Stakeholder management

Abstract

Projects do not exist in isolation. Even if there is a defined brief, budget, programme and scope of work the project is still subject to external influences. The project exists within a ‘political’ environment, populated by all those who have a particular stake or interest in the outcome of the project. This political environment and the expectations of stakeholders represent significant risk to a project. It is unlikely that the requirements of all stakeholders will coincide and they will seek to influence the project in order to meet their own requirements. Pressure from stakeholders generates change and change increases the complexity of the management task, jeopardising cost and programme certainty. However if the views of project stakeholders are not addressed and if stakeholders are not involved in the development of the project, then the project is unlikely to deliver optimum value for all involved. It is important that project managers strike the right balance between stakeholder involvement and isolation of the project from external influence in order to achieve delivery on cost and time but also to maximise benefit for the client and his stakeholders.

Background and General Principles

Stakeholders are those who have a stake or an interest in a project or strategy undertaken by a company or an organisation, they will be affected in some way be the project and so have an interest in influencing it. They may benefit from the project and so will be supportive and positive about it; conversely, the project may damage their interests or they may perceive it will have a negative outcome for them so they will seek to stop it or, at the very least, project it in a bad light.

In construction projects stakeholders can include:

  • Users of a building
  • Funders
  • Neighbours
  • Regulatory bodies
  • General public

It generally falls to the client to manage project stakeholders. In order to do this the client needs to reconcile the differing stakeholder requirements and pass clear direction to the project manager. Where briefing information is late, where answers to questions are delayed or where sign off of the design at different stages is a lengthy process this is probably because the client representative is liasing with the different project stakeholders in order to gain their agreement.

The term multiheaded client is often used to describe organisations where the decisions are not made by one individual but by a group. Some projects are the result of a joint venture between different organisations or development partners. This is common in the public sector, for example transport projects. For public projects or projects within large private organisations it is often the case that there are numerous internal stakeholders as well as external ones.

Stakeholder influence is often felt most keenly in the early stages of the project. The project is flexible at this stage and can be changed and stakeholders are generally aware of this. Once it starts to progress, it takes on a momentum and a power of its own and the cost of stopping it or altering its direction becomes high. Stakeholder influence often drops off markedly when construction starts, but will increase again as handover nears. Project managers should continue to manage stakeholder expectations to ensure that the completed building meets the needs of stakeholders as well as possible and is favourably accepted.

Some client's are better at managing stakeholder influence than others, and some stakeholders are easier to manage than others. On a sizeable, publicly funded project it is easy to identify 40 – 50 stakeholder groups all with different involvement, requirements, levels of power to influence the project and levels of interest in doing so. This is a very complex situation to manage.

Internal and External Stakeholders

Internal Stakeholders

There are broadly two groups of project stakeholders, those internal and those external to the client organisation. The type most usually recognised are the external stakeholders, however the management of internal stakeholders is often more problematic. In construction projects it is often difficult to identify who actually is the client, there may be a nominated single point of contact but this person is not really the ‘client’ just the representative of the client organisation. Very often it is the case that this person has the responsibility of juggling a whole range of different requirements within the client organisation and as a result they will be subject to many influences which will may well affect the project as change. Within the client organisation there will be a whole range of individuals with very different ‘stakes’ in the project, unless the nominated client representative takes a very strong line they will succeed in influencing the course of the project.

The client organisation is made up of a whole range of individuals with differing wants and needs who make up a ‘multiheaded’ client. In these situations the decision-making process becomes complex. Questions cannot be answered directly by the nominated client single point of contact. That single point of contact must negotiate with the various other stakeholders within the client organisation in order to get an answer.

Generally all project information passes from the various members of the client organisation via the client representative and vice versa. The client representative acts as a filter

Exhibit 1 Generally all project information passes from the various members of the client organisation via the client representative and vice versa. The client representative acts as a filter.

There is a school of thinking that states that organisations do not have goals, it is the individuals within the organisation that use the organisation to further their own differing personal goals. By extension of this, the individuals use the projects the organisation undertakes to achieve their own ends. If we consider this - Do you go to work to help your company achieve every bullet point of its mission statement? Or do you get the 7am train every morning to earn money, gain experience, improve your CV, work on interesting projects, grow your department, build your empire, gain promotion and be part of the team? The same applies to the people in your client's organisation.

It is hardly surprising that when you are building to meet the diverse goals of your multiheaded client, it is difficult to find the right solution that satisfies the goals of most of those individuals and prevents those who do not get exactly what they want from obstructing the project.

Internal stakeholders could be anyone within the organisation. Most commonly, they are the eventual users of the project, but they could also be the heads of marketing, IT or human resources, other employees, trade unions and so on. All have a stake in the project and all can affect it, directly or by influence.

External Stakeholders

External stakeholders are the individuals or organisations who are not part of the client organisation but nevertheless have an interest in the project. They are perhaps the stakeholder groups most readily recognised. For publicly funded projects the number of stakeholders who can be identified is high. These generally consist of:

  • Funders, whether this be a government department, grant provider or private sector partner.
  • Users, whether these be passengers for a transport project or visitors for a museum.
  • Regulatory authorities. Most commonly the planning authorities, but also specialist regulatory authorities for example those involved in rail projects.
  • Those affected, who may be neighbours or those working or living nearby.
  • The press and media are another significant group who can greatly influence perception of the project and its perceived, and in some cases actual, success.

It is relatively easy to identify forty individual stakeholder groups for a significant public project, although private sector projects tend to have slightly fewer. One of the key problems with stakeholder management is the sheer number of people involved and the fact that their levels of power and interest differ markedly.

Management of the stakeholder environment is a highly complex management task.

Stakeholder Analysis

Stakeholder analysis can be used to understand the stakeholder environment and to prioritise management resources. It can be undertaken as follows:-

  • The first step is to identify stakeholders, you can't manage them if you don't know who they are, list them out. This exercise will need to involve all members of the team.
  • Next decide on the level of power and interest each individual stakeholder has to influence the project. This is not a precise art, the assessment can only be based on the perceptions of the team, but it is important that you consider ‘interest’ from their point of view not yours, a large organisation, for example a key grant provider, may be of great interest to the project but is the project of great interest to the grant provider? If the project does not happen they can just fund something else. You then plot the stakeholders on a matrix.
    The stakeholder analysis matrix offers a way of grouping stakeholders to enable us to better understand them

    Exhibit 2 The stakeholder analysis matrix offers a way of grouping stakeholders to enable us to better understand them.

  • You will then need to define whether the individual stakeholder groups are broadly positive or negative about the project. You will probably find that those with a high level of interest, on the right of the matrix are either strongly supportive or otherwise, this is not surprising as their interest is high and so they have an opinion. Those on the left may have no strongly formed views.

This completes the basic analysis, you should then use the analysis to form the basic management and communication strategy for the project.

Active Management of Stakeholders

The basic requirement is to manage the project so that positive stakeholders are in the bottom right hand corner and negative stakeholders are out of that corner. You need to remember that the matrix is dynamic, changes of individual within stakeholder organisations or changes to your project will be reflected in the matrix. The following are some ideas for strategies that you or the client may wish to adopt to deal with the various groups.

High Power, High Interest

If they are positive provide them with information to maintain their support, look after them well they are important, let them know that. Don't ignore them just because they are not causing you any problems at the moment. Involve them in your project, make them part of your project steering group (if they are not already), involve them in decisions, use them to lobby other groups and make sure they voice their support. Those with high power and interest, who are negative are a big problem and you need to put effort into dealing with them. Use other positive stakeholders to lobby them and hopefully change their views, attempt to counter any negative influence they may have on other groups, reduce their power if the means exists to do this. They may also respond to bargaining. Find out what is important to them, help them out, buy their favour. Some also respond to information and interest.

Management strategies

Positive

  • Provide information to maintain their support
  • Consult with them prior to taking project decisions
  • Meet with them regularly
  • Consult with them, involve them and seek to build their confidence in the project and the team
  • Encourage them to act as advocates for the project
  • Nurture them, look after them, they are critically important to you and to the project

Negative

  • Attempt to develop their support and change their view by ensuring they fully understand the project and the benefits it will deliver. Their resistance maybe due to lack of information or understanding.
  • Attempt to build their confidence in you and in the team.
  • Find out what is important to them, if you can help them out or minimise negative impact on them they may be more helpful.
  • Demonstrate that you are doing your best to limit adverse effects on them.
  • Counter any negative influence they may have on others.

High Power, Low interest

The high power, low interest group are the unexploded bombs – their interest is low, at the moment. However if the project alters or the individuals change their interest may suddenly increase and they will use their power to influence the project.

Management strategies

  • Maintain a careful watching brief, make sure that changes to the project or changes within the stakeholder organisation do not suddenly increase the level of negative interest.
  • Find out what is important to these groups and make sure that the project does not adversely affect this. If the project is likely to have a positive effect for them make sure they are aware.
  • Beware of other negative stakeholders passing information to this group to encourage them to oppose the project.

High Interest, Low Power.

If they are positive they are strong allies – treat them well, provide them with information, involve them, use them to lobby other groups. If they are negative, they will probably deluge you with e-mails and phone calls, you need to ensure that you don't spend too much time on them.

Management strategies

  • Positive
  • Maintain their enthusiasm and interest in the project, they are good allies to have.
  • Provide them with information, invite them to presentations, involve them as much as resources allow. This can be done fairly cheaply through a project website, newsletter or open presentations.
  • Seek their input and opinion if you can, they will be flattered by this, but ensure that you do not get too many opinions.

Negative

  • This is a group that you will probably know all too well, because of their high level of interest they will probably deluge you (or your client) with e-mails and other correspondence. You need to be sure that you do not spend too much time on them, remember their power is low.
  • You may need to get the project sponsor or client representative to take a firm line with them they can use a lot of time and resource.

Low Power, Low Interest

Make sure you don't spend too much time on them but if they are supportive provide them with information and be nice to them, their position or view may change in the future

Management strategies

  • Ensure they receive the project newsletter, have access to a project website or are invited to presentations.

Conclusions

Like all management models, the key benefit of stakeholder analysis is that it helps bring understanding to a complex situation and therefore helps project managers and teams to manage and communicate with stakeholders in the most effective way, enabling hem to concentrate resources where maximum benefit will be derived and informing communications planning for the project. The benefits are very much in the discipline of having undertaken the process. However stakeholder analysis is only a tool that helps the project manager and the team identify the management actions necessary. It is perhaps most easily applicable to the management of external stakeholders and a useful output of stakeholder analysis is a project communications plan which will help the team define and understand which stakeholders they need to communicate with and how. A typical format for a project communications plan is given below, the output of the stakeholder analysis exercise can be used to help define the recommended approach and action plan. On a large project this helps define clarity of communication routes and ensure consistency.

Communications Plan

Exhibit 3 Communications Plan

Management of internal stakeholders is, if anything, more complex because internal stakeholders are generally closer to the issues and will be affected to a greater degree. If we are to avoid large scale change to the project as it progresses it is important that we ensure that it is set up right in the first place with the right types of involvement and consultation. The important thing is to get the wider internal stakeholder group involved as early as possible. Involve them in the detail of the briefing process, present the initial designs to them, and take their comments seriously. Everyone must get a chance to learn about the project, have their say, hear about what others think, learn about the complexities and limitations of the project and the opportunities it presents. Not everyone will get exactly what he or she wants, but they are more likely to accept what they do get if they know why a particular decision was made and if they feel they played a part in making that decision. This is a time consuming process but it is important because it will smooth the path for the later stages of the project and it is the best way to ensure that the project optimises benefit for the client organisation. For example there may be the opportunity to streamline the project by sharing facilities rather than by satisfying individual wish lists and broader consultation will lead to better project briefing. These processes allow you to tap into the knowledge, skills and creativity of a wider range of individuals.

The process obviously needs control, but communication should occur as freely as possible, and decisions made should be communicated to the wider group as efficiently as possible. It is important to avoid the very simple and limiting communication routes described in Exhibit 1.

Free communication between designers and users, certainly in the early stages, allows the designers to build a better understanding for what they are designing and allows users the opportunity to learn about what is achievable and what is not. The sort of communication route described in Figure 1 may well simplify the project management task and maximise the chances of delivering the project to cost and time but it is unlikely to assist in the delivery of the best project to meet the needs of the organisation as well as possible.

Where a range of departments within an organisation are affected by a particular project we need to give careful thought to how communication is managed. The project team is set up as a temporary team, who will probably move on after the project is finished, other departments in the organisation know that they will have to live with the results. We need to ensure that the project is suitably integrated with the overall development of the organisation. A project team that works in isolation may well deliver a project on budget and time as there has been little client led change but it is unlikely that they will deliver the project that the organisation actually requires. It is important that information about the project, that will affect the whole organisation, is cascaded out. One mechanism is to nominate project representatives in each of the departments affected who maintain communication.

It is important that we remember that when we build, we are building not just for a single individual but also for a wide group of people who will have to live with the building when the project team has moved on. Rather than complaining that we cannot get clear decisions out of the client, we need to try to understand the range of needs to be satisfied and achieve an optimal balance. Project managers will probably always be judged on whether or not they delivered the project to time and budget and the more they need to involve project stakeholders in the process the greater the risk to time and budget but if we are to deliver projects that meet the long term needs of organisations we need to involve and meet the needs of the organisations stakeholders and we can only do this through active stakeholder management.

Reference

Johnson, G. & Scholes, K. (2002) Exploring Corporate Strategy. UK:Prentice Hall

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