What is a Stakeholder? Who They Are and Why They Matter?

In the grand scheme of an organisation, Stakeholders encompass a diverse cast of characters: Dedicated employees who pour their heart into the company, investors who blend the organisation's vision with their own, loyal customers who are an enterprise's lifeblood, regulators who act as guardians of compliance, and more. This makes understanding What is a Stakeholder essential for any aspiring business owner.

Through vested interest, Stakeholders can play the decider when it comes to business success by guiding everything from risk mitigation and social responsibility to customer satisfaction and employee engagement. This blog explores What is a Stakeholder in comprehensive detail and will help broaden the horizon for your company's success.

Table of Contents 

1) Meaning of a Stakeholder 

2) Different Types of Stakeholders 

3) Distinguishing Between Stakeholders and Shareholders 

4) Examples of a Stakeholder 

5) How to Manage Stakeholders? 

6) Conclusion 

Meaning of a Stakeholder 

In this section, we will provide the answer to the question, “What is a Stakeholder?” A Stakeholder is someone, a group, or a company affected by the results of a project or a business endeavour. These individuals or entities care about whether the project succeeds and can be from the organisation running the project or outside it. Stakeholders matter because their choices can either help or hinder the project. Some are particularly vital, and the project can't proceed without their support; we call them critical or key Stakeholders.

Stakeholder Analysis Template

Identifying your project Stakeholders is one of the most important tasks you’ll have as a Project Manager or a business owner. For that reason, a Stakeholder Analysis template is vital, as it enables you to list your Stakeholders, their level of influence, and their preferred method of communication, among many other relevant information about them. 

While making a Stakeholder Analysis template, consider these steps:

a) Identify the Stakeholders: Begin by identifying who your Stakeholders are. Consider all those affected by your work, those with influence over it, and those invested in its outcomes. Stakeholders can be individuals or organisations, so ensure you identify the right people within each Stakeholder group.

b) Prioritise the Stakeholders: Determine which Stakeholders can advance or hinder your project. Classify them based on their power and interest in your work to prioritise your actions accordingly.

c) Understand the Key Stakeholders: Learn how key Stakeholders feel about your work and find the best ways to engage with them. Establish a relationship by asking their opinions. Consider using a colour-coding system to summarise their support: For example, Green for supporters, Red for critics, and Orange for the indifferent.

Consider the following sections in your Stakeholder Analysis report:

a) Stakeholder/Stakeholder Group

b) Impact Level 

c) Level of Support

d)  Reason for Support or Resistance

e) Action(s) to Address Stakeholder Group

f) Point of Contact

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Different Types of Stakeholders 

Stakeholders can be those who have the power to influence the project or those who can be influenced by it. Stakeholders can be categorised into two main groups: Internal Stakeholders and external Stakeholders. Let's examine both of these categories. 

Internal Stakeholders 

Internal Stakeholders are people inside the organisation who are directly affected by the project because they work for or are connected to the organisation overseeing it. These can be employees, owners, the board of directors, project managers, investors, and others. 

External Stakeholders 

External Stakeholders are individuals or groups who are not part of the organisation but still feel the effects of the project. They're not employees, but they can include suppliers, customers, and people the organisation owes money to, such as clients, middlemen, rivals, the general public, the government, and others.

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Distinguishing Between Stakeholders and Shareholders 

Shareholders are a subset of Stakeholders with a financial stake in a company. While Stakeholders have a general interest in a company's performance, shareholders specifically focus on how well the company's stocks perform and the returns on their investments.  

When a shareholder invests in a company, their money supports the organisation and its operations. Depending on the extent of their investment, shareholders may have a more significant impact on the organisation and its projects compared to other Stakeholders. Shareholders' investments may also grant them the privilege of receiving regular financial updates about the company and the opportunity to participate in business decision-making. 

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Importance of Stakeholders  

The significance of Stakeholders in the context of a business is underscored by several key reasons. These reasons are discussed below:  

a) Support and Resources: Stakeholders, particularly investors and financiers, provide crucial financial support, resources, and funding necessary for the initiation and sustenance of projects or business operations.  

b) Influence and Decision-making: Stakeholders often possess the authority to influence decision-making processes. They may participate in strategic planning, governance, and policy formulation, shaping the direction of the project or business.  

c) Accountability and Transparency: Stakeholders, including regulatory bodies and the public, demand accountability and transparency. This fosters ethical practices and responsible governance, enhancing the credibility of the business.  

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d) Risk Mitigation: By involving various Stakeholders, businesses can identify and mitigate risks more effectively. Different perspectives and insights can lead to better risk management strategies.  

e) Customer Satisfaction: Satisfied customers are vital Stakeholders. Their feedback and loyalty impact a business's success. Happy customers can become brand advocates, leading to increased sales and brand reputation.  

f) Employee Engagement: Employees are integral Stakeholders. Their commitment and motivation are essential for productivity and innovation. Engaging employees can lead to higher job satisfaction and better performance. 

g) Community and Social Responsibility: Businesses often operate within a community and have a social responsibility. Engaging with local communities and addressing social issues can improve public perception and goodwill.  

h) Adaptation to Change: Stakeholder input helps businesses adapt to changing market conditions and emerging trends. This agility is critical for staying competitive and relevant. 

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Examples of a Stakeholder 

Listed below are some common examples of a Stakeholder:

a) Material Suppliers: Companies or individuals providing raw materials or components essential for the manufacturing process.  

b) Service Providers: Entities offering specialised services like transportation, logistics, or maintenance critical to the production and supply chain. 

c) Financial Institutions: Banks or lenders providing financing options, loans, or credit lines for the company's operations.  

d) Regulatory Authorities: Government bodies responsible for overseeing industry standards and compliance with regulations related to the manufacturing sector.  

e) Employees: Workers within the manufacturing company who rely on a stable supply chain for job security and livelihood. 

How to Manage Stakeholders? 

Managing Stakeholders effectively is crucial for the success of any project or business. The process involves understanding their interests, expectations, and influence, and then developing strategies to engage, communicate, and collaborate with them. This can be achieved through several key steps, including  

a) Identifying Stakeholders 

b) Categorising Stakeholders 

c) Establishing Clear Lines of Communication 

d) Regularly Updating Them on Project Progress 

It's also essential to address their concerns and feedback, involve them in decision-making where appropriate, and ensure transparency and accountability in all interactions. A well-executed Stakeholder management plan not only helps in building strong relationships but also mitigates risks, enhances support, and fosters a positive reputation, ultimately contributing to the achievement of project goals and long-term success. 

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Conclusion 

We hope this blog helps you gain deeper insight into the significance of Stakeholders in driving business growth. Understanding it is an essential aspect of Project Management and business strategy. Stakeholders can be internal, such as employees, or external, including customers, suppliers, regulatory bodies, and the broader community. Recognising the multifaceted nature of Stakeholders and their distinct roles is essential for effective management and fostering positive relationships.

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