Stakeholder conflict

Stakeholder conflict happens when the objectives of two groups clash, so satisfying one group makes another less satisfied. Money, time and profit are limited, so a business cannot give every group everything it wants: it has to balance competing interests, and a decision that suits one group can leave another worse off.

Employees often want higher pay and secure jobs, but shareholders want lower costs, higher profit, dividends or retained profit for growth. At a garden centre, the manager wants to keep six seasonal workers on through the quiet winter months, costing about £8,400 in wages, but that money would otherwise fund a dividend or a new glasshouse. Shareholders may accept the cost if trained, loyal staff give better service in spring, but the conflict remains.

Customers want low prices and high quality, while shareholders want higher profit, which can mean higher prices; cutting prices can win sales but shrink margins, and improving quality adds cost. Suppliers want higher prices and prompt payment, which conflicts with a business trying to keep costs down. Paying suppliers later helps cash flow but can damage supply.

The local community or pressure groups may want less noise, pollution, disruption or environmental damage, while shareholders want expansion. A parcel depot running a third shift through the night adds profit but means lorries arriving past midnight beside a housing estate. Managers may want bigger budgets or higher pay, which conflicts with shareholders' cost control. Government demands for tax and regulation can also reduce owners' profit.

Not all conflict can be resolved. If a business must cut jobs to survive, it cannot fully protect employees and keep costs low at the same time; it can only choose the least damaging balance.