Stakeholder Management

Can you identify the key individuals whose support is essential for your organization to exist?

These individuals or groups are known as stakeholders because they hold a valuable stake in your business. The origin of a business stakeholder can be traced back to 1963, when the term appeared in an international memorandum at the Stanford Research Institute and was defined as “those groups without whose support the organization would cease to exist.”

Supporting your stakeholders and receiving their ongoing support creates a symbiotic relationship that ideally benefits all parties. Therefore, it makes sense to identify them, understand their needs, and then determine how you can best manage the various relationships for maximum reciprocal benefit.

Broadly speaking, your stakeholders include all the people affected by your organization’s actions, and in turn have some impact on your company. You have both internal and external stakeholders. The internal stakeholders are all of the people on your payroll who depend on your company for their livelihood, which includes executive managers, supervisors, and employees. Those groups and individuals that are external to your organization include your suppliers, stockholders, community, bankers/lenders, government leaders, customers, and competitors.

Yes, your competitors are impacted by your business, just as they can affect your margins and sustainability. It is possible to manage the relationship you have with your competitors so you work collaboratively instead the competitive, cost-cutting relationship that most develop.

Let’s look at the specific individuals or groups that can have the biggest impact on your organization. The most obvious are your customers. Without their support through purchases, your company could not exist. Even though it’s obvious that they are important stakeholders, it’s surprising how many businesses do not have a plan to effectively manage their customers for maximum value. They can’t tell you basic metrics such as how many prospects, on average, visit their store, what percentage of those convert into paying customers, the average purchase value, or how many return and how often. They often lack policies, procedures, and practices that create greater customer satisfaction and loyalty. Going deeper, most business owners haven’t taken the time to delve into the psyche of their customers to better understand what makes them tick, why they buy, or what specific benefits will keep them coming back.

The same could be said about your other important stakeholder – your employees. These individuals have chosen your company as the place to spend much of their waking hours to earn a living. They expect a safe working environment, reasonable compensation, and they want to be treated with respect. They can be managed to earn greater profits for the company, but have you considered managing them so they have greater life fulfillment working with your firm? This again requires you to delve into the psychological factors that motivate them to perform at their best and want to remain with your company. Their overall satisfaction as an employ has a direct impact on the satisfaction of your customers, and lowered costs due to turnover and waste.

Focusing on and taking care of your customers and employees will help overcome the majority of challenges your business faces now and in the future. Other important stakeholders include your suppliers, those people who provide the goods and services that allow you to operate your business efficiently and effectively. Often, price is the major consideration in choosing a vendor, but other factors should be considered to develop and manage long-term relationships with vendors who work well with your company. If you walk into any McDonald’s restaurant in the world you will never see Pepsi products sold. The reason why is because when Ray Kroc was cash poor trying to expand the franchise, Coke offered him generous credit terms that allowed the company to remain solvent. Because of this, the company made a lifetime commitment to the vendor. Many other major corporations have strong ties with their suppliers that help them maintain a competitive advantage.

It’s possible to create a win-win situation with all of your stakeholders so that your organization continues to prosper. Your challenge as a business owner is to learn how to identify your most important stakeholders and to balance, as much as possible, their needs for mutual benefit. For example, the need for your business to earn a profit needs to be balanced against the needs of your employees to earn a sufficient income, and the needs of your customers to gain as much value as possible from your company. Managing and balancing all the stakeholder relationships within and without your organization will go a long ways to enable your organization to remain profitable and to create greater fulfillment in the lives of all those you touch.