Stakeholders are individuals or groups who have an interest in an organization’s ability to deliver intended results and maintain the viability of its products and services. We’ve already stressed the importance of stakeholders to a firm’s mission and vision. We’ve also explained that firms are usually accountable to a broad range of stakeholders, including shareholders, who can make it either more difficult or easier to execute a strategy and realize its mission and vision. This is the main reason managers must consider stakeholders’ interests, needs, and preferences.
Considering these factors in the development of a firm’s mission and vision is a good place to start, but first, of course, you must identify critical stakeholders, get a handle on their short- and long-term interests, calculate their potential influence on your strategy, and take into consideration how the firms strategy might affect the stakeholders (beneficially or adversely). The table below provides one way to begin thinking about various stakeholder groups, their interests, importance, and influence. Influence reflects a stakeholder’s relative power over and within an organization; importance indicates the degree to which the organization cannot be considered successful if a stakeholder’s needs, expectations, and issues are not addressed.
As you can imagine, for instance, one key stakeholder group comprises the CEO and the members of the top-management team. These are key managers, and they might be owners as well. This group is important for at least three reasons:
- Its influence as either originator or steward of the organization’s mission and vision.
- Its responsibility for formulating a strategy that realizes the mission and vision.
- Its ultimate role in strategy implementation.
Typically, stakeholder evaluation of both quantitative and qualitative performance outcomes will determine whether management is effective. Quantitative outcomes include stock price, total sales, and net profits, while qualitative outcomes include customer service and employee satisfaction. As you can imagine, different stakeholders may place more emphasis on some outcomes than other stakeholders, who have other priorities.
Stakeholders, Mission, and Vision
Stakeholder analysis refers to the range of techniques or tools used to identify and understand the needs and expectations of major interests inside and outside the organization environment. Managers perform stakeholder analysis to gain a better understanding of the range and variety of groups and individuals who not only have a vested interest in the organization, and ultimately the formulation and implementation of a firm’s strategy, but who also have some influence on firm performance. Managers thus develop mission and vision statements, not only to clarify the organization’s larger purpose but also to meet or exceed the needs of its key stakeholders.
Stakeholder analysis may also enable managers to identify other parties that might derail otherwise well-formulated strategies, such as local, state, national, or foreign governmental bodies. Finally, stakeholder analysis enables organizations to better formulate, implement, and monitor their strategies, and this is why stakeholder analysis is a critical factor in the ultimate implementation of a strategy.
Management 2020 text remixed from multiple sources under a CC Attribution-NonCommercial-ShareAlike 4.0 International License. View a complete list of original sources.