The Importance Of Stakeholders For Business Development
Stakeholders are any individual or organisation that has an interest in the success, or failure, of its work. Whilst their impact may vary from time to time no organisation can afford to be complacent about the role that they play and the pressure that they exert over time.
If we look at the above diagram we can make some key assessments and judgements about how the organisation is developing and reacting to these interest groups.
Internal Stakeholders
Internal Stakeholders tend to be overlooked or down-played by organisations with the exception of those who actually own the company. Owners can range from complex mixtures of corporate groups, Pension investors and individuals who are willing to invest in shares in that organisation. Here the focus is upon securing a financial return on their investments in the form of a Share Dividend and possibly the feeling of investing in an ethical business where appropriate. Where sustainable growth for the company is being delivered an Owner would be unlikely to withdraw their financial support in the short to medium term.
The Management in any organisation are a powerful force and have much to gain from the success of the organisation, but much to lose in times that are unsuccessful. Whilst not necessarily shareholders much is to be gained at this level by being part of a successful and progressive company or venture as this will be an important factor in their career development and professional growth. For a successful organisation the management groups in each section are committed with high staff retention in the group, indicating that they are currently satisfied with their roles and are willing to continue to contribute their efforts and focus at least in the short-term.
Employees are critical to the success of the business as, without them, simply delivering the day-to-day activity of the company would not happen. This group of stakeholders are vital to engage with but, in many organisations, the views and input of employees is under-developed or ignored with employers merely seeing them as resources to be used. More aware employers however tap into this pool of expertise by operating systematic Talent Management strategies to bring on and develop the most gifted and committed staff members and shape organisational growth around them. Unless employees are at least motivated to deliver their targets, this group of stakeholders will seriously limit the effectiveness and efficiency of operations and will have a drastic impact upon quality, customer satisfaction and organisational health.
People and organisations need each other: social responsibilities to employees extend beyond the contents of a Job Description and should recognise their staff as human beings. Staff now expect far more than just pay and look for equitable treatment, fairness, quality of working life and opportunities for promotion and progression.
External Stakeholders
Suppliers are a key part of any business as all businesses are inter-connected to some degree. If the links between a supplier and an organisation are strong, and there is a serious need for what the supplier gives to the organisation, then any fluctuations in that supplier-customer relationship will result in serious implications for both parties including loss of raw materials, increased prices and a worsening of the product or service for the end consumer.
The links into wider Society are important for all organisations: this is because they all have a part to play in generating income that goes back into the local economy, through employing staff, acting ethically and delivering Green credentials and being part of a range of goods and services that are offered up to the wider economy. Reducing the carbon footprint of the organisation is an essential part of the business and includes a wide range of topics from minimising packaging, recycling activities within the business to a commitment to purchasing energy from sustainable sources only.
Government impacts upon all areas of business but is important for a number of different reasons. Firstly, it is the policy of any government to promote and recognise the importance of commercial activity to grow the economy so that central government can effectively function from taxes collected and used. Organisations should obey the law and follow government directives and instructions: this may not always be in the best interests of the business however. Businesses are expected to follow the direction set by all areas of government: for example taking part in national/regional training initiatives that seek to up-skill and equip staff to face future workplace competence issues necessary for global competitive advantage.
Creditors are a very important component of any Stakeholder mix for an organisation as the business owes them money and is using their investments to grow and develop. Creditors need to be managed very carefully so that there is a stable and reliable relationship between both parties as creditors who call in their investments can seriously jeopardise the smooth running of the operation. Creditors should be kept abreast of developments on a regular basis.
Shareholders invest their capital in a business with the intention of getting a Dividend upon those monies at a rate that would normally be higher than just placing it with a standard investment through a retail bank. Whilst this carries a risk in terms of that return, the expectation is that in the long term the share value will increase as the business grows. There is a risk to the business regarding the transfer of shares in that ownership of the business can be gained through the acquisition of those shares unless the number of shares issued is carefully controlled.
Customers: this is a very important group of stakeholders who are looking for the following:
- Gaining good value for money
- Safety and durability of products/services
- Good after-care if applicable
- Prompt and courteous attention to queries and complaints
- Fair and accurate standards of advertising and trading
- Full and honest information to help them make a purchasing decision
The importance of retaining customers is paramount in terms of encouraging an organisation to provide more opportunities to work with that organisation and to grow a closer and increasingly mutually beneficial relationship between both parties. A truly collaborative relationship is what is needed for long-term customer satisfaction which is measured through increased business and shared discussions around product/service development.
Customers are often the very best way to market products and services as they will readily tell other potential customers about their experiences and their experiences. This can either be a positive or a negative for the business concerned.
By firstly identifying and listening to our customers, we can then understand their needs and integrate them securely into the business model.
Successful organisations are just so because they take the time and effort to understand and use the different dynamics of the Stakeholder groups identified: ignoring or neglecting any one of them is opening the door to declining sales, weaker profit margins and the possibility of organisational decline.
Good Luck!
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