How to do a stakeholder analysis in business
Stakeholder analysis which is the process of collecting and assessing information about persons that are likely to affect or be affect by the workings of your organization or project is important.
In salary negotiations, for instance, you could be asked how much should we pay you? And while it may seem like your answer is just for the person who asked it, truth is even the finance person who may not be in that meeting, will have an impact on such because they are a stakeholder in that situation.
Who is a stakeholder?
A stakeholder is a person or a group of persons that are affected by an organization or who can affect an organization.
This can be anyone, for example, the government, another company, a customer or even society at large as long as they have the capability to exert influence on a given company or to whom the company is in a position to influence through its day-to-day activities.
Learning how to identify who stakeholders are is fundamental in stakeholder analysis
Why knowing your stakeholders is important
Imagine that you are a door-to-door sales person selling insurance policies. When you knock on a particular door and a woman with a child answers, and you start selling her the idea of having a medical cover who are stakeholders in this conversation?
- The husband (if she is married)
- Her child
- The woman
- All of the above
All of these are people you need to be concerned with. What if she wants the policy but has to talk to the husband who is the one to pay for it.
The point is by identifying your stakeholders you can tell what their needs are, their influence and the level of power they have in the context you are operating under.
The question then is how to do you know what stakeholders want?
A quick way to assess and analyze stakeholders
When conducting stakeholder analysis, you always want to look at stakeholders’ power, interest and influence.
Meaning what? It is important for you to understand the power they can exert in the organization, the degree to which they are interested in the organization and the extent to which they can actually influence the workings of the organization.
Stakeholder analysis in terms of power, interest and influence
What is power?
According to Johnson and Whittington (2017) power can be defined as “the ability of individuals or groups to persuade, induce or coerce others into following certain courses of action”
Power will vary from one stakeholder to another. In contract negotiations for example, a sales person may stick to a given number because the number falls within their zone of potential agreement, and that means their power to go out of that zone is limited. This may not be the case with their boss.
In supply chain a small supplier has a power to stop supplying their products to you but the effect may not be as that of a major supplier, and yet they all have power.
Regarding stakeholders’ interest
Understanding the powers that stakeholders wield is one thing, you still need to know how interested they are in the organization.
Think of it this way, employees, customers and shareholders are all stakeholders. But what are their interests in the company?
- Employees are interested in things like fair pay, continued employment and things like status.
- Customers are likely to be interested in things like low prices but this will vary from one company to another
- Shareholders on the other hand could be in interested in things like return on investment
The point here is that by knowing the needs of various stakeholders you can start to know their levels of interest in a company or organization and what things may change their level of interest.
Regarding stakeholders’ influence
In addition to knowing what stakeholders want you also have to know the influence they have over an organization. Since we mentioned employees, customers and shareholders their influence can be something like this;
- Employees if properly motivated may add value in what the organization is doing or just do the reverse
- Customers can provide feedback which may affect the organization, for example using social media to express their feelings about the organization
- Shareholders will provide finances to the company but they also have rights, like voting rights, which can change the organization management structure
In short, in your stakeholder analysis you can know more about your stakeholders if you look at them in terms of their power, interest and the level of influence.
There are a number of tools to help you assess stakeholders in terms of power, interest and influence.
Quick tools for stakeholder analysis
Here are some tools that you can use when assessing and analyzing your stakeholders
Mendelow’s matrix
Here is how mendelow’s matrix works. You draw a two-by-two matrix that enables you to classify your stakeholders into relevant quadrants which best describes them by their power and interest level. You end up with stakeholders in the following categories
- Key players – these stakeholders have high power and high level of interest in the organization
- Keep satisfied – in this case you have stakeholders with high power but with low level of interest in the origination
- Keep informed – Here you have stakeholders whose level of interest is high but their power is low
- Minimal effort – this group is made up of stakeholders with low levels of power and interest in the organization
Block’s matrix
When using block’s matrix in stakeholders mapping you are essentially looking at the extent to which you can trust the stakeholders to commit to the agreement you have with them.
So, how does block’s matrix work?
By assessing stakeholders in terms of whether you trust them and can agree with them you end up with the following groups;
- Allies – these are the ones you agree with on important issues and trust to do what they have to do
- Bedfellows – while you agree with these stakeholders you don’t trust them and so your goal is to turn them into allies
- Fence-sitters – You don’t have much confidence on these stakeholders and even if they change their view, you still don’t trust them
- Opponents – the thing with these opponents is that we know where we stand with them and we can trust them to be opponents but we don’t agree with them. This makes it easy to deal with them
- Adversaries – in this group we have stakeholders we don’t agree with and also do not trust
Eden’s and Ackermann’s matrix
Eden and Ackermann’s matrix assesses stakeholders in terms of power and interest just like Mendelow’s matrix, but it brings in a new perspective.
The way Eden and Ackermann’s matrix works is by dividing stakeholders into four quadrants based on how high or low their power and interest levels are, and so you end up with the following;
- Subjects – These are stakeholders who have significant interest in the organization but have little power
- Player – In this group you end up with stakeholders with significant interest in the organization and substantial level of power
- Crowd – In this group you have stakeholders with little power and interest in the organization
- Context setters – these ones have substantial power but very little interest in the organization
Egan’s nine stakeholders’ groups
The other tool you can use when conducting stakeholder analysis is Egan’s nine stakeholder groups which is a development of Block’s approach to stakeholder mapping. The idea is to classify your stakeholders under the following nine groups;
- Partners – these are those who support you
- Allies – those you need to give a bit of encouragement to, so as to turn into supporters
- Fellow travelers – these are passive supporters
- Bedfellows – they support your organization’s need for change but they don’t trust the people in charge of the change
- Fence-sitters – are the sort whose allegiance you are not certain of
- Loose cannons – these are the stakeholders who could choose either to support you or not. You are not entirely certain about these ones
- Opponents – these are opposed to the change you are trying even though they are not against your organization
- Adversaries– they are against the organization
- The voiceless– these are silent stakeholders who are affected by the agenda you have but they lack the power to influence
Remember any one of these matrices will help you out when it comes to analyzing and assessing your stakeholders.
Business environment and stakeholder’s influence
The one thing you should always have in mind as you conduct stakeholder analysis is that things like power, interest and level of influence can always change. One reason for such change could be the environment the business is operating in.
Which is why you need to understand environmental factors and their influence in your organization.
A faster way to understand this is by looking at PESTLE method, which works this way;
- Political
Government policies can reduce or increase the power and influence of a stakeholder for instance favorable tax policies on fossil fuel can trigger environmental groups who may attack oil companies.
- Economic
Economical changes affecting price of a product can increase or reduce consumer power and influence depending on the change
- Social
Things like corporate social responsibilities can make a company influential in the society and this will make the company out stand its competitors
- Technology
Technology like social media gives power to people to a degree that companies have to quickly respond to the needs of their clients less the same end up complaining on social media
- Legal
Legal policies like the kind you see intended to protect employees will increase employees’ power, of course this will depend on what the law actually says
- Environmental
The increasing concern for the environment can raise the power and influence of environmental pressure groups.
Conclusion
At this point the assumption is that you are now in a position to identify stakeholders in an organization and map them out in a way that helps you identify who the major ones are.
You should also remember that the power, interest and influence of stakeholders do change and environmental factors can contribute to this.
Let me know if you have any questions
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