What is a Stakeholder: Definition, Types & Examples

In a Nutshell

1. Stakeholders can affect or be affected by a project or business.

2. They may be internal, such as employees, or external, such as customers and suppliers.

3. Effective stakeholder management involves identifying, prioritising, and engaging them.

4. Stakeholder maps and communication plans help manage relationships effectively.

5. Regularly reviewing stakeholder needs and engagement strategies can help projects adapt to changing expectations and improve outcomes.

What is a Stakeholder?

A stakeholder is an individual, group, or organisation that can affect, be affected by, or have an interest in the decisions, activities, or outcomes of a project or business. Stakeholders can be inside the company (like employees) or outside (like customers or suppliers). They often play a role in how successful a project is.

Stakeholders are important because their support, influence, needs, or concerns can affect project progress and outcomes. For example, if a company is building a new product, the project team, managers, investors, and customers are all stakeholders. Each of them has different expectations. Some want the product delivered fast, while others want it to be cost-effective or high-quality. Good communication with stakeholders helps the project run smoothly.

Different Types of Stakeholders

Stakeholders can be classified in several ways, but two broad categories are internal and external stakeholders:

Internal Stakeholders

Internal stakeholders are people who are part of the organisation. They work within the company and play a direct role in decision-making and daily activities. Their involvement can have a strong impact on how well a business performs.

Example of Internal Stakeholders:

a) Employees working on specific tasks or projects

b) Managers leading teams or departments

c) Company directors or board members

d) Business owners and shareholders who are actively involved in the organisation

e) HR and finance teams whose responsibilities affect the project or business

How to Identify Internal Stakeholders?

To identify internal stakeholders:

a) Look at who works inside the company

b) Check who is responsible for day-to-day operations

c) Find out who is involved in project decisions

d) Notice who attends planning meetings

e) Identify those accountable for business results

External Stakeholders

External stakeholders are individuals or groups who are not part of the organisation but are still affected by its actions. They don’t work within the company, but their interests may depend on the organisation's performance.

Example of External Stakeholders:

a) Customers who buy the company’s products or services

b) Suppliers providing materials or goods

c) External investors or lenders providing funds

d) Government bodies setting rules and regulations

e) Local communities around the business location

How to Identify External Stakeholders?

To identify external stakeholders:

a) Think about who is affected by business decisions

b) Consider people or groups outside the company

c) Check who supplies resources or funds

d) Identify those who can influence or are affected by business outcomes

e) Look at feedback from external partners or customers

Stakeholders vs Shareholders

Here are the key differences between stakeholders and shareholders:

1) Definition

A stakeholder is anyone affected by or interested in a company’s actions, like employees, customers, suppliers, or the local community. They may not have any financial investment in the company. On the other hand, a shareholder is someone who owns shares in the company and is directly invested in its financial success.

2) Interest in the Company

Stakeholders have different interests depending on their relationship with the organisation. Employees may focus on working conditions and job security, customers on product quality and service, suppliers on reliable business relationships, and communities on the organisation's wider impact.

In contrast, shareholders have a financial ownership interest in the company, although their priorities can vary and may focus mainly on profits, dividends, and the company’s stock performance.

3) Type of Involvement

Stakeholders can be involved in day-to-day operations or affected by them, even if they don’t own part of the business. Their involvement varies depending on their relationship with the organisation. On the other hand, shareholders are usually not involved in daily activities; they influence the business mainly through voting and other rights attached to their shares.

4) Goals and Expectations

Stakeholders may seek stability, fair treatment, job security, or reliable service depending on their connection to the company. Their goals vary widely. In contrast, shareholders generally have a financial and ownership interest in the company. They mostly want the business to grow so they can earn more money from their investment.

5) Impact on Business Decisions

Both stakeholders and shareholders can influence business decisions. Stakeholder influence varies according to their role, authority, interest, and relationship with the organisation.

Shareholders may influence certain company decisions through voting rights attached to their shares, while other stakeholders may influence decisions through management responsibilities, contractual relationships, regulation, customer demand, employee representation, or public feedback.

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Importance of Stakeholders

The significance of stakeholders in the context of a business is underscored by several key reasons. These reasons are discussed below:

a) Support and Resources: Some stakeholders, such as investors and financiers, provide financial support and funding, while others may contribute resources, expertise, information, or services necessary for projects or business operations.

b) Influence and Decision-making: Stakeholders often possess the authority to influence decision-making processes. They may participate in strategic planning, governance, and policy formulation, shaping the direction of the project or business.

c) Accountability and Transparency: Stakeholders, including regulatory bodies and the public, demand accountability and transparency. This fosters ethical practices and responsible governance, enhancing the credibility of the business.

d) Risk Mitigation: By involving various stakeholders, businesses can identify and mitigate risks more effectively. Different perspectives and insights can lead to better risk management strategies.

e) Customer Satisfaction: Satisfied customers are vital stakeholders. Their feedback and loyalty impact a business's success. Happy customers can become brand advocates, leading to increased sales and brand reputation.

f) Employee Engagement: Employees are integral stakeholders. Their commitment and motivation are essential for productivity and innovation. Engaging employees can lead to higher job satisfaction and better performance.

g) Community and Social Responsibility: Businesses often operate within a community and have a social responsibility. Engaging with local communities and addressing social issues can improve public perception and goodwill.

h) Adaptation to Change: Stakeholder input helps businesses adapt to changing market conditions and emerging trends. This agility is critical for staying competitive and relevant.

Pro Tip:

Separate stakeholder demands from underlying needs. What someone initially asks for may not always reflect the actual business problem or outcome they are trying to achieve.

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Stakeholder Management Templates

These templates help you organise, understand, and communicate with stakeholders effectively. They save time and ensure nothing important is missed during your project. Here are the key templates to use for better stakeholder management:

Stakeholder Analysis Template

This template helps you list all stakeholders and understand their interests and influence. You can record their expectations, concerns, and how much they affect your project. It’s useful for planning how to manage each stakeholder properly.

Stakeholder Map Template

The stakeholder map visually shows who your key stakeholders are and where they stand in terms of power and interest. It helps you see who needs the most attention and who to keep informed. This makes it easier to prioritise your communication and actions.

Communication Plan Template

This template outlines how and when you’ll communicate with each stakeholder. It includes the message, channel (like email or meetings), and how often updates should be sent. A good plan keeps everyone informed and reduces confusion.

How to Manage Stakeholders in a Project?

Managing Stakeholders well helps your project stay on track and keeps everyone informed, involved, and supportive. Here's how to manage project stakeholders effectively:

1) Stakeholder Identification

The first step is to find out who your stakeholders are. These are people or groups who have an interest in your project or may be affected by it. Knowing who they are helps you plan how to work with them.

a) List everyone affected by the project

b) Include both internal and external stakeholders

c) Use brainstorming or stakeholder maps

2) Stakeholder Analysis

Once identified, analyse their needs, expectations, and how much influence they have. This helps you understand their concerns and level of interest. It also guides how much attention and communication they need.

a) Assess their level of power and interest

b) Understand their goals and worries

c) Group them based on influence and impact

3) Stakeholder Prioritisation

Not all stakeholders need the same level of attention. Some have more power to affect your project, so they need to be a higher priority. Prioritising helps you manage your time and resources better.

a) Focus more on key decision-makers

b) Use a power-interest grid

c) Keep lower-priority stakeholders informed as needed

4) Stakeholder Engagement

This step involves building strong relationships through clear communication and regular updates. It’s important to listen to their feedback and involve them in important steps.

a) Share updates regularly in simple terms

b) Ask for feedback and input

c) Include stakeholders in major decisions when possible

5) Monitor and Adjust Stakeholder Engagement

Stakeholder priorities, influence, and attitudes may change as a project progresses. Regularly review your stakeholder analysis and communication approach to ensure engagement remains appropriate.

a) Review stakeholder needs periodically

b) Monitor changes in influence, interest, or support

c) Adjust communication and engagement strategies when necessary

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