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What is a Stakeholder: Full Details of Key Stakeholders
Stakeholders: A stakeholder is a business term that is quite widely used, even outside the business field. When viewed from its literal meaning, the use of the word stakeholder is not limited to the business field but can be used in almost every field.
Then, if its use is very broad, how is it used in the business world? What do you mean by stakeholders?
What are Stakeholders?
A stakeholder is a term in English that combines the two words ‘ stake ‘ which is taken from the term gambling and means ‘bet’ and ‘ holder ‘ which means ‘holder’.
In the business field, a stakeholder can be defined as a person or party who holds the authority to make decisions that may affect the direction of business development.
Perhaps, many are wondering why the term gambling is then used for the business field. The answer is simple because the business decisions that will be taken by these stakeholders have a big impact on the business itself; not infrequently even the decisions taken brought bankruptcy.
In other words, using the word ‘bet’ is the right thing to do. Therefore, the role of stakeholders in running a business is quite large.
However, what are the functions of the people who are stakeholders, and who can be considered capable of filling these roles?
Stakeholder Functions in Business
If seen from the understanding, the role of stakeholders in business operations is very important; especially because stakeholders have several very important functions, for example:
1. Support Business Funding
One of the main functions of a stakeholder is to support funding activities for the implementation of business operations. Because of this function, investors or other parties who invest in a business will automatically become stakeholders of that business.
After all, stakeholders are parties who will risk the sustainability of the business being carried out, when these stakeholders hold a funding support function, automatically every decision made must be considered properly and carefully. Otherwise, funding is taken from personal treasury which will then be ‘at stake’.
Understanding the function of the first stakeholder, it is not surprising that investors or any party who invests in a business automatically have the right to determine the direction of development of the business.
2. Responsible for Business Management
Being in charge of every management activity of a business is also a function and role of stakeholders that cannot be abandoned.
If viewed carefully, poor business management will also result in poor performance where the business income received will also not be maximized. If business performance is not optimal, of course, the business will have more potential to go bankrupt.
Therefore, as parties who have a large enough share in running the operations of a business, the stakeholders are also responsible for ensuring that business management continues to run well. If stakeholders can carry out their functions properly in managing their business, business income can be increased even more and in the end, these stakeholders will also receive the benefits.
3. Business Decision Maker
Stakeholders also function as decision-makers in running the operations of a business. Returning to its function as funding support, stakeholders are the parties most entitled to make business decisions.
Where will the business run be taken, what is the most appropriate strategy to be implemented according to the business situation and conditions, and what should be done when the business being run faces challenges? Such decisions will be the responsibility of the stakeholders.
How the direction of the development of a business will be largely determined by the skills of a stakeholder in carrying out its functions. Therefore, to become a stakeholder, one must be able to make decisions quickly and precisely according to what is faced by business operations in the field.
For the same reason, stakeholders are also expected to have the skills to see things from a wider perspective. Thus, business decisions that will later be taken can also consider various business aspects that can be influenced by the decisions taken.
4. Business Social Responsibility
The functions and roles of stakeholders are not only limited to the management of the business being carried out but also the social situation of the business being carried out.
In this case, what is meant is the role of stakeholders to ensure that the work environment remains healthy and conducive, both internally within the business itself, as well as externally outside the business.
How the business that is run is viewed by the general public, even by those who are not actual consumers, is the responsibility of the stakeholders. Because, whether we realize it or not, the performance of a business in generating business revenue is not only influenced by how the business itself is run, but also by the perception held by the general public as a market.
For these reasons, it is easy to understand how big a role a stakeholder has in running a business. Therefore, it is not uncommon for business operations to have more than one stakeholder who can carry out their functions properly according to their roles.
Recognizing the Types of Stakeholders in Business
Yep! That’s right, by the existing roles, stakeholders do not only consist of one type but several types of stakeholders hold different functions and roles.
Because there is more than one stakeholder in a business, generally each stakeholder is distinguished by its type of urgency in carrying out the operations of a business: Main stakeholders, supporters, and also key stakeholders.
What is meant by each type of stakeholder?
What are Key Stakeholders?
Also known as primary stakeholders, the function of this type of stakeholder has a lot to do with the preparation of business policies, including those related to program operations that are to be implemented.
A stakeholder can be primary or primary when his position, power, and influence are very large. Not infrequently the largest shareholder of a company or the person with the greatest investment value in a business becomes the main stakeholder.
Due to being the largest shareholder, decisions made by major stakeholders generally cannot be disputed by other entities in the business. However, on the other hand, the main stakeholder has the right to veto decisions made by other stakeholders.
The position of CEO or chief executive officer can be an example of a company’s stakeholders belonging to this type.
What are Supporting Stakeholders?
By its name, the role of supporting stakeholders, also known as secondary stakeholders, is to support or provide other considerations to key stakeholders in the decision-making process.
Operationally, supporting stakeholders may not be much involved in the formulation of policies or programs that will be implemented. In this case, the main stakeholder remains the highest decision-maker who can determine the direction of the business policy to be carried out.
However, supporting stakeholders still contribute to the decision-making process by conveying their ideas. Even though they are supporters, not always the ideas held by supporting stakeholders will be in harmony or in line with the decisions taken by the main stakeholders.
In this situation, the ideas put forward by the supporting stakeholders should be taken into consideration before the main stakeholders apply the business decisions they have taken. Thus, the function of supporting stakeholders is to control the main stakeholders.
The existence of a division head or department head can be an example of a company’s stakeholders belonging to the second type. Why is that? Because broadly, department heads cannot determine the direction of business policies to be taken but have a role in responding to different perspectives that may escape the consideration of key stakeholders.
What Are Key Stakeholders?
Similar to the main stakeholders, key stakeholders play a significant role in determining the direction of business policies to be carried out. However, just like supporting stakeholders, those who are classified as key stakeholders cannot make business decisions without the approval of the main stakeholders.
However, key stakeholders have an influence that is no less large than the main stakeholders, so the considerations given by key stakeholders should still be carefully observed and taken into account so that other obstacles in business operations do not arise from the decisions taken.
Because of their equally great influence in determining the direction of business development, C-Levels such as chief technology officer (CTO), chief communication officer (CCO), or chief operating officer (COO) can be examples of corporate stakeholders belonging to this type. In some companies, the chief executive officer may be a key stakeholder with investors as the main stakeholder.
After understanding the functions, types, and roles of stakeholders that have been described in full above, we can return to the original question: Is it important or not, is it important to have stakeholders in running a business?
The answer, of course, is no longer an important or unimportant matter, because, from the functions it has, the operations of a business will not be able to be carried out properly, or even cannot be run at all, if the business does not have stakeholders who will make business decisions and determine the direction of its development.
In other words, this role must exist in every business, regardless of what structure it has and what kind of business model it runs. For small-scale businesses, such as micro, small, and medium-sized businesses, generally, the business owner will be a stakeholder.
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