What is a stakeholder? Definition and guide to stakeholder management

The term stakeholder can refer to a person, a group of people, or an organisation. So it’s a broad term that’s worth explaining. Here’s what you need to know.

Stakeholder meaning

A stakeholder definition is a person or group that has an interest in a business or project. Taking this further, stakeholders can both affect and be affected by a business or project.

Types of stakeholder and their role in business

It’s important to identify stakeholders, because these are often the key people or groups that can lead your business or project to success (or failure).

What’s more, in the past, a key motive for many businesses was maximising value for shareholders (people who own parts of the business and make money from its success). By shifting perspective to stakeholders, businesses can gain a deeper understanding of how its operations affect people, groups and communities more widely.

So, what does stakeholder mean more practically? Stakeholders can be both internal and external. An internal stakeholder has a direct relationship with a business or project. They can affect its course and its outcomes will affect them directly.

External stakeholders, meanwhile, are defined by an indirect relationship. They might not be able to change the course of a business or project easily, but its outcomes will still affect them in some way.

Internal stakeholder examples include:

• business owners
• executives and management
• project team
• other employees involved with delivering a project
• clients

External stakeholder examples include:

• customers
• suppliers
• creditors
• government
• wider communities

What is stakeholder management?

So, the term stakeholder covers a huge variety of people and groups. Everybody will bring a unique perspective on the business or project, which means stakeholder management is important.

If you don’t at least know who your stakeholders are before starting work, there could be problems later on. For example, if someone in senior management wants to sign off on a project but they weren’t involved from the beginning, they might suggest some fundamental changes when they do get brought in. This costs time and money.

A method you can use is the stakeholder matrix, which is a tool for stakeholder analysis.

Stakeholder analysis

Firstly you should identify key stakeholders. List all the internal and external stakeholders that you (and your team) can think of. If you’re listing groups and organisations, make sure you note the key people that you’ll be communicating with.

Then you can map out your stakeholders with a stakeholder matrix that helps you prioritise the actions you need to take with them.

Stakeholder matrix

You can create your own stakeholder matrix template with a grid of four squares on two axes, plotting power on one and interest on the other, categorising these as either low or high.

This matrix will help you analyse how to engage the various stakeholders involved:

• high power, high interest stakeholders you should manage closely – concentrate your efforts on these stakeholders, communicating with them clearly and making sure that they stay engaged
• high power, low interest stakeholders you should keep satisfied – communicate with these stakeholders well and keep them updated, but not so much that they become bored with the work or project
• low power, high interest stakeholders you should keep informed – these stakeholders are enthusiastic, so make sure they stay updated, as they can provide helpful details and direction (but don’t let them use too much of your time and resources)
• low power, low interest stakeholders you should monitor – these stakeholders need to be kept on side as their position may change in the future, but you’ll only usually need to update them every now and then

Once you’ve drawn up a stakeholder matrix template, get your list of stakeholders and put them into position across the grid. Where does everyone fall?

Stakeholder management plan

When you’ve prioritised your stakeholders, you can come up with a plan for managing them. It’s likely that you’ll need to adapt your communication style depending on the stakeholder.

For instance, you’ll need to consult with someone who has high power and high interest regularly and make sure you take their views into full consideration. You’ll need to nurture them and counter any resistance they have, as they’ll often determine the success or failure of a project.

On the other hand, while you might be in regular contact with someone who has low power and high interest, you’ll need to take a firm line, as their views ultimately won’t change the project’s course.

Ask the following questions while looking at your stakeholder matrix to help inform your strategy:

Tools to manage your business or project

Now that you know a bit more about stakeholder management, why not take a look at more guides and downloads to help you become more efficient?

• free cash flow forecast guide and template
• how to do a SWOT analysis
• how to write a business proposal (guide and template)

What are your top techniques for stakeholder management? Let us know in the comments below.

More useful guides for small businesess

• How to write a business plan: free template
• Tips for developing a product: a simple guide
• How to price a product: strategies for pricing your product
• What is business insurance?

Photograph 1: Jacob Lund / stock.adobe.com

Photograph 2: Shutter B / stock.adobe.com