Types of Stakeholders and their interests

Question:

Critically Analyze How Stakeholder Management Combines with Decision Making to Enhance Value Creation in Organization?

Stakeholder is considered to be an individual or group of individuals who acquire any specific stake or property. If an individual has the right on a property or product, it is of high value to the stakeholder owing to its professional s well as moral interest. It is a common phenomenon that stakeholders invest their money into any project because of financial profits in a long run. They use various strategies to acquire the desired outcomes along with short term as well as long term planning and implementation for the project success. Short term plans usually vary from three to eight months and are known as operational plans (Bonnafous-Boucher and Porcher, 2010). On the other hand, long term plans vary from three to five years and are called strategic plans. Any stake is categorized into three groups namely interest, right, and ownership. Some kinds of business stakeholders are economic, political, and technological. Political stakeholders refer to the government bodies that are responsible for investing money for the good of common local people and their welfare (Botha, 2007). They have a larger interest for the welfare of the common people. The economic stakeholders are those who aim at getting a financial gain on investing money into projects. Technological stakeholders are those who keep a stake within the institutional groups with individuals having no position within the stakeholder management. Within this concept of stakeholder management, two basic types of stakeholders exists namely primary stakeholders as well as secondary stakeholders. To illustrate both the types it may be said that primary stakeholders possess a spirit and zeal for achieving success of investments and they are directly involved with the organizational undertakings. On the other side, secondary stakeholders are more interested with the organizational investments than that of the primary stakeholders. Within stakeholder management, all associated stakeholders utilize key performance indicators to achieve the organizational goals as well as objectives. Any organization is said to utilize KPI in the long term. KPI would change only if an organization changes. 

Win-Win Approach

Within an organization, the related stakeholders utilize the Win-Win technique and with this approach they aim at delivering value to each of the stakeholders and enable them to achieve increased profit on investments made. The chances of success of any given project are dependent upon the culture of the specific organization and even on the communication system prevalent within the organization. The active participation of individuals of varied cultural backgrounds plays significant roles within the success aspect of the projects as they possess abilities regarding the way to conduct a project (Fassin, 2012). Another factor in this regard is the co-operation; if individuals are co-operative in nature they would be willing to work cohesively among groups with mutual balance, and this would lead to deliverance of successful projects. Other key requisites of successful deliverances are transport facilities, salary, etc. The management of stakeholders is solely responsible for the processes of decision-making and that of value creation. The organizational managers need to understand the abilities of each of the employees, especially that of decision-making within organizational environment. These managers are supposed to utilize the skills and capabilities of the members in creating value of product like that of minimizing the product cost with enhancement of its quality. The organizational stakeholders are highly responsible for creating value on the international level.

The importance of a Win-Win Approach to Value Creation

The organizational management is known to play a key role in the increased process of value creation by taking most appropriate and effective decisions. The process of creation of value is referred to as the increase in the product value as well as increase in the goods worth within business conducts. Customers, clients, and suppliers are keys to business firms and play significant roles in the process of value creation of any project. Several sectors exist where values may be created, like value for organizational employees would be the salaries and benefits, work environment, conditions and work standards (Katsoulakos and Katsoulacos, 2007). Another factor is shareholder and for them the value creation refers to the dividend that is paid to the stakeholders by the business firms. The value for investment would be rising with increased business profits. Besides, for customers the value creation would mean high quality of products and services, low cost, etc. The quality as well as price may vary or be similar, for instance, an Apple laptop may vary in price than that of Hp. It is because an Apple laptop has multiple features and facilities as compared to that of Hp laptop. Hence, every customer would prefer an Apple laptop. So, stakeholder management must concern each approach for decision-making.

Organizational stakeholders possess the power of awareness, admiration, and action. If a stakeholder is thoroughly aware of all organizational processes and procedures including abilities to perform specific actions instantly to increase the product, it is only beneficial to the organization. The process of decision-making relies upon the individuals who work within an organization as in absence of their support and skills no organization can accomplish its objectives or achieve success and sustainability in the long run (Missonier and Loufrani-Fedida, 2014). Moreover, no decision would be a success and it would reduce the value of projects. A manager needs to pay equal attention to all the related stakeholders and before taking any major decision about the organizational functions and achievements, he needs to listen to all the needs and opinions of the related stakeholders. This is an important consideration to be made by the managers. The created value must be shared among all the shareholders and this is based upon effective strategies to realize effective gain for the organization. For example, the angelosexon business model (class note summer, 2014/15) is quite useful in the process of value creation. Nations like America, England, and Australia apply this model within their business operations.

The stakeholder management has useful corporation and this includes two forms – Stakeholder inclusiveness and stakeholder symbiosis.

Stakeholder Inclusiveness – Here in this management, the main aim of stakeholders is to provide effective response and feedback to all other stakeholders as per their interest since expectations of stakeholders are greater from projects (Roloff, 2007). These stakeholders are required to care for all needs of clients as customers have the most significant position in the success of projects. The stakeholders create conveniences within the process of value creation of enhanced product quality.

Key Requisites of Successful Deliverances

Stakeholder Symbiosis – Within the market, several firms exist that depend upon each other for some reasons. All the firms possess market values and so if these firms coordinate with each other, they would achieve success within the business deliverances (Veltri, 2014). Within the process of stakeholder management, all stakeholders are required to maintain effective and cordial relations. The project success completely depends upon the stakeholders since they are the ones who initiate creative thinking.

This organizational structure plays a key role in the management of stakeholders. Here, the individuals come together from varied and diverse cultures to work cohesively as a group. These stakeholders are liable to report to the managers in case of occurrence of risk.

Key principles of stakeholder management are acknowledgement, communication, and monitoring. The stakeholders are required to maintain all relevant information regarding projects (Saunders, Rast and Lopes, 2014). This would be possible only with effective communication with the organizational members and they also observe the suggestions that are given to the employees. Every project is unique and beneficial for organizations. So after implementation of such procedures, effective monitoring is required to realize assured success of projects.

Basically two types of stakeholders exist in business context; one is internal stakeholders and secondly external stakeholders. Internal stakeholders include managers, employees, and shareholders who play major roles in achieving success of projects. These individuals work for the organization as well as support in creating value of product or any project. External stakeholders include suppliers, distributors, local community, customers, and government (Shuttleworth, 2006). They not internal to an organization but have significant impacts upon the company executions. It is due to their help and support an organization develops its projects. Customers are greatly responsible for creating values of products, for instance, when a firm sells its products within the market, the customers perceive the quality at the beginning and then purchase these, so, this is an outcome of for the firm.

Within the stakeholder management, the interests of stakeholders are quite significant. Any organization is said to operate on behalf of its related stakeholders since they are the key identities of an organization. Managers are required to pay greater attention to this aspect as decision of projects is made with respect to stakeholder interests for distributors. Similarly retailers earn capital profits from the customers. Three important limitations of this concept are scope, cost, and time (Stanghellini, 2010). These three factors are keys to any project success within stakeholder management. Even if any single constraint is missing, the entire project would fail. For instance, if a project is not completed within time frame, project quality would diminish and this would fail the project. Hence, the project success largely depends upon the appropriate decisions of the stakeholders.

Source:  (Szwajkowski, 2000)

This concept of stakeholder management has three key traits, namely power, urgency, and legitimacy that lead a project within an organization. Al the above mentioned traits are linked with each other. The stakeholders possess influences upon the organization since they possess power to operate the business operations (Veltri, 2014). Without power of stakeholders no company can achieve desired objectives. However, not all stakeholders are powerful but they are influential with their claims that are legitimate. The stakeholders have immense right to take effective decisions of creating value for organizational products and projects.

The Role of Organizational Management in Value Creation

Three types of stakeholders are present in the concept of stakeholder management. These are Core stakeholders, Strategic stakeholders, and Environmental stakeholder.

Core Stakeholders – These are most important for an organization or business to increase the global market value.

Strategic Stakeholder – These stakeholders attempt to solve issues of projects with effectiveness.

Environmental Stakeholder – These are the individuals who work within projects such as managers, employees. They are affected by varied cultures (Szwajkowski, 2000).

Some of the key responsibilities of the stakeholders are:

• To create the structure of a project
• They work as teams to achieve the best output
• The stakeholders possess responsibilities to identify risks as well as problem issues

The most significant benefits are that stakeholders can produce value output to a firm with effective planning as they possess thorough knowledge about the problems and issues. They need to possess the ability to create trust so that projects are achieved with success.

Stakeholders may lead to failure of projects if timely decisions are not taken with adequate effectiveness. Again, if a manager engages a stakeholder into a project and refuses to take his advice, it would lead to the failure of project quality.

Value creation varies with the variation in the age group. The value creation is different for elderly people and young age group of people. Pension is received by the elderly people and they save it in the super account (Collett, 2014). For the elderly people value creation occurs when they receive a fixed amount of interest rate by depositing the pension amount in the bank (Telegraph.co.uk, 2015). However the younger generation sees growth in the stock market as the return is more and they invest in the equity shares and create value (Businesstoday.intoday.in, 2015). With the rise in the price of the equity shares they get good amount of return (The Economic Times, 2012).

There are three approaches for the business or the project. The approaches are as follows –

1. Instrumental approach – This approach identifies the relationship between the management of the stakeholders and the goals set by the company. For e.g. the factual data is used by the company in order to recognize the relationship (Weiss, n.d.).

2. Descriptive approach – The positive aspect and the way in which the organization behaves are described by the descriptive approach of the stakeholders. For e.g. the way in which the organization is organized and how the structure of the project are managed by the project manager (Phillips, 2011).

3. Normative approach – The outline is identified and the guidelines of the organization are stated in the normative approach of the stakeholders (Freeman et al., 2010).

Project communication is an essential aspect for a project as it is used to identify the risk management, conflict management is identified and the view of the stakeholders towards the project is identified. The view point of the manager is communicated with the stakeholders. The ideas of the stakeholders are taken by the manger in order to make improvement in the project. This will increase the involvement of the mangers and the stake holders in the project. The project will be successful.

Risk Management – The risk management approach promotes group work.  The project communication is used to work in a group. By working in a group , the risk factors can be identified. The group will be able to solve the problem.

Conflict Management – Another aspect of project communication is the management of conflict by working in a group. The managers motivate the stakeholders to complete the project successfully. The problems of conflict can be solved effectively by using effective modes of communication (Binder, 2007).

Conclusion

Stakeholder management is an important aspect for the success of the project. The value creation of the stakeholders can be enhanced by strategic decision making. The various techniques used by the stakeholders include reduction of the cost and maximization of the quality of the project. These factors will lead to the success of the project and the profitability of the organization will increase. The success of a project will be achieved and there will effective value of the project if the stakeholders work in a group. Stakeholder management is an important aspect for the success of the project.

References

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