Understanding the Roles of Stakeholders in Business: Interests, and Impact

Who are stakeholders in business, and how do they steer a company’s journey? Ranging from investors and employees to governments and local communities, they play pivotal roles in influencing a company’s trajectory and overall business success.

In this article, ProCoders demystifies stakeholders’ roles and their varied impacts, setting the stage for a comprehensive discussion on why understanding each stakeholder group is crucial for business strategy and success.

Key Takeaways

• Stakeholders encompass a wide spectrum of entities that can be categorized into internal and external, as well as primary and secondary, all of whom can significantly influence operations, success, and governance.
• Effective management involves identifying key stakeholders, understanding their interests and influence, engaging them through clear communication and collaboration, and adapting business strategies to balance their diverse concerns and priorities.
• The shift towards stakeholder capitalism reflects a changing corporate philosophy that emphasizes the well-being of every key person and the broad impacts of corporate decisions, moving beyond traditional shareholder primacy towards more inclusive and sustainable corporate practices.

What are Stakeholders?

Stakeholders are any people, groups, or organizations that have something to gain or lose based on the outcome of a project or company. They have a lot to do with the results and decisions surrounding the project or business—they can heavily influence the project or be influenced by it.

These are the people or organizations that have a vested interest in the outcome, which often means they have different interests, needs, and perspectives, and can include anything from financial considerations to regulatory concerns. Indeed, they are an integral part of making the undertaking work and what it becomes.

The Spectrum Of Stakeholders Explained

These include a diverse range of people:

• Owners
• Employees
• Investors
• Suppliers
• Communities
• Governments

But while shareholders are stakeholders with a financial interest in an organization, the term extends far beyond the balance sheet, including those interested in the company’s performance as a whole, not just the stock market.

Stakeholders typically care about the company’s financial performance (financial metrics, stock price, and potential return on investment), but shareholders take a particular interest in the company because the primary interest of shareholders is the company’s returns.

Simply put, stakeholders are the veins of a company that weaved internally to crank it out of the gate to a defined goal.

Traditionally, companies used to make products for all the stakeholders keeping respect for each other and did not forget being part of neighourhood. This creates a variety of partner types, including:

• Internal stakeholders
• External stakeholders
• Primary stakeholders
• Secondary stakeholders

Let’s take a closer look at these categories.

Identifying Key Stakeholders

Some major stakeholders in a company usually are:

• Customers
• Employees
• Investors
• Local communities
• Suppliers
• Government agencies

All of these can have a large effect on the company.

Therefore, identifying and ranking these people becomes inevitable. The process includes analyzing their individual opinions and impact on the project or the overall operations.

Knowing the key players is essential for the management of relationships, and a matrix of stakeholders must be well defined to guide you.

Key partners are engaged to varying degrees in projects. Specifically, governmental agencies can have a substantial influence through legislative and regulatory decisions.

By contrast, customers, an external pressure group, expect products and services of high quality at fair prices.

Internal Versus External Stakeholders

Internal stakeholders are people, departments, or other entities directly linked to a firm, usually through an employment, ownership, or investment relationship. However, foreign players are those not included in the internal structure of the company but affected indirectly by its actions. To maintain a positive organizational environment, a company must evaluate the needs and expectations of these groups that we have mentioned and their extent of being an internal or external stakeholder.

Because they are involved in the operational process, internal stakeholders such as employees and investors influence the company directly. At a base level, they want to be happy with their work, drive decisions, and get a return on their investment.

External stakeholders (suppliers, community groups) indirectly influence a business through:

• service provision
• community relations
• influencing operational costs
• the company’s standing in the community

Hence, internal and external stakeholders are centric to the functioning of a business.

Primary vs. Secondary Stakeholders

Within these two groups, primary stakeholders have a direct stake in a company, while secondary stakeholders are indirectly affected by the company’s operations. Employees, for example, have direct contact with customers and have a stake in a safe and equitable workplace; plus, they help run the company and can influence company culture.

The financial contributions by investors and partners entail expectations for returns and influence strategic direction and profit management. The most direct way owners and shareholders impact business goals and decisions is by defining the goals and making decisions, and managers influence activities and company goals through decisions.

In contrast, the local community, as secondary stakeholders, affect the operations of a firm indirectly, keeping in mind whether they support or oppose the business.

Stakeholder Roles and Responsibilities

Stakeholders have multiple roles within a project or company, such as:

• decision-making
• resource allocation
• risk management
• governanceThey are generally divided into two main types: internal and external.

Stakeholders as Agents of Corporate Governance

Stakeholder primacy — the idea that companies have obligations to a wide range of key players, not just shareholders — had historically developed as a response to shareholder primacy models, favored by people like Milton Friedman in the past. A revival of this notion has emerged to combat the reduction of interests to only shareholders, branding the idea stakeholder capitalism, where the interests of all parties involved become prioritized.

This changing business philosophy reinforces the significance of key players and their impact upon corporate governance. With the perspectives of all stakeholders included, companies are in a better position to create a decision process that develops a culture of respect, that leads to the success of the company.

How Do You Decide if a Decision is Good or Bad?

Strategic management is influenced by key internal stakeholders such as managers and owners. Management is the responsible authority; they make day-to-day operational decisions, whereas ownership flows to an entity that supports the organization with capital, resilience and perspective. Meanwhile, external stakeholders like investors and partners influence strategic choices by evaluating company reinvestment against their expected returns on investment, and occupying board seats to affect direction.

Companies are owned by owners, but sometimes customers can influence company management decisions more than the owners themselves, particularly as a long-term strategy for mutual benefit. Because of this, the stakeholders who impose constraints on the firm must be the key consideration in strategic corporate governance, making management a critical piece in corporate governance.

Managing Multiple Interests

The interests of all stakeholders of a company are not necessarily aligned and can be achieved as clashes, creating a competing interests and balancing issues. Financial — Shareholders and owners, one of the key stakeholders, influence business decisions by their financial interest, which is mainly concerned with financial returns. Within this context, they possess a stake in the success of the company.

Players like internal affairs tend to dominate decision-making, but vendors and suppliers, other key stakeholders, are needed to be encoded into business functions with consideration for remaining inclusive to their budgeting and scheduling requirements. Stakeholder approaches to corporate governance may lead to increasingly complex governance structures with multiple centers of authority. Management, then, involves balancing these interests in a delicate act that companies must learn to master.

The stakeholders’ interest can vary from project to project. Hence, we should engage and give priority to the people with high interest in the project.hority. Balancing these diverse interests is a delicate act that companies must master for successful stakeholder management.

“The level of interest to a project might be different for each stakeholder, and we should prioritize the stakeholders who have high interest to the project.”
Mike Perepecha, Project Manager at ProCoders 

Stakeholders Management and Its Necessity

Management is important to get buy-in to the project and the ability to prevent, influence, or potentially derail it. The key to an effective strategy is addressing, managing, and balancing conflicts, catering to different interests, and considering their limits on company actions.

Communicating with stakeholders is necessary, regardless of project management methodology. Be it your particular methodologies or management, feedback gathering, or successful project outcome, all can be achieved.

For big projects, a stakeholder management plan can be utilized to eliminate confusion:

“Stakeholder management plan is a tool to increase efficiently in managing. It is created for big projects and contains information about which stakeholder is responsible for what matters to avoid miscommunication during the project.”

Mike Perepecha, Project Manager at ProCoders

ProCoders is an example of a company that implements proactive management and integration. Resource allocation, such as budgeting and skilled personnel, and investing in a specialized tool or profession help them adapt to different players’ needs in an effective manner.

Principles of Stakeholder Management

Well-managed interest is an indispensable element for a project or business. Here are some principles that can help with management:

• Identify and analyze their interests, needs, and expectations
• Keep them informed through regular updates, feedback, and engagement
• Invite stakeholders to be part of the decision-making
• Foster trust building, relationship management, collaboration, and conflict resolution.

Strategies for Interacting with Stakeholders

Companies can achieve this by sending periodic email updates, developing newsletters that transparently explain decisions and rationale, and soliciting active participation in areas of stakeholders’ expertise. The strategy adds face-to-face meetings to phone calls and digital counterparts like webinars, Slack chats, podcasts, and meetups, showing that input is greatly appreciated.

Stakeholder mapping for custom solutions, end-user feedback inclusion, and frequent communication are just a few ways that are helpful in case of decision-making processes, as shown with ProCoders examples. Good stakeholder relationships serve as a mechanism to reflect community values, identify issues earlier, and improve policy quality while also preventing potential complications.

Focusing on What Matters Most to Stakeholders

A thorough understanding of power and interest in the company is essential to properly prioritize stakeholders. This insight is essential for whom to work with and closely manage. This aspect is pivotal in acknowledging various expectations and interests of stakeholders whose prioritization directly focuses on addressing the ethical expectations, which in turn reflects the sequence in which key player concerns are to be managed.

Rewards of Good Stakeholder Management

There are many advantages beneficial to the project/business, provided that manageable stakeholders are present:

• Better relations
• Trust and credibility building
• Better decision-making
• Enhanced reputation
• Improved risk management
• Enhanced engagement and participation

How Stakeholders Affect Business Operations and Revenue

The stakeholder role, therefore, is that the good is more or less valuable to an entity depending on their ability and willingness to pay. All successful businesses are engaged in building financial value in the form of value for growth as well as perceived value through customer satisfaction and a positive business environment for employees.

Enhancing operational efficiency and ensuring business continuity also means understanding your internal and external stakeholders. Stakeholders influence business processes through resource distribution and the roles these stakeholders play within a collaborative environment.

Of course, when it comes to accelerated deployment, cost-effectiveness, and less disruption in every IT project, collaboration with stakeholders such as ProCoders makes a winning team.

Involvement of Direct Stakeholders in Operations

Managers, employees, and owners are direct stakeholders. A manager’s decisions affect the day-to-day operations of the business by executing plans intended to attain the goals set by owners and shareholders. Through performance on the job, employees directly support the attainment of the company objectives, motivated by factors like job security, stable pay , and performance-related bonuses.

As Grand Canyon University faculty points out, providing fair compensation and opportunities for growth will create loyalty with employees, which will translate into improved performance and participation in operations. Owners and shareholders give guidelines and funds for the business, thus impacting the operational strategies and the long-term objectives of the company. Owners may influence the decision but to varying degrees; their input ranges from the pursuit of maximum profitability to the promotion of core company principles.

Integrating Stakeholders: A ProCoders Case Study

As a leading IT solutions provider, ProCoders shares a successful case study of stakeholder merging. ProCoders specializes in building unique development teams dependent on the specific needs of the task or launches R&D for the clients and is among the 10 percent of global companies proven to be the best in providing such services in 2023. They have a well-defined workflow that consists of:

• Sharing needs
• Interviewing developers
• Onboarding remote teams
• Quality products and quality support

A team of experts (ProCoders) has implemented more than 150 products.

Offering a team with experience in SaaS, logistics, IoT, and other areas, ProCoders also provides dedicated developers who you can communicate directly with, resulting in flexible and scalable IT solutions. They are IES 27001-certified under ISO, validating their focus on the security of other business stakeholders—no outsourcing a provider who doesn’t follow best practices for data security.

Strategies for Collaboration and Communication

ProCoders partners closely with clients to inspect the data they provide for accuracy, consistency, and timeliness, all key to project success. As one of the communication channels used by the company to enable regular and transparent dialogue with them, it uses project management software and intranets.

Here at ProCoders, we cultivate a collaborative culture where the stakeholders are encouraged to freely express their opinions, ideas, and concerns, which helps in building trust and mutual understanding. ProCoders also establishes clear stakeholder goals and roles, which keep the focus, prevent confusion, and ensure alignment and accountability in IT service projects.

Practical management and communication skill sets are complemented with work approaches the company takes to fill in gaps between team members, ensuring smooth advancement toward project goals.

Adapting to Stakeholder Needs

Our work with Ushahidi proves that ProCoders can always adjust our approach to fit the needs of the stakeholders. Our experts identified challenges and then provided feedback to the partner’s developers, leading to significant improvements in the presentation and performance of the platform.

The challenges of this project were managing the essential features in the development of a mobile app for Ushahidi, which the team was able to handle in a manner that showed it could provide solutions matching stakeholder priorities and end-users requirements.

ProCoders is highly rated by the reviews for the ability to provide our customers with the relevant specialists, to give adequate solutions with just the right ideas and of high tech.utions.

Summary

To sum up, stakeholders build the fate of businesses. Their impact ranges from operational processes through strategic decisions, corporate governance and income generation.” ProCoders understands this. Their good people call it stakeholder capitalism aka integration. Companies are realizing that the future belongs to those who practice stakeholder capitalism — a new business paradigm that considers the effects of corporate decisions beyond shareholders alone. This change encourages a climate of respect, improves decision-making practices, and nurtures sustainable success for both companies and stakeholders.