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What are stakeholders? Different types & importance

SEEK content team – updated on 23 April, 2024

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‘Stakeholders’ is a word that gets used a lot in big organisations. But who exactly are they and what do they do in a company? Put simply, stakeholders are the main people (or groups) that influence decision-making at an organisation.

The stakeholders of a project or at an organisation are the people whose opinions determine the outcomes. They’re not always necessarily the same people, as stakeholders can change depending on the situation.

Discover more about the ‘stakeholders’ meaning, the role of stakeholders in a business or in a project, and strategies for managing stakeholder expectations.

What is a stakeholder?
Why are stakeholders important?
Types of stakeholders in a business or organisation
Examples of stakeholders in a company
How to manage stakeholders in the workplace
Potential challenges to stakeholder management at work
FAQs

What is a stakeholder?

What is a stakeholder in a business? A stakeholder is any person, group or entity that has an interest in an organisation. Some examples of stakeholders are:

Employees
Customers
Suppliers
Creditors
Shareholders
Governments
Communities

Stakeholders can have either a positive or negative influence on a business. Positive stakeholder influence is when their involvement leads to beneficial outcomes for the organisation. These groups might include loyal customers, dedicated employees and investors providing funds for growth.

On the other hand, negative influence is when stakeholder demands harm the organisation’s performance or reputation. This could be through public opposition from community groups or internal conflicts with employees.

Shareholder vs. stakeholder

The terms ‘shareholder’ and ‘stakeholder’ seem similar, however there is a clear distinction between the two.

Shareholders are individuals or entities that own shares in a public company. They have a claim to part of the company’s profits and can vote on decisions the company makes.
Business stakeholders are a broader group. They include anyone affected by the company’s operations and decisions. This includes employees, customers, suppliers, community members and shareholders.

Why are stakeholders important?

Who are the stakeholders in a business context? They’re anyone with a ‘stake’ in the company. Their needs, expectations and feedback influence business decisions, therefore shaping its direction and success (or failure).

Certain stakeholders, such as investors and suppliers, provide resources – financial, material, or human – that are vital for the company’s operations and growth. Here’s how they impact day-to-day operations:

Operational efficiency: internal stakeholders like employees and managers directly influence the daily operations of a company through decision-making and performing their duties well.
Customer relations: positive interactions with customers impact customer loyalty and influence revenue.
Supply chain management: suppliers and vendors affect the reliability and quality of products the company needs to fulfil their customers’ demands.
Feedback and innovation: regular feedback from various stakeholders can lead to improvements and innovations in products, services and processes.

Types of stakeholders in a business or organisation

There can be many types of stakeholders in a business. For example, there are internal stakeholders like employees and managers, and external ones like suppliers, customers and regulatory bodies. Here is the specific role of stakeholders in each category.

Internal stakeholders

Internal stakeholders include groups or people who are directly involved with the company.

These stakeholders typically include:

Employees: employees as stakeholders include all the people in the organisation. Some will have more influence than others, but every employee has some impact on the organisation’s success.
Management: this group consists of those who oversee the day-to-day operations of different departments. They play a critical role in decision-making, strategy direction and managing company resources.
Executives: executives like CEOs, CFOs and other leaders define the direction of the organisation. They make high-level decisions that affect the company’s long-term objectives.
HR department: the human resources department is responsible for managing employee relations, benefits, recruitment and compliance with labour laws.
Union representatives: in companies where employees are unionised, union representatives act as stakeholders, representing the interests of the workforce in negotiations and discussions with management.

External stakeholders

External stakeholders are individuals or groups outside of the organisation who are impacted by or have an influence on its activities and decisions. External stakeholders typically include:

Customers: customers receive the products or services provided by the organisation. Their satisfaction and feedback are critical to the business’s success and reputation.
Suppliers/vendors: these businesses provide an organisation with goods and services. Their reliability, product quality and pricing directly affect profitability.
Investors: this includes individuals or entities that finance the organisation, such as shareholders.
Government agencies (regulatory bodies): official bodies oversee compliance with laws and regulations. Their requirements can impact the organisation’s operations and decisions.
Local communities: the organisation’s impact on the local community, environment and economy are often areas of interest.
Media outlets: media plays a role in shaping the public perception of the organisation and can influence its reputation and brand image.
Industry associations: these are groups that represent specific industries. They provide networking opportunities, industry standards and advocacy, and often influence industry-wide practices and policies.

Examples of stakeholders in a company

To understand how stakeholders play important roles in shaping the company’s projects and overall direction, it can help to look at specific scenarios.

Customers influence what type of products or services a business provides. If they don’t buy a certain product, a company will start to lose money on that product and may change their product offerings as a result of customer behaviour.
Suppliers influence the availability of materials or resources a company needs to fulfil their customers’ purchases. If a supplier doesn’t provide this in a timely manner, it will negatively affect the business by reducing sales.
Government agencies shape the business environment through regulations and standards. For example, if a governing body bans a certain product or ingredient, businesses that make a profit from that product will be negatively affected. If regulations are tightened, companies must spend money to make sure they comply with the new laws.

Are employees shareholders or stakeholders?

What about employees: are they shareholders or stakeholders? The short answer is they can be both. They are considered stakeholders because their career development and job satisfaction are directly influenced by the company’s performance and decision-making processes. They contribute their skills and labour to the company’s operations, contributing to its success.

However, being a stakeholder doesn’t automatically make an employee a shareholder. ‘Shareholders’ specifically means people who own shares in the company. Most employees do not own shares in their company, though some may be offered stock options or Employee Stock Ownership Plans (ESOPs) as part of their compensation. ESOPs are programs that enable employees to own shares in the company, either as a form of compensation or through purchase plans that offer shares at reduced prices.

How to manage stakeholders in the workplace

Stakeholder management is an important aspect of any successful business or organisation, and can be a big part of individual roles as well. It involves understanding and balancing a variety of interests, needs and expectations, to simultaneously ensure all stakeholders are satisfied and the company is on track towards its goals. Managing stakeholder expectations can be a delicate balancing act and may sometimes require a strategic approach.

Here’s how to manage stakeholder expectations:

Regularly update stakeholders on progress and developments, to maintain their trust and support.
Involve stakeholders in the decision-making process, to make them feel heard and positively engaged in the outcome.
Be responsive to stakeholder feedback and adapt the strategy or project, to let stakeholders know their input is valued even if it isn’t being actioned.

Take note of the typical stakeholders in a project

We’ve looked at stakeholders of a company, but there can be stakeholders for any operations at an organisation. In any workplace that has projects, there will be stakeholders for each of them. Stakeholders all contribute to and influence the project’s outcome in some way. Recognising and understanding stakeholders and the different roles they play is essential for successful project management.

Project manager: this stakeholder is responsible for planning and managing the project from start to finish, often delegating work, handling the budget, creating the timeline and liaising with the client, team and other stakeholders.
Project sponsor: this stakeholder secures funding for the project, oversees the project strategy, and makes sure it has the resources it needs to be successful. The project manager will report to the project sponsor, who will report to the c-suite.
Project team members: these are the individuals who work on the project, contributing their skills, expertise and efforts to complete tasks.
Client/customer: the recipient of the project deliverables, clients or customers are the reason the project exists.

Define internal vs. external stakeholders in a project

Understanding the difference between internal and external stakeholders is vital in project management. Internal stakeholders usually have direct control over the project, while external stakeholders usually have an indirect influence.

Tips on managing internal stakeholders

Internal stakeholders like team members, managers and company executives, have a direct interest in the project’s success and can have a big impact on its outcome. To manage these stakeholders, you can try the following:

Maintain open communication channels: open communication is important. If you’re a project manager, make sure you have the contact details of all team members, and establish a platform (like Slack or Teams) where you can quickly ask questions and share information.
Regularly update stakeholders on project progress: to keep stakeholders informed and reassured that the project is meeting milestones.
Address concerns promptly: stakeholders appreciate being kept in the loop about challenges and the steps being taken to resolve them.
Foster a collaborative work environment: encourage all stakeholders to contribute and stay engaged in the project, to ensure a smooth workflow.

Tips on managing external stakeholders

External stakeholders could be clients, end-users, suppliers or any other party outside your company. Managing these groups can be trickier, as you may not be able to be as transparent with them, and therefore may not have as much trust.

Clearly define project goals and deliverables upfront: a clear and thorough scope of work should be established before the project starts, to set realistic expectations and reduce the possibility of misunderstandings in the future.
Manage expectations effectively through clear communication: this involves not only sharing information about the project’s progress, but also making yourself available to external stakeholders if they have any questions or concerns.
Be responsive to enquiries and concerns: being responsive demonstrates competency and respect for their input and/or concerns.
Build strong relationships with external stakeholders: over time, you can build trust and rapport by maintaining open communication and by meeting project milestones consistently.

Potential challenges to stakeholder management at work

Managing stakeholders is an important aspect of any workplace project, but it isn’t always easy. There are lots of obstacles, which can include the complexity of some projects, multiple stakeholders, workplace politics, time constraints, and a variety of other factors. Here are a few potential challenges you may encounter as a project manager.

Not identifying all stakeholders in a project

One of the main challenges in stakeholder management is the failure to identify all relevant stakeholders. This might happen if you’re new to a company or if you’re taking on a larger project than usual. Overlooking stakeholders means you won’t have all the input you need to properly get your project underway. This can result in unexpected pushback and lead to delays or even derailment of the project.

Communication breakdown

Communication breakdowns can lead to missed milestones, small issues growing into big problems, and confusion among stakeholders. Maintaining clear and consistent communication is vital for keeping all stakeholders engaged and on the same page.

Clashing priorities

Stakeholders often come with different goals and priorities, which can sometimes conflict. Part of a project manager’s job is to mediate and smooth over any clashes in order to keep the project on track. Finding common ground and aligning stakeholder interests with project objectives requires skillful negotiation and compromise.

Power imbalances

Power dynamics play a significant role in stakeholder management. Senior stakeholders can sway the direction of a project and create unexpected delays. Recognising where delays like this might occur can help when scoping out a project timeline.

Resistance to change

Some stakeholders may be resistant to adapt to the changes brought about by a project. Sometimes this can be due to fear of the unknown or comfort with the status quo. Addressing these fears and providing support during the transition can help.

Lack of equal effort

In some cases, certain stakeholders may not contribute equally to a project, though they stand to benefit from its success. This can create resentment among other stakeholders.

No matter where you work or what your role is, it’s important to keep stakeholders happy. They could be external stakeholders like customers or a governing body, or internal stakeholders like your supervisor and your teammates. Good stakeholder management often comes down to open communication and establishing clear goals from the outset, whether they’re individual or for the whole organisation.

FAQs

What is a stakeholder and examples?

A stakeholder business definition is any individual, group or entity that has an interest in an organisation. Examples include:

employees,
customers,
suppliers,
creditors,
shareholders, and
community members.

What is the role of a stakeholder?

The role of a stakeholder changes depending on what they are a stakeholder in. For example, an employee is a stakeholder whose main role is to provide labour. A customer’s main role is to make purchases. A supplier’s main role is to provide resources.

What are stakeholders in a project?

Stakeholders in a project are people or groups who have a vested interest in the project’s outcome. This includes the project team, sponsors, clients, suppliers and any party affected by or influencing the project.

What is a stakeholder vs shareholder?

A stakeholder is anyone with an interest in an organisation or company, while a shareholder specifically owns shares in a publicly traded company for investment purposes. All shareholders are stakeholders, but not all stakeholders are shareholders.

What is the role of stakeholders in project management?

In project management, stakeholders play a crucial role in defining project goals and influencing decision-making. Different stakeholders have different roles, including: the project manager, team members working on the project, any legal team overseeing the project, any client, supplier, or third-party involved in the project.

How do stakeholders affect decision-making?

Stakeholders affect decision-making by:

providing input,
expressing concerns, or
exerting their influence.

Are employees considered stakeholders?

Yes, employees are considered stakeholders as they are directly affected by the organisation’s success and contribute to its performance and to reaching its goals.

How do you engage with stakeholders effectively?

To engage with stakeholders effectively, maintain clear and consistent communication, understand their needs and interests, involve them in decision-making processes and manage expectations through open communication.