5 Simple Steps to Manage Stakeholders Effectively (Types)

Updated June 12, 2023

Stakeholder Management

Who are the stakeholders? What and who does this term stakeholder refer to? Are they simply the internal members of the company? Are they supporters of the company? Yes, we understand each question on your mind regarding stakeholder management, and we are going to help you get an answer to these questions. Many people believe that stakeholders are only the company’s investors or profit makers; however, this is not the care in terms of stakeholders. Let us know and understand the meaning of stakeholder and stakeholder management, and then finally, see how you can effectively manage stakeholders. To get an answer to your questions, refer to the notes below, as they will guide you through.

Who is a Stakeholder, or What is a stakeholder?

Anyone or everyone affected by the actions of a business or an organization is a stakeholder. Stakeholders are people without whom the organization might never exist.

Let’s see the types of stakeholders and how the company benefits them

1. Government

The company helps a location grow; this, in turn, helps the government pay taxes to the government, pays VAT, follows legislation, creates employment opportunities, reports truthfully to the state government, etc.

2. Employees

The company employees earn their bread and butter from the company. The company rates their wages or salaries, gives them job security, and compensates them for their jobs and loyalties, giving the employees respect and a fair communication opportunity.

3. Customers

The company’s customers earn value for their money when they buy the organization’s goods and services; they spend for the quality of the products they want; the company also gives them good service and ethical products. So yes, even customers are part of the stakeholders of the company.

4. Suppliers

Suppliers are people or smaller companies who provide raw materials to the company. The result of these raw materials is the finished goods that they supply to the customers. The company provides business opportunities to these suppliers, which creates employment for the suppliers and their people.

5. Creditors

The company benefits creditors with their credit scores, new contracts, and liquidity.

6. Community

For a community, a company or an organization provides job opportunities, involvement, protection of the environment, sharing of the company listed or not listed, and truthful communication.

7. Trade Unions

The concern of a trade union is providing a qualitative work atmosphere, protection for workers, and job opportunities for people.

8. Owners

The company owners are concerned with the profit-making ratios of the company, the longevity of the company, its market share and position, its succession planning, capital raising, its social goals, and the company’s growth.

9. Investors

The investors put in their money; hence they will only be concerned with the returns they receive on their investments and how much they earn through their investments.

Types of stakeholders

Now the above list is divided into two types of stakeholders

1. Primary stakeholders or internal stakeholders

These stakeholders are usually directly related to the economic transactions of the organization, for example, the company’s stockholders, employees, customers, suppliers, and creditors.

2. The secondary stakeholders or the external stakeholders

These stakeholders are people who do not directly engage in the economic transaction of the organization; however, they are either affected by the actions of the company, or they can affect the actions of the company, for example, the community, the general public, the media, activist groups, communist and also business support groups.

What is Stakeholder Management?

Stakeholders are critical and sensitive to an organization as they directly impact its operations. No company can exist without the support of stakeholders. Developing and controlling relationships with stakeholders is a crucial part of project management, as they play a vital role in the organization’s success. Studies show that businesses often fail due to a lack of involvement from key stakeholders. Improving relationships with stakeholders can enhance their involvement, leading to better business and project outcomes. Stakeholder support and contribution include executive support, sponsorship, emotional maturity, and effective utilization of the organization’s ecosystem, such as infrastructure, procurement, facilities, and legal support.

Why Manage Stakeholders?

Efficient stakeholder management is crucial as stakeholders have different roles, allegiances, powers, interests, and importance throughout the company’s life cycle. Managing stakeholders effectively is important as they can block or support your business. Stakeholders’ interest varies, and it’s essential to prioritize and manage them based on their significance to the business. For example, you are into a project in which your boss will be extremely interested. So will your family; however, an outsider not directly related to you will not be as interested. Similarly, in a business, the owner and the employees will be very interested; however, the community and the media will not.

Effective Stakeholder Management Steps

With the help of 5 simple steps, we can help you manage stakeholders effectively.

1. Identify and Acknowledge your Stakeholders

The very 1^st part of managing your stakeholders is to know them. You need first to know the stakeholders and their concerns, for example, people who can affect your business, like people from all around the organization, and people who can be affected by your business, like the community, the suppliers, etc., as an organization, you will have a huge list of stakeholder hence you have to prioritize every interested stakeholder; however efficiently. Priorities are given below.

• Stakeholders with high power and high interested

You need to make sure that you keep this lot of people happy, they must be completely engaged, and you must put in all your efforts to keep them satisfied or content.

• Stakeholders with high power and less interest

You need to keep even this lot happy and content, and hence you need to put in a good amount of effort in this lot of people; however, make sure that you limit your efforts somewhere, or else they will be bored or irritated by your messages.

• Stakeholders with low power and high interest

To keep these people happy is also important. Keep this lot well informed and keep talking to them to make sure that no issues are cropping up. Besides, this lot can be very useful as they offer helpful details for your business.

• Stakeholders with low power and less interest

This group of people needs to be monitored so that issues do not crop up; however, do not message these stakeholders, as they will easily get bored with your messages.    

2. The Purpose of Management needs to be Defined

Obviously, before you execute a job, you need to know its purpose. A key purpose will help you engage stakeholders effectively as it gives meaning to your management. The purpose you want to achieve with your stakeholder engagement will vary with the sector or the industry and, of course, with your organization. However, the common purposes for a public sector organization will include the following.

1. Development of policies
2. Planning of shared services
3. Planning travel
4. Initiative toward the environment
5. Development and encouragement of curriculum
6. Arranging campaigns for healthcare
7. Risk protection

The purpose of a retail sector organization will include

1. Development of the product
2. Refining the line of product
3. Issuing special offers
4. Working on pricing strategy
5. Planning new retail outlets
6. Working on the improvement of service levels
7. Working on the store interiors and its interiors

These purposes can help you use the list of these stakeholders and manage their involvement in the venture in the best possible way. Making them work together, showing how considerate they are, and keeping them informed or satisfied depends on how interested, active, and influential the stakeholders are.

3. Choose the Right Tool to Communicate with them

Now that you know your stakeholders and how interested they are, and your purpose for their involvement, you must also know how to communicate with them. You need the right tool here. In this digital era, you must choose the right digital tool to communicate with your stakeholders. To engage with each stakeholder group, we recommend you create a map. Create a map with 4 blocks of stakeholders according to their priorities. And on the map, jot down the types of engagement and communication you would want to use to inform or engage the stakeholder. Remember, for every lot, according to their priorities, you will choose the right way to communicate with them. Also, the level of engagement will be different for each group.  

4. Create a Plan of Action and also Activate the Plan

Once the stakeholder analyses are done, you need to focus on the key personnel associated with them; besides knowing the key people, you also need to know their level of interest and importance. This is the best way to interact effectively with the stakeholders, especially in planning proactive communication. In your action plan, you will also identify the obstacles you might face while executing business and communication plans. Your next step will be to serve and eliminate or minimize the cropping up of these obstacles. Identifying problems is not easy; you need to practice it to identify and remove them. These problems can be: 

1. Missing knowledge and information
2. Planning and decision-making with less engagement
3. Not informed to participate
4. Not available due to other responsibilities
5. Unavailable due to location and duration
6. Does not agree with the changes and the proposition
7. Inefficient skills
8. Conflicts with the other stakeholders
9. External provider with no formal agreement in place
10. Potential doubts of the stakeholder

Based on the stakeholder’s position on the map, you can communicate with them. Now that you know the obstacles you can face, you need to get the right information and solution. You can now activate your plan by

• Communicating with them about their matter of interest
• Gaining information relevant to the project
• Managing the expectations of the stakeholders again according to their priorities.
• Involving them in the all-important decision.

5. Managing the Plan and Monitoring it

Once you set any plan managing it and monitoring it is extremely important. You can assess each stakeholder’s position, check their requirements, and determine if the process needs any action. Check their determination and commitments and if you require adding a management plan. Check on how well the stakeholders are managed. Focus on front and performance management to understand what amendments and adjustments need. Take feedback from stakeholders; it will help you understand the situation and the additions and subtractions you must make. Once all the processes are in place and all the stakeholders have been allotted their jobs and duties, you must continue to monitor the processes, if important, and apply the management process all over again.

Recommended Articles

Here are some articles that will help you get more details about the Stakeholder, so just go through the link.

1. Types  of Communication
2. Competition Level
3. 12 Major Principles of Brand Management
4. Funding Requirements