*Why are stakeholders essential in an organization?
What are stakeholders?
Any individual who has an interest in an organization and the outcome of its activities is a stakeholder. So, it could be employees, shareholders, customers, suppliers, the community, investors, and the government. Different stakeholders have different interests.
What is a stakeholder in accounting? A stakeholder is any person or entity interested in a business or project. Stakeholders can have a significant impact on decisions regarding the operations and finances of an organization.
Differentiate into external and internal stakeholder examples for internal stakeholders are employees, managers, also direct stakeholders. Shareholders can also be internal because they own a part of the business and sometimes take control of the company.
The external stakeholders are customers, suppliers, investors, communities, and the government.
Types of Stakeholders
We will analyze the unique needs each of them has in the business. Therefore, you have to think like and see the effects from their points of view.
Customers
Any business has to take care of its customers as they are stakeholders of the company and are obstructed by the quality of the product or service and the value they receive from you.
Employees
Employees earn money to support themselves and other benefits from the organization; therefore, they have a direct stake in the business. Besides this, the employees will be interested in their health and safety depending on the industry where they work.
Investors
They are the shareholders in the business, and their primary interest will be the ROI on their invested capital. Investors are concerned about the shareholder value created; the value increases when the company makes more profit. All other money providers, such as lenders and potential acquirers, took in this group.
Suppliers & Vendors
They sell goods and services and depend on their revenue generation also ongoing income. Again, the suppliers will be interested in their health and safety depending on the industry because they might get involved in its operations.
Communities
When a large company exists in a small community area, it will immediately impact people in the area, such as new employment; if there are small food shops, they will expect more sales, which will result in economic growth. They might also have an interest in health and safety, depending on your business type.
Government
It will look forward to more employment opportunities for people. There will be a reduction in the benefit payments, less unemployed, and the government will make more from the business by receiving more income from sales taxes and payroll taxes. Governments benefit from the overall Gross Domestic Product (GDP) that companies contribute to the country.
Prioritizing stakeholders
If you are a new start-up, your interest will be in making a profit; it will be with the customers and the employees. But for a well-established business, it will be different; then, for them, the shareholders will be in front and center.
The final decision depends on the CEO and other directors of the company and also on the competing interest among them.
What is the difference between the stakeholders and the shareholders?
The shareholder becomes part of the company because they own the company shares, have an equity interest, and can be stakeholders. But the stakeholders are interested in the company and its actions, so they have some stake in it. Still, they can never be shareholders. It is essential to make the distinction between the two types.