How does a company understand stakeholder needs?

A company understand the needs of stakeholders by performing stakeholders analysis before the beginning of the project.

What are the 2 types of stakeholders?

Two types of stakeholders include 1) internal: employees and owners. 2) External: Governments, customers, investors, suppliers and communities.

What are the 5 principles of stakeholder management?

There are five phases of the stakeholder management process. They are identified as 1) Identity 2) Analysis 3) Plan 4) Engage 5) Monitor.

Stakeholder (Business): Definition, Types & Management

- Warren G. Bennis

All businesses have a variety of stakeholders. As a result, it is important to understand how the organisation impacts stakeholders and how stakeholders may impact the organisation. This can be understood through stakeholder analysis. Let's take a look.

Stakeholder Definition

Stakeholders are parties that have an interest in the organisation. These parties can be either affected by or affect the organisation. The group of stakeholders generally include employees, owners, governments, customers, investors and suppliers communities

Stakeholders do not all have the same interest, therefore it is important to understand each of them individually.

Customers' interests may be to buy good quality products at affordable prices. While the interest of employees is to get a higher salary and sustain their employment.

What are the types of stakeholders?

There are two main types of stakeholders which are either internal or external. It is important to understand each of the stakeholder groups to be aware of their interests and the effect they may have on the organisation.

Internal stakeholders

Internal stakeholders are those who have a direct relationship with the company. As they are a party working inside the organisation or are the company executives. Their key role is to perform in the organisation effectively so that the company or a project gains value. The internal stakeholders' interests are usually to gain benefits from the project or a company.

Employees - The main interest comes from employment income, security and safety. These stakeholders affect the company or a project through their quality of work.

Owners - The main interest of this stakeholder party is to reach the organizational goals most effectively and efficiently and maximise the company's profits. Executives affect the company or a project in regards to how well they're managing the company or a project.

External stakeholders

External stakeholders do not work with the company directly but are affected or have an effect on the organisation or a project. These stakeholders are interested in the company or a project.

Governments - These stakeholders' best interest is to collect taxes and benefit from the increased GDP. Governments can affect the company by implementing new regulations and imposing taxes on products or services that the company produces.

Customers - The main interest for customers is to buy the best quality product or service at the lowest price. If customers are satisfied with the service they might have a positive impact on the company by leaving a positive review, for example. On the other hand, negative reviews can damage a company's reputation.

Investors - Investors are interested in a company or a project that can grow and bring more value in the future. Investors have an impact on the company as their investments can give the company more finances to grow.

Suppliers - This external stakeholder party is crucial to the company as they supply products or essential parts that the company needs. They have the interest to gain profit from the company by supplying goods. They can positively impact the company if they supply resources of good quality and affordable price. On the other hand, if organizations if suppliers produce goods at a bad quality and high price it can have a negative impact on the company.

Communities - This party is interested in the organization that creates employment, community spirit does not pollute the environment. Communities can have a positive effect on the organization if they positively talk about the business. However, if this stakeholder party does the opposite it may damage the company's image.

What is the stakeholder analysis?

Stakeholder analysis is an important aspect a company should undertake before the beginning of any project as it helps to understand stakeholders. This analysis is often used in project management. The stakeholders are grouping them based on their levels, participation, interest and influence on the project. This analysis is usually presented in the stakeholder's analysis matrix.

Why is stakeholder analysis important?

Stakeholders usually have different needs which might overlap or contradict one another. Stakeholder analysis helps managers identify and manage potential conflicts of interest to make the best decisions. They group stakeholders according to the level of influence (power) and interest using analysis matrices.

What is a stakeholder matrix example?

The stakeholder matrix is the representation of stakeholders analysis in the visual format (see Figure 1 below). This matrix allocates stakeholders in terms of their level of power and interest that they have in the organization or a project. These assist business managers to be aware of the level of importance of each stakeholder group.

This is the example:

Stakeholders, What is a stakeholder matrix example, stakeholder matrix, StudySmarter Figure 1. Stakeholder Matrix

The stakeholder matrix will assist the business managers in deciding to which stakeholders they should invest the most time and effort. Organizations should put the most time and effort into the stakeholders who have high power and interest (also called key players) in the organization or a project. For instance, this can include managers ensuring that all main stakeholders such as customers needs are met and that they are satisfied with the project or the organization.

What is the stakeholder management process?

The stakeholder management process (see Figure 2 below) is aimed to improve the organization's relationships with stakeholders. As well as organize, monitor and manage stakeholders in an effective way.

The stakeholder management process follows five steps. Which are:

Stakeholders, What is the stakeholder management process, steps of the stakeholder management process, StudySmarter Figure 2. Steps of the stakeholder management process

1. Identify

At this step, the stakeholders that have an interest in the company or a particular project are identified. Stakeholders can be internal and external, they can have positive or negative interest in the company or a project. Additionally, its crucial to identify each stakeholder's needs and expectations in regards to a company or a project.

2. Analysis

At this stage, the stakeholders are analyzed in great detail. The analysis may include:

How stakeholders point of interest aligns with organizational goals
Their power and level of interest in the organization or a project
Stakeholders expectations and needs of the company or its project
How stakeholders will positively impact a company or a project.
How the project or a company will meet stakeholders needs and expectations

3. Plan

At this stage business managers should plan how to effectively manage and engage with the stakeholders so that they add value to the project or a company and fulfill their expectations.

4. Engage

To get the most value from the stakeholders business managers should keep them engaged throughout the project. This can be done by motivating them by stating how the outcomes of the project successfully will fulfill stakeholders' needs and expectations. Additionally, trust between stakeholders and the organization must be built to get the most value from the stakeholders.

5. Monitor

During the execution stage, stakeholders' engagement and level of participation in the project or organization should be monitored. This way business managers will be aware if stakeholders need additional assistance. As well as if stakeholders are on target reaching set goals.

Stakeholder - Key takeaways

Stakeholders are a party that has an interest in the organization or its project. Stakeholders can either have an effect or are affected by the organization or a specific project.
Two types of stakeholders include 1) internal: employees and owners. 2) External: Governments, customers, investors, suppliers and communities.
In business, the key stakeholders usually involve: governments, customers, employees, investors, suppliers, communities.
The stakeholder analysis is important for the company and to begging of any project. As the analysis can communicate the level of power and interest of stakeholders. This will help managers to adjust the plan on which stakeholders they should put the most time and effort towards.
The stakeholder matrix example is the visual presentation of stakeholders analysis. The matrix includes stakeholders' level of power and interest in the company or a project.
There are five phases of the stakeholder management process. They are identified as 1) Identity 2) Analysis 3) Plan 4) Engage 5) Monitor.

Stakeholder

StudySmarter Editorial Team

Stakeholder Definition