Business Tips

What are stakeholders and how to to manage them for your business

I still remember the first time I heard the word stakeholder . It was my first day of MBA at SPJIMR Mumbai: SP Jain Institute of Management and Research

The first day of these things you already know how they are: a lot of beer, wine, pinchos … In short, that we were getting a little happy to lose the stage fright of the first time and that way we would meet the classmates. There the spark arose.

And you will ask yourself, what is the meaning of stakeholders . If I tell you that the stakeholders are stakeholders as individuals or institutions whose decisions affect your business , you are probably not finding much … right?

So let me tell you something that will probably help you better understand what they are and the true impact they have on businesses like yours.

What are stakeholders ?

I don’t know what your business is, nor do I know your profession. But what I can assure you is that where it is located, the type of clients or suppliers that you have have influenced, influence and will significantly influence its development and how the management is going to be a key aspect.

The vast majority of people who are in charge of businesses control 5% of what happens to their businesses.

Only a few are capable of reaching much higher percentages. I dare say that Elon Musk could control 15% of what happens to him. And it doesn’t seem like much, does it?

But I insist, the vast majority control a very low percentage And the difference from controlling 5% to controlling 6% is a lot. That point makes your business significantly increase the chances of survival.

The stakeholders and good management is what makes your business is more likely to succeed. If you have a client who accounts for 40% of sales and decides not to continue working with you, you have a problem. If a good part of your clients come to you because your business is in a central street and the City Council decides to undertake works to reform it, it is likely that the volume of clients will decrease, and you have a problem.

If you have a factory for a specific product and the government decides to eliminate tariffs on those products and therefore it is cheaper to import, you almost certainly have a problem.

If you have a restaurant and your electricity bill goes up significantly, then you almost certainly have a problem.

These are some examples of how decisions made by others can significantly affect your business .  All those “others” are stakeholders and how you manage them is key to the future of your business.

The importance of stakeholders in a company

In stakeholder management there is a lot of money and if you know how to take advantage of it, you will not only be able to maintain your business, but also grow And the importance is in knowing how to influence their decisions or how to make sure that, at least, they do not harm you.

Before, I used the example of Elon Musk with a certain intention of taking advantage of it now to explain the importance of stakeholder management .

Let’s put ourselves in context: Tesla was founded on July 1, 2003.

Since its founding, Elon has been channeling public opinion towards the importance of the electric vehicle and its importance to improve pollution in cities. Even without having manufactured cars. At the end of the 2000s, with Tesla already created and launching messages towards the electric car and its future, the governments of half the world said that the best fuel to buy cars was diesel. At that time, the purchase of diesel cars was encouraged and encouraged compared to other types.

Well, Elon, through different movements, managed to get governments around the world, in just 6-7 years, to totally change the discourse and focus on the electric car as a solution. Obviously he has not done it alone but, without your help, he probably would not have gotten to where he is now. But it has also done it so well that no one wonders how that electrical energy is generated.

The discourse is not in what energy sources are being used to generate energy, but in the benefit of the electric car compared to the fuel ones.

But where is the other 85% that Elon doesn’t control?

Well, in the rest of the brands that have also moved and released their own electric cars, in the people who are still very skeptical or in the oil companies that also do their own stakeholder management .

But with good stakeholder management , as of September 15, 2021 Tesla has a market value as a company of 737 billion dollars with sales of almost 500,000 vehicles in 2021, while Volkswagen has a market value of 124 billion (almost 6 times less) with sales of more than 9,300,000 units (18 times more sales).

Regardless of the size of your business, you have to identify what affects your business to make decisions about it.If you leave it to chance and do not make an effort to understand that the decisions of many people influence your business, surely the future will not be very hopeful.

Types of stakeholders

There are different classifications of stakeholders , but the two most common ways to classify it are as follows:

 *Internal and external

Internal stakeholders are those who are linked to the business , are part of the business itself, such as workers or shareholders.

External stakeholders are those outside the business , such as suppliers and customers.

* Primary and secondary

Primary stakeholders are those who are part of the usual business dynamics. While the secondary ones are those that do not have that close link but that can significantly affect their performance. As the limit may seem a bit fuzzy, I will try to shed some light on how to establish that limit that differentiates the stakeholder that forms the day-to-day business and the one that does not.

Imagine we have a bar in the center of a city. Customers, suppliers or waiters. If any of them fail, the business can be seriously compromised, right? It may be that one day the order of beers will not arrive, that the volume of customers will be lower or that a waiter is unwell and cannot go to work. If it is a specific situation, then it is corrected in a natural way and the business is hardly affected.

However, if the City Council does not renew the license of the premises overnight, your business will go out of business. The City Council has never needed to appear for the business, but its decision affects it in a very noticeable way.

Of course: not all secondary affect in the same way.

In the case that we have now, the City Council does affect drastically, but if another secondary stakeholder , such as your bank, decides to raise the costs of credit commissions, it does not directly affect the profitability of your business .

But it may be the case that that same stakeholder (as is the case with the bank) does not renew your credit policy or does not grant you a loan for an extension. There it is, it is significantly affecting the development of the business.

Differences between stakeholders and shareholders

I want to make a little clarification about the difference between stakeholders and shareholders . More than anything, in case you’ve come this far looking for the term shareholders, don’t go away empty-handed.

The shareholders are shareholders of a company. The shareholders (shareholders), or through their decisions can influence the business, they are also considered stakeholders . They have to approve accounts, they can appoint and remove administrators, directors or reject capital increases.

Why is it necessary to do good stakeholder management

Because you are not Superman and we are not in the stone age where everyone had to do it all. Every day we are more interconnected with each other and every day there are more and more things that affect the development of our businesses.

Business is becoming more complex and requires more skills and knowledge. Today, most businesses have SEO or social media specialists . The demands at the tax level are increasing. More complex financial products. New technologies and the appearance of new business models.The figure of the false self-employed or teleworking. New legal frameworks.

Each and every one of them are aspects that make new figures enter our businesses. Business consultants, community managers, commercial lawyers, more specialized tax advisers, etc. All of them will affect the development of your business and their good or bad management makes it easier or more difficult for your business to survive.

Stakeholder matrix

With the stakeholder matrix you will be able to see, visually, the distribution of your stakeholders where, depending on how they can influence your business and their power, it proposes a way to manage and treat them.

Examples of stakeholders

I don’t want to say goodbye without leaving you a small list of stakeholders .

  • Shareholders: they are the promoters of the business and their decisions influence the future of the company.
  • Clients: without them there is hardly any business. If what you sell does not convince them, the future is complex.
  • Employees: they are in charge of generating value for customers and for what they pay for the products and services that the company offers.
  • Managers: constantly make decisions in the company. They are very weighty decisions that affect it.
  • Sales representatives or intermediaries who are responsible for making such sales directly or indirectly.
  • The government: they generate legislation and norms that regulate the relations between us.
  • Competition: their decisions can and do that our clients can go to them or the other way around.
  • NGOs and non-profit institutions: can influence the decision-making capacity of clients and affect the business indirectly.
  • Media: can positively or negatively affect business communication.
  • Suppliers: As we talked about before, their performance influences our business.
  • Banks: whether they grant a loan or not is an aspect that will affect the chances of a business growing or even surviving.
  • Society: social movements can also favor or harm certain businesses.

With these, I think you have enough information to get an idea of ​​what stakeholders are and so that you can evaluate yourself which ones are yours and what measures you are taking so that their decisions influence your business in a more or less positive way. Or if, on the contrary, they can influence negatively and see how to minimize the risk of exposure.

I hope you have enjoyed reading and, above all, that you have become aware of the importance of identifying, serving and managing all these institutions and people. And it is that many times we are not aware that their decisions significantly affect our business.

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