Stakeholders refer to those groups or individuals who are directly or indirectly affected by an organization’s pursuit of its goals. Stakeholders fall into two categories:
Internal stakeholders-Groups or individuals, such as employees, that are not strictly part of an organization’s environment but for whom an individual manager remains responsible. They include employees, shareholders and the Board of Directors.
External Stakeholders-Groups or individuals in an organization’s external environment that affects the activities of the organization. They include customers, suppliers, governments, special-interest groups, the media, labour unions, financial institutions and competitors.
The roles stakeholders play may change as organizational environments evolve and develop. Managers must be sensitive to this fact when they are tracing the various influences on an organization’s behaviour and recommending responses to environmental change.
Even though, strictly speaking, internal stakeholders are not part of the organization’s environment (because they are part of the organization itself),they are a part of the environment for which an individual manager is responsible.
The nature of the workforce is changing in most organizations, partly because of demographic factors. At the same time the skills needed by employees are changing. As companies find it necessary to experiment with quality programs, team approaches and self- managed work groups, they need employees who are better educated and more flexible. They are increasingly becoming aware of their rights and industrial relations have to be well managed.
Shareholders and Boards of Directors:
The governing structure of large corporations allows shareholders to influence a company by exercising their voting rights. Traditionally, however, shareholders have been interested primarily in the return of their investment and have left the actual operation of the organization to its managers.
Customers exchange resources, usually in the form of money, for an organization’s products and services. A customer may be an institution, such as a school, hospital or government agency; or another firm such as a contractor, distributor or manufacturer; or an individual. Selling tactics vary according to customer and market situations. Usually a marketing manger analyzes the potential customers and market conditions and directs a marketing campaign based on that analysis. They are now demanding quality products and this has led to introduction of TQM techniques to keep up quality standards.
Every organization buys inputs-raw materials, services, energy, equipment and labour-from the environment and uses them to produce output.. What the organization brings in from the environment-and what it does with what it brings in-will determine both the quality and the price of its final product. Organizations are therefore dependent upon suppliers of materials and labour and will try to take advantage of competition among suppliers to obtain lower prices, better quality work, and faster deliveries.
The doctrine of laissez-faire, developed in the eighteenth century, holds that a government should exert no direct effects on business, but should limit itself to preserving law and order, allowing the free market to shape the economy. Government also act to aid and protect industries. The government expects taxes to be paid on time failure of which penalties are imposed or some other legal action. This has an impact on the profitability of the firm.
These use the political process to advance their position on particular issues such as gun control/fire arm disarmament, abortion or prayer in the public schools. Managers can never be sure whether an ad hoc group will form to oppose the company on some issue-waste disposal methods, etc
The media can give such groups instant national attention, and political action committees of such groups may use campaign contributions to influence legislators to vote in particular manner on issues of organizational interest. Managers must take both present and future special-interest groups into account when setting organizational strategy. Among the most important special interest groups are consumer advocates and environmentalists.
The economy and business activity have always been covered by the media because these topics affect so many people. Today, though mass communication allow increasingly extensive and sophisticated coverage, ranging from general news reports to feature articles to
in-depth investigative exposes. The coverage is also more immediate, due to the increasing use of communication satellites.
Today, managers at most large organizations realize they operate in a fishbowl, where every action may be the subject of media scrutiny. To improve their communication with both internal and external audiences, they have developed sophisticated public relations and marketing departments. In addition, executives who regularly deal with the media often seek professional coaching to improve their ability to present information and opinions clearly and effectively. Some organizations provide training for all employees to help them respond capably in situations that may arise.
Personnel specialists generally deal with an organization’s labour supply, sometimes supplemented by other managers with specific hiring and negotiating responsibilities. They use multiple channels to locate workers with the various skills and experience the organization needs. When an organization employs labour union members, union and management normally engage in some form of collective bargaining to negotiate wages, working conditions, hours, etc.
Organizations depend on a variety of financial institutions, including commercial banks, investment banks, and insurance companies, to supply funds for maintaining and expanding their activities. Both new and well, established organizations may rely on short-term loans to finance current operations and on long-term loans to build new facilities or acquire new equipment. Because effective working relationships with financial institutions are so vitally important, establishing and maintaining such relationships is normally the joint responsibility of the chief financial officer of the organization.
To increase its share of the market, an organization must take advantage of one of two opportunities:
– it must gain additional customers, either by gathering a greater market share or by finding ways to increase the size of the market itself; or
– it must beat its competitors in entering and winning in an expanding market
In either case, the organization must analyze the competition and establish a clearly defined marketing strategy in order to provide superior customer satisfaction.
Other stakeholder groups:
Each individual organization has a host of different stakeholders. For instance, a hospital will have to consider the Kenya Medical Association (KMA); groups of doctors, nurses, caregivers and patients. Every organization has a particular stakeholder map that is in essence a picture of the direct-action component of its external environment.