Stakeholder is often used in multiple sectors, including business, education, and governance. Even though it is a widely used terminology, its true essence is often misunderstood, and the importance of all the individuals who can impact a project, decision, or initiative is not considered directly or indirectly. In this article, we will explore what is a stakeholder in business and:
- What is a stakeholder?
- What type of stakeholders are to be considered?
- Identify the main roles and responsibilities of the stakeholders
- Recognize the power that each type of stakeholder has over the success of a project
Knowing who a Stakeholder is
Initially, this term was specifically used in the business / corporate world, but it has been widely used in other disciplines for the past few years. Now, you would notice every small business, newly formed organization, and new policies being introduced in an educational institution or any government organization to consider their stakeholder’s behavior and response before making a new decision or initiating a new plan.
A stakeholder is someone who has an interest in or is in any way impacted by a particular project, decision, process, or initiative. These stakeholders are the main entities that lead to the success or loss of any new project. Their effect on the success may be in terms of their actions, objectives, behavior, or policies they created or would have to act upon.
The behavior of a stakeholder in response to the project or an initiative determines the project’s future and leads it in a certain direction. There are two main types of organizational stakeholders: internal stakeholders, who can be considered employees, and external stakeholders, who can be customers or communities.
Types of Stakeholders
The type of stakeholder is categorized into recognizing their impact on the project or the new decision. To notice how closely a stakeholder is linked to a particular project or will affect the project’s success.
Internal Stakeholder
The internal stakeholders are the ones who are closely linked to the project or organization. Following are the examples of some internal stakeholders:
Employees
These are the most important internal stakeholders as they are directly involved in the project, working on and managing it. They are highly interested in the project’s success as it directly or indirectly impacts their job security, career advancement, financial benefit, and the conditions in which they work.
Managers and Executives
Even though these stakeholders do not work themselves, they are involved in decision-making and defining the pathway to lead the project in a certain direction. They take the organization towards sustainability and are closely linked to the organization’s success as a whole.
Owners and Shareholders
These are indirect internal stakeholders but have a higher significance as they are the ones who invest their finances into the project. Without them, the project and even the organization would not exist. These stakeholders are very interested in the return on their financial investment, which is why they are closely linked to a project’s success.
External Stakeholder
These stakeholders do not work directly on the project and do not gain any profits from the success of the project/product, but the outcomes of the product or the project impact them. Following are the examples of these stakeholders:
Customers/consumers:
These are the important external stakeholders, as they use the product or utilize the project’s outcome, so the overall success of the product directly depends on them.
Suppliers:
They provide the material for producing the goods or the resources needed to develop the project.
Communities:
The communities in which the company is situated are impacted by the by-products produced by it. These can be harmful or beneficial, so in a way, the community is affected by them.
Government offices or Regulating bodies:
These organizations/institutes ensure that businesses/companies follow the rules and regulations to establish themselves and do not prove harmful to society. Visit our website for more related information.
Role of Stakeholders
The stakeholders directly or indirectly impact the businesses in the following ways:
- They impact the company’s decisions. Internal stakeholders have a direct say in these decisions, while the opinions and feedback from external stakeholders affect the quality of the services/products.
- Stakeholders provide resources/materials for a particular business to perform day-to-day functions
- These stakeholders often help resolve problems. Their diverse perspectives on a particular situation allow the organization and major position holders to look at the same thing from different viewpoints before making a final decision.
- Provide feedback on a decision, a newly launched product, or a process introduced. The input can lead to improvement and better quality.
In short, stakeholders play an essential role in the functioning and success of any business or organization. If an organization wants to survive and thrive in its domain, it must identify its stakeholders, cater to their needs, and consider their opinions when making decisions or introducing a new product or process.