Stakeholder Management using Social Network Theory

Author - Shubham Ingole (Msc. Business Analytics, DTU)

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 . 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, categorize and prioritize them based on their importance, impact, and power using alternative mapping tools, profile stakeholders, and prepare them for their participation, and to achieve the stakeholder management processes. The significant sight in project success is effective stakeholder engagement and communications between all stakeholders, where structured communication is adhesive that holds everything together. Communications Strategy sets the groundwork for the potential progress of the combined organization and effective communication can be served as a great technique to structure and manage the stakeholder at multiple levels. This article covers a viewpoint of the existing processes along with the challenges and uncertainty in stakeholder management. It specifically focuses on providing an effective communication tool as a solution for stakeholder management intending to fulfill the void in the existing literature. Communication and stakeholder interaction strategies are often characterized as fragile and dealing with various stakeholders, and designing suitable knowledge sharing information is critical because of unforeseeable project actions and uncertainty . In order to have successful stakeholder management, an effective communication strategy must be implemented. Hence, in this article, Social Network Theory is leveraged as an efficient tool for developing effective communication for stakeholder engagement at all levels. Besides, the article discusses the scope, methodology, application, and limitations of the tool. An overview of the existing Stakeholder Management process and optimize the solution for managing communication between the stakeholders will be the key takeaway from this article.

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Stakeholder Management and current practices

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 . 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, 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 . 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 of the 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 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 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 govern 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 . The suggested methodology by PMBOK book 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 .

Directions of influence

Classification of stakeholders can be done based on four different directions, where the stakeholders are classified based on their influence project .

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 regarding time. Legitimacy: the analysis of their involvement in the 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 the framework to examine the significance of identified stakeholders . Performing a stakeholder analysis is an important step that can be altered according to the type of project. Besides, any of the above mention tools can be used to analyze the identified stakeholder based on the complexity, uncertainty, and size project.

Note: To gain in-depth knowledge on application of mentioned Stakeholder Management Tools, please refer to the following literature

For the power/influence grid and Salience tool refer to the following article:

• Stakeholder Management Processes in Projects

And, for Direction of influence refer to the following article:

• Stakeholder Management

Stakeholder Engagement

The last step is to engage stakeholders and monitor them effectively. 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. Implementing effective stakeholder management can be critical at every step that comes along with many challenges and uncertainty as to the project progress, which must be addressed to check the robustness of the project.

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 amount of time spent on creating plans likely to 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, which is one of the reasons that the project is more likely to fail . 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 concerning time, cost, and value creation. Often the amount of information provided by the stakeholders 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 like power, interest, influence. Thus, developing management strategies for a project comes along with multiple assumptions and limited robustness analysis of the project.

Social Network Theory

Methodology

Social Network theory is a framework comprised of one or more actors that are bound together by a tie that is used to understand how an individual, organization, or a group interact within their connected network, as they are often defined as simple networks of social interactions and personal relationships . In other words, a network consists of nodes and edges. While applying SNT in stakeholder means an individual stakeholder represent nodes and edges the relationship between them .

There is three key network ideology that is structured based on the network effect those are: Centrality, Cohesion, and Structural Centrality . Linton Freeman . suggested the theory of centrality where the three most common measures to indicate centrality are as follows: Degree, closeness, and betweenness . These networks are leveraged to understand how distinct forms of stakeholders interact with the flow of information differently. The definition of centrality depends on the process characteristics, where the cohesion network evaluates the degree of interdependency between a group of nodes (stakeholders) can be reflected as Bridge ties. Structural equivalence in comparison describes two or three network locations that follow the same sequence of network links . This literature discusses the incorporation of SNT in Stakeholder management, using the following network ideology have higher significance in project management.

• Centrality Network
• Cohesion Network

These networks can significantly help to address all the challenges and uncertainties addressed in this article, the Social Network Theory can be leveraged by an organization, portfolio, or project control board that is dealing with stakeholder management, or can be used by the regulatory body responsible for managing the project's stakeholder in hindsight considering an effective and efficient flow of the process as a result.

Application of Social Network Theory (SNT)

Social Network Theory (SNT) can be a great tool to leverage in stakeholder management, by using this tool the project managers will be able to understand and examine the interaction between the stakeholders. Organizations and the responsible individual can benefit in terms of developing an effective communication network of stakeholders combining with stakeholder analysis. As compared to existing tools, social network theory allows managers to use it as a visual portfolio map where it assists them to showcase the interdependences, importance of stakeholders, and way of interaction between them .

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 . With the help of SNT crucial information can be extracted through social relationships, such as behavior, work structure, influence, power, in between stakeholders. This will help to quickly identify the weak link and root cause of the problem and help to monitor the process efficiently. In order to analyze and gather data stakeholder portfolios and interviews are the most resourceful and well-planned method that reflects the significant way of interaction, influence, and power among different stakeholders.

The implementation of the model is very intuitive but may become complex if it is interpreted incorrectly. To begin with, there are main elements of a traditional Social Network Theory .

• Implementing Nodes
• Actor Level
• Tie Level

Implementing Nodes

Figure 1: Implementing Nodes. (This schematic shows the different involved stakeholders as nodes and edges as a link between them. The color and Shape differentiate stakeholders based on their influence and power, (Notations: TL - Team Lead, R&D - Research and Development, PM - Project manager, HR: Human Resource)) .

At this step, the qualitative data shall be collected by using interview questions and a portfolio of identified stakeholders in order to grasp an appropriate understanding of stakeholder’s motivation, parameters, and objectives in the project. Further, the stakeholders should be categorized based on their power and influence with the color code attribute, and the different shapes of the node in the network . As an addition size of the node can also be used to define High, Medium, and Low influence.

The color is used to provide an overview of the interaction, for instance, project owner/sponsor having the high centrality in the project and have high influence and power as a stakeholder will be classified as “Keep Satisfied” and they will have connections mostly with project managers. In contrast, Project managers might have dense networks than others as they will be linked to more nodes such as developer, analyst, HR, team lead, and the team leader as a stakeholder classifies as “manage closely”. . The initial network map can be seen in the figure as the node represents the stakeholders, links show the level of interaction between them, and the shape is used to differentiate the stakeholders while the color shows the influence and power.

 

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Actor Level

Figure 2: Actor Level, .

The ideology behind the Actor level is a two-step flow of communication framework, it 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 and use it in practice, stakeholders 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 .

From Figure 2 we can see the Centrality Network : Where,

Degree Centrality: This measures the number of links between an individual network, it guide stakeholder manager to identify the communication activity between all internal and external stakeholder.

Closeness Centrality: This parameter helps to investigate the average distance between an individual node and all other nodes in the network. It reflects the independence of the stakeholder in terms of their ability to reach another stakeholder within the network. Stakeholders having higher closeness centrality need relatively fewer steps to reach out to other individuals in the network and thus the information flow becomes faster.

Betweenness Centrality: It determines the frequency of an and shortest path between each node in the network and it also pinpoints the stakeholder’s potential to control communication. Considering a stakeholder who has high in betweenness centrality is more likely to serves as a bridge in the network.

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Tie Level

Figure 3: Tie Level, .

A theory proposed by Mark Granovetter , states that Tie-Level is the “Strength of ties” where it argues that the network tends to become denser as the rate of new information distribution is lower and information becomes easily redundant in a way that every stakeholder in the network know about the information that is of no use or need not be given. In addition, the new information usually comes from the week ties and they are stated as a social relation that needs small investment where 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 . Project managers or stakeholder managers shall consider relations or ties being accounted for understanding the possible information transfer and collaborative complex problem solving .

From Figure 3, the stakeholders having different interests can be classified into Cluster A and Cluster B. These ties are responsible for exchanging information from cluster A to cluster B. Here a node from cluster A can access the information from cluster B with the help of a bridge tie as they are interconnected in their network along with having a connection with another cluster network. The project manager shall critically consider this network to create a network to provide essential information to individuals who are involved in the project. It is significantly effective in the cross-function environment, where the constant exchange of information is needed for a different group of people.

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. This article showcases appropriate tools to tackle these challenges and to have effective and efficient stakeholder management.

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 store of best practices and tools for project managers and organizations it provides the foundation of Project, Program, and Portfolio Management. This book has and detailed overview of stakeholder definitions and significant information on stakeholder management. This book is highly recommended for project management practices.

Social Network Theory , WENLIN LIU, ANUPREET SIDHU, AMANDA M. BEACOM, and THOMAS W. VALENTE, University of Southern California, USA. Social Network Theory: This article provides an overview of the Social Network approaches and some of their limitations. This literature is recommended to understand the use of social network theory in practice and methodology it also intimated as a viable perspective for stakeholder identification, analysis, and management because of its theoretical & methodological aspect and its ability to provide insightful visualizations and useful network development 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 This literature is highly recommended to gain more insights on the application of social network theory in stakeholder management, where the wiki article is highly influenced by this paper. The reader can gain more information on the three steps of network building in stakeholder management.

Social network theory in the behavioral sciences: potential applications : J. Krause, D. P. Croft, and R. James. The article by J.Karuse on Social Network application in behavioral science is a good path to understand the behavior of stakeholders that changes over time due to several uncertainties. Every industry is more inclined to data analytics for project successes and applying appropriate data analytics tools. This paper reflects on a mathematical calculation of nodes and edges, and it leverage guidance in terms of managing stakeholders with quantitative data analytics and data scrapping.