What are the types of stakeholder?

Within a business or organisation, groups can have an interest and be impacted by the outcome without being directly involved within the business. Stakeholders can be split into two different types, internal and external.

Internal stakeholders are people who have an interest in the company due to a direct relationship, such as employment, ownership or investment. 

External stakeholders are people who do not directly work for the company but are impacted in some capacity by the outcome and actions of the business. Typically these will consist of groups such as public groups, suppliers and creditors.

Suppliers are the people or businesses that provide your business with goods and they rely on the revenue from the sale of the goods. The success of your business is important to them as if you are successful you will look to purchase more goods from them. Suppliers are usually categorised as follows:

• Service providers: This category encompasses various essential services such as electricity, water, telecommunications, IT support, email services, website hosting, office supplies, transportation services, and more.

• Subcontractors: If your business operates in the trades, subcontractors may include fellow tradespeople. Alternatively, if you’re in a consultancy or training role, subcontractors could consist of other consultants, trainers, and similar professionals. These services may be engaged directly or through intermediary agencies.

• Manufacturers and producers: Depending on the nature of your business, you may be involved in procuring goods or components directly from manufacturers and producers. 

• Distributors: Acting as intermediaries between manufacturers and end-users, distributors purchase goods in bulk and may apply their markups before supplying smaller quantities to retailers or consumers. This facilitates access to products that manufacturers may not distribute in small volumes.

• Importers: Similar to domestic distributors, importers source goods from overseas suppliers. 

As external stakeholders go, customers are arguably the most important. Customers are the people who buy business services or products, driving your revenue or growth. Thinking about your customers as vital stakeholders should flow through all your work and drive your decision making. Neglecting to do so can lead to diminished sales and damaged reputation.

Here are some of the strategies you can employ to ensure they have a stake in the business:

• Market research: Utilise focus groups and digital analytics to gain valuable insights into customer preference. 
• Product and service development: Develop and tailor your offering around market needs and customer insights. 
• Brand identity and communication: Craft compelling messaging and visuals that resonate with customers.
• Customer feedback and engagement: Implement mechanisms for capturing feedback and fostering a two-way conversation with your audience (e.g social media)

Amazon are often praised for its customer-centric approach; famously Jeff Bezos would insist on always leaving an empty chair in meetings – left vacant for the symbolic customer. 

Employees are impacted by the performance of a business or organisation as they are the ones who will pay their salaries. The better the performance of the company, the more opportunities they are likely to receive for growth, whether it be positional, salary or educational. The more your employees are bought into the idea of being stakeholders the more likely they are to shape your success. You can do this by:

• fostering an open and collaborative environment 
• creating opportunities for progression and career development
• canvassing employee feedback and involving them in decision making
• ensuring fair pay and access to employee benefits
• having company values that reflect the company vision and values you wish to uphold
• embedding equality, diversity and inclusion into your workplace culture.

Investors are people who will invest money into the organisation or business. They can range from the owner to people outside of the company, who are not directly involved. As an investor’s potential return is impacted by the performance of a company they have a great interest. Investors will also have access to information such as financial statements, alongside rights that may allow them to be involved in large decisions that can impact them, the business and other stakeholders. Meeting investor expectations is crucial as they may withdraw their backing. You can do this by:

• aligning goals and expectations
• providing effective communication and transparent updates on company performance
• hosting regular meetings and investor events
• setting up effective feedback mechanisms to solicit input and suggestions on company performance and strategic direction
• implementing robust risk management practices to mitigate potential threats to investor value. 

Communities can be impacted by a business or organisation in many ways. If a business succeeds it provides the opportunity for more jobs and economic development. Businesses may also have ties with the local community in which they assist. The performance of a business to the community, allowing for growth opportunities that can be reinvested into the community makes them an indirect external stakeholder. 

Looking at this in a broader sense, communities can extend beyond local residents, and might include:

• Other local businesses: Other small businesses and enterprises operating in the area are part of the community network. These businesses may collaborate, compete, or interact with each other in various ways, contributing to the overall economic ecosystem of the community.

• Government and public institutions: Local government bodies, public institutions, and regulatory agencies also play a role in the community. They may provide essential services, infrastructure, and regulations that affect the business environment and quality of life within the community.

• Nonprofit organisations and community: Nonprofit organisations, community groups, and civic associations represent the social fabric of the community. They may collaborate with businesses on community initiatives, advocate for local interests, and provide support services to residents and businesses alike.

• Local environment: The physical environment and natural resources within the community are also integral components. Businesses have a responsibility to minimise their environmental footprint and contribute to sustainable practices that preserve and enhance the local environment for current and future generations.

Governments are major stakeholders in a business, the performance of the business impacts the taxes from the business, employees and other spending from the company. The better a company performs the likelihood that they will pay more taxes increases. 

It can be difficult to rank stakeholders as they all interact and are impacted by your company differently. It is important to try to align stakeholders to make it as easy as possible as they will have the same requirements. 

However, there are instances where this may not be possible, for example, if an investor wants the company to cut costs, it may result in a lower-quality product or service being provided, which does not align with the customers’ interests.

There is no set way to prioritise stakeholders, the prioritisation is generally based on the stage of the company. New startups will often prioritise employees and customers as the main stakeholders, whereas a large corporation may be required to prioritise the shareholders and investors within the company. Although it is down to the company to decide what they think is most important if not all stakeholders are aligned.