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External stakeholders can derail a project if their concerns aren't addressed from the outset.

BY SARAH FISTER GALE // ILLUSTRATION BY IAN WHADCOCK

NEGATIVE STAKEHOLDERS

In the PMI Project Risk Management Community of Practice, John Aucoin comments:

Negative stakeholders should not be considered a project risk. They should be considered part of your project landscape and should be actively managed. Depending on their political status, you can formulate a strategy for neutralizing or containing their impact on the team. First of all, listen to their needs and concerns. Then try and convert them into an ally. If you have no luck with that, just acknowledge their role and opinions and move forward.

Also, make alliances with other stakeholders who agree with your way. They can be a big help in negating the influences of a negative stakeholder. stick to the ground rules of the project in order to help you stay on track and avoid distractions from any troublemakers.

imgJoin the discussion at risk.vc.pmi.org.

There's a stakeholder so powerful that if you win its backing, you will gain a powerful ally in moving your project along smoothly. Ignore its concerns, however, and it will quickly turn against you—creating delays, adding costs, drawing unwanted media scrutiny—and possibly leading to a project's cancellation.

We're talking about the public, of course. This external stakeholder may have little formal control over the project's planning and outcome, but its support—or lack thereof—can have a tremendous impact on an initiative's success.

Google's recent efforts to expand its Street View technology in Germany is a prime example of a major corporation feeling the sting that comes from a lack of public support. Citizens raised privacy concerns over the Internet giant's plans, and the backlash resulted in the project's termination.

From protesters declaring the National September 11 Memorial & Museum project in New York, New York, USA isn't “patriotic” enough to claims of human rights violations against the Ngobe people at the Barro Blanco hydroelectric power plant in Tole, Panama, the public exerts a powerful hold over a project and can cause serious damage to an organization's reputation.

Such damage can be avoided if project teams acknowledge the impact the projects will have on the community from the beginning. Attaining public support is especially vital for the success of a megaproject, says Richard Gerspacher, Paris, France-based project director of mining and metals for Fluor, the engineering, procurement, construction, maintenance and project management giant.

“As a project manager, it's your job to try and reduce resistance to the project because resistance is a risk,” he says. “It's one big risk you can minimize so the project moves forward quicker and smarter.”

This is particularly necessary in developing nations, where the public is often wary of big corporations making big promises, he says. “They've seen it before. An industry comes in and fails to deliver sustainable solutions that meet the local population's expectations.”

Mr. Gerspacher educates the public about a project by organizing “road shows” at the outset of an initiative. Project owners break down facts by topic, such as scheduling, environmental issues and technology. These road shows often occur months before the project team breaks ground. “We want to put it on their radar so they know what's coming,” he says.

Perhaps the most popular (and influential) topic at these events is the one dedicated to jobs. Citizens can learn about career opportunities, a facet of the project that should be emphasized, according to Mr. Gerspacher.

It can sometimes be hard to draw skilled labor to remote project sites. So, along with offering information about the types of roles available, Fluor sets up training centers to develop the local labor pool. “We want to use locals to our advantage to gain a strong resource pool,” he says.

Hiring and training workers from the community is less expensive than bringing in and housing outsiders. It also reduces the risk that they will leave mid-project if better opportunities arise closer to home.

“The training center is like an insurance policy for the project,” Mr. Gerspacher says.

Another organization, Ma'aden Saudi Arabian Mining Company in Riyadh, Saudi Arabia, makes job training part of every project plan, says Pedro Bottesi Neto, director of business development for the organization.

Building the skill set of the local work force boosts the economy, ensures access to skilled labor in remote towns and increases community support for the project.

“It's a win-win situation,” he says. “We cannot live without the resources from the community, and they benefit from the education, support and opportunities we bring.”

Along with job training, Ma'aden defines development opportunities in the community as part of every project scope. That may include updating schools, developing water resources or building roads and other infrastructure. A small percentage of the project budget is dedicated to these initiatives, which varies depending on the community's needs and the investment size.

“Part of Ma'aden's mission is to develop the economies of the communities where we work,” Mr. Bottesi Neto says. “So we see these developments as an extension of the capital investment process.”

PUBLIC UTILITY

Addressing community concerns might begin in the planning stages, but it doesn't stop there. Project managers must stay attuned to any unexpected problems that arise during construction and implementation that could upset local citizens, says Randy Clough, PMP, manager of project services for SAIC Constructors LLC, an energy, environment and infrastructure company in Tumon, Guam.

Mr. Clough is currently building a high school in Tumon that had full community support, but a recent heavy rain left one nearby resident with a problem. Runoff from the project site had inundated her yard and washed gravel onto her lawn.

“It was a stakeholder risk that no one had identified,” Mr. Clough says. The project site wasn't mismanaged, and no zoning or environmental laws were broken, “but she was impacted negatively by the project.”

Rather than wait until a zoning board meeting was called to address the problem, Mr. Clough responded immediately. As soon as the issue was brought it to his attention, he sent a crew to clean up her yard, then had it redirect the runoff from the project site to prevent the same problem from happening again. Team members also made a point of thanking her for coming directly to them, rather than going to the city council to complain, which would have caused much bigger scheduling delays.

“Sometimes people just need to be heard,” Mr. Clough says. “When you acknowledge their concerns and address them, it goes a long way toward satisfying stakeholders.”

PUBLIC POLICIES

Average citizens need to be taken into consideration on projects, but they're just one part of the public stakeholder group. Project leaders must also work closely with officials, regulators and government agencies to be sure the project goals align with local rules and expectations. “The government plays a huge role,” Mr. Gerspacher says.

That's certainly the case on his next effort in remote Guinea, Africa, where Fluor is in the planning stages of a five-year, US$15 billion megaproject to build an iron ore mining development in partnership with the Rio Tinto mining group. The plan includes roads, rail, ports and other complex infrastructure construction projects necessary to transport the ore.

“The legal framework in Africa is shaky, so it's important for us to understand the exact sequence, process and permitting issues we will face,” Mr. Gers-pacher says. “To do that, we have to move hand-in-hand with the government.”

Building strong relationships with government agencies can also help project teams overcome complex obstacles on megaprojects that they couldn't master on their own, says Fernando Napolitano, senior partner and managing director of the management consulting firm Booz & Company Italia in Rome, Italy. “Even the most well-intentioned and capable organizations, when working separately, eventually hit a wall, limiting their effectiveness,” says Mr. Napolitano, coauthor of Megacommunities: How Leaders of Government, Business and Non-Profits Can Tackle Today's Global Challenges Together [Palgrave Macmillan, 2008]. “Failure occurs because each constituency is working in isolation.”

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imgCreate a stakeholder matrix, similar to a risk management matrix, suggests Randy Clough, PMP, SAIC Constructors LLC, Tumon, Guam. It identifies every external stakeholder, defines how they might be impacted by the project, and calculates the expense and probability of that impact. “Public stakeholder concerns are a subset of your risk,” he says. “This is a way to mitigate that risk.”

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WHAT'S AT STAKE

Columnist Lynda Bourne, DPM, PMP, also covers stakeholder management in the Voices on Project Management blog for PMI.

imgFollow her posts at PMI.org/Voices.

A great example of a strategic partnership, he says, is the megacommunity to combat hunger, consisting of the not-for-profit World Food Programme (WFP), the governmental agency Poste Italiane and the broadcasting company Mediaset. Mediaset provided free advertising and gave WFP personnel airtime on its TV shows, while the Poste provided its network of offices and mobile operations to promote fund-raising.

PUBLIC PERSUASION

When the Italian energy provider Enel first attempted to diversify its project portfolio, it joined forces with the U.K. company BG Group to build a terminal for regasifying liquefied natural gas in Brindisi, an economically depressed city in Italy. Enel fulfilled all the legal requirements necessary for starting the project but did not take into account stakeholder fears about the environmental impact, Mr. Napolitano explains.

Ignoring this risk led to a major social backlash. Environmental activists proclaimed the project a danger to the health and security of the local population. Protests ensued and the project was shut down.

That experience spawned an epiphany for Enel CEO Fulvio Conti, who recognized that his company could not, on its own, convince the Italian public to support projects that would keep pace with growing energy demand while satisfying environmental and local land-use concerns.

On the next project, a coal plant in Porto Tolle, in northeastern Italy, the project team took the lessons learned and evaluated social concerns on the front end—including fears that the plant would raise the temperature of the water, destroy local biodiversity and not be compliant with carbon dioxide emissions regulations. Based on the public's direct input, the team partnered with scientists to find technology that would cool the water before returning it to the river and meet emissions regulations. Incorporating this technology into the project plan added cost and time and was not required by Italy's environmental laws. But it addressed the concerns of external stakeholders by protecting the environment in which the facility would operate. The project moved forward and was built without delays.

“The team took short-term value away from the project by making these changes. But they increased its long-term value to the company and the community, while eliminating hidden risks,” Mr. Napolitano says.

Despite reaching out to secure public buy-in, project professionals still face risks. A number of green associations challenged the negative environmental impact of the Enel coal plant project. In June, the Italian Supreme Court overturned government and local approval of the project.

“Because of the educational and information provided by Enel, the local population, the workers and the unions took the street protesting against this decision,” Mr. Napolitano says. “They resent not only the fact this overhaul would have been compliant with the most restrictive European emission regulation, but also that an ideological, short-term and myopic view will hamper job creation and the local communities.”

Spending extra time and money to meet the needs of external stakeholders may seem like an unnecessary cost to a project, but when those costs help win community support, the payoff is worth the investment. Public support can help—but by no means guarantee—project team took the lessons learned a smooth path to project completion. PM

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.

PM NETWORK SEPTEMBER 2011 WW.PMI.ORG

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