Importance of Stakeholders in Business and in a Project
Every business requires support. This support is provided by the stakeholders of the business in many forms. A person alone cannot carry a business by oneself. therefore, many people are involved in a business – whether small or big. Employees, owners, customers, and other stakeholders together make a business profitable. This article will discuss the importance of stakeholders for a business and how does it affect other areas related to a business. Before starting, it is important to clarify the concept of a stakeholder.
Table of Contents
What is a Stakeholder?
As indicated by the name, a stakeholder is someone who has a stake in a business. In simple words, stakeholder(s) are the people who are directly linked to a business and the success or failure of a business have a direct impact on them. They include owners, shareholders, investors, brokers, vendors, or anyone who is making a profit over the business. All of these stakeholders are affecting the business and are being affected by the profit or loss of the business. There are different types of stakeholders involved in a business or a company.
- Primary or secondary stakeholders
- Direct and indirect stakeholders
- Internal and external stakeholders
This categorization of stakeholders is done for easy understanding of the concept and explains their role in the business.
1. Primary or Secondary Stakeholders
Primary stakeholders are the ones who are affected by the business the most and they have big responsibilities at work. Managers, team leaders, or owners are primary stakeholders. Whereas, other jobs that deal with the administration of the company or business that are less affected by the business are secondary stakeholders.
2. Direct and Indirect Stakeholders
Direct stakeholders are the ones who are involved in the whole process of the business on a daily basis i.e. regular employees, as compared to indirect stakeholders who get involved in the process after it is completed i.e., customers.
3. Internal and External Stakeholders
Internal stakeholders are the people from the company or the business as indicated by the name. for example owner, shareholders, and employees of the company. On the contrary, external stakeholders are not the part of the company but they are affected by the company’s success. For example, market, media and ad campaigns, vendors, and customers.
Indeed, the success of the business is most profitable to the owner and shareholders of the business. But every stakeholder – who has an interest in the business – gets a benefit, somehow, from the success of the company.
Shareholder vs. Stakeholder
Though the terms are often used interchangeably but there is a difference. Shareholders are the ones who invest in the company thus providing financial support. Whereas, stakeholders are the people who have an interest in the company in any way and gain something out of the company’s success. A stakeholder is not necessarily a shareholder but a shareholder is a stakeholder.
Importance of Stakeholder in Business
Every business’s success depends upon the minds that are working behind that business. In this case, stakeholders. This is why the importance of stakeholders in business is still relevant.
1. Stakeholders Make a Team
As discussed above, the different types of stakeholders collectively make a team. This team can either gain loss or profit with their collective efforts because business success can not be achieved alone. The managers, team leaders, legal team, tech team, CEO, etc. collectively make a team and manage the smooth functioning of the business. The results can be seen, in the end, in the form of sales or profits.
2. Business Ideas
Every business firm has an innovative team that works their brain for a new and creative business idea. For example, a makeup brand will have to launch a new product that has a competitive edge, makes good sales, liked by the customers, and has a creative element to it. Though everyone from the owner to the assembly line is involved in the process – thus is a stakeholder – but the most responsibility lies on the innovative team whose members are also the stakeholders of the business.
Importance of Stakeholder in a Project
Every project is made successful with the help of employees and other people. Considering this, the importance of stakeholders in a project is discussed below.
1. Input Expertise in Right Direction
Every employee that works in a company on a specific project is there because of their expertise. This experience of each employee and their knowledge in the subject matter is valuable for the project. For example, in a new security software development project, the people who have expertise in the field will put their efforts to complete the project. Software engineers are fit for the job and not doctors. Similarly, in a hospital, doctors’ expertise is required. Because everyone’s interest in the business is at stake, they put their expertise in making the project a success.
2. Overlook a Project
The stakeholders are always involved in the project to overlook its progress. Any project, along the way, faces many challenges. The reason is that in today’s competitive and rapidly changing market, changes are constant. Market changes rapidly and products are launched every day. One has to make sure the new product is different from the previous one which is why constantly studying the market and project’s progress is important. Many challenges or risks can come along the way. Only vigilant employees (stakeholders) who are interested and invested in the project will overlook a project, predict the market’s trend, and make necessary changes to meet the requirement of the market at that time.
3. Calculate Success or Failure
Since every employee is a stakeholder of the project and its success is affecting all of them, they work hard to achieve success. Consequently, the project becomes a success due to the efforts of all of the employees. This can only be achieved when the stakeholders have experience, in-depth knowledge of the project, have done their pre-project homework well, and are invested in the success of the project.
Importance of Stakeholders to Effective Leadership
Leadership is important in many areas of life including business. The right kind of leadership can bring success to a business or a project. Furthermore, the responsibilities of a leader are more as compared to the rest of the team thus added pressure. Therefore, the importance of stakeholders for leadership doubles itself. A leader needs to realize the responsibilities and implement the right strategies for the progress of a business. Leadership is responsible for setting the timeline for a project and reaching out to stakeholders (employees) to assign tasks according to their expertise. Moreover, good behavioral conduct from leadership boosts the morale and motivation of everyone involved. Therefore, big business firms spend so much effort in establishing their company’s and owners’ good image for the public.
Effective leadership’s analytical skills are necessary to study the market trends and plans the project accordingly. Moreover, the resource allocation department also lies with the leadership that can be done effectively if the leadership is experienced in the matter. Employees that are involved in a project are just doing their jobs or following the orders of the leadership. However, the leadership is not only involved in assigning tasks but training the employees along the course of the project. Leadership also has to set boundaries or limit each stakeholder’s participation in the business. On the other hand, each stakeholder is affecting the leadership. The performance of each stakeholder – whether small or big – acts as the motivation for the leadership to work harder.
Conclusion
Stakeholders are an important part of any business or company. They invest their money, efforts, expertise, knowledge, and time. Every stakeholder holds a specific responsibility and duty in the company, collectively, all the stakeholders bring success to the company. This is why the importance of stakeholders of every type is valued by the company.
