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Introducing the voluntary sector
Introducing the voluntary sector

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2 Stakeholder power and interest

Group of women volunteers.
Figure 3 Not all stakeholders have the same amount of power

Organisations depend on a number of stakeholders for their success and effectiveness. Funders, for example, have substantial power in determining how well an organisation can meet the needs of its clients and service users. Funders will also have a keen interest in how their funds are managed and in the effectiveness of the programmes they fund. As you saw in Week 3, some funding – particularly through contracts – is tightly controlled and monitored.

Activity 3 Keeping stakeholders happy

Timing: Allow approximately 5 minutes

Read the following short extract from an article by Emma De Vita, a senior section editor on Management Today. While reading, think about how your chosen organisation responds to the interests of its stakeholders. Is it similar to the approach advocated by the author of this article?

As a manager of a stakeholder organisation, you have a responsibility to make everyone feel part of the decision-making process.

In practice, humans are often far too self-interested to make this happen in any meaningful way. Some stakeholders will be far more powerful than others, and it’s your job to work out who they are and butter them up to keep them happy. Then you’ll have those stakeholders who have little power or influence but who tend to be the most vocal. Keeping them happy is a headache in itself.

Charities, whose causes engender far more public interest than those of businesses (everyone cares about a homeless dog, but who has strong feelings about vacuum-cleaner production?), have a harder time putting [stakeholder theory] into practice. Public attention is the lifeblood of voluntary organisations, but it tends to make the number of concerned stakeholders skyrocket.

Keeping all of them happy would lead every charity chief executive to the edge of a breakdown. Better instead to console yourself with the axiom that, although all stakeholders are equal, some are more equal than others. Keep the most important people (those with the money) happy and placate the rest with free pens and newsletters.

(Source: edited from De Vita, 2007)
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Emma De Vita’s perspective on stakeholders may be cynical in one sense, but it fails to recognise the importance of secondary stakeholders. At the heart of stakeholder theory is the idea that organisations must make relationships with their stakeholders – both primary and secondary.

Speaking from a business and management perspective, theorist Freeman, et al. (2007) argued that even if a primary stakeholder (such as a funder) was satisfied, secondary stakeholders (such as an advocacy group) could still influence the relationship between an organisation and its primary stakeholders. In this case, a stable primary relationship could be jeopardised (or enhanced) by another relationship. Nevertheless, organisations will often need to choose how they engage with different stakeholders – most organisations do not have the resources to relate to them all.

It should also be pointed out that there may be different stakeholders related to different projects within an organisation, and that one of the challenges organisations face is to manage the different stakeholder needs and wants across various projects in the organisation. For many charities and organisations within the sector, the primary stakeholders are not necessarily funders. For example, for some membership organisations, members are the primary stakeholders. For many charities, service users are the primary stakeholders.

Moreover, many primary stakeholder groups (for example children) have little power in terms of getting their issues addressed, so organisations must be aware of the voice they give to certain stakeholders. Finding the right balance between competing interests and the level of power of each stakeholder group can be challenging.