Question

Why is networking important to stakeholders? How does a stakeholder most effectively develop a network within the organization? Explain in 250 words or more.

Answer 1

Networking is the process of creating connections and establishing relationships with various parties. When we speak about stakeholders they could be of various types for an organization or an institution. For example, employees, managers, customers, shareholders, partners and vendors are usually considered the standard stakeholder for various decision making models.

These stakeholders tend to network with the other stakeholders or externally in order to exert influence on the organization and its environment. In order to maintain balance of power and to make sure that organization is operating for the benefit of the greater good, networking is extremely important for stakeholders because it gives them power over the organization.

Consider the example of an organization where the vendors hold tremendous amount of power. This is also known as high degree of bargaining power of the suppliers. In such scenario, the organization needs to succumb to the vendors’ demands and may find it at a serious disadvantage that may result in stock-out, opportunity loss, loss of business, etc. This causes an adversarial effect for the organization’s other stakeholder such as the shareholders and the customers. However, the opposite is also not true. For example if the customers hold excessive power over the organization then the organization may not be able to create enough profit margin and the shareholders will be at disadvantage. This is why networking provides a balance of power within the overall system of the organization.

A stakeholder creates a network within the organization using various means. The key among them is communication of ideas, rallying supporters of the ideas and creating an ideology that serves the purpose of the stakeholder. For example, in many cases we have seen customers avoiding the products from companies known to abuse human rights or use animal testing. This has brought about changes in the way businesses conduct themselves and this positive change has been possible due to the networking effect and the communication of ideas by a few stakeholders that are customers.