A stakeholder, generally viewed, is any party that has any interest in your business. Stakeholders can be individuals, any groups and even organisations. While the primary and typical types of stakeholders are your company’s investors, employees, suppliers and customers, such parties as a community, a trade association and even a government are also sometimes seen and analyzed as stakeholders.
As stakeholders have certain interests in the company, they can affect or be affected by its decisions and deeds and, also, their interests may conflict with each other — with the priorities being set by the company’s bosses.
Accounting services take the burden of paper relations with any stakeholders involved in your business — letting you pay more attention to direct communication.
Types of stakeholders
In the stakeholders’ analysis, they can be divided into several groups by a certain factor and each type of stakeholders have their own set of characteristics.
First, stakeholders can be internal and external. Internal stakeholders include those who are within a business — owners/shareholders, managers, employees. External stakeholders include those who are outside a business — customers, suppliers, community, government, banks.
Stakeholders may also be primary and secondary. Primary stakeholders in a small business are the owners, employees and customers, while in a large company, it is usually shareholders, who have the power to vote out directors. All the other less influential stakeholders are considered secondary.
The stakeholders can also be broken down into direct and indirect. Direct stakeholders are those involved in the company’s day-to-day activities. Like employees, who carry out their daily tasks, working on the company’s ongoing projects. Indirect stakeholders are those who are more interested in the result of the production. For example, customers are those who care about pricing, packaging and availability of the product or service, after it is produced by the company.
Here is the basic classification of the general types of stakeholders by the factors mentioned above.
- Suppliers are external, secondary and indirect.
- Owners are internal, primary and direct.
- Investors are external, primary and direct.
- Creditors are external, secondary and indirect.
- Employees are internal, primary and direct.
- Customers are external, primary and direct.
Based on these factors, the stakeholder analysis is usually made through a matrix, which allows to identify key stakeholders and their levels of influence or importance in the company.
How to identify who is a stakeholder of your business?
There are several questions that might help you to identify who might be the stakeholder of your business. To know as many of those who can influence your business as possible is crucial in making the work of the company more efficient.
- Who might be affected — either positively or negatively — by your company’s activities?
- Who might be influenced by the decisions you make?
- To whom does your company have legal obligations?
- Who can make decisions that will affect the way your company works?
- Who can help your company to fix specific problems?
Of course, this is not the whole list of the questions you might use to find out your stakeholders, but the main idea is who can be affected or affect the business’ activities.
Stakeholders and their interests
All the stakeholders have their own interest in a business. For example:
- Owners want the profit to be bigger.
- Managers want good salaries.
- Employees want to keep their jobs and get high salaries.
- Customers want to get quality products at reasonable prices.
- Suppliers want the business to continue buying their products.
- Lenders want the business to pay in time and in full.
The stakeholders’ interests and objectives may come into conflict with each other. For example, while one of the owners’ goals is high profits, they might not want to give big salaries to the employees — what is a direct interest of the latter. Or, if a business expands, owners would be happy, while if it means that the quality and service become poorer customers would be totally unhappy.
When any competing interests clash, it is for the company’s CEO and board of directors to set the priorities.
Let us say a company is pressured by its shareholders to cut costs, which will affect the employees’ salaries and for the customers — the quality of the products. So, it is for the company bosses to decide whose interests to put first. The development stage of the company usually defines much of the prioritization. If it is a start-up or a business at an early stage of development customers and employees are more likely to be put first. If we are talking about a big experienced publicly-traded company, its shareholders are likely to be given a priority.
Stakeholders vs shareholders
Both stakeholders and shareholders are seen as investors to the company, but though they might sound similar, their investment and interest in a company are different.
- A shareholder is always a stakeholder in a company, while a stakeholder is not always a shareholder.
- A shareholder owns a part of a company through shares, while a stakeholder might not have any connection to the company ownership at all.
- A shareholder has an interest in the company’s stock performance, while a stakeholder usually has an interest in the company’s long-term activity performance.
- A shareholder has a vote right and can make decisions on the company’s management, while a stakeholder might have nothing to do with it.
- A shareholder may decide to sell their shares and buy different ones and they don’t have a long-term need for a certain company, while a stakeholder is bound to the company for a longer-term, usually need it more in their lives and are interested in its future prosperity.
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