Management Study Organisation Study

Organisation, Stakeholders and Classification of Stakeholders

Written by punit

 People who have an interest claim, or stake in the organisation, in what it does, and in how well it performs.

The stakeholder can thus be defined as “an individual, a group, or an organisation that gets affected or affects the actions, policies, or objectives of the organisation.” For example. the product marketing of an organisation affects its customers (better products). employees (greater salaries, incentives). supplier (orders for raw material, packaging). creditors (credit for the growth plans of the organisation). owners (returns on equity), the government (increased corporate taxation revenue), etc.

Various stakeholders of an organisation have differing objectives. The stakeholders are dependent on the top management of the firm in maximizing their Mums. The management of the tine often has to play a balancing role between fulfilling the needs of the firm and maximizing returns to stakeholders. For example, the stakeholders are concerned with maximising returns of their investment in the form of dividends, bonuses, salaries, incentives, etc. The leadership, on the other hand, would want to spend more on the research and development department which increases the productivity of the organisation and thus makes it more future-ready. To achieve this, stakeholders need to forego short term benefits. This balancing act is done by the leadership of the company to meet the shod-term benefits of stakeholders and long-tent investments of the organisation.

Classification of Stakeholders

On the basis of relationship with the organisation, stakeholders cart be classified into two major groups:

Internal Stakeholders

The people that are inside the organisation, or that work directly with the organisation, are known as internal stakeholders. Some major internal stakeholders are as follows:

1) Shareholders:

Shareholders are the individuals or companies who hold the shares of the organisation. Hence they are called the “owners of the business”. Shareholders are treated as members of the organisation. These shareholders invest in the organisation so as to help the organisation in realizing its objectives. The organisation’s prime responsibility is to fulfill the interests of shareholders. The shareholders get the share in the profits as a return for the investments made by them.

2) Workers/Employees:

Workers or employees are the people who work in the organisation, and in return, they expect remuneration, benefits, security, etc. The relationship between employees and the organisation is based on the employment contract. Employees contribute their time and efforts for the benefit of the organisation, which in turn poses certain obligations to the organisation. It becomes the responsibility of the organisation to fulfill its duties regarding its employees. One of the major responsibilities of the organisation towards its employees is to treat them as human beings and acknowledging their significance as a valuable resource for achieving organisational goals.

3) Management:

Management of an organisation affects the organisation as well as other stakeholders. The major responsibility of the management is to maintain the operations of an organisation as well as to make strategies for the well-being of the organisation. Management is responsible for harmonizing the different entitlements of the stakeholders. Management is related to the organisation through an implicit or explicit contract.

Also Read:- Principle of organisation

External Stakeholders

The individuals, groups or companies that are outside the organisation and work indirectly with the organisation are known as external stakeholders. External stakeholders can influence and be influenced by the changes in the organisation. Some of the key external stakeholders are as follows:

1) Customers:

Customers or consumers are the people or organisations that purchase the products of the organisation. Hence, customers are one of the main sources of revenue for any business. As these earnings are re-invested in various business activities, therefore, customers are the key asset involved indirectly in the new product/service development process. Customers maximize the sales of the organisation by purchasing its products and by spreading positive word-of-mouth. Hence, satisfying customers is one of the most important goals for an organisation to survive in the long-run.

2) Suppliers:

Suppliers are those individuals or business owners that supply the raw materials or semi-finished goods to the organisation for the final production process. Some suppliers that deliver finished goods to the customers are called distributors. The quality and value of the end product are defined by the material provided by the suppliers. Therefore, business dealings with the suppliers should be treated wisely by the organisation. It is very important for the organisation to develop good relations with the suppliers through which the production costs can be minimized while productivity and quality can be maximized.

3) Creditors:

The companies that provide raw materials or semi-finished goods on credit to the organisation are called creditors. If the organisation does not pay the due amount in time, then the business is at risk of losing its competitive edge, as judicious relation between the organisation and its suppliers is one of the major sources of success. In case of dissatisfaction, the suppliers can affect the business of an organization by discontinuing the supply of goods or by supplying poor quality goods.

4) Competitors:

The organisation is grateful to its competitors as it is towards its stakeholders. Any competitive strategy adopted by the firm can positively or negatively affect the operations of its competitors and vice versa. Hence, an organisation should always adopt ethical measures for survival in the competitive market.

5) Government:

The government regulates the activities and policies of the organisations by formulating various laws and posing restrictions. One of the prime responsibilities of an organisation is to abide by the laws governing its activities. Management should formulate the strategies considering the laws enforced by the government. Management can affect and in turn get affected by the taxes, laws, and duties imposed on the business.

6) Society/Community:

Society or community in which the organisation exists also affects its operations. The management is responsible for educating and informing the society as well as ensuring its wellbeing by raising the standard of living of the society at large. The organisations should not adopt measures that can harm society like a discharge of hazardous waste and pollutants.

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