Advantages and Disadvantages of Stakeholders

A stakeholder is a person or group that has an interest in the success and choices a company makes. Stakeholders can be internal, with a "vested" or financial interest in the company such as a shareholder, partner or investor. External stakeholders generally don't have a vested interest, but instead have a broader interest in how a business will affect the community, local business economy or environment. Read on to learn about the disadvantages and benefits of stakeholders.

Advantage: Business Experience

Internal stakeholders with a large vested interest in a business often sit on the board of directors. This stakeholder's value is partially his business experience and partially his book of business relationships.

The business acumen an experienced business leader has is highly beneficial for a business owner. Not only can the stakeholder offer mentoring advice, but the stakeholder can also help guide the company to grow properly and not make costly mistakes along the way.

Disadvantage: Representing Own Interests

There are times in which stakeholders are focused on their own interests. Often, external stakeholders are community groups or political appointees who might not act in a company's best interest if the company is not offering anything that helps the stakeholder with his constituents. However, while situation crops up often for external stakeholders, it's not exclusive to them.

According to Forbes, even an internal stakeholder, such as an inexperienced investor, might vote against a proposal for growth in fear of losing money. He is focused on his own financial needs and not on the needs of the business. Stakeholders who weigh their own interests over their companies' may disadvantage the companies in question.

Advantage: Anticipate Potential Problems

The importance of stakeholders becomes apparent when stakeholders help a business owner anticipate things that might go wrong. Stakeholders often come from a variety of backgrounds and levels of experience, which help them see a bigger picture that a business owner might not see. This is one reason that some small businesses owners bring an accountant or an attorney onto the board of directors so that the accountant or attorney might be able to foresee potential legal or financial issues.

It is also possible that a stakeholder has experience with a potential vendor the company needs and can provide valuable first-hand testimony to working with the vendor. This type of stakeholder insight often proves invaluable.

Disadvantage: Block Progress

When stakeholders operate for the sake of their personal interest over the interest of their companies, they may block progress. According to the Construction Industry Institute, Blocking progress is particularly at-issue when external stakeholders fear that a business' actions will harm their interests. A school might not want a medical marijuana center within a specific proximity to the campus. The school is the external stakeholder and might be able to petition to block business permits for the business.

Business owners should anticipate problems like this and have a plan to appease external stakeholders that have concerns about the business. Smart business owners approach potentially antagonistic stakeholders before a problem starts, and then they build a relationship to take a disadvantage and make it an advantage.