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Identifying and managing internal and external stakeholder interests

Understanding Organisations: Identifying and managing internal and external
stakeholder interests


Stakeholder is a person who has something to gain or lose through the
outcomes of a planning process, programme or project (Dialogue by Design 2008).

Stakeholder Engagement is the process of effectively eliciting
stakeholders’ views on their relationship with the
organisation/programme/project (Friedman and Miles 2006).

Stakeholder Analysis is a technique used to identify and assess the
influence and importance of key people, groups of people, or organisations that
may significantly impact the success of your activity or project (Friedman and
Miles 2006).

Stakeholder Management is essentially stakeholder relationship
management as it is the relationship and not the actual stakeholder groups that
are managed (Friedman and Miles 2006).

As public participation becomes increasingly embedded in national and
international public health policy, it becomes ever more crucial for
decision-makers to understand who is affected by the decisions and actions they
take, and who has the power to influence their outcome: the stakeholders. The
stakeholder concept has achieved widespread popularity among academics,
policy-makers, the media and corporate managers. Within the field of strategic
management the stakeholder concept has become firmly embedded. References to
stakeholders are commonplace and the requirement to engage stakeholders in
public sector organisational strategy and project design is a key priority in
current government policy both within the NHS and local government sectors. Many
of these organisations recognise that stakeholder engagement is not about giving
the public a list of options to choose from – it’s about drawing them in
right from the start, so that their views, needs and ideas shape those options
and the services that flow from them.

A technique to help identify which individuals or organisations to include in
your programme / project is known as a ‘stakeholder analysis’. The following
stages have been identified to support the stakeholder analysis process:

  1. Identify and map internal and external stakeholders
  2. Assess the nature of each stakeholder’s influence and importance
  3. Construct a matrix to identify stakeholder influence and importance
  4. Monitor and manage stakeholder relationships.

Identify and map internal and external stakeholders (and partnerships)

The start of any stakeholder engagement process is stakeholder mapping.
Stakeholder mapping identifies the target groups and pulls together as much
information as possible about them. ‘Stakeholders’ are by definition people
who have a ‘stake’ in a situation. Stakeholders can be described in
organisation terms as, those who are maybe ‘internal’ (e.g. employees and
management) and those ‘external’ (e.g. customers, competitors, suppliers

However, within the field of public health the development of strategies,
programmes and projects may well be undertaken on a cross-boundary,
interdisciplinary way.  For example, a local health and well-being strategy
may be developed by:

  • Internal stakeholders who participate in the co-ordination, funding,
    resourcing and publication of the strategy from a local health and
    well-being partnership, the local Primary Care Trust and the local
  • External stakeholders who are engaged in contributing their views and
    experiences in addressing the issues that are important to them as patients,
    service users, carers and members of the local community.

The following questions are designed to reveal the stakes as well as help to
identify the right people to involve in any particular situation.

  • Who is or will be affected, positively or negatively, by what you are
    doing or proposing to do?
  • Who holds official positions relevant to what you are doing?
  • Who runs organisations with relevant interests?
  • Who has been involved in any similar situations in the past
  • Whose names come up regularly when you are discussing this subject?

The following list of internal and external stakeholders is based on a Public
Health Department within a Primary Care Trust:

Internal Stakeholders

External Stakeholders

  • Director of Public Health
  • Head of Health Intelligence and Information
  • Procurement
  • Director of Nursing
  • Public Health Strategists
  • Public Health Management Analyst
  • Director of Programmes and Services
  • Research Scientist
  • Communications
  • Environmental Health Intelligence Analyst
  • Public Health Manager
  • Trustees
  • Board committee members
  • Local Authority/council
  • Providers
  • Acute trusts
  • Patients
  • Service users
  • Customers
  • Suppliers
  • Funders
  • Quality assessors
  • LINk group
  • Special interest groups
  • Health visitors/school nurses
  • Wider public health workforce
  • Media

If you work in a commissioning organisation rather than in an organisation
that provides services, the organisations that provide services will be an
important group of your stakeholders (such as patients and service users)
whereas competitors will be of less significance than they are for provider

Assess the nature of each stakeholder’s influence and importance

It is important to understand that individuals and groups behave differently
in different situations. The impact stakeholders can have on organisational
policy, strategy, and project is dependent on their relationship to either the
organisation itself or the issues of concern, or both. Once a list of possible
stakeholders has been created it is necessary to estimate their influence
and importance.

Influence and importance is always in relation to the objectives you are
seeking to achieve.


  • simply refers to how powerful a stakeholder is in terms of influencing
    direction of the project and outcomes.


  • simply refers to those stakeholders whose problems, needs and interests
    are priority for an organisation. If these important stakeholders are not
    assessed effectively then the project cannot be deemed a success.

Here are some examples of types of direct influence:

  • legal hierarchy (command control of budgets)
  • authority of leadership (charismatic, political)
  • control of strategic resources (suppliers of services or other inputs)
  • possession of specialist knowledge
  • negotiation position (strength in relation to other stakeholders).

Indirect influence may also be achieved through:

  • social, economic or political in status
  • varying degrees of organisation and consensus in groups
  • ability to influence the control of strategic resources significant to the
  • informal influence through links with other groups
  • other stakeholders in assessing their importance to the project issues.

The tables below identify both the sources and indicators of influence
that internal and external stakeholders may hold.

Stakeholder Sources of Influence

Internal Stakeholders

External Stakeholders

  • Hierarchy (formal power) e.g. authority, senior position
  • Control of strategic resources e.g. materials, labour, money
  • Influence (informal power) e.g. leadership style
  • Involvement in strategy Implementation e.g. strategic partners in
    distribution channels
  • Control of strategic resources e.g. responsibility for strategic
  • Possession of knowledge and skills e.g. cooperation partners,
  • Possession of knowledge and skills e.g. expert knowledge that
    forms the organisations core competence
  • Through internal links e.g. networking
  • Control of the environment e.g. negotiation & network of
    relationships to external stakeholders
  • Involvement in strategy implementation e.g. as a change agent or
    responsibility for strategic projects

Different stakeholders may have commonality of purpose at a very general
level (e.g. ‘providing quality of services’ or ‘improving the quality of
life for the community’) but at more detailed levels they may wish to impose
different purposes and priorities on an organisation.

The level of importance, given by an organisation to the
stakeholders’ needs and interests is also key to the success of strategy and
project development. For example these sources of importance can affect both
internal and external stakeholders:

Stakeholder Sources of Importance

Internal Stakeholders

External Stakeholders

  • Which problems affecting which stakeholders, does the
    strategy/project seek to address or alleviate?
  • For which stakeholders does the strategy/project place a priority
    on meeting their needs, interests and expectations?
  • Which stakeholders’ interests converge most closely with the
    strategy/project objectives?

Construct a matrix to identify stakeholder influence and importance

One basic tool of stakeholder analysis is the influence/importance matrix.
This technique can be used in relation to a particular strategic development
(such as the launch or withdrawal of a service).

Stakeholders should first be plotted in relation to how they would line up
– the level and nature (for or against) of their importance and the
extent of their influence. A second map can also be plotted showing how
you would need stakeholders to line up
if the development were going to have
a good chance of success.

By comparing the two maps and looking for the mismatches, priorities for
managing stakeholders can be established, as well as priorities for maintaining
stakeholders in their current positioning.

Each quadrant can be analysed in the following way. In a clockwise rotation:

Quadrant one: Key stakeholders placed here have high influence and
high importance need to be fully engaged on the strategy/project. The style of
participation for stakeholders needs to be appropriate for gaining and
maintaining their ownership.

Quadrant two: Stakeholders placed here can be highly important but
having low influence or direct power, however need to be kept informed through
appropriate education and communication.

Quadrant three: Stakeholders here have low influence and low
importance and care should be taken to avoid the dangers of unfavourable
lobbying and therefore should be closely monitored and kept on board.

Quadrant four: Stakeholders placed here can hold potentially high
influence but low importance should be kept satisfied with appropriate approval
and perhaps bought in as patrons or supporters.

However, it is important to recognise, that the map is not static, Changing
events can mean that stakeholders can move around the map with consequent
changes to the list of the most influential stakeholders.

Monitor and manage stakeholder relationships

Stakeholder management is essentially stakeholder relationship management as
it is the relationship and not the actual stakeholder groups that are managed.
The Clarkson Centre for Business Ethics (in Friedman and Miles 2006:151)
developed the following list of principles that summarise the key features of
stakeholder management:

Principles of Stakeholder Management

Principle 1

Managers should acknowledge and actively monitor the concerns of all
legitimate stakeholders, and should take their interests appropriately
into account in decision-making and operations.

Principle 2

Managers should listen to and openly communicate with stakeholders
about their respective concerns and contributions, and about the risks
that they assume because of their involvement with the corporation.

Principle 3

Managers should adopt processes and modes of behavior that are
sensitive to the concerns and capabilities of each stakeholder

Principle 4

Managers should recognize the interdependence of efforts and rewards
among stakeholders, and should attempt to achieve a fair distribution of
the benefits and burdens of corporate activity among them, taking into
account their respective risks and vulnerabilities.

Principle 5

Managers should work cooperatively with other entities, both public
and private, to insure that risks and harms arising from corporate
activities are minimized and, where they cannot be avoided,
appropriately compensated.

Principle 6

Managers should avoid altogether activities that might jeopardize
inalienable human rights (e.g., the right to life) or give rise to risks
which, if clearly understood, would be patently unacceptable to relevant

Principle 7

Managers should acknowledge the potential conflicts between (a) their
own role as corporate stakeholders, and (b) their legal and moral
responsibilities for the interests of stakeholders, and should address
such conflicts through open communication, appropriate reporting and
incentive systems and, where necessary, third party review.

Friedman and Miles (2006) have developed a model that can be used to identify
the style of stakeholder management required based upon Arnstein’s ladder of
participation, although their model comprises twelve distinct
levels (see attached PDF)
. This model can be used to identify the style of
stakeholder management. The lower levels, (manipulation, therapy, informing)
relate to situations in which the organisation is merely informing stakeholders
about decisions that have already taken place, although these levels represent
bad practice if done in isolation. At middle levels, (explaining, placation,
consultation, negotia tion) stakeholders have the opportunity to voice their
concerns prior to a decision being made, but with no assurance that their
concerns will impact on the end result. The highest levels, (involvement,
collaboration, partnership, delegated power, stakeholder control) are
characterised by active or responsive attempts at empowering stakeholders in
corporate decision-making. It is likely that different stakeholder groups and
the same stakeholder groups at different times will be treated at different
levels and these can be affected by stakeholder characteristics, different
stages in an organisation’s life cycle, different strategies pursued by
stakeholders and the different focus and stage of the programme.

For an example of a Case Study of stakeholder engagement please see
the Interactive Learning Module on “Learning from Stakeholders”
provides a completed stakeholder matrix for the development of a Later Years


  • Dialogue by Design (2008) A Handbook of Public & Stakeholder
  • Friedman, L. and Miles, S. (2006) Stakeholders Theory and Practice
    Oxford University Press
  • Hunter, D.J. (2007) Managing for Health Routledge Health Management
  • Johnson, G. and Sholes, K. (2001) Exploring Public Sector Strategy
    Prentice Hall
  • Martin, V. and Henderson, E. (2001) Managing in Health and Social Care 
    London: Routledge
  • Pickstock, A. (2007) Towards World-class Commissioning Engaging
    Liverpool Primary Care Trust
  • NHS Integrated Service Improvement Programme:

© S Markwell 2010