Stakeholder Theory

Aligning your business values with stakeholder values.

The stakeholder theory developed by R. Edward Freeman in the 1980s was designed to overcome the limitations of the shareholder-centered view of corporate management. Freeman argued that the exclusive focus on shareholders neglects other important groups whose interests are crucial to the long-term success of the company.

Stakeholder theory states that a company should create value not only for shareholders, but for all stakeholders, including employees, customers, suppliers, communities and other groups affected by the company's activities.

The stakeholder concept is applied in organizational management, as well as in change management and project management. It has a strong ethical component and attempts to provide a holistic view of the impact of corporate behavior on all stakeholders and affected parties. For this reason, stakeholder theory is also used when it comes to corporate social responsibility.

Application in companies

In practice, companies apply stakeholder theory by identifying their stakeholders and engaging with them to understand their needs and concerns. This often involves the following:

• Stakeholder analysis: Identifying stakeholders to determine their influence and interests.
• Stakeholder management: Developing strategies for managing relationships with different stakeholder groups.
• Change management: integrating stakeholder feedback into decision-making processes.

Stakeholder theory is a way of combining the resource-centered and market-centered view of companies with a socio-economic and socio-political perspective. This enables companies to take a more holistic view of their internal and external practices and to better recognize the influence on the various stakeholders and, if necessary, to question and adapt them.

Effects of stakeholder theory on companies

When companies are open to feedback from stakeholders, they can experience the following positive effects:

• Improved public image: companies that take their stakeholders' interests into account often enjoy a better public image and greater customer loyalty.
• Risk management: Stakeholder involvement helps to identify and mitigate potential risks at an early stage.
• Sustainability: A stakeholder-centered approach promotes sustainable business practices that ensure long-term profitability.
• Innovation: Stakeholder input can drive innovation by identifying new opportunities and unmet needs.

Stakeholder theory in project management

What can have a positive impact on an entire organization can also apply to project management within a team or department. Stakeholder management is an established practice in projects and is crucial for project success. In addition to the structured identification of stakeholders and the categorization of interests, the application of stakeholder theory leads to

• Improved communication: establishing clear and effective channels for communicating with stakeholders increases transparency and trust.
• Better conflict resolution: Early identification and involvement of stakeholders helps to promptly address concerns and reduce conflict.
• Greater project success: Ensuring that the project meets stakeholder needs can lead to greater satisfaction and successful project outcomes.

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