What is a stakeholder?
A stakeholder is an individual or party with a vested interest in a business. Stakeholders influence the company and its operations. At the same time, the company itself affects the stakeholders. Examples of common stakeholder groups are investors, employees, customers, governments, and local communities.
Some stakeholders are very concerned with the impact their business partners have on their communities. In these cases, businesses can take advantage of corporate social responsibility (CSR) software to track the impact of their social good initiatives. Effective tracking and measurement allow companies to integrate social and environmental responsibility in their operations to be socially accountable to themselves, their stakeholders, and the greater public.
Internal vs. external stakeholders
The two primary groups of stakeholders are internal and external within the organization and directly impacted by the work. Examples of internal stakeholders include investors, employees, and business leaders.
External stakeholders function outside the organization and are indirectly affected by the work of the business. Examples of external stakeholders include the community and the government.
Types of stakeholders
In order to meet stakeholders’ needs, businesses need to understand the different kinds
- Customers: Customers can be internal or external. Companies must consider both kinds because products, services, and customer service directly impact them. Organizations have to prioritize appealing to customers to generate sales.
- Employees: No matter the organization's size, employees are an important stakeholder group to consider because they rely on business decisions from company leaders for salaries and job security. Employees of all tenures and titles are part of this stakeholder group.
- Investors: The investor stakeholder group relies on the company’s success to see a financial return on their investments.
- Vendors: Suppliers and vendors sell goods to a business and count on the purchasing company for sales revenue. In addition to payment, vendors are typically concerned with safety and how their goods will be used.
- Communities: The local community is sometimes considered a stakeholder because a company’s actions and decisions affect its surroundings. Whether through economic or environmental factors, business decisions can influence the community for better or worse.
- Governments: Businesses are obligated to pay state and federal taxes, which means the government is also considered a stakeholder. In addition to taxes, governments may hold organizations accountable to specific rules and regulations.
Stakeholder management challenges
Managing a large group of stakeholders and their interests is no easy feat. Identifying challenges is the first step toward overcoming them. Common challenges of managing stakeholders include:
- Lack of alignment. While considering everyone’s thoughts and opinions is inclusive and necessary, it sometimes leads to a lack of alignment among stakeholders. Knowing how to spot misalignments and having conversations to address them is critical for helping initiatives progress.
- Competing priorities. Stakeholders hold different perspectives and are more likely to favor scenarios that benefit them. This becomes problematic when priorities compete. Concerned parties must learn how to compromise among stakeholder groups and mediate difficult situations.
- Communication breakdown. When communication breakdowns occur, initiatives may stall or fall apart altogether. Intentional and ongoing communication is imperative when managing multiple stakeholder groups.
Best practices for managing stakeholders
Stakeholder management has many approaches, but some best practices are important for getting and keeping stakeholders engaged.
- Select the right stakeholders. Choosing the right people to fulfill various stakeholder roles ensures the stakeholder group stays committed and engaged. Stakeholders with ambiguous or unclear roles won’t add as much value as those who fully understand how to contribute and play their part.
- Establish a regular cadence for stakeholder communications. Informing stakeholders early and often through clear messages conveys progress. Additionally, stakeholders need to know when issues arise so they can act quickly and avoid bottleneck time-sensitive scenarios.
- Commit to resolving conflicts rapidly. Disagreements will happen. Rather than try to prevent disputes, teams should cooperate to resolve conflicts quickly.
Stakeholder vs. shareholder
A stakeholder is not necessarily the same as a shareholder. Stakeholders are affected by an organization’s decisions and operations. In contrast, shareholders themselves have partial ownership of the company because they have shares or stocks. Shareholders are always stakeholders, but not all stakeholders are shareholders.
Learn about different communication channels and how to use them to keep stakeholders aligned and informed.
Alyssa Towns
Alyssa Towns works in communications and change management and is a freelance writer for G2. She mainly writes SaaS, productivity, and career-adjacent content. In her spare time, Alyssa is either enjoying a new restaurant with her husband, playing with her Bengal cats Yeti and Yowie, adventuring outdoors, or reading a book from her TBR list.
