What is a Stakeholder?
Many things that companies do or don’t do have an impact on people and organisations. Stakeholders are all internal and external persons and groups of persons who are directly or indirectly affected by activities of a company or who have a concrete interest in these activities. They can be natural persons or legal entities.
The term stakeholder is derived from the two words stake and holder. The word stake means entitlement or share, holder means owner or proprietor. Stakeholders are therefore also referred to as interest groups or participants who have an interest in the activities of a company because their input is at stake.
Typical participants with interests are:
- employees and customers,
- suppliers and partners,
- trade unions, associations and consumer organisations,
- as well as capital providers such as owners, silent partners, shareholders or banks.
In addition, also
- authorities or
are stakeholders, because they can significantly influence the achievement of corporate goals.
What is Stakeholder Management?
Stakeholder management addresses the targeted, continuous engagement of a company with its interst groups. It comprises three central tasks that build on each other:
- analysis and
Stakeholder identification aims to identify all organisations and individuals that are directly or indirectly affected by a company’s activities or have a concrete interest in these activities. The result should be a list of all interested parties.
Within the scope of a stakeholder analysis, companies must recognise their relevant participants, their expectations and possibilities of influence, as well as the associated opportunities and risks. This is important because interest groups behave differently. At a cinema box office, a customer would probably wait several minutes in the queue at the box office, but in an online shop he would not accept this.
Who ignores stakeholders
- often does not know what is to be developed,
- does not recognise problems in time,
- neglects those who have a relevant interest in the success of a project,
- missed opportunities to improve products and systems,
- detects too late when a project gets into trouble.
Stakeholder communication addresses the regular exchange between a company and its collaborators. It differs in type, means, frequency and timing. And it is very important because people pursue individual goals. Conflicts can easily arise between the goals of individuals, e.g. if quality leadership on the one hand and price leadership on the other are strived for. Such professional conflicts easily become personal conflicts as well. Conflicts also often arise when management believes it knows what customers want and defines its own opinion as the benchmark for future actions.
Professional interaction with stakeholders is very important for companies. As the project manager, you should therefore record the following information for all relevant participants:
- What is the influence of the partner?
- What is one’s attitude and motivation towards the project or undertaking?
- What goals does he or she pursue?
- How can he or she be influenced?
- How is this person perceived and how does the person express his or her opinion?
- What conflicts exist between him and other interested parties?
In addition, you should also document contact data with the appropriate communication possibilities and times, as well as conflicts with other involved parties. Simple tables or a stakeholder matrix can be used for documentation purposes. Since people also change their opinions, it makes sense to review their knowledge at regular intervals. Only if you notice changes can you respond to them.
Stakeholders and Shareholders
The term shareholder is often used alongside interest groups. The shareholder concept is aimed at the economic interests and expectations of the company’s stockholders. The primary objectives are therefore maximisation of turnover and profit. This is the so-called shareholder value.
In theory, the interests of involved parties are only taken into account if a positive effect on the company’s success can be expected. However, since companies are hardly in a position to focus exclusively on the interests of shareholders or the needs of stakeholders, both approaches are usually pursued simultaneously in practice. Possible conflicts can be visualised with goal diagrams.
Tips for Dealing with Stakeholders
How do you find out who your stakeholders are and what their motives, attitudes or goals are? Here are some tips on how to deal with them:
- Identification and analysis should be done as early as possible, because it is a basis for eliciting requirements.
- Both identification and analysis are not one-off tasks, because people change their opinions and priorities in the course of a project.
- A structured approach to identification and analysis is useful, but usually does not need to be reinvented for every project or development; the use of good practices is useful here.
- The procedure itself should be reviewed regularly, because mistakes in identification, analysis or communication can quickly have far-reaching consequences.
- Ideally, you should document and version the findings of the identification and analysis, because this will enable you to trace project changes back to changes in associates at a later point. If the documentation also includes agreements with representatives of individual groups, this also facilitates communication with these representatives at a later point in time.
Stakeholders in Practice
Here you will find some articles that deal with stakeholders in practice:
- How does good the management of allies work in practice?
- Where does management of interest groups fit into requirements management?
- How can expectations of an initiative or development be systematically elicited?
- Which questions help to clarify assignments?
- Who is more important: the customers or the employees?
- What is the relationship between customer satisfaction and fulfilment of customer requirements?
- What is and how does strategic scope management work?
We would be happy to add further exciting contributions to the list.
Impulse for discussion:
Is it deceptive, or is the importance of interest groups still underestimated in many companies today? Why do you think that is?
Here you can find a German podcast about the challenge of effectively engaging stakeholders.
Here you can find a template to record interested parties.
And here you can find additional information from our Smartpedia section: