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Stakeholder Analysis and Management – Primary and Secondary

CMS Vocational Training Hadyn Luke posted this on Friday 10th of September 2021 Hadyn Luke 10/09/2021

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Stakeholder Analysis and Management – Primary and Secondary

Every organisation has stakeholders, but the key focus is usually on those stakeholders who receive financial returns, such as investors and stockholders.

However, recent stakeholder theory suggests that greater success comes from taking into account the needs, concerns and views of all stakeholders, including those without a financial stake in the business.

What is a stakeholder?

A stakeholder is a person, group or organisation that is affected by and/or affects the operation of an organisation.

They could be an employee, an investor, a customer, a supplier or an outside organisation with an interest in the company’s success.

What is stakeholder analysis?

This is the process of analysing the influence that various stakeholders have on a business. It is carried out in order to understand their varying needs and expectations, and to ensure that businesses communicate at the right level to win stakeholder support for their organisational goals.

This kind of analysis should be carried out at project and departmental levels by managers, as well as at operational level.

What are primary and secondary stakeholders?

Primary stakeholders are those who are essential to the existence of the organisation, e.g. employees, customers, suppliers, shareholders and investors.

Secondary stakeholders are those who have an interest in the business and can affect its operation, usually from the outside, for example business partners, trade unions, inspectors/regulators, consumer/environmental groups, government and local councils, community groups, business premises owners.

Why should all stakeholders be taken into account?

Shareholders only own shares in a company, which can be sold, they don’t own the company itself, and yet they are often the first consideration when making major decisions.

If a company only takes account of the interests of stakeholders with a financial stake in the business, they risk alienating other stakeholders who can affect future success. Meeting the needs of all stakeholders will maximise business value.

How can an organisation manage the needs of all stakeholders?

First draw up a list of all stakeholders and list them under primary and secondary stakeholders, using the specific names of people and organisations. Map these out in a visual diagram and group them into sectors, for example: suppliers, customers or partners.

Next, use a power-interest grid to identify how much interest various stakeholders have in the business – and how much power they have over its operation. Those with high levels of power and interest will require the most engagement. Stakeholders with high power but low interest should be kept informed but not bombarded with detail. Those with high interest but little power should have occasional communication, and those with low interest and power will not require much of your time.

Understanding your stakeholders

To understand your stakeholders, you need to try to see the organisation from their point of view. This will help you understand their motivations, needs and concerns, and to work out what influences them. Do they represent an opportunity or a threat to your business?

A few questions to consider

Now you have a list that prioritises your stakeholders in order of power and interest, you can look at strategies to take the business forward. Think about issues such as:

  • How to motivate your employees
  • Improvements to products and services to keep your customers happy
  • Ways to improve relationships with your suppliers
  • Activities that could encourage co-operation from external stakeholders
  • Policies that could damage relationships or help competitors
  • How you can improve external opinions of your organisation

Draw up a list of actions with detail on cost, ease of implementation and how they might affect other stakeholders. It’s not always possible to keep everyone happy, but try to avoid trading off the interests of one group of stakeholders against another.

Communication is key

How you communicate with stakeholders will influence their feelings about the organisation – and it should not be one way. Engage with stakeholders through dialogue. Ask for feedback and act on it. Build trust, respect – and a better picture of their perspective, which will help with any conflict resolution.

Finally, be aware of change, both within an organisation and in the outside world. Revisit and review your stakeholder relationships regularly and be prepared to adapt to internal and external changes.

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