Stakeholder Analysis

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Assessing who or what really counts. Explanation of Stakeholder Analysis.


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Stakeholder Analysis - Internal and External StakeholdersWhat is Stakeholder Analysis? Description

A Stakeholder Analysis is an approach that is frequently used to identify and investigate the Force Field formed by any group or individual who can affect or is affected by the achievement of the objectives of an organization. Stakeholder Analysis identifies the ways in which stakeholders may influence the organization or may be influenced by its activities, as well as their attitude towards the organization and its targets.

 

According to the Stakeholder Value Perspective of Edward Freeman (Strategic Management: a Stakeholder Approach 1984), the very purpose of the firm is to serve as a vehicle for coordinating stakeholder interests.  In this view, Stakeholder Analysis is an end in itself. But even when we take a Shareholder Value Perspective, stakeholder analysis is an important means to achieve the corporate purpose.

 

The role of management is to formulate and implement strategies and to make decisions that satisfy all or most of the stakeholders, or to ensure at least that no powerful and legitimate stakeholders are left too unhappy.

 

Here is a comprehensive list of typical stakeholders:

  • Owners and stockholders, investors
  • Banks and creditors

  • Partners and suppliers

  • Buyers, customers and prospects
  • Management
  • Employees, works councils and labor unions
  • Competitors
  • Government (local, state, national, international) and regulators
  • Professional associations, Industry trade groups
  • Media
  • Non-governmental organizations
  • Public, social, political, environmental, religious interest groups, communities

More individuals or groups may be identifiable in specific circumstances. Some individuals can be part of multiple stakeholder groups. Some stakeholders may have an explicit, formal organization, others may not. There are Internal Stakeholders (such as employees) and External Stakeholders (such as government).

 

The interests of all stakeholders are closely related with the general success and wealth of the organization. However, certain stakeholders interests are particularly important at times when certain issues must be addressed, for example:

  • Customers are important when quality of products are discussed.
  • Employees are important when circumstances or safety at work is discussed.
  • Government is important when dealing with the environment or legislation.

Stakeholder Analysis - Primary and Secondary StakeholdersWe can also distinguish between Primary Stakeholders (such as stockholders) and Secondary Stakeholders (such as government). Where the line is drawn precisely, is a source of much debate.

 

Usage of Stakeholder Analysis. Applications

  • Making a list of all stakeholders

  • Analyzing the interest of the various stakeholders
  • Analyzing potential conflicts of interest with or between stakeholders
  • Basis for further Stakeholder Mapping
  • Basis or major influencing factor for Strategy formulation and Decision-making
  • Evaluating existing strategies
  • Basis for stakeholder communication

  • Can also be used in Program Management and Project Management environments

Steps in Stakeholder Analysis. Process

  1. Identify stakeholders (Brainstorming)
  2. Understand stakeholder needs and interests. Classify them into meaningful groups. Compare: Stakeholder Mapping
  3. Prioritize, balance, reconcile or synthesize the stakeholders
  4. Integrate stakeholder needs into the strategies of the organization and into its actions

Results of Stakeholder Analysis. Benefits

  • Better insight can be obtained per stakeholder in:

    • The relationship with the stakeholder
    • Coalitions or organizations of which the stakeholder is a member
    • The significance of the stakeholder to the organization
    • The power of the stakeholder
    • The priorities of the stakeholder
    • Associated risk areas
  • Better strategies and decisions
  • Better acceptance of the strategy and decisions of the organization

Limitations of Stakeholder Analysis. Disadvantages

  • Ideally, a Stakeholder Analysis should be performed regularly or even continuously, since the relevant stakeholders, their power and associations may change quickly.
  • Note that the management of an organization has to assess the position of each stakeholder. It is the subjective perception of management that will ultimately decide the way in which the organization will act towards its stakeholders.
  • It is normally impossible for management to satisfy all demands of all stakeholders completely. Therefore managing becomes a balancing act or even a reconciliation or synthesizing act, with the following options:
    • Focusing on one leading stakeholder group, and satisfying all others to the extent which is necessary or possible. The leading stakeholder group could be the owners or stockholders (Shareholder Value Perspective) or even the managers themselves.
    • Trying to balance or reconcile or synthesize all interests according to their weight, importance or urgency (Stakeholder Value Perspective).
  • Note that quite often, a constructive cooperation with stakeholders is missing.

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Recent User Comments
Olopade Gboyega - Nigeria Satisficing all Stakeholders "I like this article. It shows that no stakeholder is to be left out as all of them should be carefully understood and dealt with appropriately. But this also leave me with a question. Are we trying to "satisfice" all the stakeholders in the organization?"    0
Strategist - USA Avoiding Subjectivity in Stakeholder Analysis "As correctly stated in the excellent article above, any stakeholder analysis is typically the sum of the SUBJECTIVE PERCEPTIONS of the management team of the company. This means that if these perceptions are incorrect, the stakeholder analysis will also be incorrect. This could have devastating consequences for the strategy of the firm.
I am looking for ways how such subjectivity in Stakeholder Analysis can be decreased or avoided altogether. Who can help me?"		    6
Godzy - Australia Not doing a Stakeholder Analysis? "First excuse my writing. Personally I like the article, it gives me a notion of what to expect from a stakeholder analysis. There is one thing that I would like to know. What is the consequence of NOT doing a stakeholder analysis? I can understand why we do it but not really. I know it might sound dumb, but I was told that there is no such thing as a dumb question."    2
Guy Grandchamps - Belgium Stakeholder Analysis "I discovered "hand on maps", about the same sorts of maps, developped by Paul Defourny (a Belgian colleague) with the aim to create opportunities connecting the different stakeholders. I use the same sort of maps in a strategic context: in the center I note the organization capacities, what the organization can deliver to stakeholders, around the center hollow squares for performance markers (numbers or colors). I complete the map adding the key success factors, the vision and the values, even with a marker for each of one. The map is becoming then a very suitable tool to animate a strategic seminar to determine for instance the "Mission Statement", the priorities in developping relationship and organization capacities. "    -2



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Compare with Stakeholder Analysis: Stakeholder Mapping  |  Force Field Analysis  |  Stakeholder Value Perspective  |  Shareholder Value Perspective  |  Ashridge Mission Model  |  Clarkson Principles  |  Intrinsic Stakeholder Commitment  |  Strategic Stakeholder Management  |  PEST Analysis  |  Crisis Management  |  Scenario Planning

 

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  └► Jim Burke (USA) Avoiding Subjectivity: Assumptions Exercise "Perceptions are tied closely to assumptions and one way to address that is to gather the key stakeholders for an assumptions exercise. That, then, puts forth the basis for the perceptions.
A technique taught me about 10 years ago helps smoke out those assumptions. Picture a graph, with a time line on the bottom/x axis and a metric on the left/y axis. Ask the stakeholders to draw trend lines about how the metric will be measured over the time line. For example, the metric could be profit or it could be customer satisfaction. Have everyone draw their lines on a tablet sheet (which you have prepared beforehand) and then transfer that to a large wall chart. Ensure that the senior stakeholder goes last. In the US, at least, the lines go every which way. The chart looks like a bowl of noodles. You then ask why the line was drawn like it was and out comes the assumptions which can be used to filter the perceptions."
  └► Derrick (Ghana) Reports and Senior Qualified Personnel "To eliminate or reduce the level of perception or subjectivity of a stakeholder analysis, two key issues comes to the fore; pre-determind outcome before interviewing of stakeholders and lack of ability to capture right information from the respondents. Executives who manage what I call " IN - OUT - IN STRATEGY " Thus what we think should be the same as our stakeholders, build reports to validate that. The right approach should allow the company strategy to be influenced by what stakeholders think and want to have their companies do for them. Secondly, senior and qualified personnel must at all times be used for such key exercise."
  └► Martin Buenger (Switzerland) Avoiding Subjectivity "The stakeholders analysis is always based on experience and intuition of the management. This is one of the limitations of this instrument. You can ask for reasons for the assessment, but this tends to be circular. An intuitive alternative would be to test it with a constellation."
  └► John Jenkins (United Kingdom) Avoiding Subjectivity With Stakeholders "In a pure sense this probably not possible, as the information in use will always be 'a matter of opinion'. Where 'stakeholders' are concerned we do not have reliable statistical data or 'hard' facts to use; the data will probably always be of the 'soft' type. If one accepts that as a given, then 'reducing subjectivity' becomes either a process based on aggregating a number of views, opinions or assumptions to identify 'common ground' or similarities OR of collecting a variety of disparate views that can be contrasted and compared to 'map' the scope of the differences. OR both approaches can be blended, depending on the circumstances and the purpose of the work. My experience has been that however you approach this subject 'meaningful dialogue' is an essential prerequisite to any productive work with 'stakeholders'."
  └► Claude Balleux (Canada) Avoid Subjectivity towards Stakeholders "First, excuse my English. I think that this kind of exercise will never be objective. Because people are not able to answer without thinking about themselves. But if you ask employees (even if they are senior personnel) to do this job, that could raise the risk of subjectivity."

  └► S K "Bal" Palekar (India) What happens if the stakeholder analysis is not done? "What will suffer is execution. Many times what is theoratically best cannot be executed because one of the key stakeholders (say, employees) dont want it to happen and the "power equation" of the management with employees may be such that the plan cannot be enforced (suppose the employees ae underpaid and/or they may easily find jobs outside)."
  └► Lucie (Vybiralova) No stakeholder analysis is like having no map "Starting a change project without stakeholder analysis is like going to a dark mountain forest without a map and a flashlight. Maybe you will be lucky and not step into mud, fall into rocky canyons and bump into several trees, but maybe you will not have so much luck and you will learn the need of the map by your direct experience.It is up to you. What happens depends on your preparation OR just good luck."