STAKEHOLDER ANALYSIS AND STRATEGIC MANAGEMENT

By Suresh V Menon, Principal Consultant of Six Sigma and Strategic Management | Wednesday, 21 April 2021, 05:54 IST

Stakeholders are the individuals and groups who can effect and are affected by the strategic outcomes achieved and who have enforceable claims on a firm’s performance. Stakeholders can support sustainable strategic management of an organization. They could also withhold participation essential for sustainable strategic management of an organization. At the extreme they could oppose the top management of an organization in strategy formulation of an organization. Organizations that can effectively manage stakeholder relationship generally outperform those that do not. Managing stakeholder relationships is critical for the strategic management of an organization.

Stakeholders are divided into internal and external stakeholders

  • Internal stakeholders are shareholders/owners, managers or employees
  • External stakeholders are customers, suppliers or government.

The stakeholder’s association with the organization is a two-way relationship. Stakeholders provide support to the organization and contribute in many different ways. In return the organization tries to satisfy the expectations of the stakeholder and honor their legitimate claims. External stakeholders such as customers pay the price for the products and services, suppliers provide materials, creditors grant finance and government supports legislation and regulation so on.

 

Stakeholder Analysis

Stakeholder relationship management requires that stakeholder analysis be done to identify importance of various stakeholders and ensure claim of the more important stakeholders are satisfied first. Usually stakeholder analysis is guided by the following steps given below:

  • Identify the stakeholders
  • Identify the stakeholder’s expectations, interest and concerns
  • Identify the claims stakeholders are likely to make on the organization
  • Identify the stakeholders who are more important from the organizations perspective.
  • Identify the strategic challenges involved in managing the stakeholder relationship.

A simple template is shown below to show the results of stakeholder’s analysis at a glance. The process of creating the graphical illustration of stakeholder’s analysis is called stakeholder’s mapping.

 

 

POWER OF THE STAKEHOLDER OVER STRATEGIC DECISION

UNKNOWN

LITTLE OR NO POWER

MODERATE DEGREE OF POWER

SIGNIFICANT POWER

 

EFFECT OF STRATEGY ON THE STAKEHOLDER

UNKNOWN

 

 

 

 

 

LITTLE OR NO EFFECT

 

 

 

 

MODERATE EFFECT

 

 

 

 

SIGNIFICANT EFFECT

 

 

 

 

Stakeholder analysis is basically for the purpose of analyzing the dispositions of various stakeholders on the basis of their expectations and claims in order to prioritize them in terms of their value to the organization. The value of the stakeholders to the organization is assessed, for instance, in terms of intensity and quality of their support or opposition to strategy formulation. The more intense and wholesome the support or opposition of a particular stakeholder, the more important is the stakeholder to the organization.

Lastly we should know how important is the stakeholder to the organization even in six sigma which is a business process management tool wherein stakeholder analysis is done thoroughly.

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