Stakeholders are parties who are interested in an organization and are directly or indirectly affected by its actions. Businesses are nearly impossible to run without stakeholders as they pose various benefits.
Fortunately, experts have developed more digitalized tools for managing and tracking business stakeholders. With such tools, businesses are likely to perform incredibly well. In addition, you can seek a financial advisor’s help managing your stakeholders and watch how everything falls into place.
Let’s learn about the importance of stakeholders.
Types of Stakeholders
There are two main types of stakeholders:
Internal stakeholders
They have a direct impact and are impacted by the operations of the organization since they are based within it. They include investors, project managers, boards of directors, owners, and employees.
External stakeholders
They indirectly impact and are impacted by the organization’s projects since they are found outside the organization. They include the community, government, clients, creditors, customers, competitors, and suppliers.
Stakeholder Engagement
Stakeholder engagement is how organizations constantly communicate with their stakeholders to understand their wants and how they can influence them. The process aims at simplifying the relationship between the company and its stakeholders.
You can use a strategy matrix and an interest matrix to help you assess engagement. A strategy matrix organizes and groups various stakeholders’ projects depending on their activeness and the need for frequent communication. Likewise, an interest matrix is a tool for prioritizing your stakeholders’ concerns on engagement and management.
The stakeholder engagement plan outlines the communication scheme concerning different stakeholders and their projects. Similarly, the stakeholder engagement framework outlines the company’s key activities, models, approach, and plans to enhance existing schemes. Both the plan and framework will help you management stakeholder engagement easily.
Importance of Stakeholders
Engaging stakeholders directly enables you to understand and embrace different perspectives hence acquiring more genuine feedback on your performance. In addition, stakeholders also provide the following benefits:
Financial support
Sometimes, stakeholders can offer significant financial support to your business and save it from collapsing. For instance, stakeholders can positively vote against specific unfavourable government regulations that would otherwise affect your business negatively.
Risk identification and management
Stakeholders can help a business identify and manage risks long before they mature into catastrophes. Some of the risks can be identified through feedback or stakeholder meetings.
Saving costs
Maintaining a healthy relationship with your stakeholders can save significant business costs that would otherwise be a burden. For instance, when stakeholders point out risks in their infancy, the business saves on costs that would otherwise be used to eliminate the problems.
Quicker and healthier decision-making
By seeking varied opinions from different stakeholders, a business can avoid mistakes and enhance its decision-making process.
How to Manage Stakeholder Conflicts
Conflict is when two or more parties disagree based on different needs, ideas, and options, creating an unstable state in the organization. Stakeholder conflicts are unavoidable in the business world and should be managed for better performance.
Some of the most common stakeholder conflicts arise when:
- The locals raise issues about the standards of the products and services offered by the company.
- Creditors pressure organizations to pay high-interest rates or make loan repayments on time.
- The government sets strict legal requirements for businesses, such as raising taxes.
- Companies switch to different suppliers other than their usual ones.
- Customers raise concerns about the safety and privacy protection of the products and services offered by an organization.
- Employees want an increment in salaries and incentives, and the management delays making positive moves.
- Shareholders pressure the company to make more significant profits for their hard-earned shares.
Managing stakeholder disputes can be quite challenging, especially for large businesses. To successfully settle such chaos, business managers can start by listing their stakeholders and where the conflicts arise. They should then proceed to evaluate the impact of the disputes under discussion on the business.
Address conflicts in their infancy rather than ignoring them till they mature. Also, concentrate better on communication and its effect on the stakeholders’ performance. In addition, embrace digital workplace tools for better performance. That way, you can track projects from their early stages till they become fruitful.
Undertake short-term performance meetings to determine the stakeholders’ performance. Request regular feedback from other stakeholders. Listen to your stakeholders more than offering justification for your actions as a business. Also, engage financial advisors and other business experts to nourish your business-stakeholder relationship.
Negative Effects of Overlooking Stakeholder Conflicts
Unresolved or poorly managed stakeholder conflicts have significant effects on the business, including:
- Lowering productivity.
- Lowering profits and efficiency.
- Poor relationship with other stakeholders.
- More costs as companies strive to mend the loopholes.
- Discouraging creativity and innovation among employees and other stakeholders.