Who Are Stakeholders In A Business?
Updated July 21, 2022
Stakeholders are parties invested in the success of a business or organization. Many decisions and results need to be considered from the perspective of various stakeholders to ensure all investments are honored. There are many roles you can serve in that require you to understand the needs and wants of different stakeholders. In this article, we define what stakeholders are and explore different examples of stakeholders you may encounter in your organization.
What are stakeholders in business?
Stakeholders are parties that take interest in a specific company, often for financial investment. They can directly impact decisions or successes of an organization through:
Sharing their feedback on company decisions or processes
Providing continued loyalty or participation
Increasing or decreasing financial investment
Taking a position or making a decision that goes against a company's goals and strategy
There are two types of stakeholders: internal stakeholders and external stakeholders. It is important to consider how an organization's decisions can influence stakeholders because they often have the potential to change the priorities of how a business functions. Understanding who your organization's stakeholders are and what they need can help you achieve your business goals.
What are internal stakeholders?
An internal stakeholder is an individual party that is directly or financially part of the organization's operations. If the company is successful, then they have a higher likelihood of earning a monetary gain as a result. Here are some common internal stakeholders you may encounter:
Employees are hired by the company as an instrumental asset in completing tasks that result in products or services provided to clients or consumers. These stakeholders contribute in exchange for compensation, benefits, training and professional development. Their time and effort are investments made to the organization, and they depend on the organization's success to ensure their continued employment.
Employee feedback can be considered to determine if they are satisfied with their environment, role and work-life balance and other factors. Their satisfaction can directly impact their productivity, which can then affect overall output and success as well as the satisfaction of other stakeholders.
Owners have exclusive rights over a property or business. They usually have full ownership in terms of the products and services that impact the customers who eventually purchase it from the company, and they set out strategies to meet and exceed sales goals for the product. They're often directly responsible for the success of the company and the employers who go forth generating results orchestrated by the owner. The success is dependent on the owner's actions.
Managers directly oversee employees within their department and execute the tactics communicated to them by the owner in the strategy in addition to delegating tasks and making sure the employees have the right directions in performing certain tasks. Overall, managers hold the responsibility of completing their tasks and having their employees meet their objectives in the process of successfully reaching business goals.
All managers impact the same comprehensive strategy that the owner decides to implement and measure success off of. Here are some levels of management within a large corporation that can have an impact on an organization's success:
Senior managers: These high-level leaders include a Board of Directors, Chief Executive Officer or the President and other C-level executives who delegate direct supervision duties to the middle and lower managers.
Middle manager: These include Regional Managers, Department Managers or Section Managers who usually work in a specific region and represent a larger company. They carry out tactics to ensure success in their region to employ lower-level managers to hit their performance goals.
Lower managers: Direct supervisors or other Front-Line Managers execute plans and distribute tasks to front-line employees who report to them.
What are external stakeholders?
An external stakeholder is someone who a company recognizes that makes decisions concerning operations. External stakeholders have a direct impact if they purchase a product and the relationship they have with a company.
Here is a list of some of the most common external stakeholders your organization may work with:
Customers purchase a product or service of the company. Sales, marketing, public relations and the overall strategy centered around the customer, and their interest in these strategies determine whether they buy a product. Customers buying products greatly affect the success of an organization, and customers can be given access to new products if the company has the profit to expand their product line. Overall, the customer is vital to the success of a company, and their satisfaction can directly influence whether internal stakeholders are also satisfied.
Communities are made up of the people who live near an organization's physical location. The opinions of people living in those communities influence an organization because their opinion of a company's facilities and adherence to environmental and other local, state and federal regulations can impact a company's reputation. Positive relationships with communities can ensure internal stakeholders and other external stakeholders, such as customers, shareholders and investors remain satisfied.
A company's relationship with the community that surrounds them can also impact whether they purchase products and services and contribute to the company's financial success.
Today, companies enact corporate social responsibility initiatives that benefit a local or global community. Programs such as volunteering build a relationship with a company's local community to create an image that persuades them to interact with a business. Companies must focus on the communities that can compile the most sales with their business and establish and core relationship to increase the prospect of future sales.
Shareholders own one or more shares of stock within an organization. Many shareholders are external parties, like customers and people within the community who have shares of a company's stock. If a shareholder has more shares, or ownership of a business, it's more likely that they have more power to make choices on behalf of the employer. These decisions can involve finances, staffing, strategies and others. Thus, shareholders' opinions influence how an owner determines a company's strategy and which audiences they're selling to.
Developing a strong relationship with all shareholders can increase their desire to invest in a company while providing feedback on decisions to create products and services that tailor to everyone's needs.
Creditors can be a person, company or a government that lends property, service or capital to an organization. There are two types of creditors:
Secured creditors have a legal benefit of collateral over some of all of the assets pertaining to a business.
Unsecured creditors can be suppliers, customers or contractors that can lend capital without having collateral they can get in return.
A creditor can charge collateral after an organization purchases or acquires a product, service, property or another factor. Making payments to creditors is crucial in building a positive relationship with them while having the capital to scale a business. If a company is doing well, then it is likely making on-time payments to a creditor and forging a strong relationship.
The government is the ruling body of the country in which a business operates. The government takes taxes out of the company's revenue as well as from employees' income. It also enforces labor laws that organizations are required to follow to ensure safe working conditions for employees. in addition, it sets regulations on the financial system to protect consumers.
A business must follow federal, state and local rules and regulations to continue and grow its operations, making this external stakeholder especially vital to an organization's success. Following these regulations, remaining transparent as necessary and seeking opportunities to partner with government agencies to provide mutually beneficial services can help a company build a positive relationship with the government.
Many industries and organizations work with labor unions that legally represent the employees of an organization and work with all levels of management to secure pay, benefits and adequate working conditions for all staff. Employees pay fees or union dues to earn this representation and negotiate contracts to guarantee or improve conditions of employment. If there are alterations to a company policy that affects employees, then labor unions intervene to ensure that the terms are agreed to on the employees' behalf.
Since labor unions work closely with employees, their satisfaction is directly related to how the organization's employees feel. This external stakeholder's satisfaction is very important to the company's productivity as well as financial and cultural success.
Competitors are an entity that has a conflicting goal with another business that offers similar products and services. These external stakeholders compete for the same opportunities to profit within the same market. Having strong competitors can motivate an organization to innovate better products and services, improve marketing to their audience and increase its profit over other companies in its industry.
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