Stakeholder Analysis

Introduction

Figure 1: Input-output model. Modified from Donaldson and Preston (1995).

Figure 2: Stakeholder model. Modified from Donaldson and Preston (1995).

According to the ISO 21500 standard a stakeholder is defined as:

Person, group or organization that has interests in, or can affect, be affected by, or perceive itself to be affected by, any aspect of the project.

Many other versions of this definition can be found in the literature but in general containing the same content. It is important to distinguish between shareholder and stakeholder, and understand that stakeholder analysis includes analysis of the shareholders but also takes all other stakeholders into consideration.

Figure 1 shows a classic input/output model with suppliers, investors and employees that provide an input so the firm can generate an output to the customers. Figure 2 shows stakeholder model where the firm are interacting with several stakeholders. The transformation from Figure 1 to Figure 2 illustrates the difference of a shareholder and stakeholder approach.

Management of a projects, programs or portfolios happens to be complex and require an extensive overview of several aspects and constraints. But in order to act appropriate and create sustainability the management often has to consider these aspects and constraints not only from their own point of view but also from a number of other stakeholders views.

It is important for the management to know who their stakeholders are and there characteristics in relation to the project, program or portfolio. This might be their influence, impact, interest, attitude etc.

In stakeholder analysis all stakeholders first have to be identified and relevant information gathered. The stakeholders are then mapped based on relevant parameters. Some of the most typical parameters when mapping are power, interest and influence, which is often visualised in a 2D diagram. The map gives an overview of the stakeholders and can be foundation for planning how to deal with stakeholders.

Background

In 1932 Dodd started one of the first arguments that a company should not only focus on shareholders but also consider the entire spectra of stakeholders when managing a company. However Dodd did not use the term stakeholder since this was not developed within this field of study yet. The term stakeholder arose in the first half of the 1960´s. Among others Freeman (1984) are crediting an internal memorandum from Stanford Research Institute in 1963 for being the first to apply the term Stakeholder in this field of the literature. In 1995 Donaldson and Preston described their view on stakeholder theory as the existence of three types:

• Instrumental stakeholder theory argues that companies/organisations that take stakeholders into consideration will benefit from doing so.
• Descriptive stakeholder theory is just stating that the company/organisation have stakeholders and that there they should analyse not only the shareholders but all stakeholders.
• Normative stakeholder theory evaluates why a company/organisation should take their stakeholders into consideration.

Baker and Nofsinger (2012) use Coca-Cola for examplifing the three types of stakeholder theory:

• An instrumental stakeholder theorist might say: Coca-Cola should manage its water policies so as to minimize the negative impact of reputation effects on firm value.
• A descriptive stakeholder theorist might say: Coca-Cola´s water policies are an important defining characteristic of the firm.
• A normative stakeholder theorist might say: Coca-Cola has a duty to protect the environment, so it should pay more attention to its water policies.

Among others Egels-Zanden and Sandberg (2010) neglected instrumental and descriptive stakeholder theory.

• Dodd (1932)
• Friedman (1962)
• Stanford Institute, SRI (1963)
• Hirschman (1970)
• Friedman (1970)
• Freeman (1984)
• Milgorm and Roberts (1992)
• Donaldson and Preston (1995)
• Freeman (1998)
• Mercier (1999)
• Jensen (2002)

Process

• Identify stakeholders (brain storm, stakeholders could for example be: Employees Shareholders Media Suppliers Government Customers Community Managers Directors Competitors Sponsors Consumers)
• Define key stakeholders
• Collect relevant information
• Stakeholder table
• Stakeholder map
• Dealing with stakeholders

Mapping stakeholders

• Why mapping stakeholders?

Types of maps

• Power/Interest diagram
• Interest/Influence diagram
• 3D mapping
• Stakeholder Circle

Figure 3: 3D mapping visualised as 3x3 matrix.

Other methods

Methods/tools to use together with the stakeholder analysis

Further reading

http://sustainable-learning.org/wp-content/uploads/2012/01/Who’s-in-and-why-A-typology-of-stakeholder-analysis-methods-for-natural-resource-management.pdf

Dodd Jr., E. Merrick. 1932. “For Whom Are Corporate Managers Trustees?”. Harvard Law Review 45 (7): 1145. doi:10.2307/1331697.