{"id":48714,"date":"2021-04-06T14:30:25","date_gmt":"2021-04-06T14:30:25","guid":{"rendered":"https:\/\/staging-mondaycomblog.kinsta.cloud\/?post_type=pm&p=48714"},"modified":"2026-02-28T03:57:31","modified_gmt":"2026-02-28T08:57:31","slug":"stakeholder-theory","status":"publish","type":"post","link":"https:\/\/monday.com\/blog\/project-management\/stakeholder-theory\/","title":{"rendered":"What is stakeholder theory? A practical guide for managers"},"content":{"rendered":"

Let\u2019s talk about oceanic animals \u2014 bear with me; it\u2019s relevant to stakeholder theory, I promise.<\/p>\n

The stonefish, for example, is a \u2018does what it says on the tin\u2019 type of fish. It\u2019s a fish that looks like a stone.<\/p>\n

That, my friends, is the oceanic animal naming committee on a Friday afternoon at the end of a long week.<\/p>\n

Seahorse, however? A tad misleading, but with Monday morning creativity written all over it.<\/p>\n

It\u2019s the same in project management.<\/strong><\/p>\n

Some names make no sense. Like, brainstorm. How is violent turbulence of the atmosphere, happening inside my head, a helpful way to solve problems?<\/p>\n

But stakeholder? Much more simple. They\u2019re literally people holding a stake in something, which usually means they\u2019re interested in it. They\u2019ve got skin in the game.<\/p>\n

And, when it\u2019s your game, you need to know how to look after them.<\/p>\n

In this article, we’ll explain all you need to know about stakeholder theory, including what it is and what it means for working with your project stakeholders.<\/p>\n

So, what is stakeholder theory?<\/h2>\n

Stakeholder theory is a concept with its origin in business ethics<\/a>. It states that anyone affected by an organization and its workings is a stakeholder and<\/strong> that organizational success depends on creating value for all those stakeholders.<\/p>\n

Stakeholder theory is important because it encourages businesses to consider stakeholders outside of just their company shareholders. It suggests that corporate governance<\/a> has a social responsibility to consider stakeholders\u2019 interests in whatever they do.<\/p><\/blockquote>\n

It\u2019s different from stakeholder management<\/a> because it\u2019s about integrity and involvement, not mitigation.<\/p>\n

For project managers, it\u2019s about giving full visibility to your stakeholders specifically to ensure they have an opportunity to influence your project.<\/p>\n

Which, knowing some stakeholders, might sound like a downright scary thing to try and manage.<\/p>\n

Get started with monday.com<\/a><\/p>\n

How exactly does it work in project management?<\/h2>\n

The first step in incorporating stakeholder theory into your project is to identify your stakeholders. This is likely to include both internal and external stakeholders.<\/p>\n

Once all stakeholders have been identified, it\u2019s important to judge their relationship to the project. Judging their relationship to the project is done by analyzing 2 elements: their level of interest in the project and their level of influence over the project outcome.<\/p>\n

Part of your stakeholder analysis<\/a> will be determining what they can contribute.<\/p>\nA key part of stakeholder theory is to involve stakeholders in decision-making. So, understanding which groups to seek input from on what element of the project is important.<\/span><\/a>\n

Finally, you\u2019ll need to make a plan to communicate project progress to stakeholders and how best to involve them in the project, and when.<\/p>\n

It\u2019s important to recognize that there are also drawbacks to stakeholder theory. Trying to juggle the needs of diverse stakeholders might prove tricky at times, if not downright contradictory. Remembering that it\u2019s a goal \u2014 not a mandate \u2014 allows you to give yourself some slack.<\/p>\n

How can I identify and analyze stakeholders?<\/h3>\n

Firstly, you need to identify stakeholders. These can be either internal <\/strong>\u2014 the project affects them directly \u2014 or external<\/strong> \u2014 the project affects them indirectly.<\/p>\n

Stakeholder identification can be tricky, so we\u2019ve got you started with some examples below.<\/p>\n

\"screenshot<\/p>\n

A classic way to analyze stakeholders is by using a power vs. interest matrix.<\/p>\n

This simple 2 x 2 matrix helps determine how best to manage stakeholders by plotting them on a grid, based on their level of power over the project outcome and their level of interest in the project.<\/p>\n

This positions them into one of 4 boxes, which defines how the project should work with them.<\/p>\n

\"screenshot<\/p>\n

(Image Source<\/a>)<\/p>\n

For stakeholders with a high level of power but lower interest<\/strong> in the project, you want to keep them satisfied. Make sure they receive information about the project that\u2019s most valuable to them.<\/p>\n

Stakeholders with a high level of power and interest in the project<\/strong> should be closely managed. They\u2019re likely to be an internal stakeholder group like senior management, but could also be an external stakeholder group such as an authorizing body or industry special interest group.<\/p>\n

For stakeholders with a high level of interest but lower levels of power<\/strong>, make sure you keep them informed. Remember that stakeholder theory is about stakeholder interests, so this is less about focusing solely on key stakeholders and more about stakeholder fairness.<\/p>\n

Even though their level of power is lower, the level of stakeholder value could be high from working with this stakeholder group. They\u2019re already engaged in the project, so they should be willing to contribute their knowledge and experience.<\/p>\n

Finally, stakeholders with a lower level of interest and power<\/strong> should be monitored. Their level of interest \u2014 or even power \u2014 could change over time. Also, stakeholder theory is about value creation for all stakeholder groups, so you\u2019ll still need to consider what that means for these stakeholders.<\/p>\n

For more tools to identify and analyze stakeholders, check out our comprehensive guide<\/a>.<\/p>\n

How can I involve stakeholders in decision-making?<\/h3>\n

Ultimately stakeholders define the success criteria for your project. So, it makes sense to involve them where you can.<\/p>\n

Ensure they have visibility<\/strong><\/p>\n

To effectively involve them, you need to start by giving them visibility of the planned project outcome, the current progress, and any challenges you’re facing.<\/p>\n

That last one\u2019s important as stakeholders are also a group you can go to for help. They can provide knowledge, influence, and insight that can help you move past any roadblocks you might be facing.<\/p>\n

monday.com<\/a> has all the tools you need to help engage your stakeholders. It can present data in 8 different visualizations, including Gantt and timeline to track progress, and calendar view to get a high-level snapshot of planned work.<\/p>\n

\"screenshot<\/p>\n

Plus, dashboards can consolidate all your data into one place, making data-driven decision-making easy.<\/p>\n

Make collaboration simple<\/strong><\/p>\n

However you\u2019re choosing to work with stakeholders, you want it to be easy. Working within the monday.com Work OS makes collaborating with internal stakeholders a breeze.<\/p>\n

They can view project documentation and contribute in real-time by adding notes and tagging other contributors. And, because everything is stored in a single, shared workplace, you don\u2019t need to worry about whether you\u2019re making changes to the most up-to-date versions of things.<\/p>\n

\"screenshot<\/p>\n

Working externally is pretty simple too. monday.com<\/a> integrates with all of the usual collaboration and communication tools, which means you\u2019re not limited in who you can engage and share information with.<\/p>\n

Get started<\/a><\/p>\n

Seek out their support<\/strong><\/p>\n

Stakeholders can be a rich source of knowledge and experience, which makes them well-placed to help with risk identification and contingency planning.<\/p>\n

And it\u2019s of double benefit to the project.<\/p>\n

As well as getting some solid tips to manage project risk, feeling purposeful can, in itself, create feelings of value for stakeholders. That is, in a nutshell, what stakeholder theory is all about.<\/p><\/blockquote>\n

Stakeholder groups have specialist knowledge about their areas, which helps with risk identification and prioritization. It can be challenging for a project team to analyze the likelihood of a risk occurring or how impactful it might be.<\/p>\n

Stakeholder input can make estimating those things much more accurate. Plus, they might have good suggestions about possible risk mitigation strategies or contingency planning.<\/p>\n

\"screenshot<\/p>\n

That knowledge and experience can also help with dependency identification and management as part of a dependency workshop. These are run by the project team to help identify internal and external dependencies.<\/p>\n

Dependencies management is important. Doing it poorly contributes to 12%<\/a> of project failures. But capturing how tasks relate to each other in a Gantt chart<\/a> makes it easier to track the impact of changing dependent tasks and take action as required.<\/p>\n

\"screenshot<\/p>\n

Stakeholder theory builds trust<\/h2>\n

The key element of stakeholder theory is ensuring stakeholder awareness and enabling their involvement in decision-making.<\/p>\n

In this article, we\u2019ve shown you how to identify and analyze your project stakeholders. Our stakeholder register<\/a> is a great place to capture that information. You can list your stakeholders and begin to think about their level of power and interest.<\/p>\n

After that, you can try some of our ideas for getting them involved in decision-making. It might seem challenging at first, but creating engaged stakeholders \u2014 and building productive stakeholder relationships \u2014 is by far the most valuable<\/a> thing you can do for your project.<\/p>\n

Get started<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Let\u2019s talk about oceanic animals \u2014 bear with me; it\u2019s relevant to stakeholder theory, I promise. The stonefish, for example, is a \u2018does what it says on the tin\u2019 type of fish. It\u2019s a fish that looks like a stone. That, my friends, is the oceanic animal naming committee on …<\/p>\n","protected":false},"author":5,"featured_media":50014,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"pages\/cornerstone-primary.php","format":"standard","meta":{"_acf_changed":false,"_yoast_wpseo_title":"What is stakeholder theory? A practical guide for managers","_yoast_wpseo_metadesc":"What is stakeholder theory? Learn how to apply it to improve project success, mitigate risk, and build stronger business relationships. A practical guide for managers.","monday_item_id":18041612372,"monday_board_id":0,"footnotes":"","_links_to":"","_links_to_target":""},"categories":[13904,13903],"tags":[],"class_list":["post-48714","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-project-management","category-teamwork"],"acf":{"lobby_image":false,"post_thumbnail_title":"","hide_post_info":false,"hide_bottom_cta":false,"hide_from_blog":true,"cluster":"","banner_url":"","main_text_banner":"","sub_title_banner":"","sub_title_banner_second":"","banner_button_text":"","below_banner_line":"","landing_page_layout":false,"hide_time_to_read":false,"sidebar_color_banner":"","custom_tags":false,"disclaimer":"","cornerstone_hero_cta_override":{"label":"","url":""},"show_contact_sales_button":"default","display_dates":"default","featured_image_link":"","faqs":[{"faq_title":"FAQs","faq_shortcode":"FAQ_tag","faq":[{"question":"What is the main difference between stakeholder theory and shareholder theory?","answer":"

The main difference is focus. Shareholder theory states a company's primary goal is to maximize profits for its shareholders. Stakeholder theory argues that a company should create value for all stakeholders, including employees, customers, suppliers, and the community, not just those who own stock.<\/p>\n"},{"question":"Who created stakeholder theory?","answer":"

Stakeholder theory was developed and popularized by R. Edward Freeman, an American philosopher and professor of business administration. He first detailed the concept in his 1984 book, \"Strategic Management: A Stakeholder Approach.\"<\/p>\n"},{"question":"What are the main criticisms of stakeholder theory?","answer":"

Critics argue that stakeholder theory can be impractical, as balancing the often-conflicting interests of diverse stakeholder groups is challenging. Some also claim it can distract management from its primary responsibility of ensuring the company is profitable, potentially leading to a lack of accountability and clear direction.<\/p>\n"},{"question":"Can you give a real-world example of stakeholder theory in action?","answer":"

A company that invests in sustainable sourcing for its materials is a great example. While this might increase costs (potentially reducing short-term shareholder profit), it creates value for other stakeholders: it benefits the environment (community), ensures ethical treatment of suppliers, and appeals to socially-conscious customers.<\/p>\n"}]}],"activate_cta_banner":false,"custom_header_banner":false,"use_customized_cta":false,"custom_schema_code":"","sections":[{"acf_fc_layout":"content_1","blocks":[{"main_heading":"","content_block":[{"acf_fc_layout":"text","content":"

Some project management terms are confusing. \u2018Brainstorm,\u2019 for example. How is a violent storm in your head a helpful way to solve problems? But \u2018stakeholder\u2019 is much simpler. They\u2019re people holding a stake in your project, which means they have skin in the game.<\/p>\n"},{"acf_fc_layout":"text","content":"

When it\u2019s your game, you need to know how to look after them. In this article, we\u2019ll explain all you need to know about stakeholder theory, including what it is, why it matters, and how you can apply it to your projects.<\/p>\n"},{"acf_fc_layout":"text","content":"

TL;DR:<\/strong> Stakeholder theory is a business concept that says companies should create value for all stakeholders\u2014not just shareholders\u2014including employees, customers, and the community. For managers, this means actively involving these groups in project decisions to build trust and ensure success.<\/p>\n"}]},{"main_heading":"What is the core idea of stakeholder theory?","content_block":[{"acf_fc_layout":"text","content":"

Stakeholder theory is a concept rooted in business ethics<\/a>, first detailed by philosopher R. Edward Freeman. It states that any person or group affected by an organization\u2019s actions is a stakeholder and that long-term success depends on creating value for all of them. This includes everyone from employees and customers to suppliers and the local community.<\/p>\n"},{"acf_fc_layout":"text","content":"

This approach goes beyond simple stakeholder management<\/a>, which often focuses on mitigating risks posed by stakeholders. Instead, stakeholder theory is about integrity and active involvement. For project managers, it means giving stakeholders full visibility and a genuine opportunity to influence the project\u2019s direction.<\/p>\n"}]},{"main_heading":"Stakeholder theory vs. shareholder theory: What's the difference?","content_block":[{"acf_fc_layout":"text","content":"

The main difference lies in the primary focus of the business. Shareholder theory, the more traditional view, argues that a company\u2019s main responsibility is to maximize profits for its shareholders. It\u2019s a financially-driven model focused on prioritizing shareholder value<\/a>.<\/p>\n"},{"acf_fc_layout":"text","content":"

Stakeholder theory, on the other hand, proposes a broader mission. It suggests that a business must also consider the interests of all its stakeholders. This includes employees, customers, suppliers, creditors, and even the wider community. The goal is to create shared value and achieve sustainable success by balancing the needs of all parties involved.<\/p>\n"}]},{"main_heading":"Why is stakeholder theory important for your business?","content_block":[{"acf_fc_layout":"text","content":"

Adopting stakeholder theory isn\u2019t just about ethics; it\u2019s good for business. By considering a wider range of interests, companies can build stronger relationships, enhance their reputation, and foster long-term loyalty.<\/p>\n"},{"acf_fc_layout":"text","content":"

Key benefits include:<\/p>\n