Although you have heard the term many times, do you still find yourself asking, "what is a stakeholder?" What are their responsibilities and what role do they play in business? Do you know the difference between a shareholder and a stakeholder? Well, if you want to learn 'what is a stakeholder' you will find plenty of information to help you here.
All shareholders are stakeholders. That does not mean all stakeholders are shareholders. A stakeholder is any individual or group of people that are interested in the performance and progression of a business. This means a stakeholder can be an employee, bond-holder, customer, vendor, or anyone that has a “stake” in the company. The role of the stakeholder depends on the company invested in. We will discuss the different types of stakeholders, what their role and responsibilities are, and give you a thorough answer to the question, “what is a stakeholder?”
What Is a Stakeholder? Different Types of Stakeholders
To better understand the answer to what is a stakeholder, it is a good idea to familiarize yourself with the different types of stakeholders. It takes several different types of stakeholders to make a project successful. The major types of stakeholders are the project manager, the project team, the project management office, sponsors, customers, vendors, and external stakeholders. As you can see, the answer to the question 'what is a stakeholder' is not a cut and dried one.
The person is in charge of overseeing the project team and ensuring they complete a given project is known as the project manager. It is the project manager’s duty to establish the project plan and lead the team’s performance of all project activities. It is also their responsibility to secure the approval of the project sponsor and other stakeholders.
The group of people that plans and executes a given project is the project team. This team is lead by the project manager. The project team is responsible for completing tasks and producing the goods or services promised by the project.
On a larger project, a project manager may appoint a project team leader. Sometimes called technical team leads or functional managers, still have the same duties as the project team members. They will also help the project manager ensure the team successfully completes all their objectives.
Project Management Office
Also known as a PMO, this group is made up of anyone that can influence project team members and be affected by the development of the product is a member of the management team. Some companies have their own PMO while others may outsource the responsibility.
The project sponsor has a clear interest in the project and is responsible for securing project resources. In certain instances, they can be titled as the “owner” of the project and may desire the full authority to decide necessary to complete the project. They are responsible for acquiring the money needed for the project and allocating how to spend it. The sponsor supports the project manager as well as approves the product and its release.
Sponsors are the top of the reporting ladder. They take on all risk associated with the project. If something is going wrong and it is outside the project team and manager’s control, they should be the first to know. Keeping a project sponsor informed requires a high level of detail. Project sponsors may also be a part of an Executive Steering Committee or ESC. Any project involving a budget of over 500,000 must have one.
The customers are the users of the product the project will create. They are what determines the need for the product. Customers have a significant interest in the project because they are directly affected by the product.
Vendors provide additional products the project requires and may also be on the project team.
All the stakeholders mentioned above are internal stakeholders. They always have an interest in the organization, most commonly a financial one. Internal stakeholders have a vested interest in the success of the project and usually have more influence than external stakeholders. One of the main advantages internal stakeholders have is the ability to vote. This is based on the percentage of the company owned they own or the number of shares.
External stakeholders are stakeholders that do not have personal or organizational funds invested in the company. They have much less at stake, if anything at all, than internal stakeholders. Therefore, these stakeholders do not get to vote on any company decisions although they may be concerned with the decisions a company makes. If that is the case, there may be opportunities to meet with the project’s leadership to discuss ideas, concerns, and issues.
External stakeholders often reflect the concerns of the community. For example, a manufacturing company planning to build a new plant in a small town might want to meet with the town’s council to go over the potential advantages and disadvantages to the community and surrounding environment. Ignoring the citizens of the city, the external stakeholders in this scenario could lead to a block on the project. It is a good idea to listen to the voice of the external stakeholders in the process of project planning and to work with them in developing solutions that work for both the community and the company.
The Stakeholder's Role
Still unsure as to what is a stakeholder? If a person is classified as a stakeholder in a project, it means they have the ability to positively or negatively affect it. This includes the customers, project manager, project team, sponsors, and management team, and external sellers. Stakeholders are responsible for the success of a given project’s product. They are involved in developing a project plan, identifying the needs and possible restraints of a project, and accessing potential risks.
Engaged stakeholders help to create huge financial benefits. Employees who are passionate about the work they do act as the best ambassadors for your business and its projects. Customers who believe in a company will support it through the long haul. Investors, vendors, and community members who see a business as more than just a way to make money will go the extra mile to make sure a project has all the materials it needs to succeed.
What is a stakeholder responsible for? The amount of responsibility you have as a stakeholder depends on what type of stakeholder you are. Some stakeholders may have personally invested in the projects they are involved in. If that is the case, they may be responsible for finding and allocating the project’s funds. Some stakeholders may own the equipment and supplies needed for the project. They will be required to provide them in good working order when it is necessary. No matter the type, all stakeholders have ethical obligations to the project. It is up to them to report going over the budget or not meeting project milestones at the expected time. Stakeholders must always review the products of a project and fulfill their specific project duties.
Sponsors of the project may seek to gather other stakeholders to make decisions and review the project's plan. This is called a steering community and might be made up of community and union leaders as well as lenders whose support is required to making the project possible.
It is essential for a business’ stakeholders and communities to work together. They both need each other to grow. Businesses create jobs and provide help for the economy of the community they live in. Communities can provide both the customers that will fuel the sales and employee base. Stakeholders should look at its surrounding community as a valuable resource and not an obstacle in the way of a project’s success. It is beneficial to involve the community, or external stakeholders, at the beginning of project development. With community input, compromises can be made early on where necessary. This way internal stakeholders can spot problems before they happen and protect all project interests.
What is a stakeholder? They are a practical and financial way to support a business and its projects. Done correctly, the relationship between stakeholders and the business they support is symbiotic and healthy. Stakeholders will increase the number of people that care about a company’s well-being and working to ensure its success.
Hopefully, you have gained a better understanding of what is a stakeholder. Stakeholders can have an interest in both the inception and the outcome of the project. They include project managers, project teams, the project management office, sponsors, customers, vendors, and external stakeholders such as the community. Stakeholders should always be kept informed as to how the project is contributing to the profitability of the business.