In business, a stakeholder is a group or individual who has a direct and material interest or concern in the business's activities. For-profit industry stakeholders include financial backers like company owners and shareholders and certain other parties like employees or customers. Nonprofits are designed to serve the public, not make money. For this reason, a list of nonprofit stakeholders is significantly longer, more nebulous and more diverse, and includes populations served and board members.
Internal stakeholders are those who have in some way committed to carrying out a nonprofit's mission. These people include board members, staff members, volunteers and donors, particularly large donors. In some cases, former members of these groups are still stakeholders, provided they are still active in promoting the nonprofit.
External stakeholders are those who are served by a nonprofit; members of this group are determined largely by the nonprofit's mission and how it implements that mission. For instance, Goodwill Industries and the Salvation Army both serve the public at large by recycling used items, providing a convenient way for some to dispose of still-useful objects and for others to purchase used items cheaply. Both also provide a service for disadvantaged jobseekers, using the cash generated from sales to fund job programs. The Salvation Army also funds substance abuse and other rehabilitation programs designed to get addicts and others into jobs. Goodwill moves in a different direction, seeking out and funding programs that bring jobs directly into disadvantaged communities.
External stakeholders for both nonprofits would include the public at large, customers seeking bargains, and disadvantaged jobseekers and those who want to employ them. Stakeholders in the Salvation Army further include substance abusers and other severely disadvantaged people who need jobs, while stakeholders in Goodwill further include specific disadvantaged communities that are impacted by Goodwill programs.
Identifying Key Stakeholders
Listing stakeholders in a nonprofit helps identify key stakeholders. All nonprofits have as key stakeholders their boards of directors and major donors; these are simple to identify by using a list of internal stakeholders. External key stakeholders are a bit more complex. In the example above, the Salvation Army might identify key stakeholders to be certain highly involved employers or politicians who help create legislation encouraging the hiring of ex-addicts. Goodwill Industries may also have employers who are key stakeholders, but its different focus might identify community leaders and local politicians as key stakeholders.
Using Stakeholder Theory
A clear understanding of who a nonprofit's stakeholders, especially key stakeholders, are helps that nonprofit craft appropriate fundraising campaigns and advertising campaigns. For instance, understanding who main clients are helps a development department target advertising within those communities and groups. For board members and higher-level executives, identifying and agreeing on key stakeholders helps the nonprofit target personalized appeals and pitches to those stakeholders who can make the most difference for the nonprofit's mission.
A nonprofit must also be held accountable for serving its stakeholders. If its mission fails, stakeholders will punish the nonprofit accordingly either by withholding future funding or by failing to use its services. A good grasp of a nonprofit's stakeholders enables the nonprofit to track its impact on the populations that are most interested in its success or failure. Ultimately, whether or not a nonprofit appropriately serves stakeholders is an important element in determining its longevity.
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