What are stakeholders? (And how to manage them effectively)

Stakeholders have a big influence on a company’s performance. But what are stakeholders, and how can they impact your business? In this guide, we will go over everything you need to know about stakeholders and how to effectively manage them.

• What is a stakeholder?
• Shareholder vs stakeholder
• Types of stakeholders in a company
• Examples of what stakeholders do in a company
• Are employees shareholders or stakeholders?
• How to manage stakeholders at work
• Tips on managing internal stakeholders at work
• Tips on managing external stakeholders at work
• Potential challenges to stakeholder management at work
• Conclusion
• FAQs

What is a stakeholder? 

Stakeholders are people or groups with an interest in a company or its activities. They're important because they can affect the direction and growth of the organization. 

Stakeholders can have a positive or negative influence on a company. Positive stakeholder influence can lead to increased support and investment in the company. For example, when employees feel that the organization values them, they may work harder and stay longer. Negative stakeholder influence can have detrimental effects. For instance, suppliers who engage in questionable practices may harm the company's reputation.

Shareholder vs stakeholder 

A shareholder is a specific type of stakeholder who owns shares in a company. They're investors with a financial stake in the organization. Because of this, they may have a direct interest in its profitability. Shareholders may have voting rights on certain issues. Often, they can elect who is on the board of directors and approve major decisions affecting the company. 

Stakeholders include a broader range of groups and individuals who have a vested interest in an organization's performance and success. In addition to shareholders, they can include the company's workers, customers, suppliers, and the local community.

Stakeholders can have different interests. For example, employees may care about having a safe place to work. On the other hand, the local community may be concerned about the company's impact on the environment and their quality of life.

Types of stakeholders in a company 

Stakeholders can be internal or external. Let's explore these types.

Internal stakeholders

These are people and groups that have a direct involvement with the company. Internal stakeholders often have a good grasp of the organization's goals and objectives. They include the following:

• Employees work in different departments and at varying levels. They're often the largest group of internal stakeholders.
• Management handles day-to-day operations. They oversee employees, establish policies and procedures, and make strategic decisions. 
• Executives are top-level leaders who set the company's direction and strategies. They can influence major decisions such as acquisitions, mergers, and expansions.
• The human resources (HR) department manages employee-related matters such as hiring, training, and benefits. They also help promote a company's culture and values.
• Union representatives are employees who speak for workers and focus on labor rights and conditions. Not all companies have unions, so this group may be smaller.

External stakeholders

These are groups or individuals outside the company. They may have an interest in its performance, or the organization's activities may affect them in some way. Here are examples of external stakeholders:

• Customers are people or businesses that buy the company's products or services. 
• Suppliers and vendors provide goods and services the company needs to operate. 
• Investors include shareholders and others with a financial interest in the company. They're major stakeholders in a business.
• Government agencies ensure that the company complies with laws and regulations. They're secondary stakeholders.
• Local communities are the people living near the company's operations that its activities may impact.
• Media outlets report on the company's actions and influence public perception.
• Industry associations represent the collective interests of companies in the same industry.

Examples of what stakeholders do in a company 

Here are some examples of how different stakeholders might interact with a company:

• Employees suggest improvements for a product they're making, boosting its quality and appeal.
• Management starts a new project to enter a new market and takes care of planning and allocating resources.
• Executives approve investing in renewable energy to boost the company's green credentials.
• HR launches a training program for staff. The aim is to increase employee productivity and job satisfaction.
• Union representatives work with management to negotiate better working conditions or pay for their members. 
• Customers give feedback on a product. The company makes changes in response, improving customer satisfaction and loyalty.
• Suppliers and vendors sign a contract to provide materials at a fixed price. This helps the company control its costs and plan its budget.
• Investors back the company's plans to expand its business operations. This may result in higher profits.
• Government agencies introduce new regulations for cutting emissions. This leads the company to make changes in its manufacturing process.

Are employees shareholders or stakeholders? 

Employees are stakeholders because they work for the company and care about its success. How well the company does can affect their jobs, pay, and work environment. But they're not automatically shareholders. Shareholders own a part of the company through stock.

Some companies offer Employee Stock Ownership Plans (ESOPs) as a special program. ESOPs let employees own shares in the company, turning them into shareholders as well. This can motivate employees to work harder.

How to manage stakeholders at work 

Knowing the stakeholders in a company or project is important because they have different interests. Learning what these are helps you understand their expectations. You can make better decisions based on their needs and concerns. 

When managing stakeholders, certain skills are useful. Communication skills allow you to listen and speak to them and get their input. Negotiation skills allow you to find a middle ground that meets stakeholder needs while keeping the project on track. Conflict resolution skills help you handle conflicts. These can help you minimize negative impacts on the project.

Below are two key points to remember when managing stakeholders.

1. Take note of the typical key stakeholders in a project

A project often involves these four stakeholders:

• Project managers oversee the project's progress and execution.
• Project sponsors provide the necessary support and resources to complete the project.
• Project team members execute tasks and contribute to delivering the project.
• Clients or customers receive the project deliverables and may provide feedback.

Knowing and considering the needs of an organization's internal and external stakeholders is vital to a project's success. For example, team members may have a more realistic timeline for the project. Listening to them can help the project manager adjust the expectations of the project sponsor and the client. The project manager can also update the client on the team's progress and ask for feedback. This allows the team to make changes that align with the client's expectations.

2. Manage internal vs external stakeholders in a project

Internal stakeholders in a project include the project manager, sponsor, and team members. External stakeholders may include clients or customers, suppliers, contractors, and government entities. Sometimes, the client may also be an internal stakeholder. For example, the project is a product that the company uses. Here are several examples that show the involvement of different types of stakeholders in a project:

• Project sponsor: Often a company executive. They secure the resources to fund the project. They make sure to align it with the company's goals.
• Project manager: They receive the project's requirements and create a plan to meet them. They also assign tasks to team members and conduct status reviews to ensure the project is on track.
• Team members: They do the actual work of the project and report to the project manager.
• Client or customer: They use the final product and provide feedback. 
• Contractor: They're not part of the internal project team but provide a service or product that's crucial to the project.
• Government entity: There may be regulatory requirements that the project must meet. A representative may participate in status meetings to ensure the project is compliant.

Tips on managing internal stakeholders at work 

Here are tips for managing internal stakeholder groups at work:

• Maintain open communication channels: Encourage stakeholders to share their input and concerns. Conduct regular meetings, ask for email updates, or create a designated communication platform. 
• Update stakeholders on project progress regularly: This ensures everyone is on the same page. It also helps to build a culture of transparency that promotes a sense of trust and accountability.
• Address concerns promptly and transparently: Listen to feedback and issues that stakeholders raise and act on them. Be transparent about your actions and decision-making process to build trust.
• Foster a collaborative work environment: Include internal stakeholders in project planning and decision-making. This cultivates a sense of ownership and shared responsibility.

Tips on managing external stakeholders at work 

Here are tips for external stakeholder management:

• Define project goals and deliverables upfront: This helps the client set realistic expectations about the project. It also encourages vendors and suppliers to align their work to these goals.
• Manage expectations through clear communication: Inform external stakeholders of the project's scope, schedule, and other important details. This can help you meet their expectations.
• Be responsive to inquiries and concerns: This shows that you value input, building trust and credibility. People are more likely to support the project as a result.
• Build strong relationships with external stakeholders: These people can help ensure the success of a project. They can also increase the likelihood of future work with the same stakeholders.

Potential challenges to stakeholder management at work 

Here are some of the challenges when managing stakeholders and their impact:

• Not identifying all stakeholders in a project: This can lead to unexpected pushback and project delays. 
• Communication breakdown: Giving infrequent, unclear, or incomplete updates can erode trust. It can also create confusion among stakeholders. 
• Clashing priorities: Stakeholders have different goals or expectations about a project. This can make it hard to meet their needs.
• Power imbalances: Some stakeholders have more power than others. This can include shareholders and executives. They might make decisions that benefit them but not others, which can cause problems and conflict.
• Resistance to change: Stakeholders who resist new ideas or methods can slow a project's progress and create friction. 
• Having “free riders” in a project: There may be stakeholders who don't take part in the project but still reap the benefits. This may breed resentment among those actively involved in the project.

Conclusion 

Stakeholders are individuals, groups, or organizations that have a direct or indirect interest in a company or project. They can affect project outcomes and organizational performance. When managing stakeholders, you need to know who they are and what they need. It's also crucial to maintain clear and open lines of communication. This enables you to set their expectations, encourage collaboration, and build trust.

FAQs 

Here are answers to questions about this topic.

1. What is a stakeholder?
   A stakeholder is a group or individual that has a vested interest in a project or organization. Examples include employees, customers, investors, suppliers, or members of the local community.
   ⁠
2. What is the main role of a stakeholder?
   The main role of a stakeholder is to have a vested interest in a company or project. What this entails depends on what kind of stakeholder they are. For many internal stakeholders, the main role is to help projects succeed.
   ⁠
3. What are stakeholders in a project?
   Stakeholders in a project are groups or people who have an interest in the project's outcomes. They also include those that the project affects. The main project stakeholders are the project sponsor, project manager, team members, and the client.
   ⁠
4. What is a stakeholder vs shareholder?
   A stakeholder is any individual or group that has an interest in an organization's performance. They also include those that a project's outcome or a company's activities impact. Stakeholders consist of different types of people and groups, including shareholders.
   A shareholder usually owns shares of stock in the company. Shareholders are major stakeholders. 
   ⁠
5. What is the role of stakeholders in project management?
   The role of stakeholders in project management is to ensure the project's success. The tasks of each stakeholder depend on their type. For some, it means getting resources for the project. For others, it means planning and doing tasks to meet the project's goals.
   ⁠
6. How do stakeholders affect decision-making?
   They do this by giving their opinions, raising concerns, and advocating for their interests. Their influence depends on what type of stakeholder they are. 
   ⁠
7. Are employees considered stakeholders?
   Yes, employees are stakeholders. They have a direct stake in the organization's success and are affected by the company's decisions and actions.
   ⁠
8. How do you engage with stakeholders effectively?
   This involves identifying them and understanding their interests and concerns. It means communicating with them transparently. It also entails involving them in decision-making and building positive relationships with them.
   ⁠
9. What happens when you don't consider stakeholders in a project?
   Failing to consider stakeholders in a project can cause conflict and project delays. It can lead to a loss of trust and credibility, making it difficult to gain their support and cooperation throughout the project. It may also cause the project to fail when there's a lack of alignment between the project's goals and the expectations of key stakeholders.