Q&A - How should a business manage its stakeholders?

Every business has a range of different stakeholders, including employees, customers, government and the local community. But we know that each stakeholder group varies in terms of its power. How should a business respond to the differences that exist in stakeholder power and influence? The matrix below provides some guidance on the approaches often taken:

In handling its stakeholders, a business also has to accept that it will have to make choices. It is not always the case that “win-win” solutions can be found for key business decisions. Almost certainly the business cannot meet the needs of every stakeholder group and most decisions will end up being “win-lose”: i.e. supporting one stakeholder means another misses out.

There are often areas where stakeholder interests are aligned (in agreement) – where a decision can benefit more than one stakeholder group. In other cases, there is a clear conflict of interest. Here are some common examples:

Where Stakeholder Interests are Aligned
- Shareholders and employees have a common interest in the success and growth of the business
- High profits lead not only lead to good dividends but also greater investment (retained) in the business
- Suppliers have an interest in the growth and prosperity of the business
- Local community, employees and shareholders benefit from business involvement in the community

Where Stakeholder Interests Conflict

- Wage rises might be at the expense of lower profits and dividends
- Managers have an interest in organisational growth but this might be at the expense of short term profits
- Expansion of production activity might cause extra noise and disruption in local community