An important step in defining your organization’s strategy is identifying all of your stakeholders. A stakeholder, in my mind, is anyone who can have a positive or negative impact on your organization’s ability to achieve its mission and vision. Stakeholders are important to organizations because they are usually the individuals or groups that the organization is ultimately accountable to.
So who counts as a stakeholder? Customers are a special group of stakeholders that get identified because of their role in the revenue generation value chain. Employees are another important stakeholder. In private sector organizations, the shareholder is considered a key stakeholder (particularly in the current age of activist shareholders). In public sector organizations, the funder(s) (i.e. the government/taxpayers, donors, etc.) are another class of stakeholder.
The key is to look both inside and outside your organization to create a list of individuals and/or groups that can help or hurt you in your drive to achieve your mission and vision.
Most organizations have a very long list of stakeholders and this long list can make responding to stakeholder needs very challenging indeed. One way to make a long list of stakeholders more manageable is to look for opportunities to group stakeholders with common needs and expectations together. Sometimes you might be surprised by which stakeholders can be grouped together based on this common ground.
That being said, not all lists of common needs and expectations are created equal. While stakeholder groups may have things in common, they may prioritize them differently. For example, employees and volunteers may both want a fulfilling learning experience but this need may be higher up on one group’s “must have” list than it is on the other’s list. When this is the case, it might be best to not lump stakeholders with common needs and expectations together. The key is to not force it. If it will be risky to lump multiple stakeholders/stakeholder groups together (i.e. thinking of these stakeholders as a homogeneous group will produce faulty business decisions) then don’t feel pressured to do it.
The goal is to get your stakeholder list down to as manageable number as you possibly can (fewer than 8 different stakeholder groups is what I often see).
However, I do want to say one word about the process for developing your stakeholder list. Be sure to assemble a group of employees with your senior leadership team and have them work together to create your stakeholder list. When you take this approach you’ll discover (if you are like most organizations I know) that there is a lack of consensus on who your organization’s stakeholders are. Working together to create a commonly understood and agreed to stakeholder list is the first step in creating a solid foundation for your strategic plan and in building the organizational alignment necessary to produce better, more consistent business decisions.
While getting your stakeholder list together is a great first step, don’t be tempted to stop there. Here’s why.
As I mentioned earlier, most organizations end up with a list of, on average, eight stakeholders. Some have more and some have less. Any way you look at it, trying to meet the needs and expectations of eight different stakeholder groups, that you acknowledge have different motivations and are making different (often competing) demands on your organization, can be an enormous challenge. But many organizations strive (and struggle) to do exactly this every day.
Unfortunately, despite their best intentions and a great deal of honest effort, organizations that try to meet the needs of all their stakeholders equally usually end of serving (and satisfying) none of their stakeholders in a way that delights.This is a problem.
It’s so much of a problem that savvy business leaders and employees will naturally (and often secretly) choose which of their stakeholders is the most important one to respond to. That is, they decide who their number 1 stakeholder/stakeholder group is. Who can blame them? It’s the only way to manage competing demands and to prioritize the work that goes into responding to stakeholder needs and expectations. From there, whether they realize it or not, business leaders will make important business decisions, including ones with real resource and funding implications, based on their idea of who they are there to serve (i.e. their number 1 stakeholder).
While this sounds great, what usually happens in organizations is that there is a lack of consensus on who the number 1 or primary stakeholder is. Imagine the chaos that could exist if, for example, every senior manager at the executive table has a different view of who the organization’s primary stakeholder is and were making big business decisions with their own particular view in mind? Sound unlikely? Think again.
Why not test it out for yourself in your organization? Ask the next three business leaders you meet who your number 1 stakeholder is and see whether their answers are the same (you are way ahead of most organizations if they are).
Once you’ve determined which of your many stakeholders is your primary stakeholder, and everyone in your organization is on the same page in this regard, everything in your organization changes – here’s how:
You can create a stakeholder value proposition/promise that is focused on delivering value to one stakeholder and not many (here’s a secret: if you exceed the expectations of your primary stakeholder, you’ll almost always make many of your other stakeholders very happy).
You can design a balanced business model that strives to meet the needs of multiple stakeholders but keeps these needs appropriately subordinate to those of your primary stakeholder.
Business leaders and employees have the same primary stakeholder in mind as they develop and deliver their work.
Business leaders and employees have a consistent filter/criteria for making prioritization, trade off, and investment (i.e. resourcing, spending, and work effort) decisions.
Your organization works together in a more integrated and efficient way to serve your stakeholders, deliver outcomes, and achieve your mission and vision.
Once again, the best way to determine who your primary stakeholder should be is to engage a cross-functional, cross-level team in a conversation that ends with consensus on who your number 1 stakeholder is. And though you likely won’t go out and tell your stakeholders where they rank on your list (no use in alienating anyone – they are all still important to your business success in the end!), having clarity across your organization is a big win.
It’s important to realize that achieving the benefits I outlined above isn’t as easy as deciding who your primary stakeholder is – there are implications associated with your selection that you need to work through and decide whether you and your organization can really live with the necessary tradeoffs. Only until you are comfortable with the implications of your decision should you declare who your number 1 stakeholder is.