The article points to some of the distinctions, problems, and implications related to the stakeholder concept; it also clarifies and justifies the concept’s essential content and significance. Referring to the normative basis, Donaldson and Preston (1995) define stakeholders as “persons or groups with legitimate interests in procedural and/or substantive aspects of corporate activity. [They] are identified by their interests in the corporation, whether the corporation has any corresponding functional interest in them [or not]” (p. 67, boldfaced in the original text). Donaldson and Preston (1995) suggest that a modern and pluralistic understanding of the so-called theory of property rights, as opposed to a firm-as-a-set-of contracts (Evan & Freeman, 1988), is meaningful for understanding the normative basis for stakeholder theory. A property consists of a bundle of rights, and those of the landowner are not unrestricted.

  1. Rhenman (1968) states that even though management of a company can be regarded as a stakeholder, this group has the responsibility to act as a mediator that resolves conflicts between the stakeholders and, when necessary, decides which claims to satisfy.
  2. Stakeholders have an interest in the success of the project and can be within or outside the organization that’s sponsoring the project.
  3. However, when reading the other books, it becomes quite clear that they are rooted in stakeholder thinking as well.

Stakeholders have varying levels of engagement and interest in any given product, regardless of their strategic importance in its success. There isn’t necessarily a direct relationship between those most engaged and those most critical either; a relatively minor stakeholder could be pretty interested and active with a product while someone far more critical might only occasionally chime in. While the word “stakeholders” gets tossed around like it’s nothing, the concept behind the word can be the difference between a successful and a failing business. When you recognize the importance of stakeholders, you can help to shape the destiny of your business and also your own career. Finally, once you understand your stakeholders, it’s time to set up a way to keep them informed.

External stakeholders

Keep reading, and we’ll give you the scoop on the stakeholder definition, types of stakeholders in business, and more. To effectively integrate stakeholders into product roadmapping, they should be engaged at every point in the process. During the planning phase, it’s best to make them aware of where things are heading and why. This is both a tone-setter for future discussions and an opportunity to get contractual input early on. Meanwhile, those stakeholders with lots of power but little engagement should get just enough information to make crucial decisions while not being overloaded with more updates than they need (although any requests they have should be promptly addressed). And for those who are both relatively uninterested and not particularly powerful, occasional, general updates should be plenty as they don’t require much individual attention or personalized briefings on developments.

What Are Communication Strategies with Stakeholders?

Conversely, external stakeholders may also sometimes have a direct effect on a company without a clear link to it. When the government initiates policy changes on carbon emissions, the decision affects the business operations of any entity with increased levels of carbon. The researchers perceived the hospital as an open, controlled production system, and they selected stakeholder relationships for study on the basis of which ones they thought were the most important relationships in relation to the hospital’s production. They analyzed the stakeholders’ https://business-accounting.net/ contributions to the operation of the hospital and the inducements the stakeholders received in return, as well as incentives offered in the form of possibilities for extra inducements for increased contributions. On the basis of the hospital’s annual report and other available documents, a preliminary overview of the contribution–inducement balance was produced. For the analysis, the researchers tried to classify the identified stakeholders into groups consisting of those who made more or less similar contributions and received similar inducements.

We’ve shown how our real-time dashboard offers a big picture of the project, but stakeholders often want to go deeper into the data. With one click, you can generate the reports that stakeholders want to see, whether that’s project status, time or cost. If stakeholders have questions, know that every report can be filtered to show select data. Whenever possible, work on aligning the interests of your business with those of your stakeholders. Treat your employees well and pay them fairly, so they’ll work towards your mutual success. Suppliers and vendors sell goods and/or services to a business and rely on it for revenue generation and on-going income.

Types of stakeholders

Since the mid-1990s, projects have been conceptualized as temporary organizations (Lundin & Söderholm, 1995). This makes it very easy to apply stakeholder thinking to projects (see, e.g., Aaltonen, 2011; Eskerod, Hueman, & Savage, 2015b; Karlsen, 2002; Lehtinen & Aaltonen, 2020). The implications of applying stakeholder thinking to a temporary organization instead of a permanent organization have been discussed in many publications, for example, Eskerod and Jepsen (2013) and Huemann, Eskerod, and Ringhofer (2016). Eskerod and Jepsen (2013) use concepts from (consumer) behavior theory to explain and predict stakeholders’ behavior, whereas Huemann et al. (2016) use systemic constellation methods rooted in family therapy and psychology for stakeholder analysis. More publications, for example, Eskerod and Huemann (2014) and Eskerod, Hueman, and Savage (2015b), discuss the implications of applying a managing for stakeholders approach. Other recent publications discuss stakeholder value constructs in megaprojects (Eskerod & Ang, 2017) and the influence of “shadows of the context” on project stakeholders (Eskerod & Larsen, 2018).

Through actions within its control, the publishing company made the situation worse. Suppliers are an example of external stakeholders because a good portion of their revenue may come from a company. If your business were to change what it purchases or who it makes purchases from, it can impact suppliers and their revenue. Employees have a direct stake in your company because they earn an income along with other benefits.

However, that can be easier said than done, as different groups of stakeholders often have competing interests. Based on the text of this article as well as deductions, propositions for a stakeholder perspective are offered in Table 2. Each proposition can be an object for discussion as well as contribute to research questions for future research efforts. In sum, we can conclude that Rhenman (1968) sees employees and managers as two particularly important stakeholders.

How to manage stakeholders

Shareholders can vote on important decisions, elect members to the board of directors, and sell their ownership in the company. Not all stakeholders can do these things, because other types of stakeholders own no shares in the company. For example, customers can’t elect members of the board unless they also happen to be shareholders.

Characteristically, a manager both represents the company and pursues personal interests. When discussing the dependence management has on the company’s stakeholders, Rhenman (1968) points to illustrative studies prior to his own work by Selznick (1949), Höglund (1953), and Brown (1960). Further, he states that he himself was particularly influenced by Chester Barnard, Herbert Simon, and Philip Sleznick (Rhenman, 1968). Whether you know it or not, your business likely has a number of stakeholders.

A stake race is one in which the prize money is derived from the entry fees that horse owners pay to enter the race. The person or entity that takes care of the entry fees until the prize money is awarded is called the stakeholder. Traditionally, the stakeholder has no financial interest in the outcome of the race. At the end of the day, it’s up to a company, the CEO, and the board of directors to determine the appropriate ranking of stakeholders when competing interests arise. It is a widely-held myth that public corporations have a legal mandate to maximize shareholder wealth. In fact, there have been several legal rulings, including by the Supreme Court, brought on by other stakeholders, clearly stating that U.S. companies need not adhere to shareholder value maximization.

This relationship will yield value in the future, so they are by default inclined to trust and agree with product management’s recommendations. Having that solid and established foundation makes it easier to convince them of things down the line when they’re less confident about a particular topic. When supportive, stakeholders can grease the wheels of progress for product teams, whether it’s allocating budgets, quashing the concerns of doubting coworkers, wooing essential customers, or simply providing their stamp of approval whenever called upon.

What is the Importance of Stakeholder Management?

To conduct the stakeholder analysis, the design team would interview each stakeholder, whether that be the sponsors, the data providers, the IT team or the project developers. Conducting a stakeholder analysis starts with gathering enough information to understand each stakeholder’s needs, according to Chris Mattmann, Chief Technology and Innovation Officer (CTIO) at NASA Jet Propulsion Laboratory. Typically, the designers on the team would interview each of the stakeholders to understand their processes, needs, limitations and interests. Dozens of firms have helped substantially improve the quantity and quality of publicly available data about companies’ impact on their stakeholders.

Internal stakeholders are directly affected by a business’s activities or decisions. Stakeholder, any individual, social group, or actor who possesses an interest, a legal obligation, a moral right, or other concern in the decisions or outcomes of an organization, typically a business firm, corporation, or government. Stakeholders either affect or are affected by the achievement stakeholders business definition of an organization’s objectives. Identifying who your project stakeholders are is one of the most important tasks you’ll have as a project manager. For that reason, we’ve created a free stakeholder analysis template that lets you list your stakeholders, their level of influence, and their preferred method of communication, among other relevant information about them.