1.4 Stakeholders

1.4 Stakeholders

What I Need to Know

  • Internal stakeholders (AO2)

  • External stakeholders (AO2)

  • Conflict between stakeholders (AO2)

Definition of Stakeholders

  • Stakeholders: Individuals, businesses, or groups with a vested interest in the activities and outcomes of a specific organization.

  • All stakeholder groups are directly affected by the performance of the business.

  • Categories:

    • Internal Stakeholders: Individuals or groups within the organization.

    • External Stakeholders: Individuals or groups outside the organization.

Stakeholders - Getting It Wrong

  • Incident: "United Breaks Guitars" by Dave Carroll (2009)

    • Song became a protest against United Airlines after his guitar was damaged and the airline refused accountability.

    • Impact: Went viral (21 million views), became a public relations issue for United Airlines.

Stakeholders - Getting It Right

  • Contrast Example: Southwest Airlines

    • Viral video showed a flight attendant engaging passengers during safety checks, promoting customer care.

Internal Stakeholders

  • Definition: Individuals or groups part of the organization.

  • Examples:

    • Employees

    • Managers

    • Directors (executives)

    • Shareholders (owners)

Employees

  • Definition: Workers within the organization.

  • Interests:

    • Improved employment terms

    • Better pay and bonuses

    • Equal opportunities

    • Job satisfaction and security

    • Career progression opportunities

Managers

  • Definition: Individuals responsible for overseeing functions and operations.

  • Levels of Management:

    • Senior Management: Plans long-term aims and strategies.

    • Middle Management: Runs departments, sets objectives aligning with company aims.

    • Junior Management: Monitors daily tasks and supervises workers.

  • Interests:

    • Improve operational efficiency and profits

    • Enhance customer relations

    • Increase salaries and benefits

Directors

  • Definition: Senior managers legally responsible for company operations.

  • Types:

    • Executive Directors: Make key strategic decisions; work full-time.

    • Non-Executive Directors: Consultants providing expertise; do not work full-time.

  • Responsibilities:

    • Advising the CEO and filing company records.

    • Setting long-term strategic plans and monitoring results.

    • Managing organizational policies and corporate culture.

Shareholders (Stockholders)

  • Definition: Individuals or organizations owning shares in a company.

  • Interests:

    • Rights to profit share (dividends).

    • Voting power on company operations.

    • Expectation of financial return on investment.

  • Key Points:

    • Shareholders are a type of stakeholder but not the only group.

    • Reasons for investing include dividends, capital growth, and voting power.

External Stakeholders

  • Definition: Individuals or organizations not part of the business but with a direct interest.

  • Examples:

    • Customers

    • Competitors

    • Financiers

    • Labour unions

    • Pressure groups

    • Suppliers

    • Government

    • Local community

Customers

  • Definition: Clients purchasing goods/services.

  • Interests:

    • Competitive pricing, quality products, safety, and customer service.

    • Expect value for money.

Competitors

  • Definition: Rival businesses in the same industry.

  • Interests:

    • Understanding the organization's operations and financial health.

    • Measuring performance against industry benchmarks.

Financiers

  • Definition: Organizations providing financial support.

  • Interests:

    • Financial health assessment, timely repayment, and positive investment returns.

Labour Unions (Trade Unions)

  • Definition: Organizations protecting worker interests.

  • History: Originated in the 19th century for better terms and conditions.

  • Interests:

    • Bargain for benefits and protect statutory employment rights.

    • Typically create conflicts between employee demands and employer costs.

Pressure Groups

  • Definition: Organizations advocating for specific causes.

  • Examples: Greenpeace, Oxfam International.

  • Interests:

    • Influence public policy and business practices towards social responsibility.

Suppliers

  • Definition: Organizations providing goods/services to other organizations.

  • Interests:

    • Secure contracts, prompt payment, reasonable pricing, and professional relationships.

Government

  • Definition: Overseers of business legality and social responsibility.

  • Interests:

    • Ensure compliance with legislation such as consumer protection and environmental guidelines.

The Local Community

  • Definition: General public and local businesses with an interest in business activities.

  • Interests:

    • Encourage socially responsible behavior and job creation.

    • Desire support for local events.

Conflict Between Stakeholders

  • Definition: Different stakeholder interests can lead to conflicts.

  • Examples of Conflicts:

    • Employee wage demands vs. shareholder dividends

    • Manager bonuses vs. company profitability

    • Customer price demands vs. shareholder return expectations

    • Community demands vs. operational impacts on local areas.

Resolving Conflicts

  • It is challenging to balance interests but mutual benefits exist:

    • Expansion can lead to profits, job creation, and tax revenues.

    • Value for money can maintain competitiveness and profits.

    • Improved employee rewards may enhance productivity.

Reality of Stakeholder Conflicts

  • Stakeholder conflicts are common in large organizations due to diverse interests.

Case Study

  • Example: Uber vs. Lyft drivers in California.

    • Drivers claim denial of employment entitlements; companies want to protect profits.

Stakeholder Mapping

  • Levels of Stakeholder Power and Interest:

    • High Interest/Power: Engage directly.

    • High Interest/Low Power: Keep satisfied.

    • Low Interest/High Power: Communicate regularly.

    • Low Interest/Low Power: Communicate as necessary.