The fundamentals of effective stakeholder management

In any project, there are multiple stakeholders like customers, vendors, government, and employees. Therefore, understanding the importance of stakeholder management and building an effective plan is crucial for project managers. An ineffective or mismanagement of stakeholder relationships can result in delayed schedules, increased costs, and project failure.

With that in mind, let’s explore how project managers should approach stakeholder management.

Effective stakeholder management: key steps

Stakeholder management would comprise of the following steps:

1. Identification of stakeholders

2. Prioritization of stakeholders – through Stakeholder analysis

3. Stakeholder need analysis and strategy formulation

4. Planning of stakeholder engagement- defining mode of engagement, identifying key messages to be passed on, and setting up appropriate communication channels

5. Manage stakeholders

6. Measuring overall effectiveness of stakeholder engagement

Identification of stakeholders

The very first step is to identify who they are. Stakeholders could be within or outside of the organization; they may be at different levels within the organization and could offer support or resistance to the project.

The starting point could be identifying primary stakeholders; one way to do this is by referring to initial documents like the charter, procurement documents, or even consultation with the project sponsor.

Next, these primary stakeholders could be interviewed, and the list can be extended to develop a comprehensive list of stakeholders in the project.

While trying to identify stakeholders, consideration should be given to understanding:

• All those who have an influence on the project

• All those being impacted by the project

• All those involved in the project

Techniques like brainstorming and stakeholder identification workshops are usually employed for stakeholder identification.

Stakeholders could be individuals, groups, or organizations. These could be documented in a stakeholder register. It may be appropriate to classify them as Positive/Negative/Neutral and as Internal/External.

Prioritize

Not every stakeholder can influence the project the same way, nor is every stakeholder equally interested in the project. For instance, the top management has a more significant influence on the project than the ‘Manager Operations.’ Thus, the project manager needs to prioritize their effort in managing stakeholders accordingly to best utilize the time available.

The level of influence, interest, and impact need to be analyzed for each identified stakeholder. A Power-Interest grid is commonly used to map the stakeholders, as shown below.

Lower Left Quadrant – these with low power and interest would demand the slightest effort to manage. The project manager can simply watch/monitor them and intervene as required.

Lower Right Quadrant – these stakeholders with high power and low interest must be kept satisfied throughout the project. The project manager may choose to comply with their instructions. For instance, the PM cannot afford to annoy the COO by not complying with any direction (or expectation) passed on.

Upper Left Quadrant – those with low power and high interest must be informed. Because of their high level of interest, they would like to know what’s happening currently, which way the project is heading, what the plans are, etc. Notifying them of these should keep them happy.

Upper Right Quadrant – those with high power and high interest are the most critical stakeholders in the project and would require maximum attention. The project manager must engage with them very closely by proactively engaging with them and drawing up appropriate strategies.

From the above analysis, we can conclude that the CIO/CEO/CFO are the most important stakeholders in the project and require maximum attention.

Stakeholder need analysis and strategy formulation

This is about developing strategies to gain support or reduce obstacles. By engaging the right people in the right way, we can make a big difference to project success

Here is a sample Stakeholder register (based on PMBOK Guide 6th Ed.) that could be used to document the needs and expectations of stakeholders.

The initial strategies for addressing the identified needs of the stakeholders should also be discussed and recorded at this time.

Plan stakeholder engagement

This involves identifying the current engagement levels of various stakeholders and comparing them with desired engagement levels. A possible scale to define Engagement Level is given below (source PMBOK Guide 6th Ed.)

1. Unaware – not aware of the project and its impact

2. Resistant – is aware of the project and its consequences and is resisting the project.

3. Neutral –aware of the project and its consequences but is neither supportive nor resistant.

4. Supportive – is aware of the project and its consequences and is supportive, contributing as desired.

5. Leading — is aware of the project and its consequences and exhibits leadership through actions such as solving problems, creating novel solutions, setting directions, etc.

It is very likely that the engagement level of stakeholders could vary from phase to phase. For example, senior management may need to assume a leading role at the beginning of the project to reduce obstacles from those resisting the project and generate interest among all members, while the engagement level may drop to supportive once the initial course of the project is set.

A stakeholder Engagement Assessment Matrix (as shown below) can be used to display the stakeholders’ current vs. planned engagement levels for a particular phase in the project. Through this, any gaps in the current and desired levels of engagement can be identified, and appropriate engagement modes can be defined to boost their engagement levels.

C – Denotes current engagement level

D – Denotes desired engagement level

The above matrix suggests that

• The level of engagement of the CEO is as desired. We just have to maintain that.

• The CIO needs to be had in a Leading role

• The COO who is resisting the project needs to be educated on the benefits of the project to gain support

• We need to communicate with the CFO, who is currently unaware, to gain his buy-in and have him support the project.

Having identified gaps in the planned and actual engagement levels of stakeholders, Project Manager needs to plan appropriate modes of engagement to boost the current engagement levels of stakeholders. There is a need to engage with everyone, but the frequency, channel, and format would vary from stakeholder to stakeholder. Some examples of modes of engagement would be:

• Quarterly Management Reviews to engage with senior management

• Open houses to engage with the local community

• Use the website to engage with the general public.

This information may be documented in a Stakeholder Management Plan.

Manage stakeholder engagement

This step involves communicating and working with stakeholders to meet their needs and expectations, address issues, and foster appropriate stakeholder involvement. This is performed by the Project manager throughout the project and helps increase support and minimize stakeholder resistance.

Strategies formulated in step 3 and engagement modes planned in step 4 get implemented here.

Measuring effectiveness

One way to measure how effective stakeholder engagement has been is to monitor the stakeholder engagement assessment matrix (above). That is, if the gaps between current and desired levels of engagement are narrowed, it indicates that stakeholder engagement has been effective, while the ideal scenario is where they happen to coincide.

Other measures of stakeholder management effectiveness are

• Increased participation of stakeholders say in project steering committee meetings

• Conversion of stakeholders from negative to neutral/positive

• Open issues showing a decreasing trend

The project manager needs to adjust strategies and engagement modes as corrective measures if stakeholder engagement is ineffective.