Stakeholder Management Strategies

Author: Shubham Ingole

Stakeholder Management is a substantial practice that needs to be focused on throughout the life cycle of the project. A successful collaboration between an organization and its stakeholders is based on working together to achieve common objectives. (PMBOK). Stakeholder management is a significant step towards the project's success, in terms of Project, Program, and Portfolio management. In practice, various frameworks have been built for efficient and effective stakeholder management in a project. It aims to identify all the relevant stakeholders, in order to categorize and prioritize them based on their importance, impact, and power using alternative mapping tools, to profile stakeholders, and prepare for their participation, and to achieve the stakeholder management processes.

The significant sight in project success is effective communications between all stakeholders, where structured communication is adhesive that holds everything together. Effective communication can be served as a great technique to structure and manage the stakeholder at multiple levels. Besides, the Communications Strategy sets the groundwork for the potential progress of the combined organization. Communication and stakeholder interaction processes and strategies are often characterized as 'fragile,' dealing with various stakeholders, and designing suitable knowledge sharing messages is difficult because of unforeseeable project actions and uncertainty, and it is difficult to establish reliable means to evaluate progress or even success in engaging stakeholders effectively (Kirti Rajhans). A slice of stakeholder management is also to have an effective communication plan. This article offers a critical viewpoint of the existing Stakeholder management strategies, intending to fulfill the void in the literature. The focus of this article is to shed light on key challenges and uncertainties in stakeholder management, by leveraging Social Network Theory an effective methodology with a framework to use communications as an efficient tool for managing successful stakeholder connection at all levels.

Challenges in Stakeholder Management

The major challenges in managing stakeholders are due to ineffective or insufficient communication which is the root cause of the problem in a project. The root cause is evident to sub causes such as unclear scope, a lack of understanding of the brief, inefficient coordination in the cross-function team, and inefficient risk management. The project is more likely to fail if the amount of time spent on creating plans will be fade due to consistency in the flow of information to the right people, or it has been constantly ignored and misunderstood which makes it more ineffective. A survey by (Kirti Rajhans) on effective communication revealed that the main issues address these challenges are Information distortion, delay in information, miscommunication between key stakeholders, conflicts between the client and the contractors, or internal conflicts between the team, lack a single point of contact, which are related to lack of communication. Further, uncertainties in managing a project may arise from the beginning and that need to be addressed.

Uncertainty in Stakeholder Management

In the initial stage of the stakeholder management process identification and analysis might consume more time in and it varies based on the number of stakeholders involved in the project. A mega project like apollo 11 or Sydney’s Opera house constitutes more uncertainty and complexity and hence the assessment requires an adequate amount of work in regard to time, cost, and value creation. As the name states the amount of information is limited and it becomes more difficult to predict the future outcome. Since the processes of the project are not measurable based on the factors power, interest, influence. Thus, developing management strategies for a project comes along with multiple assumptions and limited robustness analysis of the project.

Introduction to Stakeholder Management

A typical definition to describe a stakeholder is a person, group, or organization that has interests in, or can affect, be affected by, or perceive itself to be impacted by, any outcome of the project (Freeman and Reed, 1983). Stakeholders are involved in the project's progress and may have a positive or negative impact on the project inside or outside the organization where many individuals engage in a good implementation of a project from the outset.

“They’re called stakeholders because if you don’t look after them, they’ll come after you with seven-foot stakes!” – Rob Thomsett

Today, most successful organizations or projects or portfolio reveals that they have a good relationship with the related internal and external stakeholder group in the organization. The adequate continuous communication and management of stakeholders actively throughout the project life cycle manage these core relationships (PMBOK). Besides, it is important to provide an appropriate analytical framework to deal with varying perceptions and characteristics of these multiple stakeholders. Designing a strategy for managing stakeholders is a three-step process. Identifying them is the primary step. The second step is an assessment where we classify and prioritize them based on parameters for prioritization, such as power, interest, or influence. Eventually, the last step is to develop a communication strategy to manage them. Despite this, it is critical and yet necessary to develop a strategy at the beginning of the project and should be altered regularly until the completion of the project. Several projects hinder and fail to attain desired outcomes due to a lack of communication planning and management.

Identifying Stakeholders

The process of identifying and classifying all the stakeholders in the preliminary part of managing stakeholders in an organization. These stakeholders can be directly or indirectly involved in activities like governance, regularization, project training, decision making. This activity is performed in the initial stage of the project; however, it changes over the project cycle due to continuous updates in the scope of work as the project progress. It can be done by review of the project character that identifies the list for stakeholders and their responsibilities. Once they are identified they are classified into two groups of stakeholders as Internal or External stakeholders (PMI). Classification of stakeholders can be done by simple brainstorming based on their influence on the project.

Internal Stakeholder

Internal Stakeholders are considered as people, groups, or organizations whose interest in the project is directly related to being a part of the organization that is managing that project. They can be team members, execs, owners, or even investors in the organization. They have a substantial interest in the success of the organization, and they are in most cases highly affected by the ongoing activities, decisions, and outcomes of a project.

External Stakeholder

External stakeholders are those who are not directly related to the organization, but they are likely to be impacted positively or negatively by the project outcome to some extent. These are usually considered as suppliers, creditors, and public groups, etc.

Stakeholder Analysis

Considering Stakeholder analysis, it is essential to gain a clear understanding of involved stakeholders, their expectations, and their motivation for being part of the project. Stakeholder analysis builds an approach to include considering their needs, expectation, interests, and potential impact on the project (PMBOK). The suggested methodology by (PMBOK) for qualitative analysis of stakeholders may use different methods to investigate the influence, power, impact of a stakeholder. The common tools that are used to categorize stakeholders and assisting them in analyzing relationship are mentioned below:

Influence vs Interest grid

This tool helps to merge stakeholders with regards to their level of authority and interest in the project outcome, or ability to cause changes to the project's planning or execution. For instance, the classification of investors and decision-makers along with the project lead. This model is more effective for small projects that have a clear relationship between the stakeholders and have less hierarchy in the organization (PMBOK)

Directions of influence

Classification of stakeholders can be done based on four different directions, where the stakeholders are classified based on their influence project (PMBOK). Upward direction depicts the top management people who are responsible for major decision-making in the project. Downward direction refers to a group of people having expertise and acts as a consultant; they may have lower interest and high influence on the project. Outward direction represents the external stakeholders in the project, mainly those are suppliers, government bodies, public servants, contractors, or regulators. Sideward includes peers of the project managers, employees, middle managers, team leads that share most information of the project. They are considered to have high influence and low interest in the project.

Salience Model

This framework acknowledges the different classes of stakeholders on factors such as Power(hierarchy) or has more power to influence the project results. Urgency: Need of immediate attention towards involvement in the stakeholder and in regard to time. Legitimacy: the analysis of their involvement in a decision on the scope of the project. This tool can be effective in a complex group of stakeholders or in a project where complex networks of connection exist. This can also be used as a framework to examine the significance of identified stakeholders. Performing Stakeholder analysis is important to step that can be altered according to the type of project. In addition, any of the above mention tools can be used to analyze the identified stakeholder based on the complexity, uncertainty, and size project.

Stakeholders Engagement

A study by PMI demonstrates that one of the most well-known project management techniques for stakeholder management is the communication plan. After identifying and mapping the stakeholders the last step and critical step is to engage stakeholders. This process refers to gaining their understanding and support to help the project by marching it on the right track. The objective of having a communication plan is to have continuous communication with all involved stakeholders and to list out conflicts while developing and upgrading strategies. Another factor of stakeholder engagement is to monitor the process and connection between the stakeholders. To develop a communication plan Social Network Theory (SNT) can be leveraged for stakeholder analysis. Social Network theory is a methodology to understand how an individual, organization, or group interacts within their network (STNblog). STN is more cost and time-efficient which helps to reflect the importance and way of interaction among different stakeholders. In every project or portfolio, each stakeholder has strong interconnection and more likely to be influenced by each other which can be negative or positive and can impact the outcome of the project. (STNblog). The crucial information can be extracted through social relationships and it can be accessed by appropriate identification and stakeholders. This information can be acquired by using the social network tool to understand and examine the interactions of the internal and external stakeholders.

Social Network Theory

A social network is comprised of one or more actors that are bound together by a tie. Where the actors can be individual, a group, or an organization, and the ties may constitute one or more relations. There is three key network ideology that is structured based on the network effect those are: Centrality, Cohesion, and Structural Centrality. Where three different measures to indicate structural centrality are Degree, closeness, and betweenness suggested by (Freeman). These three networks can be leveraged to understand how distinct forms of stakeholders interacts with the flow of information differently. Incorporating stakeholder analysis and SNT, the identification of all forms of networks, which will be discussed later in this article, can be of major importance.

The definition of Centrality' depends on the process characteristics, where the Cohesion Network evaluates the degree of interdependency between a group of nodes (stakeholders). The study suggests that the personal effect of social networks becomes greater than those that are less cohesive. Structural Equivalence in comparison describes two or three network locations that follow the same sequence of network links.

The following sections highlight three methodologies that best represent the influence of social network theory on stakeholder management.

Two-step flow of communication hypothesis

Two-step flow of communication (Network illustration of opinion leaders with high degree centrality, closeness centrality, and betweenness centrality)

The ideology behind the Two-step flow of communication framework is the concept of opinion leaders, a group, or an individual is influential in a specific domain. Opinion leaders have traits such as expertise in a domain or the ability to guide on issues. To understand it better, individuals may become opinion leaders because they have the right network position that enables them to effectively spread information and personal influence. Opinion leaders can be C-suits, Board members, mentors. Centrality can be useful for identifying leaders based on their position, as mentioned above the Centrality identify the position that opinion leaders usually occupy based on the Degree, Closeness, Betweenness (freeman).

In the figure below we can see that Degree centrality measures the number of links between an individual network. Further, closeness centrality evaluates the average distance between an individual node and all other nodes in the network. Stakeholders with higher closeness centrality need relatively fewer steps to reach out to other individuals in the network and thus the information flow becomes faster. For instance, Project managers and subordinate team members on that project. In the figure, the Dark gray nodes have high closeness centrality. Betweenness Centrality determines the frequency of an and shortest path between each node in the network. Stakeholders who have high in betweenness centrality are more likely to serves as a bridge in the network. An example of Betweenness centrality could be the Project manager or consultant as they are most likely to be the bridge among the employees and higher authorities who have more influence in the project.

The theory of weak ties

Bridging Ties (Network illustration of opinion leaders with high degree centrality, closeness centrality, and betweenness centrality)

'Week ties are stated as a social relation that needs small investment and they are composed mostly of acquaintances or other loosely connected actors. Weak ties are also often referred to as bridging ties that have social relations that provide a path between two disconnected clusters. These ties are responsible for exchanging information from cluster A to cluster B, where a node for cluster A can access the information from the cluster with the help of a bridge tie. This theory is significantly effective in the cross-function environment, where the constant exchange of information is needed for a different group of people. For example, a technological consultant being the bridge tie between the development team and the client. Where both team and client can exchange information where the consultant will be the constants provider of adequate information.

Conclusion

Stakeholder management is a central step in project management, portfolio management, and program management. It offers an incentive to recognize persons and organizations within and outside the company who may be impacted or affected by the results of the initiative, program, and portfolio. Understanding, prioritizing and planning the stakeholder’s participation and the governance structure of their desires and influence provides an added benefit for the organization also significantly adds to the project performance. Developing strategies for stakeholder management comes with a lot of uncertainties and complexity in the project which are unavoidable and that can hinder the outcome and affect the high involved stakeholder. Inefficient and ineffective communication is the root cause of the failure of the project which can not be avoided, as developing strategies and enhancing processes with help scientific framework could be the possible solution. This article showcases appropriate tools to tackle these challenges and to have effective and efficient stakeholder management in practice.

Annotated Bibliography

Project Management Institute (2013), A Guide to the Project Management Body of Knowledge (PMBOK® Guide). A Guide to the Project Management Body of Knowledge (PMBOK® Guide) is a collection of best practices and tools for project managers providing the foundation of Project, Program, and Portfolio Management. It gives the stakeholder definition and substantial information regarding the stakeholder analysis process.

Guidance on Project Management, ISO 21500:2012. The International Organisation for Standardisation developed the Guidance on Project Management, ISO 21500:2012 that provides guidance on concepts and processes of project management that are important for the success of projects. Regarding the stakeholder analysis, it provides significant and detailed input and a useful graphical representation of the different stakeholder categories.

Strategic Management: A Stakeholder Approach. Freeman, R.E. (1984), The Strategic Management: A Stakeholder Approach published for the first time in 1984 provides significant input regarding the stakeholder definition development and history. It also analyses in depth the identification and prioritization steps, presenting techniques and giving relevant examples.

Social Network Theory, WENLIN LIU, ANUPREET SIDHU, AMANDA M. BEACOM, and THOMAS W. VALENTE, University of Southern California, USA. Social Network Theory: Provides an overview of the stakeholder management approaches used and some of their limitations. It also proposes the use of social network theory and methodology is suggested as a viable perspective for stakeholder identification, analysis, and management because of its theoretical and methodological rigor and its ability to provide insightful visualizations and useful network metrics to identify key influencers, bottlenecks, informal groups.

The role of social networks theory and methodology for project stakeholder management, Kon Shing Kenneth Chung*, Lynn Crawford Social network theory focuses on the role of social relationships in transmitting information, channeling personal or media influence, and enabling attitudinal or behavioral change.

Reference

1. ISO 21500, Guidance on Project Management. 2. PMBOK(Project Management Body of Knowledge) Guide – 5th Edition (2017). 3. Freeman, R. Edward and McVea, John, A Stakeholder Approach to Strategic Management (2001). Available at SSRN: https://ssrn.com/abstract=263511 or http://dx.doi.org/10.2139/ssrn.263511 4. Strategies for Dealing With Difficult Stakeholders, By Ian Haynes, September 25, 2020 5. The role of social networks theory and methodology for project, stakeholder management, Kon Shing Kenneth Chung*, Lynn Crawford: (Procedia - Social and Behavioral Sciences 226 ( 2016 ) 372 – 380, September – 1 October 2015) 6. Social Network Theory, (WENLIN LIU, ANUPREET SIDHU, AMANDA M. BEACOM, and THOMAS W. VALENTE) University of Southern California, USA 7. Social Network by Charlie R. Claywell(https://socialnetworking.lovetoknow.com/What_is_Social_Network_Theory)