Who is a Stakeholder in a Business? Definition, Types and Differences.

picture of stakeholders

 

If their objectives are aligned, having stakeholders can be a very powerful thing for a company. While how important a stakeholder is will vary from company to company, there is a clear alignment as to what constitutes one. Anyone from an employee, to the local government, and even customers – all are considered a stakeholder. 

Key Takeaways

  • Stakeholders are people that have a direct interest in how a company performs. This is anyone from employees to investors.
  • While stakeholders can be great when it comes to having a common goal, sometimes those goals can be contradicting. 
  • Stakeholders and stockholders are two very different things. One has an easier escape route if things go south, while the other is more tied up.

 

What is a stakeholder?

A stakeholder is someone that has a direct interest in a company’s performance. They can be either internal or external to the actual operations, which is determined by their direct relationship with the organization. 

For example, internal stakeholders would be actual employees, investors, and company owners. Anyone who would be directly impacted by the overall company performance. On the other hand, external stakeholders don’t directly work inside the company but are still very much affected by its performance.  

 

What are the 6 types of stakeholders?

As a general idea, stakeholders can be categorized into 6 different types. Below you can find those In no particular order.

  • Suppliers
    Their stake in the company lies in the company’s ability to generate revenue. If more products and services are sold their supplies will be further needed. This means if the company makes money, then they make money. 
  • Government
    The government’s part lies in how taxes, rules, and regulations can affect the organization’s ability to sell and exist. They also collect money from the company in the form of tax payments so their stake relies on profit as well.
  • Customers
    There tends to be some discussion on this type given that some people say customers don’t actually have a stake. But, we would argue that they very much do. If the quality of the product diminishes then the customer would be directly impacted. 
  • Investors
    This one is pretty clear, but essentially, investors’ stake in the company is based on financial returns. The money they invested must be returned to them with interest, so they have quite a big stake in the organization.
  • Communities
    This one might come as a bit of a surprise, but communities’ stake lies in the economic growth a company provides. The better an organization does the more jobs are created, and the more money is injected back into the local area.
  • Employees
    This is arguably one of the most important types of stakeholders. With a direct stake in the company’s performance, employees rely on the organization in order to keep their job. Not only is there a financial aspect to this but also a non-financial one. They gain relationships with coworkers and even personal growth.

What are primary and secondary stakeholders?

There are two levels of stakeholders when it comes to business, primary and secondary. Each one has a different relation to the company which is what sets them apart from each other.

Primary stakeholders 

These are the stakeholders without which the company would not be able to operate. They’re essentially those that have a direct economic relationship (or direct impact outside of the financial aspect) with the organization. They have a large say in which direction the company moves towards, and can affect it greatly if they’re not 100% on board with the vision.

This would include employees, customers, and providers or suppliers. 

Secondary stakeholders

Secondary stakeholders, on the other hand, are those that have less of an economic impact on the company. But, whose presence can still influence the organization’s direction. If they were to disappear, the company would still function but it would likely have a bit of a hard time doing so. 

This would include local governments, local media, unions, and even direct competitors. 

 

What are the positives of having stakeholders?

One of the most important things stakeholders provide is how interested they are in how the company does. Because the organization’s performance directly relates to them being able to work or benefit from it, stakeholders tend to want to move together towards a common goal. 

A loyal customer who raves about your product is a stakeholder. A manager that works overtime to ensure a task is completed is a stakeholder. An investor who provides seed money is also a stakeholder. All working together towards making the company a success. 

What are the negatives of having stakeholders?

Have you ever heard of the phrase too many cooks in the kitchen? The person who coined the phrase was probably talking about the negative aspects of stakeholders. 

Ok, so maybe they weren’t. But, we can definitely find a correlation between the two. One of the biggest issues with having stakeholders is that oftentimes their objectives won’t align with each other. They can even end up being direct opposites of each other which leaves the company is not a great spot when making decisions.  

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What’s the difference between shareholder and stakeholder?

Essentially, the biggest difference between a stakeholder and a shareholder is how they relate to the company. Or, to be exact, the type of interest they have in the organization. 

A shareholder is someone who owns shares in the company purchased via the stock market. If the company does well they’re happy, and if the company doesn’t do well they can simply sell their shares and move on. 

A stakeholder however tends to be someone who works at the company or is more closely related to it. And so, they have a higher interest associated with how it performs. It’s also harder for stakeholders to get out of their relationship with the organization.  

Related Readings

Getting People Right (GPR) is an educational website providing professionals from all types of businesses with practical education in entrepreneurial leadership. To keep evolving your leadership toolkit, additional GPR resources below will be useful:

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