A Stakeholder Analysis is an approach that is frequently used to identify and investigate the Force Field formed by any group or individual who can affect or is affected by the achievement of the objectives of an organization. Stakeholder Analysis identifies the ways in which stakeholders may influence the organization or may be influenced by its activities, as well as their attitude towards the organization and its targets.
According to the Stakeholder Value Perspective of Edward Freeman (Strategic Management: a Stakeholder Approach 1984), the very purpose of the firm is to serve as a vehicle for coordinating stakeholder interests. In this view, Stakeholder Analysis is an end in itself. But even when we take a Shareholder Value Perspective, stakeholder analysis is an important means to achieve the corporate purpose.
The role of management is to formulate and implement strategies and to make decisions that satisfy all or most of the stakeholders, or to ensure at least that no powerful and legitimate stakeholders are left too unhappy.
Here is a comprehensive list of typical stakeholders:
- Owners and stockholders, investors
- Banks and creditors
- Partners and suppliers
- Buyers, customers and prospects
- Employees, works councils and labor unions
- Government (local, state, national, international) and regulators
- Professional associations, Industry trade groups
- Non-governmental organizations
- Public, social, political, environmental, religious interest groups, communities
More individuals or groups may be identifiable in specific circumstances. Some individuals can be part of multiple stakeholder groups. Some stakeholders may have an explicit, formal organization, others may not. There are Internal Stakeholders (such as employees) and External Stakeholders (such as government).
The interests of all stakeholders are closely related with the general success and wealth of the organization. However, certain stakeholders interests are particularly important at times when certain issues must be addressed, for example:
- Customers are important when quality of products are discussed.
- Employees are important when circumstances or safety at work is discussed.
- Government is important when dealing with the environment or legislation.
We can also distinguish between Primary Stakeholders (such as stockholders) and Secondary Stakeholders (such as government). Where the line is drawn precisely, is a source of much debate.
Usage of Stakeholder Analysis
- Making a list of all stakeholders
- Analyzing the interest of the various stakeholders
- Analyzing potential conflicts of interest with or between stakeholders
- Basis for further Stakeholder Mapping
- Basis or major influencing factor for Strategy formulation and Decision-making
- Evaluating existing strategies
- Basis for stakeholder communication
- Can also be used in Program Management and Project Management environments
Steps in Stakeholder Analysis
- Identify stakeholders (Brainstorming)
- Understand stakeholder needs and interests. Classify them into meaningful groups. Compare: Stakeholder Mapping
- Prioritize, balance, reconcile or synthesize the stakeholders
- Integrate stakeholder needs into the strategies of the organization and into its actions
Results of Stakeholder Analysis
- Better insight can be obtained per stakeholder in:
- The relationship with the stakeholder
- Coalitions or organizations of which the stakeholder is a member
- The significance of the stakeholder to the organization
- The power of the stakeholder
- The priorities of the stakeholder
- Associated risk areas
- Better strategies and decisions
- Better acceptance of the strategy and decisions of the organization
Limitations of Stakeholder Analysis
- Ideally, a Stakeholder Analysis should be performed regularly or even continuously, since the relevant stakeholders, their power and associations may change quickly.
- Note that the management of an organization has to assess the position of each stakeholder. It is the subjective perception of management that will ultimately decide the way in which the organization will act towards its stakeholders.
- It is normally impossible for management to satisfy all demands of all stakeholders completely. Therefore managing becomes a balancing act or even a reconciliation or synthesizing act, with the following options:
- Focusing on one leading stakeholder group, and satisfying all others to the extent which is necessary or possible. The leading stakeholder group could be the owners or stockholders (Shareholder Value Perspective) or even the managers themselves.
- Trying to balance or reconcile or synthesize all interests according to their weight, importance or urgency (Stakeholder Value Perspective).
- Note that quite often, a constructive cooperation with stakeholders is missing.