Stakeholders

Stakeholders

A stakeholder is any individual, group or organisation who is affected by and / or has a vested interest or concern in the activities, operations, objectives and decision making of a business. 

Stakeholders include:

- Owners or shareholders, Managment or directors, Customers, Suppliers, Government, Employees, Pressure groups, Competitors, Banks and other finance providers and local community.

Difference between stakeholders and shareholders

Stakeholders:

-Have an interest in the business – but do not own it

-May work for (employees) or otherwise transact with the business.

Shareholders:

-Owns the business

-May also work in the business

-Benefits directly from increases in the value of the business

Pressure Groups

•An organisation with shared aims which seeks to influence policy through political means, without seeking political office itself.

•Political means usually means lobbying (trying to persuade Ministers, MPs, European Commissioners etc, either through direct contact or through paid intermediaries). It also means petitioning, commissioning reports, takingcases to court, organising boycotts and demonstrations

•E.g. Greenpeace, Friends of the Earth,

Two types of Stakeholders

-Internal; people inside the business

•Owners

•Employees

•Managers

-External – people outside the business

•Customers

•Suppliers

•Banks / lenders (creditors)

•Local community

•Government

What does each stakeholder want?

Owners / Shareholders Objectives:

-Increased profits, increased share price, increased dividends

-Business growth

Directors & Managers Objectives:

-Increased salaries /wages

-Shares

-Job satisfaction & status within firm

What does each stakeholder want?

Employee Objectives:

-Increased salaries /wages

-Job security

-Job satisfaction / motivation

Customer Objectives:

-Quality

-Value for money

-Availability

-Good / efficient customer service

-Satisfying customers’ needs profitably should lead to financial success

What does each stakeholder want?

Supplier Objectives:

•Prompt payment

•Long term contracts

•Increased size orders Government Objectives:

 •Paying taxes

•Operating legally

•Employing people

•Lower benefit payments

What does each stakeholder want?

Local Community Objectives:

-Environment

-Local jobs – regional wealth

-Low noise / pollution

-Improved local facilities

Banks and Other Lenders Objectives:

-Interest

-Capital sum repaid

Stakeholders 

•Stakeholders are not all driven by the same objectives

•In fact it is likely that different stakeholder groups will want very different things from the business concerned.

•Therefore it is not unusual to find different stakeholders coming into conflict over a business’s activities and objectives.

Conflict of Interests 

•Clashes of objectives can occur

–Eg Higher wages for employees, means lower profits

–Consider Virgin wanting to bring in ‘greener’ fuel which will be more expensive

•Benefit some stakeholders

•Bad for other stakeholders

How a Business affects the main stakeholder groups

-Staff / Employees = Growth: new technology by product (not process) means greater production and more jobs; rising profits could mean rising wages

-Managers / Directors = Growth: new technology by process or product means a more efficient and productive business; Rising profits (especially if bonuses are available) mean greater pay

-Shareholders = Rising profits, short term and long term, mean greater payments for investment and more valuable shares.  Falling profits risk the opposite.  

-Suppliers = Growth means more orders and greater profits

-Customers = Quality of product and services: innovative new products and improving customer service mean a better customer experience and reliability from products

-Banks = Stable profits mean the business is able to pay back any current loans and be seen as a lower risk for any future finance required, eg for expansion

-Local residents = Clean, green production with few deliveries or despatches means the local community has a positive view of the business, making expansion easier

Stakeholder power and influence

•For stakeholders to have power and influence, their desire to exert influence must be combined with their ability to exert influence on the business.

The power a stakeholder can exert will reflect the extent to which:

–The stakeholder can disrupt the business’ plans

–The stakeholder causes uncertainty in the plans

–The business needs and relies on the stakeholder

What is the power / influence of each stakeholder?

Directors / Management = – Key decision makers

                              – lots of power

Owners / Shareholders =  -Owners most influence in small business

                              -Shareholders  can influence election of  directors

Customers = -Provide revenue & repeat business

               -Influence reputation/ image through word of mouth

Local Community = -Indirect via local planning / opinion

Banks and other lenders = -Can withdraw banking facilities

                              -Will recover money owed. 

What is the power / influence of each stakeholder?

Suppliers = -Can change prices; affects costs.

            -Reliability; affects product availability & quality

Government = -Responsible for regulation, subsidies, taxation.

Employees = -If unhappy: increase staff turnover, could take industrial action.

              -Trade unions increase power

Number and strength of stakeholders

•The size and scale of the business: for example, a small, sole-trader service business will have relatively few stakeholders. Contrast this with a much larger, complex business like a national supermarket chain like Asda which has thousands of employees, operates in numerous locations and is an important customer to hundreds of suppliers.

•The nature of the product or service: some products are more likely to attract the attention of stakeholders. For example, a manufacturing business that has high levels of carbon emissions or waste packaging will be scrutinised much closer than a simple service business. The local community will have a greater interest in a business that is a major local employer than in a one-man band.