Any person or entity interested in a particular business is called a stakeholder. They are affected by the business activity, and they may be part of the core decision-making team. Internal and external stakeholders may have different interests and priorities, possibly leading to conflicts of interest. For instance, the manager of a business might want to figure out how to get a raise, while the customer wants a lower price for services. If the manager gets the raise, the customer likely will not get a lower price for services.
Kinds of Stakeholders
Internal stakeholders include the owners, managers, and workers within an organization. External stakeholders include the company's customers and the suppliers. The community in which the organization does business also is a stakeholder, as the business' success or failure has some bearing on the overall culture and economy of the community.
All the stakeholders do not have equal power, and different stakeholders value different things. For instance, the customers of a hair salon might value friendly staff, reasonable prices and good quality cuts. At the same time, the supplier values regular orders and business growth that prompts growing order size. Each of these stakeholders can have direct or indirect stake in the organization and in policy-making.
Influence of Stakeholders
Each type of stakeholder influences the company in different ways and to differing degrees. Owners have a major say in the way the company functions and generally tend to extract the maximum efficiency and make the maximum profit from their investments in the company. Customers are also key stakeholders in any organization. The way they are catered to and their level of satisfaction determines how the company runs, so the owner and managers are likely to change their behavior based on what the customer wants. In a hair salon, if pink hair becomes trendy and customers are demanding it, then the salon is likely to offer services and specials that cater to this demand.
Primary & Secondary Stakeholders
Primary stakeholders are the most important people to the business, who have the strongest voice in the way the company runs. In small businesses, primary stakeholders are owners, staff and customers. These primary stakeholders decide the company policies and plans. In large businesses, primary stakeholders can vote the directors out if they feel the directors are not performing properly.
In our hair salon example, a customer who is dissatisfied with a cut might ask for a refund and a free cut to fix what they do not like. In order to keep the customer and secure their future business, the company is likely to accommodate this stakeholder and do what it takes to make them happy.
Less influential stakeholders are referred to as secondary stakeholders. This could include the greater community, the media, regulators and associations. While they do influence business operations, they do not have as much influence as primary stakeholders.
Interests of Stakeholders
Various stakeholders have various interests in the company. Owners will want to maximize their profits and are interested in how well their business is functioning. Managers and workers are interested in their salaries and will want to keep their jobs at all costs. Lenders will want the businesses to repay their loans on time and in full. Customers want the company to produce high-quality products for affordable rates. They will also look for good customer service before and after the sale. The community will want the company to be environmentally friendly.