On the other hand, external stakeholders represent outside parties, which affect or get affected by, the business activities.
Due to the complexity of the business environment, it is very difficult to identify that which factor is considered as the internal or external stakeholder. So, here in this article, we are presenting you the differences between internal and external stakeholders.
Content: Internal Stakeholders Vs External Stakeholders
- Comparison Chart
- Definition
- Key Differences
- Conclusion
Comparison Chart
| Meaning | The individual and parties that are the part of the organization is known as Internal Stakeholders. | The parties or groups that are not a part of the organization, but gets affected by its activities is known as External Stakeholders. |
| Nature of impact | Direct | Indirect |
| Who are they? | They serve the organization. | They get influenced by the organization's work. |
| Employed by the entity | Yes | No |
| Responsibility of the company towards them | Primary | Secondary |
| Includes | Employees, Owners, Board of Directors, Managers, Investors etc. | Suppliers, Customers, Creditors, Clients, Intermediaries, Competitors, Society, Government etc. |
Definition of Internal Stakeholders
Internal Stakeholders are those parties, individual or group that participates in the management of the company. They can influence and can be influenced by the success or failure of the entity because they have vested interest in the organisation. Primary Stakeholders is the second name of the Internal stakeholders.
Internal Stakeholders are dedicated to providing services to the company. They are highly affected by the decisions, performance, profitability and other activities of the company. In the absence of internal stakeholders, the organisation will not be able to survive in the long run. That is why they have a great impact on the company. Further, they are the ones who know all the secrets and internal matters of the entity. The following are the list of internal stakeholders:
- Employees: Employees are the group of people who work for the company, for remuneration.
- Owners: The individual or group who owns the organisation. They can be partners, shareholders, etc.
- Board of Directors: They are the group of individuals who governs the incorporated entity. They are elected by the members of the company at the AGM (Annual General Meeting).
- Managers: The person who manages the entire department is known as Manager. For example Sale Manager, General Manager, etc.
- Investors: The individual or group who invest their money in the organisation are investors.
Definition of External Stakeholders
External Stakeholders are those interested parties, who are not a part of the management, but they indirectly affected by the work of the company. They are the outside parties which form part of the business environment. They are also known as Secondary Stakeholders. They are the users of financial information of the company, in order to know about its performance, profitability, and liquidity.
External Stakeholders, do not participate in the day to day activities of the entity, but the actions of the company influence them. They deal with the company externally. They have no idea about the internal matters of the company. Given below is the list of external stakeholders:
- Suppliers: They provide inputs to the organisation like raw material, equipment, etc.
- Customers: They are considered the king of business because they are the one who is going to consume the product.
- Creditors: They are the individual, bank or financial institution who provides funds to the organisation.
- Clients: They are the parties, to whom the company deals and provides its services.
- Intermediaries: They are the marketing channels that create a link between the company and customers like the wholesaler, distributors, retailer, etc.
- Competitors: They are the rivals who compete with the organisation for resources and the market as well.
- Society: A firm has its responsibility towards society as well because the enterprise uses its valuable resources.
- Government: A firm is guided and controlled by government rules and regulations like it has to pay taxes and duties that are levied on the business.
Key Differences Between Internal and External Stakeholders
The following are the major differences between internal and external stakeholders:
- The individual or group that works for the organisation and they actively participate in the management of the company are known as Internal Stakeholders. External Stakeholders, on the other hand, are the individual or group that is not employed by the organisation but they get affected by its activities.
- Internal Stakeholders serves the organisation, but External Stakeholders deals with the company externally.
- Internal Stakeholders are directly influenced by the company’s activities because they are the part of the organisation which is just opposite in the case of External Stakeholders.
- Internal Stakeholders are employed by the company, but external stakeholders are not.
- Internal matters of the company are known to internal stakeholders. However, external stakeholders are not known about such matters.
- Internal Stakeholders are the primary stakeholders whereas External stakeholders are the secondary stakeholders.
Conclusion
Every enterprise operates in an environment, and there are some factors in that environment. The company has to deal with those factors and fulfil the responsibilities towards them like it is the responsibility of the company to pay fair wages to the workers and should not discriminate between employees. Similarly, it is the duty of the company to pay money to suppliers, deliver goods to customers, pay taxes to local authorities on time. They are the readers of the financial statement of the company so the company should provide a true and fair view of its financial statement along with transparency in their accounts. The trade union is a combination of both internal and external stakeholders.
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We’re all pretty clear on what a customer is, but sometimes it helps to clarify the overarching definition, especially as thinking evolves around providing a great customer experience to external and internal customers who might define experience in completely different terms. So, let’s explore the differences between external and internal customers.
- From an IT perspective, it’s often helpful to separate the types of customers you serve: you may have a help desk and a service desk, or maybe a service desk that serves both internal employees and public customers.
- From a customer service perspective, understanding the needs of your customers can help you clarify workflows and decide whether your company should distinguish between internal and external customers.
What is an external customer?
External customers are the people that pay for and use the products or services your company offers. When brainstorming problems and designing solutions, these customers are who you’re designing for.
To be clear, an external customer is a person who is not directly connected to your organization other than by purchasing your product or service. This customer could be a one-time purchaser or a person who’ve you worked with long-term and to whom you’ve provided add-ons or customization options. External customers are also known as “clients” or “accounts.”
The goals for your external customer can depend on your product or service, i.e., repeat purchasing, referrals, positive reviews, and otherwise supporting your company. You might follow up after-purchase—or during—to conduct formal or quick-pulse surveys. “The customer is always right” is generally the guiding principle when serving this group, and the revenue they generate is the lifeblood of your company. Without them, your company fails.
What is an internal customer?
Internal customers have a relationship with, and within, your company, either through employment or as partners who deliver your product or service to the end user, the external customer. Less obvious but certainly still significant, stakeholders and shareholders are also internal customers. All of these may or may not purchase your product or service.
Comparing internal and external customers
External customers have been inherent in business since people started making and selling products—a long time! The idea of an internal customer, however, is a more modern one. For instance, Six Sigma encourages identifying internal customers as a way of creating a more positive work environment.
That positive work environment includes things like kind and empathetic leadership, fair and equitable pay, comfortable working conditions, the latest technology, and so on. The thinking goes: the higher employee morale, the more those employees work with integrity and productivity. That morale can also come from the idea that they are contributing to something larger, which ripples out positively to improve how they work. One school of thought connects satisfied internal customers with happy external customers.
Beyond the feel-good psychology, though, using the term “internal customers” may have some tangible benefits. For teams who work with both internal and external customers, it can help them prioritize problems and timelines to improve inter-department communication. Treating everyone as a customer may also encourage employees to take each other just as seriously as they would take a referral or complaint from an external customer.
Do negative internal customer experiences affect external customers?
Once you determine that you’re going to address customers as internal and external, it’s easier to recognize how the former’s experience can affect the latter’s.
Case in point, if your internal customers have a role that faces external customers, such as in a call center, then it’s imperative that the systems those employees rely on for their jobs are resilient and function easily and effectively.
If outdated processes and antiquated tech frustrate your staff, that experience is likely replicated when your external customers seek assistance, so you get dual frustrations—not a great recipe for success. Delivering smooth, intuitive experiences for internal customers frees them to provide the same to your external customers.
Drawbacks of making each person a customer
Business experts and sociologists are aware of the inherent confusion in delineating internal and external customers. How do you apply “the customer is always right” to a coworker or colleague who isn’t on board with the new company philosophy or method?
The truth is you may not be able to, which is why some believe the term “internal customers” can dilute the urgency around external customers. This paradigm shift may actually promote more mediocre performance. If everyone is a customer, who is the most important? The answer should be the external customer.
CEOs find more success when they connect employees to external customers. It is more impactful to talk about how their product (medical devices, time management software, bicycle helmets, etc.) is valuable to the customers by saving their lives or improving their work than it is to compare how much money shareholders will get as a result.
Many employees in IT, customer service, and other customer-facing roles also support the “external customers only” mindset because it leads to better alignment across the organization. You’re all trying to serve the singular group of external customers, instead of the various internal clients that are spread across your company’s departments and related partners.
The Transcendent Customer Experience
One of the tenets of the Autonomous Digital Enterprise, the Transcendent Customer Experience (TCE), weighs external and internal customers as equally important. And it sees the external customer experience (CX) and internal, or employee, experience (EX) evolving to a future-state that gives customers what they want, when and where they want it, quickly and seamlessly. In many ways, that future state has been significantly fast-tracked, and CX and EX have almost blurred into one.
With the 2020 global pandemic putting so many brick and mortar businesses and on-site work arrangements on pause, CX and EX are increasingly being done online from cell phones, tablets, laptops, and an array of devices. To address this, many retailers, businesses, and employers have had to nimbly pivot their thinking, and their systems, to catch up—whether that means supporting online ordering and contactless delivery or telemedicine, or helping staff set up high-speed internet, VPN, and conferencing tools to do their jobs at home.
Businesses that immediately shifted gears to adapt to these new processes have been able to keep their internal and external customers happy.
Driven by a marriage of data and journey analytics that anticipate and deliver proactive instead of reactive experiences, TCE ascribes to the idea of taking the experience to the customers—wherever they happen to be. Merging human elements with technology—specifically artificial intelligence (AI) and machine learning (ML)—has enabled a new era of mobile-first and do-it-yourself solutions that empower external and internal customers to architect the services and solutions they need with a simple swipe or tap.
That newfound speed and convenience will no doubt have far-reaching implications for both internal and external customers as they chart a course toward the future.
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These postings are my own and do not necessarily represent BMC's position, strategies, or opinion.
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