Stakeholder is a person who has something to gain or lose through the outcomes of a planning process, program or project. Stakeholder Analysis is a technique used to identify and assess the influence and importance of key people, groups of people, or organizations that may significantly impact the success of your activity or project. Stakeholder Management is essentially stakeholder relationship management as it is the relationship and not the actual stakeholder groups that are managed.
Stakeholders can be divided into inside stakeholders and outside stakeholders. Inside stakeholders are people who are nearby to an organization and have the strongest or most direct claim on organizational resources: shareholders, executive employees, and non executive employees.
- Shareholders are the owners of the organization, and, as such, their claim on organizational resources is often careful to the claims of other inside stakeholders. The shareholders’ donation to the organization is to spend money in it by buying the organization’s shares or stock. The shareholders’ stimulus to invest is the potential money they can earn on their asset in the form of dividends and increases in the price of the stock they have purchased. Investment in stock is risky, on the other hand, because there is no agreement of a return. Shareholders who do not believe that the inducement (the possible return on their investment) is enough to warrant their donation (the money they have invested) sell their shares and withdraw their support from the organization.
- Executive Employees or Managers are the employees who are accountable for coordinating organizational resources and ensuring that an organization’s goals are effectively met. Higher managers are responsible for investing shareholder money in various resources in order to maximize the future value of goods and services. Managers are, in effect, the agents or employees of shareholders and are appointed indirectly by shareholders through an organization’s governance structure, such as a board of directors, to manage the organization’s business. Managers’ charities are the skills they use to direct the organization’s response to pressures from within and outside the organization.
- Non executive Employees an organization’s labor force consists of non executive employees. These members of the labor force have responsibilities and duties (usually outlined in a job explanation) that they are responsible for performing. An employee’s influence to the organization is the performance of his or her duties and responsibilities. How well an employee performs is, in some measure, within the employee’s control. An employee’s motivation to perform well relates to the rewards and punishments that the organization uses to influence job performance. Like managerial employees, other employees who do not feel that the inducements meet or exceed their influences are likely to withdraw their support for the organization by reducing their influences or the level of their performance, or by leaving the organization.
Outside stakeholders are people who do not own the organization (such as shareholders), are not employed by it, but do have some interest in it or its activities. Consumers, suppliers, the government, trade and other unions, local communities, special interest groups, and the general public are all outside stakeholders.
- Consumers are usually an organization’s largest outside stakeholder group. Consumers are induced to select a product or service (and thus an organization) from potentially many alternative products or services. They usually do this through an estimation of what they are getting relative to what they have to pay. The money they pay for the product or service represents their influence to the organization and reflects the value they feel they receive from the organization. As long as the organization produces a product or service whose price is equal to or less than the value consumers feel they are getting, they will continue to buy the product or service and sup-port the organization. If consumers refuse to pay the price the organization is asking, they usually will withdraw their support, and the organization loses a vital stakeholder.
- Suppliers, another important outside stakeholder group, contribute to the organization by provided that reliable raw materials, element parts, or other services that allow the organization to reduce uncertainty in its technical or production operations, thus allowing for cost efficiencies. Suppliers therefore can have a direct effect on the organization’s efficiency and an indirect effect on its ability to attract consumers.
- Government traditionally, different governments have had a major influence upon both the markets and the operating environment of business. This participation has been both proscriptive and prescriptive in nature. As business operates within, and contributes to, our society, governments have several claims on an organization. While it wants companies to compete in a fair manner and obey the rules of free competition, it also wants companies to obey agreed-upon rules and laws concerning the payment and treatment of employees, workers’ health and workplace safety, fair hiring practices, and other social and economic issues.
- Unionized Employees, the relationship between a trade or other union and an organization can be one of conflict or cooperation. The nature of the relationship has a direct effect on the productivity and effectiveness of the organization, the union membership, and even other stakeholders. Cooperation between managers and the union can lead to positive long-term outcomes if both parties agree on an equitable division of the gains from an improvement in a company’s fortunes. Managers and the union might agree.
- Local Communities also have a stake in the performance of organizations because employment, housing, and the general economic well-being of a community are strongly affected by the success or failure of local businesses.
- Special Interest Groups and the General Public, Public also wants its corporations and other businesses to act in a socially responsible way so that corporations generally refrain or are constrained from taking any actions that may injure or impose unreasonable or unjust costs on other stakeholders. As state’s social culture evolves, people become more aware of how business activity impacts the environment and social issues. Further than elections and government mandates, many of these issues become mainly important to different sub rudiments of the broader public or what are referred to as unique interest groups.
An organization is worn at the same time by different groups of stakeholders to each achieve or further their own goals. It is the collective influences of all stakeholders that are needed for an organization to be feasible and to achieve its mission of producing valued goods and services. Every stakeholder group is motivated to contribute to the organization by its own set of goals, and each group evaluates the efficiency of the organization by judging how well it meets the group’s specific goals.
Shareholders assess an organization by the return they receive on their asset; consumers, by the reliability and value of its products relative to their price; and managers and employees, by their salaries, stock options, situation of employment, and career scenario. Frequently these goals conflict and stakeholder groups must bargain over the suitable balance between the inducements that they should receive and the charity that they should make. For this reason, organizations are often regarded as alliances or coalitions of stakeholder groups that directly (and indirectly) bargain with each other and use their power and influence to alter the balance of inducements and charity in their favor An organization is viable as long as a dominant coalition of stakeholders has control over sufficient inducements so that it can obtain the charity it needs from other stakeholder groups. Though, when stakeholders refuse to contribute, the organization is placed into peril. In the United States, the spectacular collapse of Enron and WorldCom occurred when their illegal actions became public and their stakeholders refused to contribute: Shareholders sold their stock, banks refused to lend money, and debtors called in their loans.
There is no reason to assume, however, that all stakeholders will be equally satisfied with the balance between inducements and charity. Indeed, the implications of the coalition view of organizations are that some stakeholder groups have priority over others. To be effective, however, an organization must at least minimally satisfy the interests of all the groups that have a stake in the organization. The claims of each group must be addressed; otherwise, a group might withdraw its support and injure the future performance of the organization, such as when banks refuse to lend company money, or a group of employees goes out on strike. When all stakeholder interests are minimally satisfied, the relative power of a stakeholder group to control the distribution of inducements determines how the organization will attempt to satisfy different stakeholder goals and what criteria stakeholders will use to judge the organization’s effectiveness.
Evils that an organization faces as it tries to win stakeholders’ approval include choosing which stakeholder goals to satisfy, deciding how to allocate organizational rewards to different stakeholder groups, and balancing short-term and long-term goals.