What are different stakeholder objectives?
A business’s internal and external stakeholders can have different objectives. These objectives must be taken into consideration by the business as they may have positive or negative impacts on operations. What’s more, when there are major differences in objectives, these can lead to stakeholder conflict. Some stakeholders have the following objectives:
- Owners / Shareholders: Gain profit from establishing or investing in the business. They may also want to expand to to gain further profit potential. Shareholders are likely to want an increase in dividends.
- Managers: Reinvest the profit back into the business. They are responsible for the business operating successfully.
- Employees: Will want higher salaries or wages with better working conditions. They will also want to know they will not lose their jobs (job security) and have chances for further development in the organisation through training or promotion.
- Customers: Usually want better quality products at lower prices.
- Suppliers: Will want their business customers to repay quickly if they have sold their products to them with trade credit conditions.
- Lenders / Creditors / Banks: Want their loans to be paid back on time.
- The government: Will want businesses to pay taxes.
- Local community: Will want the local area to be protected. They will also want long-term investment in the area. Finally, they will also want businesses to actively support the community, for example, through sponsorship.
- Pressure groups: They will want businesses to adjust their operations to fit in with their worldview and actions.
How do different stakeholder objectives lead to conflict?
Shareholders Versus Managers
Shareholders and managers might disagree on how profit should be redistributed. For instance, shareholders may want higher dividends, whereas managers may want to reinvest the profit back into the business. Shareholders may be focused on “short-termism” whereas managers may be focused on expansion or consolidation of the business.
Owners / Shareholders and Managers Versus Employess
Shareholders and managers may have some objectives that are in agreement. They might both want to hard working employees, and may not want to continual increase their wages over time. Employees on the other hand will be focused on job security, fair payment and good working conditions.
Owners / Shareholders and Managers Versus the Local Community
Managers may want their business to have a more neutral relationship with the community, whereas the community may want more involvement from businesses. The local community will not want the environent to be damaged by the business. Furthermore, they might also want support from businesses through sponsorship of loval events.
Managers Versus Customers
Managers will be focused on reducing costs to increase their profits. This may result in providing products with average quality and trying to sell them at higher prices. Conversely, customers may want higher quality products at lower prices. Customers may be dissatisfied with purchases if their expectations are not met.
Managers Versus Suppliers
Managers will want higher quality products at lower prices. Suppliers will want to receive higher prices for the products they are selling. Managers will also want favourable trade credit terms, with more days before they need to make payments. On the contrary, suppliers will want to be paid quickly.
Managers Versus Pressure Groups
Managers might not have prioritised social and environmental issues. On the other hand, pressure groups might impact the businesses by highlighting these issues publically. These could include emplyees rights in the workplace, pollution or environmental damage being caused by the business, or animal rights, just to name a few. Pressure groups will try to generate media interest in businesses who might not be operating up to their ideology.
The impact stakeholder conflicts can have on business decision making
Each internal and external stakholder have an influence on the way businesses make decisions. Firstly, businesses will evaluate how much power the stakeholder has, and how interested they will be in their business.
Most importantly, businesses must consider the objectives of internal stakeholders. They should ensure employees are motivated in the workplace, provided fair wages, training and development, as well as able to have a strong work life balance. Managers should also be provided with growth opportunities.
Furthermore, businesses should monitor and work with their external stakeholders. Suppliers should be paid on time, customers should be satisfied with the products and services they receive, and taxes should be paid to the government.
Video: The impacts of stakeholder conflicts
Why are Amazon employees striking for the first time in the UK?
They are asking for a 50% raise to £15 per hour. The employees believe it will not impact Amazon, and will bring the money back into the economy (as employees spend it).
What other stakeholders are being impacted as some of the employees go on strike?
Other employees trying to enter into the Amazon facilities (feeling of discomfort, unease, which could impact productivity), customers (may receive late shipments), delivery personnel (might not deliver packages on time), Amazon (loss of reputation and potentially profit), politicians are beginning to view Amazon unfavourably.
Thinking for yourself: What do you think Amazon should do?
Take the quiz on stakeholder conflicts
Results
#1. Which of the following stakeholders would most likely NOT want operating costs to be cut?
Managers, shareholders, and owners all have an objective to create more profits for the business. This will contrast with employees whose focus will be to gain higher wages over time and more working conditions. They will expect the business to spend more money on them over time.
#2. Which stakeholder would be most interested in a business’s charity projects?
The local community will be the ones who observe the charity work taking place in the local community. They also have stronger expectations for businesses to have a positive impact in the community and society. The government, while interested, will be focused more on businesses observing the law and paying taxes rather than volunteer activities.
#3. If a business contributed to deforestation in a region due to its need for wood, which stakeholder would most likely object strongly?
Although internal stakeholders may not agree with the action of causing deforestation, it is most likely that pressure groups will take action on their point of view. If the pressure group focuses on environmental issues, they will expect other people in society to do the same.
#4. Which of the following is most likely to be a government objective?
The government will not be concerned with operating costs of a business, as long as laws are being followed (adhered to). The government will be concerned with pollution and its harm on people within the community where the environmental damage is taking place.
#5. What objective would be of greatest interest to managers in a manufacturing enterprise?
Managers will be required to meet production targets as one of their objectives. They will be most interested in being rewarded for organising and motivating employees to reach these objectives. The other objectives will be of stronger interest to the local community (sponsorship), the government (receiving taxes), and suppliers (being paid early).