What Is A Stakeholder?

What are the roles and expectations of all those stakeholders that you have listed above? Some stakeholders are going to have more importance to the project and their expectations will have more of an impact than others.

This is likely to upset another group of stakeholders, its employees. The most efficient companies successfully manage the interests and expectations of all their stakeholders. Shareholders frequently are interested in a company’s performance only as long as they hold shares of stock. Stakeholders, on the other hand, often have a longer-term interest in a company’s performance, even if they don’t own shares of stock. This may be because they earn their living at the company, they own or operate a business that is a supplier to the company, or they live in a community where the company operates and contributes to the local economy. A shareholder is any party—whether an individual, a company, or an institution—that has shares in a publicly owned company. Stakeholder is a broader category that refers to all parties with an interest in a company’s success.

Five Questions To Identify Key Stakeholders

Corporations are allowed to enter into contracts, sue and be sued, own assets, remit federal and state taxes, and borrow money from financial institutions. For internal stakeholders, they are important because the business’s operations rely on their ability to work together toward the business’s goals. External stakeholders on the other hand can affect the business indirectly.


There are a lot of people involved in getting a project from inception to a successful completion. You’re going to have to know how to manage each and everyone one of them, even those who don’t work directly under you. The impact of a business on its stakeholders is a bit like the effect of dropping a stone into a pond. The decisions and actions of the business have a ripple effect that can extend beyond the pond and even reach those who are standing far away on the shore. Forrester’s chief business technology officer explains how tools that capture data in real time can help healthcare organizations… In that usage, “constituent” is a synonym for “stakeholder”.

Understanding Stakeholders

Stakeholders can be internal or external to an organization. Internal stakeholders are people whose interest in a company comes through a direct relationship, such as employment, ownership, or investment. Shareholders are a subset of the stakeholder category, since shareholders have invested funds in the business, and so are automatically stakeholders. However, employees and the local community have not invested in the business, so they are stakeholders but not shareholders. Shareholders are the most likely to lose all of their money in the event of a business shutdown, since they are last in priority to be paid from any remaining funds. Stakeholders can influence everything and everyone in a project or organization, including senior management, project leaders, team members, customers, users and many others.

These normative arguments would matter little if stockholders had complete control in guiding the firm. However, many believe that due to certain kinds of board of directors structures, top managers like CEOs are mostly in control of the firm.

In more practical terms, stakeholder theory seeks to describe and examine the connections between stakeholder legitimate interests, stakeholder management practices, and the achievement of the goals of an organization. This examination should lead to a better understanding of needs of stakeholders in order to set the bounds of operation and the formulation of recommendations for increasing governance efficiency. Internal stakeholders are groups or people who work directly within the business, such as managers, employees, and owners. Managers and employees want to earn high wages and keep their jobs, so they have a vested interest in the financial health and success of the business. Owners want to maximize the profit the business makes as compensation for the risks they take in owning or running a business.

You want to vet any data stakeholders give you as true and accurate so that you don’t make key project decisions based on the agendas of others. A common problem that arises for companies with numerous stakeholders is that the various stakeholder interests may not align. For example, the primary goal of a corporation, from the perspective of its shareholders, is to maximize profits and enhance shareholder value. Since labor costs are unavoidable for most companies, a company may seek to keep these costs under tight control.

With so many ways to sway a project, as a manager it’s critical to prioritize and focus on only the most important stakeholders, those with power, proximity and urgency. When those occur in the project, you can’t just sweep them under the rug. Your job is to bring in a successful project within the quality expectations of your stakeholders. If you see that they’re acting against their best interest, it’s your job to address this. But to get the idea across, you must not only be honest, but tactful. No one likes to hear that they’re wrong, so find a way to say that in other words or, even better, don’t speak of right and wrong but of the project and its needs. Part of developing a compassionate relationship is having empathy.


Stakeholders’ values can orient the type of scientific information (e.g., among several disciplines) that is more relevant for each decision. The identification of these values can facilitate the weighting of the criteria for reaching more representative decisions. Therefore, the identification of relevant stakeholders and their values is a preliminary step in making complex decisions. According to a stakeholder approach, these people are said to have a stake in any decision affecting water quality, and their involvement is considered crucial for water governance. Stakeholder theory proposes that stakeholding has a dual instrumental-normative quality. On one hand, incorporating stakeholders’ participation enhances the organization’s management capabilities in a globalized context characterized by increasing socioeconomic interconnectivity. Much of the prioritization will be based on the stage a company is in.

First Known Use Of Stakeholder

Corporate executives need to think about the whole business and how it creates value for customers and stakeholders. Working in London in the ’90s, I was brought up in stakeholder rapport — that clients, employees and shareholders should benefit from everything. A stakeholder is anyone who has any type of stake in a business, while a shareholder is someone who owns shares in a business and thereby has an equity interest. Governments can also be considered a major stakeholder in a business, as they collect taxes from the company , as well as from all the people it employs and from other spending the company incurs . Governments benefit from the overall Gross Domestic Product that companies contribute to. All shareholders are inherently stakeholders, but stakeholders are not inherently shareholders.


Your stakeholders will respect you, believe it or not, and probably pull back from their argumentative ways to some degree. You want to be able to monitor their workload and adjust it as necessary to keep them from burning out. Note which stakeholders are going to have a bigger influence over the project, and at which stage their influence becomes lesser or greater. There is a process for this, like there is a process for everything in project management. Brought to you by ProjectManager, project & work management software trusted by 35,000+ users. Add stakeholder to one of your lists below, or create a new one. A stakeholder is a person or group who has an interest — vested or otherwise — in an enterprise and whose support is required in order for an enterprise to be successful.

Are Stakeholders And Shareholders The Same?

Use our interactive Gantt chart to present stakeholders with the project plan and schedule. It can be easily shared and acts as a collaborative platform in which they can be included. Since stakeholders usually involve multiple key contacts across many different avenues, it’s important to communicate with them effectively and efficiently.

  • The decisions and actions of the business have a ripple effect that can extend beyond the pond and even reach those who are standing far away on the shore.
  • Stakeholders’ values can orient the type of scientific information (e.g., among several disciplines) that is more relevant for each decision.
  • However, in many cases, they do not have the same interests.
  • Thus, stakeholder theory would provide tools for equipping managers to develop more effective relationships with the company’s environment (e.g., by reducing the firm’s vulnerability to stakeholder opposition).
  • Also, review the contracts, as stakeholders might be mentioned in these documents.

However, if you’re using project management software to manage your project, you can also use these same tools to manage your stakeholders. It’s important that their interests are kept intact, and that you don’t find yourself facing the furrowed brow of a frustrated stakeholder who has heard some bad news. Keeping that line of open communication is the most important step to a good stakeholder management plan. To summarize all of the lessons you just learned and put them into practice, follow these five steps to make sure all of your bases in the stakeholder management plan are covered.

Module 1: Role Of Business

Keeping track of your stakeholders with project management software is a great way to stay on top of things and ensure your stakeholders remain satisfied and productive. The stakeholders are divided into internal and external stakeholders. Companies often struggle to prioritize stakeholders and their competing interests. However, in many cases, they do not have the same interests. For example, if the company is pressured by shareholders to cut costs, it may lay off employees or reduce their wages, which presents a difficult tradeoff.

  • ProjectManager can produce status reports for stakeholders in a matter of minutes—Learn more.
  • A corporate stakeholder can affect or be affected by the actions of a business as a whole.
  • Investopedia does not include all offers available in the marketplace.
  • One of the values produced by stakeholder theory includes greater productivity across the organization.
  • Distributors and community members, however, are examples of external stakeholders.
  • The connections among individuals or organizations that benefit the entire group are collectively called a value network.

Some stakeholders might find that they’re not impacting decisions as much as another group. The different power levels and spheres of influence can be a problem.

Communities are major stakeholders in large businesses located in them. They are impacted by a wide range of things, including job creation, economic development, health, and safety. When a big company enters or exits a small community, there is an immediate and significant impact on employment, incomes, and spending in the area. With some industries, there is a potential health impact, too, as companies may alter the environment. Other stakeholders would be funders and the design-and-construction team. Primary stakeholders are usually internal stakeholders, are those that engage in economic transactions with the business .

  • If your stakeholders aren’t satisfied with the results of a project, you’ve failed.
  • He has spent over 25 years in the field of secondary education, having taught, among other things, the necessity of financial literacy and personal finance to young people as they embark on a life of independence.
  • External stakeholders are those who aren’t directly related to the organization, but they’re impacted by the project to some extent.
  • Examples of external stakeholders are customers, suppliers, creditors, the local community, society, and the government.
  • Government change moves much slower, for one thing, because so many stakeholders are interested in each project.
  • While sometimes they are thought of as the only stakeholders or the most important to a company as they hold their hands on the level of capital, they’re really connected to other stakeholders.

For example, passengers traveling on an airplane literally have their lives in the company’s hands when flying with the airline. Secondary stakeholdersare usually external stakeholders, although they do not engage in direct economic exchange with the business – are affected by or can affect its actions . Corporate governance is the set of rules, practices, and processes used to manage a company. The local community is the most indirect set of stakeholders; it stands to lose the company’s business if it fails, as well as the business of any employees who would lose their jobs as a result of the business closure. He has been a professor of management in universities in the U.S., and Canada. One of the values produced by stakeholder theory includes greater productivity across the organization.

Look those over too, as they might supply you with the names of stakeholders. For example, if there are environmental factors dictated by the government, then the government is a stakeholder. Review their regulations and standards to stay in good terms with them. Providing regular and timely project status reports that are appropriate for the stakeholders is crucial. You can go into details with team members, while executives are going to want more of an overview. Don’t forget to follow up with stakeholders as well, asking questions to see if they have any feedback. That way you’re managing them, and you’re communicating with them proactively, to know if there’s discontent or some decision has been made that will impact the project.

Employees, company executives, and board members are internal stakeholders because they have a direct relationship with the company. Suppliers, distributors, or community members are types of external stakeholders. Stakeholder theory drives more than profits and productivity. Companies find that the mental health of the workforce is greatly improved as their job satisfaction increases. It also will elevate the status of the company’s social-economic status in the local community. When one company practices stakeholder theory, it creates healthy competition among other companies, where all can thrive and help benefit their stakeholders. Like we noted earlier, their impact can be negative as well as positive.

What Is Stakeholder Analysis?

Empathy is the ability to feel others’ emotions, and should be incorporated into any stakeholder management strategy. If you can take a moment to step back, acknowledge what they’re feeling and then work towards remedying that, you’re on the road to enlightenment and a successful project. Stakeholder analysis is a way to get help from key project players. Once you determine who these key stakeholders are, then you can bring them into the kickoff to help align the project with strategic objectives. Their experience helps a project avoid pitfalls and getting their help builds stronger relationships. They can also help with conflict resolution during the project execution. Communication is key to stakeholder analysis because stakeholders must buy into and approve the project, and this can only be done with timely information and visibility into the project.

Supporters also take issue with the preeminent role given to stockholders by many business thinkers, especially in the past. The argument is that debt holders, employees, and suppliers also make contributions and thus also take risks in creating a successful firm. Stakeholders are bound to a company by some type of vested interest, usually for the long term and for reasons of need. Meanwhile, a shareholder has a financial interest, but a shareholder can sell a stock and buy different stock or keep the proceeds in cash; they do not have a long-term need for the company and can get out at any time. A stakeholder has a vested interest in a company and can either affect or be affected by a business’ operations and performance. By clustering stakeholders according to common needs, you’ll whittle your list down to a more manageable length, increasing the efficiency and impact of your efforts to meet the right groups’ needs. The terms stakeholder and shareholder are sometimes incorrectly used interchangeably.

Stakeholder Vs Shareholder

Instead, an external stakeholder is normally a person or organization affected by the operations of the business. When a company goes over the allowable limit of carbon emissions, for example, the town in which the company is located is considered an external stakeholder because it is affected by the increased pollution. Because stakeholders are typically more concerned with a company’s long-term financial stability, they may have different priorities than shareholders, who may be interested only as long as they own stock. The process of going through a stakeholder analysis is also a way to build a relationship of trust with stakeholders.

Examples of important stakeholders for a business include its shareholders, customers, suppliers, and employees. Some of these stakeholders, such as the shareholders and the employees, are internal to the business. Others, such as the business’s customers and suppliers, are external to the business but are nevertheless affected by the business’s actions. These days, it has become more common to talk about a broader range of external stakeholders, such as the government of the countries in which the business operates, or even the public at large.

Thus, shareholders are always stakeholders, but stakeholders are not always shareholders. Stakeholder theory addresses business ethics, morals and values when managing stakeholders involved with a project or organization. It seeks to optimize relations with stakeholders, thereby improving efficiencies throughout the project or organization.

Leave a Reply

Your email address will not be published. Required fields are marked *