How to Effectively Manage Stakeholder Relationships

Every business entity that exists operates within an environment that consists of both internal factors and external factors. Many times these factors affect the operations and performance of a business entity either positively or negatively.

In a larger context, the business environment comprises of various interested parties who can either be individuals or other business entities. The said interested parties are simply called the business stakeholders and they usually hold diverse expectations and interests with respect to the particular business entity.

The internal Stakeholders of a business includes Employees, Management, Directors, Shareholders, Trustees etc. while the external Stakeholders of a business includes; Customers, Suppliers, Distributors, Competitors, General Public, Creditors/Lenders, Government agencies and regulatory authorities, the Media, Trade Unions and Associations.

Shareholders – They are owners of a Business by way of owning shares/unit of ownership in the business. Their main interest will be profit growth (payment of lucrative dividends) and capital growth of their share prices or value. 

Investors – Investors include the owners of a business, and may also include other parties who have put their money into a business for example bondholders, debenture holders etc. They typically have the right to be provided with accurate and timely financial information such as regular financial statements. Investors also have the right to approve or reject major business decisions like mergers and acquisitions. They also contribute ideas, give advice, bring business referrals/connections, help in the marketing of a business etc.

Management and Employees – they are usually concerned with job security, career growth, job satisfaction, options to own the company shares – ESOPs, status, attractive remuneration etc. 

Customers – They are basically concerned about getting value for their money from the purchases that they make in a business. They are also looking for reliability and quality of the products being offered by a business as well as the desire for excellent customer service/experience. A business must deliver what it promises, as well as be honest and forthright in everyday interactions with customers, suppliers, and others.

Suppliers – These are people or business entities who sell their goods and services to a business. The suppliers are majorly concerned about securing long-term business contracts, receiving prompt payments for goods delivered to their customers as well as getting the best price for their goods and services.

Creditors – These mainly comprise of the financial institutions that lend finances to a business or even firms that offer goods to a business on credit terms. The key concern of the creditors/lenders is to see that their funds are repaid as per the loan covenants. Trade creditors on the other hand expect that the business will adhere to the trade credit terms for goods sold to the said business on credit.

Government Agencies and Regulatory bodies – these consists of the government’s Customs Departments, Business and Professional Licensing bodies, Local governments etc. A business needs to ensure that it is compliant to the requirements of the relevant government regulatory bodies and agencies failure to which the existence of a business will be in jeopardy.

Trade Unions and Associations – These bodies are concerned with the welfare of employees. They represent the interests of their members which may include; unfair remunerations, unfair labour practices, the safety of the working environment etc.

Pressure Groups – These groups are interested in whether the business is acting appropriately towards their area of interest. These may include environmentalists who are concerned about how business operations are affecting the environment, customer advocates and human rights groups who campaign for fair prices for goods and services among other issues.

Community – The community in which a business operates is also considered as another set of stakeholders. Good businesses are considered an asset to any community. When a business pays taxes, this goes along in supporting the social amenities such as public schools, hospitals, better roads etc. Community is impacted by the business by way of job creation, CSR activities that promote Health, Education, sanitation etc. 

Media – Business entities require media publication relationships to market their products and services. Businesses often interact with the press and also the various social media platforms. The media may affect the operations of a business positively or negatively.

Competitors – These are business entities that sell similar goods or services to the same with another business entity. A competitor is always trying to beat the rival business entity out of the business (the dominance aspect). A business, therefore, needs to monitor the tactics of their competitor/s so that it can remain relevant in the business environment.

With all these stakeholder groups with their unique and diverse interests, it is very important to keep close contact with them, so that as a business owner or manager, you will know in good time when things are not headed in the right direction. This will ensure that one is able to take the necessary remedial actions to correct the situation before things fall apart in the management of a business entity.

As a business owner /manager, it is advisable to be respectful, courteous, and polite when dealing with various business stakeholders. Learn how to create rapport and connect with the different stakeholder groups. Understand who has the most influence/impact on the business and keep them close. As Warren Buffet once said “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”

Effective management of stakeholders also requires emotional intelligence to help in gathering of information from the various stakeholders, interpreting the information and in analysing it in relation to the business. This will ensure that the business entity is always ready to tactfully respond to the actions of the various stakeholders.

At Springboard Capital, we offer financial advice that will help you make decisions about what you should do with your money. Get in touch with us through WhatsApp on the link below or Call us through 0700 094 444 for your friendly financial fulfilment needs.

Article by: Daniel Theuri (Senior Credit Officer- Credit Analysis & Administation) – Springboard Capital Ltd

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