The best way to minimize disagreement is to ensure that all stakeholders are in the room.
—Cheryl Yeoh
Stakeholder management is a key activity at all junctures for any business. It is a critical process for all business activity that must be well thought out, continually planned for, and adaptable to change. Keeping every stakeholder happy, despite potentially having different priorities, objectives, and expectations, is vitally important; can be difficult and can at times, be thankless. However, there is no way around it, and it has to be done and is an important part of ensuring your business has the best possible foundation for success.
The first step is to identify who your stakeholders are or are likely to be. A stakeholder is anyone who has an interest in the success or failure of the business, anyone with power and influence over the business, and anyone who may be directly or sometimes perceive themselves to be affected by work or activities carried out by the business. Stakeholders can be organizations, groups of people, or individuals and can be managed upward, downward, or sideways. If your stakeholder is an organization, make sure you identify the right person/people to communicate with, within that organization.
Generically speaking, stakeholder management comprises of:
• Identifying, recognizing, and acknowledging different stakeholders and their individual or common interests
• Determining their level of influence, while recognizing that it can change
• Establishing a robust communication plan for all stakeholders
• Influencing and engaging stakeholders
There are a number of key stakeholders to consider when starting, running, and expanding your own business, and they can be split into internal and external stakeholders.
Internal Stakeholders
Any individual or group who contributes to the businesses internal functions or is directly affected by management decisions can be considered as an internal stakeholder. The management of internal stakeholders involves ensuring they enjoy the company culture, are engaged in company goals, and feel like they are an important part of the team.
The following are the examples of internal stakeholders.
Owners/shareholders: They are liable for the impact the business has and also take a significant role in strategy. They are likely to take the majority (or all) of the key decisions regarding internal and external stakeholders. Owners are interested in the business performance, the balance sheet, and the resulting profit or loss.
Managers: They have a significant role in the business operational decisions, are accountable for decision making, and are the link between the owners/shareholders and the employees. Managers are concerned with employee performance in the business area they are responsible for and salary.
Employees: They have significant time and financial investment in the business. They want job security and a good salary or reward scheme for their work. They are also interested in being and feeling valued for their contribution, and as such, a well-run business will take into account employee values, concerns, and opinions and use that insight to help shape the business strategy.
External Stakeholders
Anyone who is outside the business and not involved in the internal functions but has an interest in its operation, performance, and well-being can be an external stakeholder. Management of external stakeholders is a team effort where each part of the business may deal with different stakeholders.
The following are the examples of external stakeholders.
Suppliers: This is an interdependent relationship where the success of one business will impact the success of another. A strong relationship with suppliers is key. Suppliers will want the business to buy supplies from them and potentially create a long-term, mutually beneficial business relationship, with timely payments, shipments, and robust and effective processes.
Customers: Understanding the core needs of customers is significant part of running a prosperous business. Interacting with customers, who want the business to produce high-quality goods or services and sell at a reasonable price, is an important part of understanding and delivering their needs.
Banks: They may have provided start-up capital or some sort of loan and will want the business to be well run and successful. They will also expect to be kept updated with progress, so they can be confident that they have a secure investment and ultimately get repaid.
Lenders: People (other than banks) who could have lent the business money, again will want the business to be run effectively and successfully, and who want any money they have loaned to be paid back on time and within agreed timescales.
Investors: They will take a keen interest in the business, all areas of the balance sheet, and how it is running, and, in some cases, they may play a big part in the day-to-day operations. Investors want a return on any money they have invested.
Government: It has an interest in business that is contributing to the economy and productivity, making tax contributions, spending money, and employing people. A government also sets regulations, with regard to accounting, employment, and ethical and legal concerns, and looks to ensure that businesses are handling and managing these responsibilities in an ethical and appropriate way.
Local community: There can be many effects a business can have on a community. They have an interest as the business may employ local people, have community development programs, and give access to unique goods or services. However, there can be negative effects such as increased traffic volume, increased pollution, and poor business practices and effects on other businesses in the area. So, community engagement needs to be maximized and any negative repercussions minimized.
Society: As the business world has changed and evolved, particularly with the digital and global economy, businesses can have an effect on society as a whole. Fast food outlets raise debate about health; social media companies raise debate about influencing, safeguarding, and data sharing; and some other industries have transformed over time. These changes are not all good or all bad and can be debated; however, the business as a whole has a responsibility to ensure that the overall outcome of their activities is as positive for society as possible.
Once you have understood who your key stakeholders are and their priorities, you are then in a position to develop strategies to influence them. It is also worth noting that as your business evolves or grows, your stakeholders can change. This is something to keep under regular review. Key areas to consider are as follows:
• What are the key motivators of your stakeholders?
• What information do they need from you and how regularly do they want it?
• What emotional or financial interest do they have in your work and is it positive or negative?
• Who and what influences their opinions and their opinions of you?
• Are there conflicting interests among your stakeholders?
• What powers do your stakeholders have and what influences can they exert?
All of these stakeholders can also be grouped as per what level of interest they have in the business and the power they have over it. This is sometimes referred to as stakeholder prioritization. Depending on what type of business you have, there could potentially be a long list of people and organizations that are affected by it. Some of these people may be able to help advance your business or block progress.
There are a number of tools and studies that look at stakeholder management. A good and simple way to prioritize is to use Mendelow’s stakeholder matrix and to look at each stakeholders’ power and interest and then group and prioritize from there. For example, a fellow director would have high power and interest in the business projects. Family may have high interest in your business but (if they are not owners/shareholders/employees) are unlikely to have power over it. So, in a nutshell:
High power and low interest Would need to be kept on side and satisfied, but not so engaged that they become bored or frustrated with your message | High interest and high power These people are key players and would be top priority and are the people who will need most engagements and go to every effort to satisfy |
Low interest and low power Least important and minimum effort: This group would need monitoring, but not regular communication | Low power and high interest Would need to be communicated with regularly and ensure that no major problems come up |
This is just to name a few areas to consider, but this shows that there is a lot to think about when it comes to understanding your key stakeholders.
In terms of managing stakeholder relationships, there are several key principles to consider:
• Understanding what success means for everyone: This is key and can be very complex, particularly if, as is sometimes the case, there are differing definitions of success between different stakeholders and how success could be achieved. This is where the art of negotiation and recognizing, understanding, and appreciating different interests becomes important.
• Consult early and regularly: Answering key questions and getting information and ideas early can avoid complications at a later stage and, in some cases, avoid unwanted or unexpected surprises.
• Communication and ensuring that there are communication systems in place to meet the requirements of all stakeholders: Ultimately, it is necessary to keep all stakeholders “in the loop”; when managing varying interests, having different interests is almost inevitable and not communicating properly can unnecessarily magnify issues. It is important to ensure that the intended message is clear and understood with the intention of getting the desired, positive response.
• The art of compromise: This can be important, particularly when you are in the position of opposite or conflicting interests or definitions of success. Ultimately, one or more parties may have to compromise for the bigger picture success.
• Taking responsibility: As in any aspect of running your own business, being willing and able to front up and take responsibility is not only necessary but also helps to create credibility in you as a businessperson.
• Even though it’s not always easy, try and keep it simple: Show that you care. Listening to your stakeholders and being understanding and empathetic to concerns can make all the difference.
• Consultation and remembering we are all human: Being aware and mindful of other people’s feelings is vital when dealing with different stakeholders. In a lot of cases, people aren’t deliberately trying to be difficult; this is where listening, empathy, and compromise again become essential.
Understand stakeholder symmetry: Find the appropriate balance of competing claims by various groups of stakeholders.
—Warren G. Bennis