Understanding stakeholders

An important part of understanding an organisation and the factors that influence it, is understanding the stakeholders who have an interest in the organisation.

Stakeholders can be internal to the organisation, or external. Sometimes their interest conflict. According to Freeman (1984), a stakeholder is “any group or individual who can affect, or affected by, the achievement of the organisation’s objectives”.

It is obvious why managers need to take into account and manage stakeholder interests and expectations.

Some key points to remember:

  • All organisations have internal and external stakeholders
  • Different stakeholders have different interests which may conflict
  • Organisational culture, structure, and control systems determine how these conflicts will be resolved.
  • Some stakeholder interests are protected by law.

According to Mitchel et al. (1997), stakeholders have varying degrees of power, legitimacy, and urgency. Page 328 in the B628 course book contains a Venn diagram which illustrates the intersection of these three factors, giving us seven different categories of stakeholder.

  • Those with only power.
  • Those with only legitimacy.
  • Those with only urgency.
  • Those with power and legitimacy.
  • Those with power and urgency.
  • Those with urgency and legitimacy.
  • Those with power, legitimacy and urgency.

The main thing to remember about stakeholders is that they do have different interests. The challenge for managers is balancing these interests when making decisions.

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