Chapter 13 : Stakeholder

A stakeholder is a group or individual, who has an interest in what the organisation does, or an expectation of the organisation. Stakeholders can be broadly classified into three groups: internal, connected and external.

1. Internal stakeholder :
Those intimately connected, and having strong influence on the organisation.

· Employees:
Need/epect-
* Pay.
* Working conditions.
* Job security.

· Managers/directors:
Need/expect-
* Status.
* Pay.
* Bonus.
* Job security.

2. Connected stakeholders:
Those having a contractual relationship with the organisation.

· Shareholders:
Need/expect-
* Steady flow of income.
* Possible capital growth.
* Continuation of the business.

· Customers:
Need/expect-
* Satisfaction of customer’s needs through value for money products and services.

· Suppliers:
Need/expect-
* Paid promptly

· Finance providers:
Need/expect-
* Ability to repay the finance with interest.
* Security of investment.

3. External stakeholders
External stakeholders have no direct link with an organization whether financially or in the running of the company. This group have varying ability to ensure that the organization meets their objectives.

1) Community at large:
Need/expectation:-
* General public, especially if their lives are effected by an organization’s decisions.

2) Environmental pressure groups:

Need/expectation:-
* Organization does not harm the external environment.

3) Government:

Need/expectation:-
* Company activities are central to the success of the economy.

4) Trade unions :

Need/expectation:-
* Taking active part in the decision-making process.

4. Stakeholder conflict

1) Employees vs managers :
* Jobs/wages vs bonus(cost efficiency)
2) Customers vs shareholders :
* Product quality/service level vs profit/dividends
3) General public vs shareholders :
* Effect on the environment vs profit/dividends
4) Managers vs shareholders :
* Growth vs independence

The needs/expectations of the different stakeholders may conflict. It is important that an organization meets the needs of the most dominant stakeholders but others stakeholders also to be considered.

They can use Mendelow’s power-interest matrix to decide who the dominant stakeholder is. The key players can be identified according to the power they have over the organization and the interest they have in a particular decision. The managers must be aware that stakeholder groups can emerge and move from quadrant to quadrant as a result of specific events, so changing their position in the matrix.