In business it pays to know each of the various key players or stakeholders. By stakeholders I mean people who can affect or be affected by the business. Johnson and Whittington, in their book Exploring strategy, defined stakeholders as “people and groups that depend on the organization and upon which the organization itself depend”
Going by these definitions then such could be customers, managers, suppliers, distributors, unions, government etc. The point is we need to know more about such persons especially in terms of their power and interest in the organization. There are a number of ways stakeholders can be mapped and a good example is the Mendelow’s matrix which looks at stakeholders in terms of power and interest.
UNDERSTANDING POWER AND INTEREST
Power
Power is the ability to influence or as Johnson and Whittington puts it, the ability of individuals or groups to persuade, induce or coerce others into following certain course of action. In case of your stakeholders this means their ability to influence the organization or, looking at it from a purchasing and supplies point of view, their ability to influence procurement activities
Example
Customers could stop buying your products, suppliers could stop to supplying although the question of the effect would depend on how big the suppliers are. Government policies could affect your business etc.
Interest
Knowing the extent to which your stakeholders can influence your business is one thing, knowing if when and why they are likely to do it is another thing, which means analyzing your stakeholders in a more sophisticated way.
Interests, looking at it from the mendelow’s matrix, means the likelihood that stakeholders will use that power, basically the strength of their motivation to do so, so based on the strength of their interest in a given issue or decision.
HOW MENDELOW’S MATRIX WORKS
This matrix works in a simple way, 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 something like this:
This is what to expect from each segment:
Minimal effort (A)
The stakeholders in this group are the type that are not interested in the organization and do not have much power either. An example here could be the suppliers with whom the organization only does a small volume of business. The decisions relating to these stakeholders have a low impact. What you want to do here is ensure that you do not waste resources taking these stakeholders goals or potential responses into account.
Keep informed (B)
These stakeholders have high level of interest in your organization but lower power. They are important because if these are not kept on the-know about decisions they may seek additional power and influence the running of the organization. Some of your workers could be in this category or imagine running a hospital and having volunteer groups, these groups provides services that are “nice to have” but is not necessarily essential so the volunteers have high interest but less power.
The recommended strategy is to keep these stakeholders informed of plans and outcomes through communication and stakeholders marketing.
Keeping satisfied (C)
Here you find stakeholders with high power, basically high ability to influence what the organization is up to, but currently have low interest in the organization. This group is important because if dissatisfied or gets concerned their interest level may arouse. Example here could include governmental agencies and regulatory bodies, large suppliers, or even senior management from other departments.
The strategy to use with these is to keep them satisfied so that they do not exert their influence.
Key players (D)
In this quadrant you end up with stakeholders who have lots of influence and are highly motivated to express their own interest. These could be your major customers, your key suppliers, senior procurement managers etc.
What can you do here? The strategy to use with these stakeholders is one of early involvement and participation, this way their goals can be integrated with organizational goals ensuring their support.
Related: analyzing your business environment
The point of mendelow’s power / interest matrix is…
- Identification of stakeholders whose needs and expectations can change the organization’s policies and priorities
- Knowing the sorts of stakeholders whose interests will be most affected by actions taken by the organisations and consequences of such
- Identifying stakeholders that need constant involvement
- To help prioritize stakeholder’s interests to allow for efficient utilization of resources or leverage for maximum advantage
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