How Stakeholders Shape Success

When defining stakeholders, the simplest answer is an individual or group who has a vested interest in a company. The stakeholder concept was originally defined as those groups without whose support the organization would cease to exist. In other words, stakeholders are people who have a vested interest in the company. There are 2 groups of stakeholders: Internal and External. Each has a specific duty and requirement.

Internally, they include the Board of Directors, investors, and employees. External stakeholders are those who are indirectly affected by the company’s actions. This group includes vendors, clients, the community, and any regulatory body.

Defining which stakeholder group is most important depends on several factors including the company's size, goals, and objectives. At some point, the individual stakeholders may belong to both groups. Since corporations are business entities with enormous privileges and public charters, the public has a right to establish rules for corporate governance that work in the best interest of the society at large.

During the takeover era of the 1980s, more than half of the states in the US adopted “stakeholder” laws, which permit (or even require) directors to consider the impact of their actions on constituencies other than shareholders, including the employees, customers, suppliers, and the community.

Embracing this holistic perspective not only fosters robust corporate governance but also heralds a new era of stakeholder-centric prosperity. The term stakeholder covers everyone with a stake in the business's success, as opposed to only those concerned with its profit growth and valuation.

With some differences compared to for-profit entities, stakeholders also influence the success of nonprofits:

Donors, volunteers, beneficiaries, and board members are all stakeholders who typically align with the nonprofit's mission and values. Their commitment and support are essential for advancing the organization's cause and achieving its goals. Donors and funders provide the financial resources necessary for the nonprofit to operate and fulfill its mission. Their contributions fund programs, initiatives, and administrative expenses, ensuring the organization's sustainability and impact. Volunteers contribute their time, skills, and expertise to support the nonprofit's programs and operations. Their dedication enhances the organization's capacity to deliver services, reach more beneficiaries, and amplify its impact within the community. Beneficiaries are stakeholders whose needs and perspectives directly inform the nonprofit's programs and services. By listening to and incorporating beneficiary feedback, nonprofits can ensure their initiatives are relevant, effective, and responsive to community needs.

Nonprofits often collaborate with other organizations, government agencies, and community groups to leverage resources, share expertise, and amplify their impact. Strong partnerships enhance the nonprofit's reach, effectiveness, and sustainability. Stakeholders, including volunteers, donors, and beneficiaries, can advocate for the nonprofit's cause, raise awareness about its programs and initiatives, and mobilize support within the community. Their advocacy efforts can lead to increased visibility, funding opportunities, and policy change. Board members and other governance stakeholders provide strategic direction, oversight, and accountability for the nonprofit organization. Their leadership ensures that the organization operates ethically, responsibly, and in alignment with its mission and values.

Stakeholders, particularly donors and funders, are interested in understanding the nonprofit's impact and how their contributions are making a difference. Robust impact measurement and reporting mechanisms demonstrate accountability, transparency, and effectiveness, building trust and confidence among stakeholders.

In summary, stakeholders play a vital role in shaping the success of nonprofit organizations by providing financial support, volunteer engagement, beneficiary input, partnerships, advocacy, governance, and impact measurement. By effectively engaging and collaborating with stakeholders, nonprofits can maximize their impact, achieve their mission, and create positive change in the communities they serve.