Who is a Stakeholder?
A stakeholder is an individual or a corporation with a contingent interest in a particular firm and can either influence or be influenced by the firm's operations. Employees, suppliers, investors, and consumers are generally the main stakeholders. Stakeholders may have a positive or negative direct impact on a business venture. They can raise their issues about the company and participate in its programs.
Internal vs. external stakeholders
There can be many stakeholders in a firm, and they can be categorized as follows:
- Internal/ primary stakeholders. Those involved in an organization on the inside, such as employees, investors, and owners, are considered internal stakeholders. Workers, managers, boards, contributors, and investors may all be considered internal stakeholders. People who have a direct interest in and significant impact on the outcome of a business or project are generally referred to as major stakeholders.
- External/ secondary stakeholders. Those who are not directly involved with a firm but will be impacted by its actions are known as "external stakeholders." Individuals or organizations outside of the company might be considered external stakeholders. Secondary stakeholders are those who have a stake in a business or project but whose involvement is more symbolic than direct.
- Excluded stakeholders. Stakeholders like children and the uninterested public were previously left out of the equation since they had no financial bearing on businesses' bottom lines. Now that it is seen from a human viewpoint, the idea may include certain parties, such as the general public, as stakeholders while excluding others. In this view, the natural world has no agency apart from its relationship with humans and has only instrumental value.
Types of Stakeholders
The most widely known examples of stakeholders who might be categorized under either internal or external stakeholders include:
- Workers. The stakes that employees hold include job safety, respect, recognition, and income. These participants care deeply about maintaining their jobs and generating income. They have a vested interest in the company since it is vital to their well-being.
- Consumers. The stakes that customers hold include value, customer care, and product/service quality. These individuals desire and anticipate receiving a high-quality, valuable end result from the project.
- Investors. The stakes that investors hold include financial returns and income. Financially motivated investors include both equity holders and loan holders. They have put money into the company and are expecting a profit.
- Companies. The stakes they hold include safety and revenue. Corporations that offer products and services to the company in charge of the project are considered stakeholders since their income is directly related to the project's success. A successful project implies additional work for them.
- Local residents and businesses. The stakes they hold include economic development, safety, and health. These participants are concerned that the construction project might have an adverse effect on their quality of life. Jobs, consumer spending, and other economic factors may be affected by the organizations based in or working on a certain community's initiatives.
- Government. The stakes they hold include Gross domestic product (GDP) and fiscal payments/taxes. The government is a shareholder since it benefits from taxes and increased GDP. They have significant financial interest since they get tax payments from the business and its employees.
Just like every other participant in the project, stakeholders are people, and some will be simpler to work with than others. In order to succeed in your new role, you will need to practice adaptability in the face of divergent viewpoints and cultivate skills in facilitating a fruitful conversation.
Managing project stakeholders
If you adopt the proper stakeholder management measures, managing stakeholders will be pretty simple. The actions each project manager should take to keep stakeholders are outlined below will be.
1. Identifying Stakeholders
Finding out who has a vested interest in the outcome of your project is crucial. Stakeholder satisfaction is crucial to the success of any project. This should begin right after the project charter is developed.
The project charter, which details the project's purpose and names the project manager, is an excellent place to start when trying to identify the project's stakeholders. You may identify the stakeholders among the details regarding the project's aims, finances, timeline, assumptions, restrictions, sponsors, and upper management.
It is important to read the contracts since they may include references to the stakeholders. Is there a certain ecosystem or group that plays an important role in this project? Examine them since they may provide you with the names of interested parties. For instance, the government would be considered a stakeholder if environmental considerations were mandated by the state. If you want to remain in good standing with them, you should review their policies and criteria.
2. Analyzing Stakeholders
The stakeholder analysis stage of a project begins once the stakeholders have been identified. At this stage, you should ask them for details and specifications. To establish communication strategies and prioritize stakeholders, you will first need to estimate their degree of engagement and impact on your project.
3. Prioritizing the Stakeholders' demands
How one should handle a project stakeholder is a fundamental topic for every project manager. To further complicate things, there may be several stakeholders, each of whom should be treated as if they were a separate item on your to-do list.
Some stakeholders may be more useful than others in terms of project objections and may need more attention than others during the duration of a project. Plan ahead by identifying who these folks are and when in the project's lifecycle they may need extra attention.
Stakeholder prioritization refers to this process, which takes into account the following three characteristics of stakeholders:
- Their influence; the extent to which they may affect business decisions.
- Whether or if they add to the company's legitimacy in the eyes of the public.
- Their sense of urgency in demanding a response from the business.
4. Participation of Stakeholders
Stakeholder management is the process of maintaining good rapport with project participants by achieving their desired outcomes and satisfying their expectations. However, this connection isn't automatically given. One must work for it. Stakeholders' confidence and cooperation may be won via open and attentive dialogue in which their interests are taken into account.
One method for achieving this goal is to conduct interviews with the project's stakeholders. It's possible you'll need to consult with subject-matter experts before engaging in effective one-on-one discussions with key stakeholders.
As with every other aspect of project management, there is a method for this as well:
- Record Interactions with Stakeholders. Make it official by drawing out a strategy for communicating with stakeholders. Take note of who they are and what they do for the company they represent. Keeping detailed notes on your interactions with these project stakeholders will allow you to not only remember their specific demands and concerns but also to check their information for correctness at a later date.
- Follow the procedure. Following this, you should be consistent in your discussions with stakeholders and make your process as open as possible so that everyone is on the same page. We welcome any questions or comments on ongoing projects. A systematic procedure for reviewing and approving your plan to record and react to such requests is required. This demonstrates to the stakeholders that you have a formal request procedure in place and that it will be adhered to.
- Give regular updates on the situation. Consistent and timely updates on progress should be provided to stakeholders, but care should be taken to write reports that are understandable to each group. Team members are the best people to discuss specifics with, whereas executives are more interested in hearing the big picture. Stakeholders should be followed up with, and questions asked to elicit input.
- Dispel certain myths. Because they may be involved in more than one project at once, your stakeholder may not be as familiar with the details of yours as you are. That doesn't imply, though, that they aren't learning anything about your project from other places. You don't want them to hear rumors or obtain bad news that might change their minds about the project.
Problems Related to Stakeholders
A major issue that develops for firms with several stakeholders is that the interests of the different stakeholders may not coincide. In actuality, the viewpoints may be directly opposed. For example, from the viewpoint of its shareholders, the fundamental purpose of a business is often regarded to be to generate maximum profits and increase the value of shareholders.
Since labor expenses are a necessary evil for most businesses, cutting corners, there might be a priority. The company's workers will undoubtedly be dissatisfied as a result of this. Most productive businesses have found a way to balance the needs of their many constituents.
It is a commonly held misconception that public enterprises are required by law to enhance shareholder value. In reality, multiple judicial judgments, including one by the Supreme Court, have been issued in response to other stakeholders, plainly establishing that US firms are not required to maximize shareholder profit.
Who are stakeholders, and how do they differ from shareholders?
Stakeholders are investors in the form of shareholders. Shareholders are interested in the performance of the firm's stock or return on investment, in addition to the overall success of the company.
Shareholders' money contributes to the operation of a firm. Depending on the size of their investment, shareholders may have more influence over a firm and its initiatives than other interested parties. Those who invest in a corporation may be permitted to vote on crucial issues and get monthly financial reports.
What are some examples of Stakeholders?
There is a hierarchy among the many stakeholders to determine the sequence of repayment of capital investments in the case of a business failure and bankruptcy. Priority in a bankruptcy proceeding is given to secured creditors, then to unsecured creditors, then to preferred shareholders, and ultimately to common stockholders, who may get nothing at all. This scenario shows that not all participants enjoy the same rights and responsibilities. For instance, if the firm declares bankruptcy, employees may be let go without compensation.
What role do Stakeholders play?
There are a variety of reasons why stakeholders matter. Stakeholders inside an organization are vital since their cooperation is what makes the company function. However, external stakeholders may have indirect effects on the company. Consumers' expenditures, firms' manufacturing and shipping techniques, and governments' regulations may change. Successful organizations realize the significance of managing their relationships with both internal and external stakeholders.
Stakeholders include everyone who has a personal or institutional interest in the success of a corporation. Because a company's credibility is determined by its ability to meet the requirements of its consumers, it is critical that it maintains good relationships with them. Stakeholders are not a single entity but rather a varied group of individuals with various desires and interests. They might also exist on the outskirts of categories. Businesses have a range of objectives they seek to attain depending on their field of employment, size, and period of existence. This will result in a change in their priorities for meeting diverse stakeholder interests.