"There is no greater enemy of effective thinking than divided interest."
- John Dewey, How We Think (1910)

Different stakeholder groups have different interests, which can conflict. Conflict refers to the mutually exclusive and incompatible interests of different stakeholder groups. If this is not managed, it often leads to protracted disagreements, disputed and arguments in the workplace.

Examples of possible conflict between different stakeholders’ interests include:

• Employees demand higher wages, which raises production costs so can reduce the amount of profits from which shareholders receive dividend payments.

• Similarly, senior managers and directors may demand large bonuses for their work, but this may also reduce the profits available to distribute to the company’s shareholders.

• Shareholders may demand regular and higher dividend payments, but this may result in less retained profits (see Unit 3.2) available for production and marketing managers to improve their functional roles.

• Customers may want lower prices, but this reduced the firm’s profit margin so can upset the company’s shareholders.

• Employers may want greater efficiency and productivity gains by investing in new technologies, but this might create job losses for employees.

• The local community want demand businesses operate in a socially responsible way and create jobs in the local area, although this can create congestion and noise and air pollution in the local area, thereby upsetting other members of the community.

Night flights can be convenient for customers, but noisy for local residents living near airports

Hence, it can be extremely challenging to satisfy the diversified interests of all stakeholder groups.

Nevertheless, there can be possible areas of mutual benefits between stakeholders’ interests. For example:

• Business expansion can generate more profits for shareholders, whilst creating more jobs in the local community. Business growth can also generate more tax revenues for the government. Suppliers also benefit from more orders.

• Customers want value for money, with competitive prices and good quality products. This does not necessarily cause a conflict with managers and directors as businesses that create value for money are most likely to sustain profits in the long term, generating a healthy return on investment for shareholders.

• Improved financial rewards for all employees will cost more, but can result in a more motivated, loyal and productive workforce. Ultimately, resolving the potential conflict in interest between employees and employers can lead to improved efficiency and higher profits.

In reality, it is likely that stakeholder conflict is likely to exist at least to some extent (especially for large organizations) due to the varying interests of the different stakeholder groups.

Satisfying the interests of stakeholders is therefore a particularly difficult balancing act of striving to meet the complex and competing interests of all stakeholder groups.

Watch this short news report about stakeholder conflict at Uber and Lyft in California, USA. Identify the various needs of Uber and Lyft and how these might conflict with their drivers.

 Watch this 11-minute video to recap your knowledge and understanding of internal and external stakeholders, their objectives, and managing stakeholder conflicts.

After watching the video, have a go at the Review Questions below for this section of the IB Business Management syllabus.

Note that resolving stakeholder conflict is no longer in the syllabus, although it may seem logical to understand how managers might go about resolving conflict between stakeholders. Click the icon below to read about this (although not explicit in the guide, it can help students to consolidate their understanding of this topic).