The process of systematic analysis, planning, finalizing, and implementation of pre-designed actions to engage with stakeholders is called stakeholder management.Stakeholder management and engagement is possibly one of the vital parts of successful project delivery.
Project managers often rely on people to respond to the benefits that they deliver. Only engagement can make people react. The stakeholder can be either an individual group or an organization depending on the nature of the project. However, in any case, stakeholder management is essential.
Need for Stakeholder Management
The basic and primary need of stakeholder management is to get the support of stakeholders. If any stakeholder has a negative effect, then a good stakeholder management strategy will help to decrease it. Only a proper plan is the difference between negative stakeholders and positive stakeholders. The efficient completion of the project can be ensured after the implementation of a successful strategy.
Many significant projects have a formal approach lined out, which is well documented and useful for stakeholder management, but in the case of smaller organizations or some other projects, they usually have a simple strategy for stakeholder management. Negative stakeholders should be paid more attention as compared to the positive ones because they are the ones who can risk the project’s success.
However, if they are managed correctly and proactively, then their impact becomes positive, and the project turns out to be a success. Stakeholder management should be a part of Project planning because, in the absence of a stakeholder management strategy, there would be many issues that will be faced during the project.
Steps in Stakeholder Management
One of the primary aspects of project management is stakeholder management. This is because stakeholders can influence the project positively or negatively, and this is why they need to be paid special attention. Following are few of the five common ways in which you can manage stakeholders:
1. Creating an OBS – Organizational Breakdown Structure
A diagram that is represented in the form of a tree structure of stakeholder organization established in excel is called is an organizational breakdown structure. When the project includes multiple departments, organizations that it is preferred that a breakdown structure is generated for every group. Sometimes color code may be used as necessary.
One of the primary advantages of having an organizational breakdown structure is, it considers the stakeholders who may not have been discussed previously.
2. Stakeholder categorisation
Once stakeholders are found, then they are to be categorised into three groups: Direct, indirect Involvement, and Regulatory. Respective stakeholders may be put under a separate group as required.
3. Understanding stakeholders impact and power
The users may be categorized as high power or high interest and low interest and low power based on the importance and the ability of the stakeholders.
4. Complete the grid of Power Interest
Once the interest and the power of stakeholders are considered, then they can be put into different quadrants of power interest grade. The top right hand would be occupied by the stakeholder who has high interest and a high power user and is to be managed very carefully because that stakeholder has a significant impact on the project. On the contrary, low interest and low power users would be in the lower-left corner and would be monitored regularly.
5. Completion of the communication plan and stakeholder management
This is the final step of stakeholder management. Once all of the steps are completed, then you can move to the next level. The first column includes the job title and the name of the stakeholders.
The second column has the communication approach and should be monitored closely, kept satisfied, and informed. The current status can be either supporter, advocate, blocker, or neutral. Any desirable actions which are needed to be recorded in the management activity column.
Basic principles of Stakeholder management
Before deciding to engage and influence the stakeholders, it is essential to understand the people that you will be dealing with and residing in the various phases of the project life-cycle.
While sharing information with stakeholders is very crucial, it is equally essential first to gather relevant information about your stakeholders.
2. Frequent consultation
During the early stages, the project may be unclear for its stakeholders. The required clarity may be in terms of scope, purpose, or risks, or approach. The regular meeting is one of the primary requirements to ensure that all of the needs are agreed upon and negotiated with every solution that is acceptable to the majority of the stakeholders involved in the project.
There may be unreasonable or irrational or inconsistency with the stakeholders. You must accept that humans are not always rational or consistent or predictable. By understanding and addressing the root cause of the behavior of stakeholders, you will be able to determine if there is any other way to maintain a productive relationship.
One of the most successful methods of stakeholder engagement is meticulous planning. Significant time is invested in stakeholder management and stakeholder training, which can bring substantial benefits to the organization.
5. Relationships are important
Trust increases when the connection is developed, and when faith is present, people often work together more effectively. Investing time and effort in building stakeholder relationships can help to increase confidence throughout the project environment. Also, it minimizes uncertainty and increases the speed of problem solving and decision-making.
Anticipating possible hazards with the help of foresight is about conventional planning. You should accept the potential dangers and expect them and take timely actions with stakeholders, so the delivery of the project can improve significantly. Even though there is an enormous success with this principle very few have seen this done very well in practice
7. Risk management
Stakeholders are considered to be influential and vital resources, which is why they are treated as a potential source of opportunity and risk within the same project.
The first step is to establish the baseline, which is most acceptable across diverging expectations of stakeholders and their priorities. Relative importance is to be established by all stakeholders Against the requirements of the project and as agreed by the sponsor of the project.
9. Understand success
Project success has different meanings for different people, and it is necessary to establish the definition of success for the stakeholders and include it in the context of the project delivery so that there are no discrepancies later.
10. stakeholder engagement
It is necessary to understand that stakeholder engagement is teamwork and not only the responsibility of one member. They should understand their role in the team and should follow the right engagement approach as well as the right communication strategy.
Providing clarity to the customer about the stakeholder engagement responsibilities and the role is what is expected from the people who are a part of the project.
Types of Stakeholders
Depending on the nature of the organisation, there are several stakeholders involved in a particular project. Following are a few of the common types of stakeholders:
The primary purpose of every business is to serve its customers. Customers are considered as primary stakeholders of every business since they are directly impacted by the service or quality and value of the offerings of the organisation.
An example of this would be passengers traveling in trains have all of their stakes in the hands of the company while going. The quality of product or service and its values are standard stakes that the customers have.
2. Employees of the organization
Employees are the elements that have a direct stake in the organization because they earn to support themselves and their families. The benefits may be monetary or nonmonetary, depending on the nature of the business and the role of the employee in the organisation.
In many cases, employees also have health and safety interests with the organization; for example, people working in the manufacturing plant of the organization.
Both shareholder’s hundred holders are included in the term investors. Shareholders expect earnings from the Investments in the organisation. They are concerned with the shareholder value and are interested in the financial returns offered by the organization.
4. Suppliers and vendors
The parties which sell goods or services to the organization and depend on it for the generation of revenue and continuing business of our suppliers and vendors. In many industries, such as healthcare, suppliers may have their safety and health at stake since they are directly involved in the operations of the organization.
Many significant businesses have communities that are substantial stakeholders. Different things such as economic development or job creation, health, and safety are few of the things which impact them.
For example, a prominent organization affects a small community in many ways, like if they enter a small city, there is a sudden increase in income of people because of increased employment opportunities; this, in turn, affects the spending of the area. Similarly, if the same big organization exists a small community, then there is a collapse of all of the things which were growing.
Even governments are considered as significant stakeholders because major taxation comes from corporate incomes. A significant part of that income comes from the people that are employed in the organization. Governments benefit from the entire GDP, which the companies contribute to.
Advantages of stakeholder management
- The company hopes to attract the people who have displayed an exceptional ability to manage relationships and other businesses. These are the ones that we called stakeholders. These individuals can be found on the company’s top management or board of directors. They may not be involved in everyday activities of the operations but play a crucial role in providing the big picture and planning long-term success for the organization. It is because of them that the company avoids costly mistakes, which may prove fatal for the organization economically.
- Every company hopes to attract specific individuals who can be valuable in terms of providing guidance when there are tough matters at hand. Board members are looking at the future five or ten years down the line, but sometimes the company needs people who know today is the situation now and here in the present. This is when stakeholders come in handy.
Disadvantages of Stakeholder Management
- Every stakeholder does not get enough time from the organization, which can be a little discriminatory.
- Not every stakeholder is going to remain a low-value stakeholder forever. There may be a possibility that the stakeholder which is at a low level right now may rise to a higher level in the future, and if every stakeholder is not paid equal attention, then the stakeholder will not retaliate in the future.