ResidentialBusiness Posted Wednesday at 02:30 PM Report Posted Wednesday at 02:30 PM The words stakeholder and shareholder are often used loosely in business. The two words are commonly thought of as synonyms and are used interchangeably, but there are some key differences between them. These differences reveal how to appropriately manage stakeholders vs shareholders in your organization. For example, a shareholder is always a stakeholder in a corporation, but a stakeholder is not always a shareholder. The distinction lies in their relationship to the corporation and their priorities. Different priorities and levels of authority require different approaches in formality, communication and reporting. It’s important that these terms are well-defined to avoid confusion. Even if you think you the definition of a stakeholder versus the definition of a shareholder, take a moment to refresh yourself. What Is a Stakeholder? A Definition We’ve written about what a stakeholder is before, and the definition still stands. A stakeholder can be either an individual, a group or an organization impacted by the outcome of a project. Therefore, they have an interest in the success of a project. They are either from the project group or an outside sponsor. There are many people who can qualify as a stakeholder, such as: Senior management Project leaders Team members on the project Customers of the project Resource managers Line managers User group for the project Subcontractors on the project Consultant for the project Internal & External Stakeholders Therefore, stakeholders can be internal, such as employees, shareholders and managers—but stakeholders can also be external. They are parties that are not directly in a relationship with the organization itself, but still, the organization’s actions affect it, such as suppliers, vendors, creditors, the community and public groups. Basically, stakeholders are those who will be impacted by the project when in progress and those who will be impacted by the project when completed. It’s important to understand the unique requirements of each of your stakeholders. You can use a stakeholder map to better understand their impact and influence on the project. Stakeholders tend to have a long-term relationship with the organization. It’s not as easy to pull up stakes, so to speak, as it can be for shareholders. However, their relationship to the organization is tied up in ways that make the two reliant on one another. The success of the organization or project is just as critical, if not more so, for the stakeholder over the shareholder. Employees can lose their jobs, while suppliers could lose income. Stakeholder analysis is an important element of planning that must be done by project managers to identify and prioritize stakeholders before the project begins. Related: Stakeholder Analysis Template What Is a Shareholder? A Definition A shareholder is a person or an institution that owns shares or stock in a public or private operation. They are often referred to as members of a corporation, and they have a financial interest in the profitability of the organization or project. Depending on the applicable laws and rules of the corporation or shareholders’ agreement, shareholders have the right to do the following (and more): Sell their shares Vote on those nominated for the board Nominate directors Vote on mergers and changes to the corporate charter Receive dividends Gain information on publicly traded companies Sue for a violation of fiduciary duty Buy new shares Shareholders Are Vested Shareholders have a vested interest in the company or project. That interest is reflected in their desire to see an increase in share price and dividends if the company is public. If they’re shareholders in a project, then their interests are tied to the project’s success. The money that is invested in a company by shareholders can be withdrawn for a profit. It can even be invested in other organizations, some of which could be in competition with the other. Therefore, the shareholder is an owner of the company, but not necessarily with the company’s interests first. Differences Between Stakeholders vs Shareholders Before getting into the differences, there is a similarity between stakeholders and shareholders. That similarity is their importance: in recent years, corporations have begun to be answerable to their stakeholders and shareholders alike. Unlike in the past, when corporations were mostly interested in issues related to their shareholders. There has been a rise in something called corporate social responsibility (CSR), which encourages companies to take the interest of all stakeholders into consideration when making decisions, rather than just the interests of their shareholders. Differing Viewpoints CSR is important because in most cases, stakeholders and shareholders have different viewpoints. Stakeholders are more concerned with the longevity of their relationship with the organization and a better quality of service. That is, people working on a project or for an organization are likely more interested in salaries and benefits than profits. Shareholders, on the other hand, are more concerned with stock prices, dividends and results. They have a financial interest in the success of the organization, not the individuals who work there. Shareholders are more likely to advocate for growth, expansion, acquisitions, mergers and other acts that will increase the company’s profitability. How They’re Categorized Shareholders are a subset of the larger stakeholders’ grouping but don’t take part in the day-to-day operations of the company or project. Shareholders do have some rights as owners of the company, which are detailed in the company’s charter, such as the right to inspect financial records—especially if they’re concerned about how the company is being run by its top-tier executive suite. There are some organizations that don’t have shareholders, such as a public university, which has many stakeholders. These include students, families, professors, administrators, employers, state taxpayers, the local and state communities, custodians, suppliers and more. In Summary: Stakeholders vs Shareholders The shareholder, again, is a person who owns shares of the company. A stakeholder has a stake in the company. Therefore, shareholders are owners and stakeholders are interested parties. As stated earlier, shareholders are a subset of the superset, which are stakeholders. Shareholders include equity shareholders and preference shareholders in the company. Stakeholders can include everything from shareholders, creditors and debenture holders to employees, customers, suppliers, government, etc. The biggest difference between the two is that shareholders focus on a return of their investment. Stakeholders are more concerned about the performance of the company. Related: What Is Stakeholder Management? How to Manage a Stakeholder It’s clear that effective stakeholder management is directly linked to project success. The goal is to be open, honest and proactive to meet stakeholder expectations. Start by creating a stakeholder register that lists all individuals or groups with a vested interest in the project. Include their names, roles, contact information and level of influence. Then, develop a stakeholder engagement plan that defines the communication channels, frequency and activities that align with the stakeholders’ expectations. Engagement goals are also a great way to track progress and evaluate the effectiveness of the engagement plan. As the project progresses, monitor and make changes to stakeholder engagement to ensure all feedback and concerns are considered. Various techniques can help manage stakeholders. For example, a power/interested grid categorizes stakeholders based on their influence and interest in the project to help prioritize engagement efforts. Change management is another technique that helps manage stakeholder reactions to project changes. If there will be project changes, be sure to communicate them early and address concerns thoroughly. Even a simple stakeholder satisfaction survey can assess their satisfaction with the project and engagement efforts. How to Manage a Shareholder Similarly, shareholder management focuses on transparency and trust to help a company achieve long-term success. Always ensure communication is consistent and honest; provide accurate and timely information on reports, market conditions, strategic initiatives and performance. Strive to build trust and relationships with shareholders by actively listening to their feedback and concerns. One-on-one meetings are a great way to cultivate relationships and show appreciation for their investment and support. There are several techniques to improve shareholder management. For example, sharing data through regular financial reporting (typically quarterly or annually) can help them understand key financial metrics and performance drivers. Digital communication through social media, email and online portals is a great way to communicate and ensure there’s an open dialogue. Should You Focus on Shareholders or Stakeholders? That’s not so easy a question to answer, and one that has been debated forever by business analysts. Should businesses be solely focused on increasing profits or do they have an ethical responsibility to the environment? These two paths are called the shareholder theory and the stakeholder theory. Shareholder Theory vs. Stakeholder Theory Shareholder theory claims corporation managers have a duty to maximize shareholder returns. Economist Milton Friedman introduced this idea in the 1960s, which states a corporation is primarily responsible to its shareholders. Stakeholder theory, on the other hand, notes that it’s the business manager’s ethical duty to both corporate shareholders and the community at large that the activities that benefit the company don’t harm the community. This doesn’t mean that shareholder theory is an “anything goes” drive to lift profits. This process must be legal and done through non-deceptive practices. It doesn’t necessarily exclude charitable works, either. However, social responsibility is structured into the stakeholder theory, but the benefits must also meet the corporation’s bottom line. Therefore, the best theory for you and your company or project is dependent on what your main interests are. But it’s most likely that you’ll proceed with a hybrid, as both theories serve different aspects of the business. Free Templates for Help Managing Stakeholders and Shareholders Both stakeholder and shareholder management can go a long way in driving long-term business success. To ensure quality and streamline many of these processes, we recommend looking at our free project management templates for Excel and Word. We’ve highlighted a few that are relevant to keeping stakeholders and shareholders happy. Stakeholder Register Template Use this free stakeholder register template for Excel to identify who the project stakeholders are and understand how they can potentially impact the project. It enables project managers to develop a stakeholder communication strategy to build trust with stakeholders. Stakeholder Map Template Download this free stakeholder map template for Excel to visually understand the project’s stakeholders. It includes a list of the stakeholders as well as their perspectives and interest in the project. Use it to gauge the level of interest and influence of each stakeholder to improve project outcomes. Communication Plan Template All stakeholders and shareholders require effective communication. This free communication plan template for Word is a streamlined way to schedule project communications and establish a feedback loop so everyone is on the same page. It leads to better documentation, data and reports to cultivate stronger relationships. ProjectManager Satisfies Stakeholders and Shareholders Now that you know the difference, how about a bridge that connects the two? Whether you’re managing stakeholders or shareholders, ProjectManager has you covered. Our project management software helps leaders manage projects online with their team, and keeps stakeholders and shareholders informed along the way. The worst thing for either stakeholders or shareholders is to feel out of the loop. ProjectManager keeps stakeholders and shareholders a part of the project and aware of its progress with its real-time dashboard. The dashboard is a bird’s-eye view of the project’s progress represented in easy-to-read charts and graphs. /wp-content/uploads/2022/03/Dashboard_Construction_Wide_Zoom-150.jpgShare the dashboard with your stakeholders and shareholders to keep them informed on what matters. Mostly, stakeholders and shareholders alike are more interested in the big picture. They just want to make sure that things are moving forward as planned. However, during a presentation, you might get some questions thrown at you that will demand a deeper look. ProjectManager has project reports for a variety of different project metrics, from variance to task progress. All these reports can be filtered instantly, so you’re always prepared to make that deep dive into the data when it’s requested. Stakeholders and shareholders will love the transparency ProjectManager gives them into the project. /wp-content/uploads/2022/03/Reports_Wide_Zoom-150_Project-Status-Report.jpgSlice and dice your project data to get the answers you need. Whether you’re working for a shareholder or a stockholder, in order to keep them informed, you’ll need a tool that can help you track progress and report back that their needs are being met. ProjectManager is a cloud-based project management software that gives you real-time data to make the right decisions at the right time. See how it can help you by taking this free 30-day trial today! The post Stakeholder vs. Shareholder: How They’re Different & Why It Matters appeared first on ProjectManager. 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