What are stakeholders and how to manage them effectively

An organisation needs its customers, employees, and investors to do well. These are its stakeholders. They're important because they can influence an organisation's performance. This guide will discuss the different types of business stakeholders. Learning about these groups can help you handle them better, especially if you're in charge of a team or working on a project with others.

Here's what we'll cover:

• What is a stakeholder?
• Shareholder vs stakeholder
• Types of stakeholders in a company
• Examples of stakeholders in a company
• Are employees shareholders or stakeholders?
• How to manage stakeholders at work
• Tips on managing internal stakeholders at work
• Tips on managing external stakeholders at work
• Potential challenges to stakeholder management at work
• Conclusion
• FAQs

What is a stakeholder? 

Stakeholders are people or groups interested in a company or its activities. They're important because they can affect the direction and growth of the organisation. They can either positively or negatively impact the company.

Positive stakeholder influence can lead to increased support and investment in the company. For example, employees may work harder and stay longer when they feel that the organisation values them. Negative stakeholder influence can have detrimental effects. For instance, suppliers with questionable practices may harm the company's reputation.

Shareholder vs stakeholder 

A shareholder is a specific type of stakeholder who owns shares in a company. They're investors with a financial stake in the organisation. Because of this, they may have a direct interest in its profitability. Shareholders may have voting rights on certain issues. Often, they can elect who is on the board of directors and approve major decisions affecting the company.

Stakeholders include a broader range of groups and individuals with a vested interest in an organisation's performance and success. In addition to shareholders, they can include the company's workers, customers, suppliers, and the local community.

Types of stakeholders in a company 

Stakeholders can be internal or external. Let's explore these types.

Internal stakeholders

These are the people and groups directly involved with the company. Internal stakeholders usually understand the organisation's goals nicely. They include the following:

• Employees work in different departments and at varying levels. They're often the largest group of internal stakeholders.
• Management handles day-to-day operations. They oversee employees, establish policies and procedures, and make strategic decisions.
• Executives are top-level leaders who set the company's direction and strategies. They can influence major decisions such as acquisitions, mergers, and expansions.
• The human resources (HR) department manages employee-related matters such as hiring, training, and benefits. They also help promote a company's culture and values.
• Union representatives are employees who speak for workers and focus on labour rights and conditions. Not all companies have unions, so this group may be smaller.

External stakeholders

These are groups or individuals outside the company. They may be interested in its performance or may be affected by the organisation's activities.

Here are examples of external stakeholders:

• Customers are people or businesses that buy the company's products or services.
• Suppliers and vendors provide goods and services the company needs to operate.
• Investors include shareholders and others with a financial interest in the company. They're major stakeholders in a business.
• Government agencies ensure that the company complies with laws and regulations. They're secondary stakeholders.
• Local communities are the people living near the company's operations that its activities may impact.
• Media outlets report on the company's actions and influence public perception.
• Industry associations represent the collective interests of companies in the same industry.

Examples of stakeholders in a company 

Here are examples of how different stakeholders might interact with a company:

• Employees suggest product improvements, enhancing quality.
• Management initiates new projects and handles planning and resources.
• Executives approve investments in renewable energy, promoting sustainability.
• HR launches training programs to boost employee productivity and job satisfaction.
• Union representatives work with management to negotiate better working conditions or pay for their members.
• Customers give feedback on a product. The company makes changes in response, improving customer satisfaction and loyalty.
• Suppliers sign a contract to provide materials at a fixed price. This helps the company control its costs and plan its budget.
• Investors back the company's plans to expand its business operations. This may result in higher profits.
• The government introduces new regulations for cutting emissions. This leads the company to make changes in its manufacturing process.

Are employees shareholders or stakeholders? 

Employees are stakeholders because they work for the company and care about its success. After all, the company's performance can impact their jobs, pay, and work environment. However, employees are not automatically shareholders, as shareholders own part of the company by holding stock.

Some companies in Singapore offer Employee Share Option Plans (ESOPs) as a program. ESOPs allow employees to acquire shares in the company, effectively turning them into shareholders. This can serve as a motivating factor for employees, motivating them to work harder.

How to manage stakeholders at work 

Understanding the stakeholders in a company or project is crucial, as they each have unique interests and expectations. By recognizing these, you can make more informed decisions that meet their needs.

Effective stakeholder management requires specific skills. Strong communication skills enable you to engage with stakeholders effectively, gathering and providing valuable feedback. Negotiation skills are essential for balancing stakeholder demands with project goals, ensuring progress remains on target.

Additionally, conflict resolution skills help you handle conflicts. These can help you minimise negative impacts on the project.

Below are two key points to remember when managing stakeholders:

1. Take note of the typical critical stakeholders in a project

A project often involves these four stakeholders:

• Project managers oversee the project's progress and execution.
• Project sponsors provide the necessary support and resources to complete the project.
• Project team members execute tasks and contribute to delivering the project.
• Clients or customers receive the project deliverables and may provide feedback.

Understanding the needs of both internal and external stakeholders in an organisation is important. For instance, team members might provide a more practical timeline for a project. Listening to them can help the project manager adjust the expectations of the project sponsor and the client. The project manager can also update the client on the team's progress and ask for feedback. This proactive communication helps ensure that all parties' needs are considered and met.

2. Manage internal vs external stakeholders in a project

Internal stakeholders in a project include the project manager, sponsor, and team members. External stakeholders include clients, suppliers, contractors, and government entities. Sometimes, the client is also an internal stakeholder, such as when the project involves developing a product that the company itself will use.

Here are several examples that show the involvement of different types of stakeholders in a project:

• Project sponsor: Often, a company executive secures the resources to fund the project. They make sure to align it with the company's goals.
• Project manager: They receive the project's requirements and create a plan to meet them. They also assign tasks to team members and conduct status reviews to ensure the project is on track.
• Team members: They do the actual work of the project and report to the project manager.
• Client or customer: They use the final product and provide feedback.
• Contractor: They're not part of the internal project team but provide a crucial service or product to the project.
• Government entity: There may be regulatory requirements that the project must meet. A representative may participate in status meetings to ensure the project is compliant.

Tips on managing internal stakeholders at work 

Here are tips for managing internal stakeholders at work:

• Maintain open communication channels: Encourage stakeholders to share their input and concerns. Conduct regular meetings, ask for email updates, or create a designated communication platform.
• Update stakeholders on project progress regularly: This ensures everyone is on the same page. It also helps to build a culture of transparency that promotes a sense of trust and accountability.
• Address concerns promptly and transparently: Listen to feedback and issues that stakeholders raise and act on them. Be transparent about your actions and decision-making process to build trust.
• Foster a collaborative work environment: Include internal stakeholders in project planning and decision-making. This cultivates a sense of ownership and shared responsibility.

Tips on managing external stakeholders at work 

Here are tips for managing external stakeholders:

• Define project goals and deliverables upfront: This helps the client set realistic expectations about the project. It also encourages vendors and suppliers to align their work to these goals.
• Manage expectations through clear communication: Inform external stakeholders of the project's scope, schedule, and other important details. This can help you meet their expectations.
• Be responsive to enquiries and concerns: This shows that you value input, building trust and credibility. As a result, people are more likely to support the project.
• Build strong relationships with external stakeholders: These people can help ensure the success of a project. They can also increase the likelihood of future work with the same stakeholders.

Potential challenges to stakeholder management at work 

Here are some challenges in managing stakeholders and their impacts:

1. Not identifying all stakeholders in a project: This can lead to unexpected pushback and project delays.
2. Communication breakdown: Infrequent, unclear, or incomplete updates can erode trust and create confusion among stakeholders.
3. Clashing priorities: Stakeholders have different goals or expectations about a project. This can make it hard to meet their needs.
4. Power imbalances: Some stakeholders have more power than others. This can include shareholders and executives. They might make decisions that benefit them but not others, which can cause problems and conflict.
5. Resistance to change: Stakeholders who resist new ideas or methods can slow a project's progress and create friction.
6. Having "free riders" in a project: Some stakeholders may not take part in the project but still reap the benefits. This may breed resentment among those actively involved in the project.

Conclusion 

Stakeholders are people or groups interested in a company or project, either directly or indirectly. They can impact how well a project does and how a company performs. When managing stakeholders, knowing who they are and what they need is important. Keeping communication clear and open is also crucial. This helps you set their expectations, encourage teamwork, and build trust, all of which are essential for success in Singapore's diverse and dynamic business environment.

FAQs 

Here are answers to questions about this topic.

1. What is a stakeholder, and what are some examples?
   A stakeholder is a person or group with a vested interest in a project or organisation. Examples include employees, customers, investors, suppliers, or local community members.
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2. What is the main role of a stakeholder?
   The main role of a stakeholder is to be deeply interested in a company or project. What this means varies depending on the type of stakeholder. For most internal stakeholders, their primary role is to support the success of projects.
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3. What are the stakeholders in a project?
   Stakeholders in a project are groups or people who have an interest in the project's outcomes. They also include those that the project affects. The main project stakeholders are the project sponsor, project manager, team members, and the client.
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4. What is a stakeholder vs shareholder?
   A stakeholder is anyone interested in an organisation's performance or impacted by a project's outcome. They encompass various individuals and groups, including shareholders. Shareholders typically own company shares and are significant stakeholders.
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5. What is the role of stakeholders in project management?
   The role of stakeholders in project management is to ensure the project's success. The tasks of each stakeholder depend on their type. For some, it means getting resources for the project. For others, it means planning and doing tasks to meet the project's goals.
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6. How do stakeholders affect decision-making?
   They do this by stating their opinions, highlighting concerns, and advocating for their interests. The extent of their influence varies depending on their stakeholder type.
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7. Are employees considered stakeholders?
   Indeed, employees are stakeholders who are directly interested in the organisation's success, as company decisions and actions directly impact them.
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8. How do you engage with stakeholders effectively?
   This involves identifying stakeholders and understanding their interests and concerns. It includes transparent communication, involving them in decision-making, and fostering positive relationships.
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9. What happens when you don't consider stakeholders in a project?
   Neglecting stakeholders in a project can lead to conflict and delays. This neglect reduces trust and credibility, making it difficult to gain their support and cooperation. Such issues can ultimately cause a project to fail, often due to misaligned goals and stakeholder expectations.