Stakeholders can have a strong influence on the success of a company or minimize the risk. For this reason, the management of a company should function as optimally as possible in this context. But how do they influence a company? And what are stakeholders anyway? In fact, this is not just another management term. These are people who are essential for a company and its goals. A good and detailed stakeholder analysis is essential for all types of companies.
What does stakeholder mean?
First of all, it should be clear why this group of people is so important. And this results from the definition of stakeholder in general: This means people who have an interest in the outcome of a certain project to have. It is irrelevant whether you are working on it yourself or are affected by it in any way. Perhaps they are simply interested in the course of the project for private reasons. Anyone who does not have a stakeholder in their company or in the respective project can possibly work past the goal. He could overlook obstacles and resistances or fail to see possible opportunities. It can also happen that important third parties are not involved in the project. And that although this would have been decisive for the achievement of the project’s goals. So it can be without stakeholders that the project fails.
Who can be a stakeholder?
Stakeholders are not specific employees of a company who have a degree in business administration or marketing. And also none who have several years of professional experience. Nor is it a job description. Stakeholders can be completely natural persons, for example if a house is to be built in this context. In this example there are several people who want the project to end positively. On the one hand there is the client, the contact person for the construction company. Then the bank and the building authority. It continues with the architect, the neighbors, the house owner’s children or even the chimney sweep. They are all stakeholders and important for the course and outcome of the house construction project.
When we move towards a company and want to understand the role of these people, we think, for example, of introducing a system in a company. Who is interested in the project being completed successfully? First and foremost, of course, the client. Then the programmer, the software tester, the human resources department and the administration. We also have to think of the managing director and the person responsible for IT. Also to the hardware supplier and the works council. They all want the system to be successfully implemented in the company without any difficulties. After all, the success of the company, but also personal factors, depend on it.
Internal stakeholders are all those interest groups who act within a company and exert an influence on the course of the project. This can be all employees of a company and of course also the management itself. In general, internal employees can also be involved with equity. At this point we differentiate between three stakeholder groups, each with different goals.
- Owners or shareholders are interested in profit and income. You want to increase your capital and have an impact on project development.
- The management is interested in a good income. You want recognition, independence and freedom of choice.
- Employees of a company want a secure job with a fair salary, social security, meaningful activity and the possibility of further training.
External stakeholders usually do not have a permanent employment contract, but are nevertheless interested in the company’s success. We differentiate between lenders , suppliers, customers , competitors and others:
- Lenders want to achieve a secure capital investment with good interest rates and asset growth.
- Suppliers rely on a stable business relationship on favorable terms and a reliable customer who can pay them.
- Good service, goodwill and a good price-performance ratio are important to customers .
- The competitors are interested in fair competition and willingness to cooperate.
- The state is also one of the external stakeholders, such as the legislature, the authorities, associations, parties, citizens’ groups, the press or, in general, the public. They depend on donations, jobs, tax revenues and the corresponding social benefits.
How do stakeholders influence a company?
A company faces many people who approach it with certain expectations. In addition to the term stakeholder, we also find the term stakeholder groups. They all pursue certain interests and act accordingly towards the company. The functions can be very different. However, they always have an impact on the actions of the company and the managers. They then have to act or react accordingly in order to meet the demands and expectations. In order to get to know these exactly, the stakeholder approach or model is used. Within this, the factors purpose, goal and strategy are precisely worked out. The stakeholder concept is finally implemented by stakeholder management. If, on the other hand, the stakeholders are not taken into account.
The stakeholder approach in management
What does stakeholder approach mean?
This approach describes the activities and measures of a company, which are geared towards the demands of the stakeholders. The management then goes about implementing this. This also includes the identification of the stakeholders and the analysis of how they are dealt with. A company must therefore deal with certain questions within a concept:
- What is the relationship between customers and a company and how do the respective parties behave?
- How are employees’ expectations dealt with and how are these defined?
- How do the requirements of government institutions affect the actions of a company?
- How is the company doing in the press and which topics are discussed there? What measures can be used to control these even better?
- Which other companies does your own company cooperate with and to what extent are they dependent on each other?
The stakeholder concept
This concept is part of the strategic corporate management and deals, among other things, with all relevant stakeholders, their expectations and interests, as well as their possible influence on the company. The concept is also important in order to be able to precisely identify risks, opportunities or potential. It is also about controlling the influence of the stakeholders. (Also called stakeholder analysis).
Risks in stakeholder management
If the requirements of the respective persons are not taken into account, this can mean bankruptcy for the company . For example, when customer complaints are not heard over a long period of time or when the company’s products are rated “poor” in tests and sales figures are falling. On the other hand, if a company treats its employees badly, this can lead to a negative image. Once a company has reached this point, bankruptcy can result in a rat tail that affects many stakeholders. Salaries for employees can no longer be paid, claims remain unfulfilled, supplier costs can no longer be paid.
Stakeholder from a system perspective
From the systemic perspective, the stakeholder approach means that a company is always influenced by various forces from its environment. Thus, these form certain framework conditions for the company. They are therefore absolutely important in strategic planning and must not be ignored. Stakeholders can be divided into groups, which is an important part of strategic planning. This is how we differentiate the areas:
- Environment and nature
- Capital market
The stakeholders are analyzed and identified within these areas. The PEST or PESTEL analysis is an important instrument for this.
Pest or Pestel analysis
PESTEL stands for:
As part of the analysis, a company can check which influencing factors from the areas just mentioned affect the company. It also becomes clear how crucial these factors are for future development and what needs to be considered in the further course. In general, a systemic model is developed for the representation, whereby a distinction is made between stakeholders from the direct and those from the indirect environment. Stakeholders from the immediate environment are in regular contact with them and must be looked after in their daily business contact. Those stakeholders from the indirect environment are often ignored, which can sometimes have fatal consequences.
The stakeholder approach in the context of CSR
In many companies, the stakeholder concept includes taking responsibility for the people under them and their natural environment. Ethical, ecological or social factors often play a role here. This is where the corporate social responsibility activities come into play.
Corporate social responsibility
CRS means making voluntary contributions from the economy in general and a company. The aim is to take into account and meet social and ecological concerns. In this case, voluntary means that the CRS goes beyond the legal requirements. A company can do a lot of good for itself with this, for example in terms of the general image or in the area of designing more attractive workplaces. Such a company shows, for example, fair business practices or an employee-oriented personnel policy. A company can also use resources particularly sparingly and work to protect the climate and the environment. Mostly they also show a social commitment and take responsibility for their supply chains. Which measures are taken here in individual cases can vary. For example, while some have a photovoltaic system installed on the office building, others take care of them Work-life balance of the employees.
The shareholder value approach
The shareholder value approach is all about the demands and expectations of owners, shareholders or investors. Here the successful placement on the market, a high profit and an increase in the company’s value are in the foreground. Stakeholders are not taken into account directly and only if they would have a detrimental influence on the company’s goals. There is therefore a clear demarcation from the stakeholder approach, in which the interests of different groups are taken into account.
Shareholder vs. Stakeholder
Is a shareholder also a stakeholder? Shareholders are shareholders in a company. In general, this term occurs particularly frequently in listed companies. As soon as someone has a fixed stake in a company, they are called a shareholder. Everyone who owns shares is a shareholder and can hope for financially worthwhile income. They also have a say in the company and can influence management, for example at shareholders’ meetings. In fact, management is dependent on shareholders because they own the company. So this should take into account the interests of your shareholders. Stakeholders describe all interest groups, including those who have no shares in a company or are interested in the company’s profit. With the shareholder approach, the wishes of the company owners are fulfilled, with the stakeholder approach it comes to the inclusion of all groups involved in the company. However, the shareholder approach is strongly represented in very large companies.
The stakeholder analysis – analyzing stakeholders and recognizing potential for conflict
Stakeholder analysis is about finding possible supporters for your project, recognizing obstacles, identifying possible opponents and finding people who you may have overlooked. It is also important that all individual goals are clearly recorded. The stakeholder analysis is therefore a basis for the implementation of the stakeholder management, the creation of a communication plan, the setting up of the project marketing and the planning and implementation of the risk management. All in all, it is important to determine which people and groups of people have an influence on the company and how they should be dealt with.
Finding stakeholders – questions
If you want to find your stakeholders, you should ask yourself the following questions:
- Who is working effectively on my project?
- Who is interested in the result of the project?
- Who has to live with the consequences of the project result?
- Who was critical of the project?
- Who is funding the project?
Everyone who is somehow involved in the project is a potential stakeholder. There is of course no magic formula for searching, but there is common sense. Afterwards, the respective people should be divided into groups, for example who has a positive or negative view of the project or who is directly or indirectly involved in the project. It is also important to find out what power or influence the respective stakeholder has on the project. Ultimately, a meaningful stakeholder portfolio is created.
Procedure for the stakeholder analysis
If you want to carry out a stakeholder analysis, it is best to proceed in individual steps:
- First, the analysis date is set, which can take place in a team or alone. However, setting up an analysis team can always be an advantage.
- The analysis methods are then determined. Anyone who works in a group can brainstorm.
- Now it is time to collect stakeholders, whereby the preparation of lists is suitable. These can always be shortened or improved afterwards.
- Once you have finished, you can begin to classify and evaluate the stakeholders. The list is then divided into individual groups, on the other hand, the individual evaluations. It is about the general attitude to the project or the influence that a stakeholder has.
- Now suitable measures can be determined, what the actual analysis means. Here it is decided how the stakeholders are to be dealt with in concrete terms.
- Finally, stakeholder monitoring should be carried out. This records when decided measures are to be repeated.
Stakeholders have a not inconsiderable influence on the company, although these differ enormously from one another. Depending on the influence and importance for the company, appropriate measures must be taken to positively influence the outcome of the project. A well-established stakeholder analysis can help. The stakeholders are not to be confused with the shareholders, who are only referred to as such if these persons hold shares in a company and participate in the profit. In general, it is important to minimize risks with regard to the stakeholders and to include them in strategic corporate planning.