete, all stakeholders can be effectively assessed and integrated into the company’s operations. The team can then ensure that they work as expected and that each of them is not negatively impacted by their interactions with any other player. After this, a control plan can be created to ensure that risks identified during analysis are identified and managed effectively. The following steps will be required for this:
These steps will make stakeholder management an essential part of all business operations and will ensure that each stakeholder connected with an organization works as expected and does not impact its standing or future in any negative way. This process is project-oriented and can be continuous, based on how it is implemented in an organization.
What is not covered here describes how stakeholders are prioritized, which of them are “first responders” and who should be involved first to do the most good. That is, of course entirely dependent on the organization, sector or market sector of which it is a part.
In business management terms – the best results from any strategy or method will come from those stakeholders who have a high import to your business – customers – suppliers – investors – competitors – influencers – employees – government agencies – NGO’s – media .
The concept of stakeholder management is not a new one. In fact it has been used for many years in the public sector with the aim to enable a government to be responsive to all its stakeholders – voters, employees, local community – and so on. The most effective stakeholder management models have been found in large organizations where the main stakeholders were at a distance from the organization – customers-suppliers-media. Smaller organizations have not been able to bring about as much change as they were able to do. For example, in an automobile assembly plant it will be the workers who will actually construct the cars that are manufactured by that assembly plant. The most effective stakeholder management would be to involve the workers in the decisions of what is produced and how it is made. This becomes more complex as the stakes rise – for example in a nuclear power plant – with the need to involve contractors, legislators and so on.
In most developed countries there has been a growing concern with “CSR” – Corporate Social Responsibility. The best way to comply with these demands is by engaging your stakeholders and integrating their views into your own decision making processes – not just at board level but right through all levels of your organization – middle management – senior management – front line managers – shop floor operators – suppliers – customers – media – community groups and so on.
External stakeholders expect a business to maintain a positive brand image, and they can also affect your company’s financial status by virtue of their buying habits. Some common examples of external stakeholders include:
Investors – These are people or organizations that have a substantial investment in your company. They might be private investors, mutual fund investors or organization owners such as stockholders and partners. It is very important that you keep their expectations high by delivering on your promises and maintaining their faith in you as a company through continuous communications.
Vendors – These are the companies that give you goods for selling as part of your product line. If your vendor does not meet your expectations, it can create negative impact that may affect your brand image. It is important to keep them happy or they can cause you to lose revenue.
Customers – The people you are contracting to purchase your products. If they are happy with what you have decided to sell them, they will buy from you, if not…
Your employees – These are the people who do the work for your company and who actually make it possible for you generate profit. Some examples of employees include: executives, salespeople and warehouse staff. Treating these people as important customers is a great way to ensure their loyalty and create a positive sense of belonging amongst all those associated with the business.
Financial stakeholders include shareholders, lenders, and bondholders. They have a direct impact on an organization’s ability to operate and thus must be recognized as stakeholders in most organizations. As such, organizations must provide financial stakeholders with information about their performance so they know how it affects them.
Organizational stakeholders include suppliers, customers, employees, and communities. These stakeholders influence an organization’s success, but they do not have a direct impact on the organization’s financials. In these situations, organizations must make awareness of their needs a priority if they want to retain the support of the stakeholder.
Two groups of organizational stakeholders – “key” and “other” – can be identified based on how involved they are with an organization. Key stakeholders are those that have a high level or intensity of involvement in an organization. In many cases, the involvement of these stakeholders is crucial to an organization’s success. In addition, even if a stakeholder is not a key stakeholder, it still needs to be considered when developing a stakeholder management program, as it becomes an important part of the organization after key stakeholders have been identified.
Organizational stakeholders interact with an organization in various ways and usually have a high level of involvement in the organization. Key stakeholders interact primarily with financial organizations and generally have a high level of involvement in that organization. Other stakeholders may or may not be involved in both an organization and its financial activities but have no involvement in the networks connecting the two entities (i.e., they are “in-betweens”).
Key stakeholders serve important functions within the organization, and failure to keep them satisfied can be detrimental to the organization. For example, suppliers and customers may refuse to do business with an organization if it cannot meet their needs. Employees and retirees must trust that an organization is acting in their best interests, otherwise they are likely to withdraw their support. These key stakeholders are also sensitive to any changes in how they are treated by an organization.
Other stakeholders are not necessarily key but are necessary for the success of the business due to complex stakeholder relationships or stakeholder dependence on one another.
For example, environmental groups would be considered other stakeholders in a company that deals with natural resources.
In summary, Stakeholder management is not an easy task as it requires the commitment and involvement of every single person within an organization who has some stake in what you do or make or provide. It does take time and it does involve learning new skills and new attitudes. While the process can be tiresome, for most organizations, the benefits are well worth the effort. For firm’s that are unable to include Stakeholder management as part of their day to day operations, Fintalent provides an opportunity for businesses to outsource this responsibility. Fintalent’s Freelance Stakeholder Management Experts will bring in their Strategic Management and Operations Management skills to bear as they bring out the best in all concerned stakeholders.
