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• Stakeholders

  Individuals or groups who have an interest in what the organisation does, or who affect, or can be affected by, the organisation's actions
• It is vital for managers to understand the varying needs of the different stakeholders in their organisation. Failure to do so could mean that important stakeholders do not have their needs met, which could be disastrous for the company.
• Types of stakeholders

  • Internal
  • Connected
  • External
• Internal stakeholders

  • They are within the organisation itself and their objectives are likely to have a strong influence on how it is run
• Internal stakeholders

  • Employees
  • Managers/directors
• Employees' needs/expectations

  Pay, working conditions and job security
• Managers/directors' needs/expectations

  Status, pay, bonus, job security
• Connected stakeholders

  • They either invest in or have dealings with the firm and tend to have varied objectives
• Connected stakeholders

  • Shareholders
  • Customers
  • Suppliers
  • Finance providers
• Shareholders' needs/expectations


  Steady flow of income, possible capital growth and the continuation of the business
• Customers' needs/expectations


  Satisfaction of customers' needs will be achieved through providing value-for-money products and services
• Suppliers' needs/expectations


  Paid promptly
• Finance providers' needs/expectations

  Ability to repay the finance including interest, security of investment
• External stakeholders

  • They tend to not have a direct link to the organisation but can influence or be influenced by its activities and have very diverse objectives
• Community at large' needs/expectations

  The general public can be a stakeholder, especially if their lives are affected by an organisation's decisions
• Environmental pressure groups' needs/expectations

  The organisation does not harm the external environment
• Government's needs/expectations

  Company activities are central to the success of the economy (providing jobs and paying taxes), and legislation must be met by the company
• Trade unions' needs/expectations

  Taking an active part in the decision-making process
• Primary stakeholders

  Those that have a contractual relationship with the organisation, e.g. employees, directors, shareholders
• Secondary stakeholders


  Parties that have an interest in the organisation, but have no contractual link, such as the public
• Common stakeholder conflicts


  • Employees versus managers
  • Customers versus shareholders
  • General public versus shareholders
  • Managers versus shareholders
• Conflict between employees and managers

  Jobs/wages versus bonus (cost efficiency)
• Conflict between customers and shareholders

  Product quality/service levels versus profits/dividends
• Conflict between general public and shareholders

  Effect on the environment versus profit/dividends
• Conflict between managers and shareholders

  Growth versus independence
• In the event of conflict, an organisation will need to decide which stakeholder's needs are more important. This will commonly be the most dominant stakeholder (in other words, the one with the most power).
• Mendelow's power-interest matrix

  A tool used to identify the dominant stakeholder(s) by plotting each stakeholder according to the power they have over the organisation and the interest they have in a particular decision
• Although the other stakeholders may be fairly passive, the managers must be aware that stakeholder groups can emerge and move from quadrant to quadrant as a result of specific events, so changing their position in the matrix.
• Sources of stakeholder power

  • Hierarchy
  • Influence
  • Control of the environment
• Managers need to consider the needs of as many stakeholders as possible. This means that nearly every decision becomes a compromise.