Project Management Institute

Got stake?

(Holder) management in your project

Abstract

Stakeholder management is critical to the success of every project. Stakeholder management is a strategic discipline that successful project managers use to win and sustain support for their projects from others, both internal and external to their project and to the project's organization.

From the authors' experiences leading project recoveries (Mr. Forman) and from project consulting and research (Dr. Discenza), we've observed that stakeholder management in projects is ad hoc at best, in many organizations. Stakeholder engagement in these situations is often limited to random hallway encounters, cafeteria discussions, or at best, project gateway reviews.

This paper's purpose is to answer several key questions: Why is stakeholder management crucial to project success? What is stakeholder analysis? How does it drive an effective stakeholder management plan? Where are found free stakeholder analysis tools? Tips for stakeholder management plan execution are also provided.

Importance of Stakeholder Management

The importance of having project stakeholders function “from the same page” as the project manager and the project leadership team, cannot be over stressed. Deliberate stakeholder management, based on a written strategy and a project team-wide approach, will bring stakeholders directly into the project success equation and is absolutely a key project success criterion. Fully engaging all project stakeholders, using broad-spectrum communications techniques and tools, based on a strategy and plan, represents a key behavior attribute of successful project managers.

In the authors' experience, stakeholder management seems to be more often the result of project manager charisma, charismatic qualities, or innate communications ability, rather than the result of deliberate execution of a stakeholder management strategy and plan.

Several authors (Irwin, 2008, pp. 69–80; Pinto, 1996, pp. 27–42; Verma, 1995, pp. 45–48) agree with our view of the relationship between effective stakeholder management and project success. Each of these three authors advocates careful, detailed stakeholder analysis as the basis for developing a stakeholder management strategy, embodied in a written plan. Stakeholder analysis is a process consisting of stepwise discovery, data collection, and analysis.

Stakeholder management is an iterative process, which manages stakeholders through a deliberate plan of action and strategic communications for the life of the project. Exhibit 1 illustrates how the stepwise stakeholder analysis process becomes a foundation for the iterative stakeholder management process that follows.

Stakeholder Management Process

Exhibit 1: Stakeholder Management Process

Stakeholder Management Fundamentals

A Guide to the Project Management Body of Knowledge (PMBOK® Guide) (Project Management Institute, 2008) charges project management teams with the responsibility for identification of these: “…both internal and external stakeholders in order to determine the project requirements and expectations of all parties involved.” In addition, project managers are specifically charged with the responsibility for managing “…the influence of the various stakeholders in relation to the project requirements to ensure a successful outcome” (p. 23).

The stakeholder management approach is unique and should be tailored to each project. However, there are proven, reusable stakeholder analysis techniques and tools that can streamline the development of a stakeholder strategy and help build a stakeholder management plan. (We present some of the tools later.)

Stakeholders can be internal or external to the project's organization. For example, internal stakeholders might include individuals not working directly on the project but whose costs, operations, policies, and risks could affect or be impacted by the project. Functional department heads contributing resources, policy-driven department heads such as finance or accounting, the project sponsor, and the project leadership team all represent examples of internal stakeholders.

External stakeholders are individuals or groups outside the organization who could be impacted by the project or those who govern policy that influences and could affect the project. Such groups might include vendors, regulatory bodies, unions, or business partners. Besides identifying and classifying all stakeholders and looking beyond the project sponsor, it is important to include everyone who will be even tangentially impacted by the project. Exhibit 2 shows an example of the potential population of project stakeholders.

Categories of Stakeholders (The Open Group, 2009, p. 284, used with permission)

Exhibit 2: Categories of Stakeholders
(The Open Group, 2009, p. 284, used with permission)

Stakeholder Analysis

Stakeholder analysis is the project manager's first line of defense and, at the same time, the project manager's first step toward taking control of his or her project. Stakeholder management, an iterative strategic process, is built on the foundation of a stepwise and thorough stakeholder analysis. This section contains an overview of the authors' approach to stakeholder analysis, along with suggestions for tools and techniques to employ.

Identify Project Stakeholders—the Register

The stakeholder register is a living document, which serves the project manager and team for the life the project. It is the index of all project stakeholders and their essential attributes. Create the register as early in the life cycle as possible. There are numerous examples, freely downloadable from the internet, which can be used “out of the box” or easily adapted. Excel-based examples are particularly useful. Exhibit 3 shows how the stakeholder register could look, as stakeholders are initially identified.

Stakeholder Register in Microsoft Excel (Brighthub, 2011)

Exhibit 3: Stakeholder Register in Microsoft Excel (Brighthub, 2011)

Capture, Document, and Analyze Stakeholder Information

Stakeholder analysis is a process of systematically gathering and analyzing qualitative information to determine whose interests should be taken into account when developing and/or implementing a policy or program. The more complex a project, the more attention needs to be paid to managing stakeholders. A project manager can do all the right things for a project, but mismanaging stakeholders can cause project failure.

Capturing and analyzing stakeholder information is best done using tools intended for the purpose. Again, the Internet is replete with free, public-domain tools; most are easy to use and effective. A few examples the authors have used are briefly described, with links to them..

Capture and Document Stakeholder Information

Start by collecting information to fill all data fields of the stakeholder register. The project manager and project leads should try to arrange an interview with each customer stakeholder to capture information. Some external non-customer stakeholders may not be approachable, so use publicly accessible sources of information to compile information about them.

Next, add two data fields to the stakeholder register or use a separate power/interest tool, such as the example in Exhibit 4, to assess these two critical pieces of stakeholder data. This tool is freely available at the reference URL.

Following the stakeholder interviews, use a Wideband Delphi approach to combine each team member's assessment of stakeholder power and interest into one data point for each stakeholder so that these can be plotted on a set of axes. Record power and interest scores for each stakeholder.

Stakeholder Power and Interest Scores (Project Management Docs, 2012, p. 4)

Exhibit 4: Stakeholder Power and Interest Scores (Project Management Docs, 2012, p. 4)

Another stakeholder analysis tool collects data about stakeholders' project interests/expectations and then weights them by their importance to the project, providing a slightly different view than the stakeholder power-interest tool above. A paper containing this tool, and several others was designed by Lynda Applegate and published by the Harvard Business Review. It is available as a downloadable reprint.

This tool can be used with the power/interest grid to provide a more multi-dimensional view of stakeholder power, interests, interest-level, expectations, and importance of expectations.

Stakeholder Interests/Expectations vs. Importance (Applegate, 2008, p. 2)

Exhibit 5: Stakeholder Interests/Expectations vs. Importance (Applegate, 2008, p. 2)

Analyze Stakeholder Power, Interest, Importance, Demands, and Relevance

After stakeholder data and information collection is complete, analysis of the collected data begins. The goal of analysis is to provide the basis to develop a stakeholder strategy and finally, a stakeholder management plan. Each of the data collection tools cited above has a companion data analysis capability to support the planning phase.

Robert Block offers an useful framework for the analysis of project stakeholder power, influence and impact (Block, 1983, pp. 47–50):

  1. Assess the environment
  2. Identify the goals of the principal actors
  3. Assess your own capabilities
  4. Define the problem
  5. Develop solutions
  6. Test and refine the solutions

Stakeholder power versus interest

Plot the power/interest scores for each stakeholder on a set of axes to provide a visualization of stakeholder power and interest. In Exhibit 6, stakeholders A, C, and D will require minimal management effort as they reside in the lower left quadrant of the matrix. Stakeholder F, in the upper left quadrant, must be kept satisfied by ensuring concerns and questions are addressed adequately.

Grid Plot Of Stakeholder Power And Interest (Project Management Docs, 2012, p. 4)

Exhibit 6: Grid Plot Of Stakeholder Power And Interest (Project Management Docs, 2012, p. 4)

Stakeholder interest/expectations versus importance

Create a stakeholder map by plotting data points for each interest/experience, arranged on a set of axes as shown in Exhibit 7, to categorize interests and expectations based on importance to project success.

Map of Stakeholder Interest/Expectations vs. Importance (Applegate, 2008, p. 3)

Exhibit 7: Map of Stakeholder Interest/Expectations vs. Importance (Applegate, 2008, p. 3)

Each of the three examples helps project managers and their teams to understand, measure importance, impact, and then prioritize project stakeholders. Understanding stakeholders needs and level of project interest is critical to creation of a stakeholder strategy and management plan.

Analyze stakeholder salience

Most stakeholder power/interest/influence/impact analysis tools take a two-dimensional grid-based approach to stakeholder classification. However, Mitchell, Agle, and Wood (1997), in their salience model, propose that three parameters—power, legitimacy, and urgency—be used to classify stakeholders instead of only two (pp. 868–872).

  • Power: Is the stakeholder's ability to influence the outcome of an organization, deliverable, or a project?
  • Legitimacy: Is the stakeholder's authority or level of involvement on a project?
  • Urgency: Is the stakeholder's expectation for responsiveness to their requests or needs/

By using the three salience parameters, stakeholders can then be classified into one of eight types: core, dominant, dependent, dangerous, latent, demanding, discretionary, and non-stakeholders.

Salience Model (Mitchell et al., 1997, p. 872)

Exhibit 8: Salience Model (Mitchell et al., 1997, p. 872)

The broader classification of stakeholder behavior by the salience model, into eight distinct personality types, enables a more focused stakeholder management approach and drives development of a stakeholder management plan that is more precisely tailored to the project's individual stakeholders.

Create a stakeholder action plan

In Applegate's Harvard Business School handout, she offers a stakeholder action planning framework to collect key issues and thoughts to drive development of a stakeholder management plan. Exhibit 8 is a snapshot of the framework.

Stakeholder Action Planning Framework (Applegate, 2008, p. 4)

Exhibit 9: Stakeholder Action Planning Framework (Applegate, 2008, p. 4)

Create a Stakeholder Management Plan

The stakeholder analysis produces substantial information and data. The next step is to understand, organize, and then apply the analysis results (data and information captured) to drive project success.

The stakeholder management plan documents the approach that will increase support and decrease negative impacts of stakeholders throughout the life of the project. It should identify the key stakeholders along with the level of power and influence they have on the project. The stakeholder management plan should describe the strategies and actions that will be used to manage the stakeholders according to their power and interest in the project.

In our experience, most projects except for the largest and most complex, can adequately manage stakeholders from a stakeholder strategy document – something short of a full-blown plan. Project Management Docs, has an excellent Word document template for this purpose, called “stakeholder management strategy” (Project Management Docs, 2012).

Stakeholder Management Plan Highlights and Suggestions

The plan needs to address each stakeholder's expected behavior. Once known, the behaviors and attitudes of various stakeholders towards the project must be analyzed by the project manager. Stakeholder behavior can be classified by using a number of tools and models, such as the salience model.

Similar to the salience model, but with fewer personality classifications, the authors have used the following personality classifications for stakeholders. Based on these classifications, the project manager can decide if, how and when to position the stakeholder roles in the stakeholder management plan:

  • Champion: A person who sees the merits of the proposed project, strongly supports it, is willing to use his or her political capital to remove obstacles, and to help ensure the successful completion of the project.
  • Neutral: One who currently does not perceive any stake or interest in the project; however, they could be converted to champion status if shown how successful project completion will benefit them.
  • Antagonist: An individual who doesn't see any merit in the project and may use his/her political capital to place obstacles in the path of successful project completion. These are not all bad people; it could be their current perception of the project makes no sense to them. Dinsmore (2003) noted that “If people resist your overtures, it doesn't necessarily mean that they are against your program. They may be uninformed or unaware of the potential benefits. Don't assume people are against you just because they fail to leap on the bandwagon immediately. Create a communication plan that provides stakeholders with appropriate information” (p. 60).
  • Stoic: A person who is known to have a stake in the project; but has minimal interest or who is distracted by other activities; they pay no attention to the project.
  • Ignored or Invisible: Individuals or groups who are somewhat removed from the project in the early stages by either the limited vision of the project team or they are being purposefully ignored by the team. This group typically includes those in human resources, purchasing, legal and operations. Project managers need to pinpoint these since they often make prime decisions or set policies that will shape the project. These individuals often termed “policy level stakeholders,” need to be identified as well as their interest, in the project so that decisions can be made on when to involve them.

Stakeholder Management Plan Includes Stakeholder Communications Plan

To execute the stakeholder management plan, is required a communication plan. All stakeholders should own part of the plan and its creation. Keeping the various stakeholders informed as the project progresses is critical to the project's success. Choosing the right method can stimulate stakeholders continued interest and encourage them to actively support the development of the project. The following stakeholder communications modalities should be considered throughout the project:

  • Group meetings: Planned sessions involving all (if possible) known stakeholders. These large meetings present useful information of general interest. Smaller meetings are useful for brainstorming, developing trust, redefining risks and addressing resource challenges.
  • One-on-one meetings: Formal and informal discussions involving two or three people that explore and clarify special issues.
  • Written approvals: Formal written agreements about a project's product, resource commitment or a technical challenge to the project's work.
  • Informal written correspondence: Notes, memos letters, e-mails, and text messages that help document discussions on challenges and share project information.

Putting the Stakeholder Management Plan into Action

The best stakeholder management plan is useless if action doesn't follow planning. Early disappointment with results can lead to discouragement, which leads to neglect of the stakeholder strategy, and then plan abandonment. In the authors' experience, especially in project recovery situations, execution discipline in stakeholder management is often the primary cause that triggers the need for recovery operations.

Here, in this section, are some execution tips and suggestions to provide encouragement and reinforcement for project managers who may be employing stakeholder management for the first time.

Improve Stakeholder Relationships:

Each stakeholder may demonstrate different and conflicting expectations. The more expectations involved, the more they may contradict each other. Experts say that 80 percent to 90 percent of a project manager's job is spent on communication. In reality, it may be even higher because everything a project manager does is communicating a message: Walking the floor, being available for a caller, being present and body language. These are some essential communication fundamentals:

  • To the greatest extent possible, project managers should know and understand the stakeholder needs. The project manager should be gathering knowledge to co-create a clear vision and understanding of what the project is to accomplish. Specifically the project manager and his/her team should ask:
    • As you think about the success of the project, what kinds of things are important to you? This discussion should include stakeholder risk tolerances which could be framed as technical tolerances (i.e., average useful life) or a performance tolerance (e.g., Must conform during certain weather conditions) or a drop dead limit (e.g., we investors will not approve this project if not completed by this time next year). Tolerances are normally grounded with expectations; hence, it is important for a project manager to know tolerances and to evaluate their intensity early in the project.
    • What are the priorities for these things?
    • What costs will be circumvented by managing the project well?
    • If all the success factors that have been described have been met, which organizational measures (e.g., increased sales, reducing operating costs, increased production, ROI, ROA) will be most improved when the project is completed?
  • Project managers should find out what information and resources are needed and why. Each stakeholder will have their own ideas relative to the information and resources needed. While some need detailed information, others merely want brief updates.
  • Project managers need to understand stakeholder bias. Each will have a particular opinion or bias. Some will quickly support results, while others may be against them or neutral. Project team members should be empathetic and try to understand differing or contrasting views. With this knowledge, communicating can be tailored to each group of individual stakeholders. This is very critical when the potential exists for stakeholders to react negatively to project results.

Tips for Working More Effectively by Creating Stakeholder Alliances

One of the project manager's pivotal tasks for creating and maintaining stakeholder alliances is to successfully manage stakeholder expectations. Involving them in project processes encourages ownership and buy in, partly through allowing stakeholders to modify their expectations as they experience firsthand knowledge of the project and its products.

  1. One of the key factors for many projects is the participation of end users, who are keys to the ultimate success of project outcomes. Their involvement has to be real, however, because they have to believe that their participation makes a difference and that they are being taken seriously.
  2. A second factor is the need for transparency on the part of the participants. When a project manager is wary of sharing project data with stakeholders, stakeholders will not be persuaded with generalities. Sharing specific evidence that has been taken from the project works best.

    A good approach is to act like a lawyer building a case. There needs to be a focus on demonstrating cause and effect – specific past actions and their harmful effects. A list of the project's disappointments may be logically and systematically illustrated to show how each of the setbacks can be traced directly to the decisions and actions that kept the project stakeholders in the dark. Emotional responses should be avoided and arguments should be objective and data driven. The late management guru Peter Drucker used to say that when sane, rational, and moral people behave in ways that seem inexplicable, it's because they see a reality that is different than yours. (Baker, 2010, p. 18) More recently, this dilemma was expressed as “Stakeholders and project managers don't always find themselves on the same page. In fact sometimes it seems as if they're not even reading the same book”(Jackson, 2012, p. 45).

  3. Another factor that weakens stakeholder alignment with the project is the lack of prioritization criteria. Are the stakeholders interested in achieving a short term problem fix or furthering the organizations five year strategic plan? In another case, is it more important to reduce costs or increase customer service? This may involve combining or running projects in tandem. The result may one that is a mix of tactical and strategic growth that includes cost driven, employee focused and customer initiatives. According to Sirott “the process only works if the governance committee is accountable for the corporate strategy and mission, and has the knowledge and authority to make project decisions and breathe life into the vision and strategy”(Swanson, 2011, p. 60).
  4. From unrealistic schedules to changing segments, sometimes stakeholder expectations do not align with the situation on the ground. The alliance may weaken. When this happens, project managers need to remember that timing is often critical. When there is a glaring breakdown, as the result of poor planning and communication, don't' move hastily. When possible, wait a few days, give those involved a chance to get over the disaster, gather information, and then setup a time to present your remedy to mend the problem. This will position you as a problem solver, not as a complainer.

Conclusion

Stakeholder management is critical to the success of every project the authors have recovered, researched, or participated in. Stakeholder management is a strategic discipline that successful project managers use to win support for their projects from others, both internal and external to the project.

Project managers need to do careful and timely stakeholder research to identify, classify, prioritize, and assess stakeholder's abilities to affect their projects, both favorably and unfavorably. From this research, project managers should develop a strategy and communicate it to their team, as the basis for a stakeholder management plan.

The stakeholder management plan defines and documents the approach and actions that will increase support and minimize the negative impacts of stakeholders throughout the life of the project. It should identify the key stakeholders along with the level of power and influence they have on the project. It also documents the strategies that will be used to manage the stakeholders according to their power, interest, and influence in the project.

Now, you've got Stake!

REFERENCES

Applegate, L. M. (2008, May). Stakeholders analysis tool. Harvard Business School, 9-808-161, 1-4. Retrieved from http://hbr.org/product/stakeholder-analysis-tool/an/808161-PDF-ENG

Baker, B. (2010, December). Viewpoints: A failure to communicate. PM Network, 24(12), 18–19.

Block, R. (1983) The politics of projects. New York, NY: Yourdon Press.

Brighthub. (2011). Stakeholder register. [Web Graphic]. Retrieved from http://www.brighthub.com/office/project-management/articles/96416.aspx

Dinsmore, P. G. (2003, February). Five ways not to pitch project management in your organization. PM Network, 17(2), 59–61.

Irwin, B. (2008). Managing politics and conflict in projects. Vienna, VA: Management Concepts, Inc.

Jackson, M. B. (2012, March). Perception vs Reality. PM Network, 26(3), 44–47.

Mitchell, R. K., Agle, B. R., & Wood, D. J. (1997, October). Toward a theory of stakeholder identification and salience: defining the principle of who and what really counts. Academy of Management Review, 22(4), 853–886. http://courses.washington.edu/ilis580/readings/Mitchell_et_al_1997.pdf

Project Management Docs. (2012). Stakeholder power and interest. [MS Word Doc file]. Retrieved from http://www.projectmanagementdocs.com/templates/stakeholder-management-strategy-template.html

Project Management Institute. (2008). A guide to the project management body of knowledge (PMBOK® guide)(4th ed.). Newtown Square, PA Project Management Institute.

Pinto, J. K. (1996). Power and politics in project management. Newtown Square, PA: Project Management Institute.

Swanson, S. A. (2011, November). Perfect alignment. PM Network, 25(11), 56–61.

The Open Group. (2009). The Open Group Architecture Framework (TOGAF Version 9)

Verma, V. (1995). Organizing projects for success. Newtown Square, PA: Project Management Institute.

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI or any listed author.

©2012, James B. Forman and Richard Discenza
Originally published as a part of 2012 PMI Global Congress Proceedings – Vancouver, British Columbia

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