Stakeholder Management

Abstract

In any case it is important to identify all the key stakeholders and define which interest they have in the project and how important they are for the completion of the project. A plan for handling and communication with the different stakeholders can then be created, when the stakeholder analysis has been performed. When managing stakeholders, both internal and external, it is important to always find solutions that are mutually beneficial. The growing focus on stakeholder analysis is a clear reflection of the general tendency to recognise how stakeholders can influence decision-making processes. This article will attempt to create an overview of the different tools associated with managing different types of stakeholders. Furthermore, the article will look into the limitations of existing methods for stakeholder analysis and management. Here it will look into the areas in need of further development such as stakeholder involvement. Lastly it will summarise the discussion and make a conclusion on the current state of the existing tools for managing stakeholders.

Introduction

The purpose of identifying and classifying stakeholders is to make the identification of stakeholder concerns easier and consequently making issue solving a smoother task. The prioritisation of the stakeholders is a key outcome of a stakeholder analysis, as it will allow the project manager to acquire the knowledge necessary to get the maximum advantage of the stakeholders’ contribution to the project. Stakeholder management was first observed in Scandinavian management [Ref (1)] and they started differentiating between shareholder theory and stakeholder theory. Freeman has defined that stakeholders with similar interests or rights will move towards forming a group. The model that followed this definition was then a stakeholder map, placing the company at the centre interacting with its surrounding stakeholders.

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Assumptions

There are some core assumption to stakeholder theory, presented by both, Jones and Wicks, Savage et al., and Phillips et al. These are as follows :

• Organizations engage in relationships with many groups that either influence or are influenced by them, stakeholders in accordance with the Freeman (1984) terminology.
• The theory focuses on these relationships in terms of processes and results for the company and the stakeholder.
• The interests of all legitimate stakeholders are of intrinsic value and no single set of interests prevails over all others, as proposed by Clarkson (1995) and Donaldson and Preston (1995).
• The theory focuses on managerial decision making.
• The theory identifies how stakeholders seek to influence organizational decision-making processes so they become consistent with their needs and priorities.
• As regards the organizations themselves, they should strive to understand, reconcile and balance the various participant interests.

• Definition of a stakeholder
• Why are they so important to projects?
• Evolution of Stakeholder theory

Identify your stakeholders and classify them

The process of identifying and classifying stakeholders is the preliminary part of managing stakeholders in an organisation. This can be made by the use of different classifications methods. These will be briefly introduced in the following segment.

Firstly they can be categorised into the following three overall categories:

Downward stakeholders

Here you find the project group itself – they hold a critical role in the completion of the project and their effort is crucial. In order to manage the project group it is important to clarify what the members wish to obtain or accomplish by participating in the project. Moreover it is important for each member to state what his/her contribution will be depending on the set of skills each member possesses.

Upward stakeholders

Here you find the stakeholder financing the project, amongst them you will also find the project owner. In order to manage the expectations of the project owner, it is important that these be discussed at the beginning of the project in order for the expectations to be in compliance with the reality.

The role of the project owner is to give visible support to the project and to use his formal power to help the project move along.

Outward stakeholders

These stakeholders can both be internal and external to the organisation where the project is taking place.

The external outward stakeholders could be the clients, suppliers, authorities and competitors amongst others.

The internal outward stakeholders could be the other project managers for projects run in parallel, other employees not directly involved in the project at hand, line managers, etc.…

Furthermore, the client/end-user of the project outcome is also and important stakeholder, because the outcome of the project can become an utter failure if the accept of the client/end-user is taken for granted. Which is why it is crucial to maintain a continuous dialogue with the client to constantly manage expectations.

Stakeholders can also be classifies into further specific types:

Dormant

Groups and individuals with the power to impose their wills on the organization but lack either legitimacy or urgency. Hence, their power falls into disuse with little or no ongoing interaction with the company. Nevertheless, company management needs to be aware and to monitor this stakeholder and evaluate its potential to take on a second factor.

Discretionary

Groups and individuals with legitimacy but that lack both the power to influence the company and any urgency. In these cases, attention should be paid to this stakeholder under the framework of corporate social responsibility as they tend to be more receptive.

Demanding

When the most important attribute is urgency. Without power or legitimacy, they do not demand greatly of the company but require monitoring as regards their potential to gain a second attribute.

Dominant

Groups and individuals that hold influence over the company guaranteed by power and legitimacy. Correspondingly, they expect and receive a lot of attention from the company.

Dangerous

When there is power and urgency but stripped of any legitimacy. The coercive stakeholder (and possibly violent) may represent a threat to the organization.

Dependent

Groups and individuals that hold attributes of urgency and legitimacy but which however depend on another stakeholder for their claims to be taken into consideration.

Another possibility is to classify stakeholder according to the following three categories:

• Power
• Legitimacy
• Urgency

DIfferences in stakeholder influence

Why do some stakeholders have more influence over organizations than others? Some litterature suggests that this is influenced by:

• The structural nature of the organization/ stakeholder relation
• The contractual forms existing
• The institutional supports available.

These influences are strongly linked to the stakeholder configurations and the associated stakeholder types. The same article suggests that there are the following four stakeholder configurations:

• Necessary compatible

This category represents the relation between shareholders and corporations and would typically be bound by a contract. These contract would of course differ based on the type of stakeholders.

• Contingent incompatible

This category represents non-contractual relations. These can be both implicit or explicit and recognised or unrecognised.

• Necessary incompatible

This category typically involves recognised explicit or implicit contracts, however, there are differences in interests among the parties involved.

• Contingent compatible

This represents relations with no formal contract and no direct relationship between the parties.

Stakeholder theories

Stakeholder salience is a model which includes stakeholder powers of negotiation, their relational legitimacy and the urgency in attending to stakeholder requirements. This model is strongly related to the last classification model described in the earlier paragraph. It is a dynamic model, displaying three main advantages:

• It is political in the sence that it considers the organisation as the result of conflicting and unequal interests
• It is orperationally practical because i qualifies the stakeholders
• It is dynamic because it considers changes in intersts over social space and time

Furthermore the model proposed by Mitchell et al. suggests that strategic behaviour is subject to various groups located in the surrounding environment with organisational strategies needing to meet the needs of these groups in accordance with their respective importance. This is defined by the three aforementioned factors varying in accordance with the situation. The proposed model is theremore dynamic for the following three reasons:

• The three attributes are variables - neither static nor stationary
• The attributes are socially construceted - not objective
• Stakeholders do not always know that they are in possession of one or more attributes

However, there are some suggested limitiation to this model following emperical work. Mitchell et al. suggests that the attributes are binary, however when looking further in to the characteristics of each attribute, doubt arrises as to whether it be accurate to only measure them in binary terms.

Discussion of the tools

• Pros and cons
• What is missing?

Conclusion

This classification of stakeholder importance is not in itself enough. It is necessary to understand relationships so as to engage in actions able to meet stakeholder demands on the organisation. Managing the relationships with each stakeholder should furthermore pay attention to how these are guided by organisational actions and initiatives established with the purpose of creating, building and strengthening the organisation’s bonds with each respective stakeholder .