Stakeholder analysis is defined as the process of identifying those affected by any activity undertaken within a business.
Stakeholder analysis is a term used in business administration to describe a process where all the individuals or groups that are likely to be affected by the activities of the organisation are identified and then sorted according to how much they can affect the organisation and how much the activities within the organisation can affect them.
This information is then used to assess how the interests of those stakeholders should be addressed in the business plan.
Stakeholder analysis has the goal of developing cooperation between the stakeholder and the organisation and, ultimately, assuring successful outcomes for the organisation.
The main interests of the various stakeholders will vary as clearly some elements will be more important for some than others. Nevertheless, if we are to develop good relationships with all stakeholders it is vital that we understand the key drivers for the individual groups and we work out a method for identifying the interests of all involved.
Stakeholder analysis may be a complex procedure or may simply involve making a quick list of stakeholders and their interests. By undertaking a simple stakeholder analysis you can quickly and easily determine:
- Who will be affected
- Who could influence the process or outcomes
- Which individuals, groups or organisations need to be involved;
- More specifically, doing a stakeholder analysis can:
- Draw out the interests of stakeholders in relation to problems you are trying to resolve by providing a service
- Identify conflicts of interest between stakeholders, which may influence the assessment of risk if you are looking at introducing a new service for example;
- Help to identify relations between stakeholders which can be built upon. Some stakeholders will be your staff.
- Help to assess the appropriate type of participation by different stakeholders, at successive stages of the project.
There are four main categories that we need to take account of when considering stakeholder interests. These are:
- The Cost and/or financial performance
- Legal and statutory performance
- Performance against the Contract and Service Specification
- Risk and business continuity
As mentioned above, the four categories will have varying levels of importance for each of the stakeholder groups. Let’s have a look at each category in more detail and then consider them in the light of the various stakeholder groups.
Cost and Financial Performance
It is generally accepted that we do not mind paying for goods and services if the quality is good and meets the requirements but if a customer feels that he or she is paying over the odds for a substandard service then relationships between customer and supplier are bound to suffer. Cost linked with satisfactory service is a key driver in ensuring good customer relations.
Organisations within the private sector may have stakeholders who have a financial interest in the organisation – shareholders. If an organisation is performing well financially, the value of the shares will increase and the financial shareholders can reap the rewards should they choose to dispose of their shares.
Poor financial performance is often a result of poor business strategy set by the Board of Directors of a company and therefore the relationship between the directors and the shareholders will suffer.
In practice, shareholder dissatisfaction with the accounts would usually reflect an underlying problem — for example, if the shareholders felt that the directors were trying to mislead them or to run the company for the directors’ benefit. The shareholders might then take action.
Shareholders can call for the dismissal of a director or, in the worst case scenario, can call for legal action to be taken.
In the public sector, whilst it is less likely that the organisation will lose customers, the financial performance of a service or institution can have a marked effect on the relations between the organisation and the various stakeholders. Financial problems in a hospital, for example, could lead to a fall in service levels and/or loss of jobs, both of which would have a significant impact on the local community.
Legal and Statutory Compliance
There is a whole range of legislation that an organisation must comply with but you can read every day of companies that fail to comply.
Non-compliance with legislation can, of course, lead to prosecution with fines and even imprisonment a real possibility. Large fines inevitably affect the profitability of an organisation and, as described above, the return for stakeholders but the less tangible effects non-compliance may have on relationships with stakeholders can cause the most problems for an organisation.
Remember the definition of stakeholders – anyone who has a vested interest in an organisation. How would failure to comply with Health and Safety legislation affect different stakeholder groups?
If you work for an organisation that has been prosecuted for not complying with Health and Safety legislation, would you be happy to continue to work for them?
It might be that you have no choice, given the current employment market but your loyalty to the company may be affected and consequently, your productivity.
It may also be difficult to attract high calibre staff to the organisation.
Customers may choose to shop elsewhere, which would have a knock-on effect on the organisation’s financial performance. In the public sector, service users may stop using the services you offer, which could lead to reduced funding from the government and subsequently job losses, reduction in service quality and so on.
Contractors may not want to tender for contracts as they will not want to work for an organisation with a poor Health & Safety record. Alternatively, they may charge significantly higher fees or you may be forced to use more dubious suppliers for whom Health and Safety is not a priority.
Although we have focused on Health and Safety legislation, non-compliance with other types of legislation, such as Employment Law, can have similar consequences.
Specific Performance Against the Contract
One of the key criteria use for deciding on the selection of a supplier when procuring goods or services is whether they have, in the past, complied with a contract. If you are providing a service and you do not comply with the contract it will inevitably affect the relationship you have with the client who has procured your services.
The best way of ensuring performance against a contract is to use accurate monitoring tools such as Key Performance Indicators and we will consider these in more detail later on in your course. For now, it is important to remember that non-performance will have a major effect on stakeholder relations, particularly those with the client who is paying for the goods and/or services.
Linked into the contract is the service specification. The specification sets out exactly what is required and how it should be delivered. There are two main types of specification – the Input specification and the Output specification.
Changes in the type of specification or in the details will likely have an impact on various stakeholder groups. You need to manage these groups in order to ensure that any changes are implemented smoothly and effectively.
Communication is the key. Telling all stakeholders about the changes and what this will mean and importantly, giving them the opportunity to comment will help maintain relationships.
It may be that you have to negotiate with both the stakeholders and the contractor to come up with a solution that is suitable for everyone.
Remember, the contractor is also a stakeholder! Communication enables you to identify the stakeholder interests.
Risk Management and Business Continuity
A key stakeholder for the FM department is the business as a whole and a key function of the FM department is to consider risk management and business continuity and implement procedures to reduce risk and to ensure business continuity.
To that end it is vital that the FM department is involved in risk assessment and the planning of business continuity procedures. To ensure that this happens, senior FMs within an organisation should ideally have easy access to the senior management team so that the requirements of the business can be easily assessed. The continuity of the business can be affected by many factors.
When talking about risk, it is common amongst FM circles to automatically think of health and safety, but in the context of business continuity risk can cover anything which could have a negative impact on the business. Risks to business continuity can include:
- Organisational risk
- Financial risk
- Environmental risk
- Security risk
IWFM (BIFM) Qualifications
This article relates to the following IWFM (BIFM) Qualification Units:
- IWFM (BIFM) Level 3 in Facilities Management
- FM3.03 Customer and stakeholder relations in facilities management
- FM3.06 Project management within facilities management operations
- IWFM (BIFM) Level 5 in Facilities Management
- FM5.11 Managing facilities management projects
- IWFM (BIFM) Level 6 in Facilities Management
- FM6.09 Developing strategic relationships in FM
- FM6.11 Corporate responsibility and sustainable FM