Differentiating Between Relevant Organizational Stakeholders
Organizational stakeholders represent parties that have a direct interest in the performance of an organization. They range from customers to shareholders and are affected by the practices of a company, and have critical characteristics of interest that shape their relationships with the company at hand. In the current scenario, the features of interest depend on their relationship to relevant processes. The main characteristics of interest that are relevant to primary stakeholders concern their financial position in the company and their direct contribution to it (Fernando, 2021). Thus, a company’s decisions may affect primary stakeholders’ incomes.
For instance, in a medium-sized company, an expansion is always an option, which means that some stakeholders will make less profit for some time as investors pay for the expansion. For investors, this represents an income threat because more money is needed to cover the expenses of an expansion (Fernando, 2021). For employees, the expansion represents an opportunity to strengthen their positions as they begin contributing to the company more.
In the context of the mid-size company, the local government and the wider community represent secondary stakeholders as they entail any laws and regulations that are applicable to the business without affecting it directly. Such stakeholders may be interested in strengthening the organization’s Corporate Social Responsibility (CSR) efforts as a means to improve its reputation while also adding value to communities. To address the needs of secondary stakeholders, the organization needs to be open to any negotiations with them to develop a comprehensive plan of collaboration, including the benefits for both secondary stakeholders and the organization (Fernando, 2021). For example, the organization can agree to participate in community fundraisers to offer tuition for employees’ children. This can motivate local communities, activist groups, and the media to speak favorably of the company.
Primary vs. Secondary Stakeholders
Primary stakeholders represent people or groups that are directly influenced, either positively or negatively, by the actions of an organization and include investors, workers, customers, and suppliers. Whether stakeholders are individuals who earn a paycheck through working for a company or they are a high-level entity of investment, primary stakeholders usually count on a company for income and future security. Thus, primary stakeholders are termed ‘primary’ because their investments are economically urgent, and their actions can tangibly influence how efficiently an organization operates daily (Guerrero-Villegas, 2019).
It is vital to mention that not all primary stakeholders have the same degree of influence over the processes at the organization. Depending on the specific situation, the extent of the impact that primary stakeholders fluctuate. Furthermore, it is possible that those people who may not be usually considered primary company stakeholders in a company can get the status of such for some time if a particular circumstance dictates.
Primary stakeholders are termed as such since they are the leading players that maintain a company’s survival. Because of this, nearly all companies need to satisfy the needs of their primary stakeholders to reach success because they directly affect the activities of an organization (Guerrero-Villegas, 2019). The needs of primary stakeholders are differentiated into different levels of their influence and the context in which they operate. Specifically, primary external stakeholders are those that have direct monetary connections with a company but do not work for it. These include suppliers, customers, lenders, and shareholders.
For example, businesses need to address the needs and expectations of customers. If they do not follow through to address their needs, they run the risk of facing possible backlash and declines in purchasing, which can impact the bottom line. Similar principles apply to meeting the needs of suppliers that may have certain conditions under which they are willing to work with organizations. If companies, for instance, do not follow through with the timely payment for goods or services, they run the risk of severing the relationship, which can adversely impact business overall. When it comes to shareholders usually expect organizations to be successful to the degree they receive a significant return rate for their primary investments. Thus, if an entity undergoes financial challenges, which leads to the depreciation of its shares’ values, shareholders may also struggle, and vice versa.
In contrast to external stakeholders, internal primary stakeholders are entities with direct monetary interactions with companies: they are either served by them or work for them. Thus, internal primary stakeholders are employees and managers as well as beneficiaries. Meeting the needs of employees and managers is possible through aligning with their desire to learn new skills, helping them advance in their careers, as well as bringing them satisfaction in their roles while being appropriately compensated. These needs must be met because satisfied workers are vital for facilitating success in organizational interactions. When it comes to addressing the needs of beneficiaries, it may be necessary for organizations to restructure their operations and face scrutiny and potential operating challenges.
Secondary stakeholders differ from primary stakeholders in that they can influence the operations and performance of organizations, but this does not take place directly. Rather, such stakeholders represent the interests of a company in some way without having a direct relationship with employees. They range from local communities to state or local government entities, and there is no clear-cut notion of secondary stakeholders while there is extensive research on the primary ones.
There are usually several groups of secondary stakeholders at organizations because they can be complicated to determine unless they can actively voice their issues. Even though secondary stakeholders do not have direct interests in the continued operations of an organization, they may still have some level of power over the actions of the organization. Furthermore, while a company rarely relies on secondary stakeholders to achieve its long-term goals and survive, they can still influence organizations.
As a rule, secondary stakeholders’ level of power in their relevant organizations is directly associated with their social involvement with the organization. Depending on the nature of relationships between the company, secondary stakeholders can help shape an organization’s reputation depending on the context. A lot of secondary stakeholders have specific interests involving organizational affairs, which may not even be completely recognized in cases of ambiguity. Therefore, it can be suggested that secondary stakeholders’ power can be significant, but the extent of such power is situational. However, secondary stakeholders tend to be the most vocal due to the peripheral relation to companies. They often represent the interests of other groups and vocalize their concerns aiming to be heard and supported by organizations.
The expectations of secondary organizational stakeholders entail the satisfaction of social groups that experience specific issues, which are often covered by the media. In cases when secondary stakeholders help launch positive campaigns for promoting the efforts of the organization, their interactions with a company are predominantly external and public. As a result, this type of public recognition can spread across different local levels, depending on particular circumstances. When an entity fails to address any secondary stakeholders’ concerns and delays meeting their needs, it risks harming its general reputation.
Therefore, satisfying the expectations of secondary stakeholders is among the priorities for organizations that want to preserve positive reputations to attract customers and potential employees. Companies should treat their secondary stakeholders with the degree of respect as they would with primary ones, and when they talk about their concerns, companies are expected to meet their demands. Not only such type of connection serves the organization, but it also benefits local entities and fosters trust and interdependence within the community.
Monitoring systems to assess the achievement of both types of stakeholders’ expectations can help organizations track their progress and identify the needs for changes to be set in place. Stakeholder analysis is the recommended monitoring system, entailing steps. The primary step is the identification and mapping of internal and external stakeholders. In this step, organizations are to identify focus groups and collect as much data as possible about their needs. The second step is assessing the nature of each stakeholder’s impact and importance. In this step, organizations will determine which stakeholders are influential in terms of impacting the direction and outcomes of a project and those whose issues and interests stand as a priority for companies.
The third step is constructing a matrix to identify stakeholder importance and influence. The matrix usually entails the levels of power ranging from low to high and levels of influence ranging from low to high. The final step is monitoring and managing stakeholder relationships. In this step, and organization will apply principles of stakeholder management developed by the Clarkson Center for Business Ethics. These principles are rooted in the need to communicate openly with stakeholders and be sensitive to their concerns and demands. In addition, it is recommended to work in collaboration with other entities, either private or public, to ensure the minimization of any risks and harms associated with corporate activities.
Provisions Offered to Stakeholders
Stakeholders, both internal and external stakeholders, are important to an organization because they can help make informed decisions and provide the support they need for achieving long-term sustainability. Engaged and happy stakeholders are instrumental in bringing important issues to light and encourage organizations to develop corporate social responsibility (CSR), which explains why meeting the needs of stakeholders is a must for organizations. The key to good stakeholder management is not necessarily about providing the exact outcome that they want. Instead, it is about supporting them through the process of decision-making and providing them vast opportunities to contribute to shaping the desired outcomes.
Organizations may have different occasions and circumstances in which primary and secondary stakeholders should possess relevant information about organizational processes, in a circumstance when an organization implements a new project to improve customer satisfaction by introducing a loyalty program of bonuses. An output offered to stakeholders entails project management plan updates, which communicate to stakeholders the step-by-step process of plan implementation (Watt, 2016). In addition, the project management plan will include a risk management plan and stakeholder engagement plan, both of which will communicate the role of stakeholders within the program. Looking at the plan, stakeholders will communicate the level of interest they have in the project as well as exert influence to control it. For instance, stakeholders’ technical knowledge, such as employees’ IT skills, can be crucial for project success.
In circumstances where an organization plans to facilitate CSR efforts through benefiting local communities and sponsoring programs, the support of secondary stakeholders can be instrumental. In this case, the example of output offered to secondary stakeholders is the service of providing ongoing work performance information, which represents the raw data of the project’s status. Specifically, it can incorporate data on the number of community members participating in the project, how much time is left until completion, the total costs incurred, as well as the projected expenses. This information is crucial for ensuring that the project meets its objectives while guaranteeing community stakeholders’ engagement.
In the instance when an organization is undergoing a managerial restructuring and introducing new positions to increase the number of employees, a stakeholder engagement assessment matrix can be offered. It can be an effective communication format that identifies stakeholders’ desires, expectations, interests, and possible influence. The matrix will include discussions of the plan’s communication management, monitor communications, plan stakeholder engagement, and monitor their engagement throughout the restructuring process. The matrix is particularly relevant to apply to primary internal stakeholders of the organization because they are the ones to be affected by the reorganization of the management at the company.
The engagement of employees and managers is relevant in organizational restructuring because the company will be tasked with meeting their needs to ensure satisfaction. The matrix consists of several rows that represent every stakeholder, each of which will be given a classification based on their levels of engagement. Specifically, the classification includes such determinants as “unaware,” “resistant,” “neutral,” “supportive,” and “leading” (McLachlan, 2021). It is notable that the stakeholder engagement matrix is technically not the component of the plan but rather an output (provision) of the process of planning stakeholder engagement. However, it is necessary to provide insight into the expected levels of stakeholders’ involvement in the managerial restructuring when compiling the engagement matrix.
The stakeholder list in the engagement assessment matrix includes employees, the chief financial officer, the chief executive officer, and head managers. In addition, it is important for the matrix to differentiate between desired and current levels of engagement for each stakeholder involved. For example, it is expected that the chief executive officer’s desired level of engagement is classified as “leading” because they are the ones taking the lead in the restructuring process. However, upon monitoring their involvement, it is possible that the stakeholder will have a “supportive” level of engagement.
Provisions to Meet Stakeholder Expectations
In the scenarios identified previously, it is imperative to facilitate a high quality of communication, especially concerning secondary stakeholders who do not directly engage in close collaboration with organizations. Gaps in communication are bound to happen, which is why it is necessary to propose a Communication Management Plan involving the organization and secondary stakeholders that will consider the company’s performing environment, including its expectations and culture (Shakeri and Khalilzadeh, 2020).
The relevant procedures, relationships, historical records, lessons learned, and other data, such as the organizational process assets, should also be considered. The Communications Management Plan is the output component of the Project Management Plan. During the initiation of the project, the efforts entail identifying stakeholders and their requirements for communication. A clear and concise plan of communication requires handling communication in a structured manner and choosing the most appropriate type of communication for every situation. The plan is developed in a written format and is disseminated among relevant secondary stakeholders, including any relevant memos and agreements on long-distance communication.
The Communication Management Plan requires a structured approach to communication. To facilitate effective communication, it is expected that senders decode their messages carefully, identifying the communication methods to be used to send the messages and ensuring that their receivers understand them. Communication technologies help to support the plan because they allow going beyond face-to-face communication with stakeholders. The Communication Management Plan will document how the organization and its secondary stakeholders will use technologies for an effective exchange of information. Plan developers will work on relevant documents to ensure that the needs of stakeholders are addressed.
The objective of the Communication Management Plan also considers stakeholder expectations, usually through proactive actions from project managers to make them feel that their needs are being considered (Baker, 2012). The attempts to manage stakeholder expectations also enable the opening of communication channels between stakeholders and the organization so that it is possible to quickly recognize potential risks, challenges, and other valuable data. Attention to stakeholder needs is a core principle of the plan because it allows for building trust, resolving any conflicts, avoiding possible problems, and increasing the adherence of stakeholders to the project at hand.
In the plan, the organization will document how those responsible for plan implementation will manage and control communication, ensuring that stakeholder needs are addressed. When preparing the communication plan, the responsible party will identify all relevant secondary stakeholders and align them to the best approaches to communication with them. Besides the Stakeholder Engagement Assessment Matrix, which was applied previously, it is also possible to implement Communication Styles Assessment. The assessment entails understanding stakeholder communication styles to tailor the information exchange methods to their needs.
Similar to the matrix that assesses the levels of stakeholders’ engagement, which categorizes individuals based on their involvement, the communications plan can also include several categories. For example, stakeholders may be closely managed, those to keep satisfied, those to keep informed, and those to monitor. As the stakeholders are classified, the communications plan will also identify the timeframe of communications, the method of communications, and the message communicator, as well as any other possible items for a communications management plan. Overall, the communication gap can be met with the help of consistency and continuity of message transferring so that the company and its stakeholders are on ‘the same page when it comes to project completion.
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Fernando, J. (2021) Stakeholder. Web.
Guerrero-Villegas, J. (2019) Managerial competencies for multinational businesses. Hershey: IGI Global.
McLachlan, D. (2021) The stakeholder engagement assessment matrix. Web.
Shakeri, H., and Khalilzadeh, M. (2020) Analysis of factors affecting project communications with a hybrid DEMATEL-ISM approach (A case study in Iran). Heliyon, 6(8), e04430.
Watt, A. (2016) Project management. Vancouver: BCcampus.