Who are your stakeholders? And how to identify them
As a project manager, department head or business owner, it’s essential to know and understand who your organisation’s stakeholders are.
Throughout this post, I use the words ‘organisation’ and ‘company’ and ‘business’ interchangeably. It simply indicates that what I am writing applies to all. Stakeholders are also important to the work of not-for-profits or non-government organisations, as well as government and businesses.
Definition
Stakeholders are the individuals or groups who have a vested interest in the success of your organisation Or they operate in the same industry or community and could be affected by your existence. For example, if you work for the local council, your key stakeholders are the communities you serve, business associations, community groups, and federal government.
From customers and suppliers to employees and shareholders, each stakeholder group can influence and play a critical role in creating optimal conditions for your organisation to operate in.
Ignoring the work needed with stakeholders is a recipe for missed opportunities and their resulting consequences.
By understanding the needs and expectations of your key stakeholders, you can make informed decisions to drive growth and success, while ensuring that you’re meeting your stakeholders’ expectations. Good communication skills go hand in hand with effective stakeholder relations and management.
In this post, we explore who your organisation’s stakeholders are, why they matter, and how you can effectively engage with them to build relationships that benefit everyone involved. Trust and respect are key ingredients.
We also look at real-world examples PwC Australia and Enron and Arthur Andersen to highlight the dangers of ignoring regulations that define the relationship between industry and governments. Its impact on trust, and employee, stakeholder, government and community relations has lasting consequences.
So, whether you’re a startup or a well-established business or organisation, read on to discover the key stakeholders in your industry and community ecosystem, and how you can leverage their support to achieve your goals.
“Contentious social issues like racial justice, income inequality, gun violence, immigration reform, gender equality, and climate change have all become part of many corporate agendas. Silence and indifference are becoming less the norm. The days of simply ignoring social issues or writing a check are gone. Corporations are now frequently expected to engage in social issues through public statements, sponsorships, partnerships, and policies supporting a position or a cause. Being a socially responsible corporation now also means being a socially active corporation.”
Tom C.W. Lin
Identifying Internal Stakeholders
Internal stakeholders are those individuals or groups within your organisation who have a vested interest in its success. The decisions you make in the company impact them. These stakeholders can include your employees, managers, executives, and shareholders. Each group has different needs and expectations, and it’s essential to understand what those are to effectively consult and engage with them.
Employees are one of the most critical internal stakeholders. They are the backbone of your organisation. They’re responsible for carrying out your company’s mission and vision. As such, it’s crucial to understand their needs and expectations. This includes providing fair compensation, benefits, and opportunities for growth and development.
“I have always believed that the way you treat your employees is the way they will treat your customers, and that people flourish when they are praised.”
Sir Richard Branson
Managers and executives are also important internal stakeholders. They are responsible for leading and guiding your organisation, and their decisions can have a significant impact on its success or failure. The challenge is when a manager and executive abdicate their role as leaders and fail to guide their organisation. This often results in low morale and high staff turnover in an organisation.
Finally, company shareholders are also critical internal stakeholders. They have a financial stake in your organisation and expect a return on their investment. Countries have regulatory requirements that dictate the release of company information and keeping shareholders informed of a company’s financial performance. Regulations also spell out the duties and responsibilities of directors, whether they are boards of directors for a company or a charity. This ensures that there are legislated rules that promote compliance and transparency when operating in the marketplace and community sector.
Whether it’s a company, or a charity operating in the community, there is a regulatory body that has a set of rules that require compliance. Regulatory bodies would usually be regarded as external stakeholders. For example, in Australia, the national financial regulatory body for companies is the Australian Securities and Investment Commission (ASIC). In the USA, it’s US Securities Exchange and Commission (SEC). For charities, in Australia, it’s the Australian Charities and Not-for-profits Commission (ACNC). In the USA, charities are registered by state, rather than by a national body.
Identifying External Stakeholders
External stakeholders are those individuals or groups outside of your organisation who have a vested interest in your organisation. These stakeholders can include your customers, suppliers, regulators, and the community in which you operate. Each group has different needs and expectations, and it’s essential to understand what those are to effectively consult and engage with them.
“How you think about your customers influences how you respond to them.”
Marilyn Suttle
Community engagement, like external stakeholder and partner engagement, refers to external stakeholders. Community engagement requires a deep understanding of the stakeholders within the community of focus. In some cases, those descriptions – community engagement, stakeholder, and partner engagement – are often used interchangeably to refer to public engagement.
Customers or consumers are one of the most critical external stakeholders. For a not-for-profit or charity, your consumers and customers are usually a community of people, or a segment of a community differentiated by age, gender, or need. They are the reason your charity or business exists. You don’t have a business without customers.
So stakeholder customer service and satisfaction play a key role in the company’s success.
Customer satisfaction is essential to your success. It’s crucial to understand their needs and expectations and ensure that your products and services meet or exceed them.
Suppliers are also important external stakeholders. They provide the raw materials and resources needed to produce your products and services. As such, it’s essential to maintain strong relationships with them and ensure that they are providing high-quality goods and services.
Government, in particular, regulatory bodies, are another key external stakeholder. They set the rules and regulations that govern your industry and can have a significant impact on your business. It’s important to understand their requirements and ensure that your organisation is in compliance with them.
You only have to look at news stories like Australia’s PwC tax leak scandal to see the consequences of underestimating the power of governments to require compliance and hold corporations to account. Once trust in a relationship is gone, whether it’s stakeholders including employees, it’s very hard to rebuild.
“In financial circles it’s widely known that once you lose the confidence of the Reserve Bank, there’s little coming back. PwC has now crossed that line and now the firm and its partners will be thinking about the damaging downward spiral. The question now is can PwC survive intact from here?”
1 June 2023, Eric Johnston @ejohnno Associate Editor, The Australian Business Network
Wise stakeholder engagement and management, coupled with an understanding of the critical importance of government relations and issues management, play key roles in creating optimal conditions for your business, company or organisation to operate within.
If you don’t take care of government relationships, and ignore regulations for your sector, it does put an organisation at grave risk. That puts employees and their lives at risk as well. It has ripple effects across communities and industries.
Enron and its accounting firm Arthur Andersen is an example of the dramatic consequences that can flow for organisations that ignore government regulations, destroy trust, upending their stakeholder relations. I had just graduated from university in 2001 when the Enron collapse was part of the daily news bulletin for some time rolling into 2002.
It was an unbelievable story at the time because Arthur Andersen was an industry giant. It was part of the inner circle of the privileged elites around the world. They held court with governments of the day. They were regarded as some of the smartest minds in the world. And then, this happened.
The Enron scandal was an accounting scandal involving Enron Corporation, an American energy company based in Houston, Texas. Upon being publicized in October 2001, the company declared bankruptcy and its accounting firm, Arthur Andersen – then one of the five largest audit and accountancy partnerships in the world – was effectively dissolved. In addition to being the largest bankruptcy reorganization in U.S. history at that time, Enron was cited as the biggest audit failure.[1]: 61 ….
Wikipedia: Enron Scandal
Many executives at Enron were indicted for a variety of charges and some were later sentenced to prison, including Lay and Skilling. Arthur Andersen was found guilty of illegally destroying documents relevant to the SEC investigation, which voided its license to audit public companies and effectively closed the firm. By the time the ruling was overturned at the U.S. Supreme Court, Arthur Andersen had lost the majority of its customers and had ceased operating. Enron employees and shareholders received limited returns in lawsuits, despite losing billions in pensions and stock prices.
Finally, the community in which you operate is also an important external stakeholder. They may often include your customers, employees, and suppliers. So it’s essential for organisations to treat communities and the people who live there with respect, dignity and in a socially responsible manner. One of the consequences is that if stakeholders, be they communities or individuals, are not treated kindly, many can or do share their negative experiences on social media with the rest of the world, as well as with traditional media.
“People don’t care how much you know until they know how much you care’
Theodore Roosevelt
In First Nations and multicultural communities, the community is often the centre of everything, for want of a better word. Trusting relationships is even more vital here. There are cultural expectations including a need for cultural safety that underpin successful cross-cultural relationships. But cultural safety is often hard to achieve without individuals having a high degree of honesty and self-awareness about what that means, and how to create a culturally safe workplace.
Genuine respect is very important. One of the differences with cultural communications is that often when there is no trust or people feel disrespected, there will be very limited information sharing and often a refusal to engage or talk. Only silence in response.
The Importance of Understanding Stakeholders
Understanding your stakeholders is critical to creating an environment where your organisation can be supported with its mission, and operate effectively.
By knowing who your key stakeholders are and what their expectations and needs are, you can make informed decisions based on real-world evidence about how you might work with a particular stakeholder based on their known expectations.
For example, by better understanding a customer’s needs and values, you can develop products and services that meet or exceed them.
As already noted earlier, in the case of established industry bodies, companies and charities, there are regulatory bodies that regulate the duties and responsibilities of organisations. Trust is breached when regulations are found to be breached. It can have devastating consequences for organisations, as the 2001 Enron and the Arthur Andersen collapse showed.
So understanding regulatory stakeholders and complying with regulations should be top of the list in your stakeholder and government relations program.
Now that you’ve got regulatory stakeholders at the top of your list, where that applies to you, you can then consider the needs of your internal stakeholders. They are key stakeholders too. By understanding your employees’ expectations and what matters to them, and taking action on it, you can create a work environment that is not only compliant but also fosters high staff morale and high engagement.
By understanding your shareholders’ needs and expectations, you can make strategic decisions that drive long-term sustainability.
Categorising Your Stakeholders and Their Interests
Stakeholders can be categorised into different types based on their interests and level of influence. These categories include:
1. Primary stakeholders
These are stakeholders who have a direct relationship with your organisation. They include your customers, employees, shareholders, and suppliers.
2. Secondary stakeholders
These are stakeholders who have an indirect relationship with your organisation. They include the media, government, and the community in which you operate.
3. Tertiary stakeholders
These are stakeholders who have a very remote relationship with your organisation. They include future generations and the environment.
Each group has different needs and expectations, and it’s essential to understand what those are to effectively engage with different stakeholder groups.
Another way to categorise stakeholders
Once you have identified your key stakeholders into primary or secondary, you can drill down further. Or you may simply wish to categorise them differently, as follows.
For example, you may want to identify the positions that stakeholders hold towards your organisation. Whether they are supporters or adversaries or ambivalent, so you can tailor your communications to each group. If so, you can simply create a table or add a column that identifies whether the stakeholder is Ambivalent, Advocate/Supporter, or Adversary.
Describing and identifying stakeholders in this way is a very useful way that allows you to respond to anticipated questions or concerns when you segment accordingly.
Mapping Stakeholders and Their Influence
Once you’ve identified your stakeholders, it’s important to map them and understand their level of influence. This can help you prioritise your engagement efforts and ensure that you’re focusing on the stakeholders who have the most significant impact on your organisation. This is where you can also use the categories mentioned previously, Ambivalent, Advocate, and Adversary, to learn more about them.
To map your stakeholders, you can use a tool called a Stakeholder Matrix. This matrix categorizes your stakeholders based on their level of influence and interest in your organization. Stakeholders can be categorised as high, medium, or low influence, and high, medium, or low interest.
High influence and high interest
High-influence stakeholders are those who have the most significant impact on your organization’s success. They can include your customers, employees, shareholders and government.
High-interest stakeholders are those who have a vested interest in your organisation’s success. They can include your suppliers, regulators, and the community in which you operate.
The stakeholders who are both high influence and high interest are your most important stakeholders.
Communicating with Stakeholders
Effective communication is critical to engaging with your stakeholders. By keeping them informed and involved, you can build trust and support that can drive your organisation’s success.
“The single biggest problem in communication is the illusion that it has taken place.”
George Bernard Shaw
There are several ways to communicate with your stakeholders, including:
1. Newsletters: Often e-newsletters these days, they can keep your stakeholders informed about your organisation’s activities and performance. You can also make these e-newsletters available on your website or Intranet.
2. Social media: Social can be an effective way to engage with your stakeholders and build a community around your brand if you are consistent. You don’t need to be on every platform. Choose the social platforms that your stakeholders use and consume and within your resource and budget to use.
3. Town hall meetings: Town hall meetings can provide a forum for your stakeholders to ask questions and provide feedback.
4. Advisory Forum or Committees: this can provide valuable insights into your stakeholders’ needs and expectations.
Managing Stakeholder Relationships
Managing stakeholder relationships is critical to your organisation’s success. By building strong relationships with your stakeholders, you can ensure that they are supportive of your organisation and its goals.
To manage your stakeholder relationships effectively, you can:
1. Be open and transparent: Be honest with your stakeholders about your organisation’s activities and performance. Keep your word and communicate regularly when there are changes or updates. It’s better to overcommunicate, then to under-communicate.
2. Listen: Listen, listen, listen to your stakeholders’ needs and expectations. Proactively consult and take them into account when making decisions. It shows respect when you do so.
3. Engage: Regularly your stakeholders to keep them informed and supportive, and involved in your organisation’s activities.
4. Solve problems: Address any issues or concerns that your stakeholders may have in a timely and effective manner.
5. Be humble and respectful: treat people with respect and be humble and gracious. Keep your word. Be quick to acknowledge mistakes and fix them. Actions and behaviour, how you treat people who are your stakeholders, helps to build trust. And trust is very difficult to build in the first place, especially if there has been a historical background mistrust and mistreatment.
Common Stakeholder Challenges and How to Overcome Them
Sometimes this can feel like you’re entering the lion’s den. Managing stakeholders can be challenging, and there are several common challenges that organisations face.
These challenges include:
1. Opposing and Conflicting Interests
Stakeholders can have conflicting interests that can make it difficult to satisfy everyone. To overcome this challenge, it’s important to prioritize your stakeholders and focus on those who have the most significant impact on your organisation’s success.
2. Resource constraints – Organisations may have limited resources to devote to stakeholder engagement efforts. To overcome this challenge, it’s important to focus on the most effective communication channels and engagement strategies within your ability to resource them. Stick to your core business and do that well.
3. Resistance to change – This is a huge one and a very common challenge across organisations big and small. Stakeholders may be resistant to change, which can make it difficult to implement new strategies or initiatives and make needed improvements or introduce processes. To overcome this challenge, it’s important to raise awareness with staff on what the problem is. This needs to occur at every opportunity, not as a once-only speech or email to staff. It needs to be woven into everyday messaging. Then you can talk about the change, why the change is the solution needed, how people will benefit, and how it will improve things. Involve stakeholders in the decision-making process.
Final Words
Knowing who your stakeholders are, and understanding them, are critical to your organisation’s success. Knowing what their needs and expectations are, and what drives them, allows you to make informed decisions based on real world data.
Identifying internal and external stakeholders, mapping their influence, and communicating regularly and effectively with them can help you build lasting relationships that benefit everyone involved. By managing stakeholder relationships and overcoming common challenges, you can ensure that your organisation is well-positioned for long-term success.
