adminentities, small or large.
Impetus to the growth of this phenomenon came about in the 1960s when social responsibility activists felt that the focus on meeting shareholder interests by multinational companies was sidelining other important social groups that had significant interest in the operations of the business, and whose livelihoods were in one way or the other affected by those operations.
These social groups include employees, customers, suppliers, regulators, etc.
A stakeholder can loosely be defined as an individual or group of people with interests, expectations and demands on how an organisation is run.
According to the UK Institute of Business Ethics, a stakeholder is any group or individual that has an interest in, dependence on, contributing to, or is affected by the organisation.
A stake is thus an interest or a share in a business undertaking which may be legal, moral, or a right.
Stakeholders can either be primary or secondary in nature. Primary stakeholders are those that have a direct stake in the organisation, while secondary stakeholders simply have a special interest in the organisation.
Primary stakeholders are essential to the survival of the organisation.
They are those that are found virtually in every organisational set up, namely shareholders, investors, lenders, regulators, advisors, employees, customers, and suppliers.
Secondary stakeholders are not usually engaged in organisational transactions. They include the media, trade associations, non-governmental organisations, and the community, along with other interest groups.
Stakeholders are also categorised into internal and external stakeholders.
Internal stakeholders include employees and managers, and external stakeholders include consumers, competitors, suppliers, etc.
Every organisation has its own unique set of stakeholders determined mainly by the nature of its operations.
As a matter of principle, it is important at inception for the organisation to identify its stakeholders and their interests and use such information during the strategic planning process.
Emerging best practices implore that improved business performance, profitability, and economic progress come to those who effectively and efficiently foster and meet reasonable expectations of their stakeholders.
Fundamentally, identifying stakeholders is about understanding and respecting the needs of interest groups, and as much as is possible incorporating them into the philosophy, the processes and activities of the organisation.
To ensure that organisations maximise the benefits accruing from fostering reasonable stakeholder expectations in their strategic and operational plans, they must be able to determine the degree of impact or dependency for each stakeholder by assigning weights to the perceived degree of impact of each stakeholder group.
According to Kennedy Briggs, key questions to ask in stakeholder analysis are:
- Who are our stakeholders?
- What are our stakeholders’ interests?
- What opportunities and challenges do the stakeholders present to the operations of the organisation?
- What economic, legal, ethical and philanthropic responsibilities does our organisation have?
- What strategies or actions should our firm take to best manage stakeholder challenges and opportunities?
When dealing with stakeholders should we accommodate, negotiate, manipulate or resist stakeholder overtures?
The three critical elements to consider in assessing stakeholder influence are, their power, legitimacy, and the urgency of issues.
For example, unhappy customers may be viewed with less urgency than negative Press stories that can seriously damage a business, notwithstanding the fact that customers are a primary stakeholder group and the media is a secondary stakeholder.
Highly visible secondary stakeholders such as the media are thus at times viewed with great concern than employees and customers.
Corporate organisations must therefore understand the different pressures and priorities coming from their different stakeholder groups.
Certainly we are all as human beings stakeholders in every organisation under the sun.
This is so because the global economy is seeing the universe shrinking into a global village where activities happening in a manufacturing factory in, say, Shanghai City in China has a direct effect on those in the remotest part of Africa through greenhouse gas emissions that give effect to climate change which negatively impact on agricultural production.
Firms should always be in the mood of negotiating and being accommodative of stakeholder interests, and should never manipulate or resist them for doing so is detrimental to company success.
l Bradwell Mhonderwa is an Ethics Coach and Trainer with the Business Ethics Centre. Send feedback to [email protected], or call 0772 913 875
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