It is a difficult task to balance the interest of all the stakeholders as well as meet the objectives of an organization as the former task involves financial resources which may affect the financial performance of the company. Hence it becomes important to prioritize stakeholders in view of their expectations and relevance to the company. A number of studies have been made in the past which throw light on the question of determining the significance of relevant stakeholders.
For ex. Savage (1991) talked about differentiating stakeholders with respect to their potential of being co-operative or imposing threat. This is an expedient way which distinguishes heterogeneous groups and calls for giving more attention to supportive stakeholders than opposing ones. But such methodology is questionable and requires further differentiation.
Polonsky (1996) suggested the inclusion of the criterion of influencing third parties as actions of stakeholders can affect business as well as inspire other stakeholders to take action. This explains that even even stakeholders who do not have direct impact on a company can also be strategically very important because of their relation to other stakeholders.
Freudenberg (1999) arranged stakeholders in accordance with the attributes of knowledge, power and preferences. However, these links are interrelated as one who have knowledge is expected to have balance of power in his favor. Frooman (1999) developed resource dependency theory which talked about dependency of companies on stakeholders and vice versa due to scarcity of resources which explained direct or indirect influence of stakeholders on the company. Johnson and Scholes (2002) worked on stakeholder’s interest in influencing business operations and their ability to enforce their preferences.
Considering that prioritization should be practical and cost-efficient for being applicable in the corporate environment, we would discuss Mitchell, Agle, Wood’s(1997) theory based on power, legitimacy and urgency. While, prioritizing, stakeholders and their respective expectations should be arranged in accordance with their strategic relevance for the company so that the extent of investment of resources can be determined.
As per Krüger (1974) and Weber/Winckelmann (2009), a stakeholder who is able to impose the own preferences against the company’s will can be referred to as powerful. Suchman (1995) defines Legitimacy as behavioral patterns which are considered appropriate or preferable within social systems. Also in words of Mitchell, et al, Urgency prevails if a stakeholder ascribes great importance to his request and considers it as critical in terms of time. Thus, stakeholders who are characterized by all three attributes have the highest strategic importance to a company whereas those that are exclusively legitimate are considered as least relevant. This helps in providing sufficient information for designing economically adequate expenditure and reducing the complexity that results from a high number of stakeholders.
After identifying potential stakeholders, care should be taken to note the following observations:
• Stakeholders should represent a mix of perspectives,experiences and roles
• They should reflect diversity in terms of race, ethnicity, age, socio-economic status, sexual orientation, education, etc. Example, for a program designed to benefit people with physical disabilities, should stakeholders include persons with physical disabilities
• Stakeholders who have maximum interest in the program must be included in the initiative along with those who have most to gain or lose from the evaluation
Stakeholders can be categorized as being Vital, Important and Nice. Vital stakeholders are those who closely keep an eye on the evaluation’s success and resultant findings. Important stakeholders have to be included due to practical or political reasons. Nicestakeholders can also be included given time and resource availability.