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CHAPTER11 Working with Stakeholders

Learning Outcomes

After reading this chapter you should be able to:

• Understand the stakeholders’ lifecycle.

• Understand how to identify stakeholders and interested parties.

• Understand how to develop a network of useful contacts.

Project Stakeholder Management is a new knowledge area that includes the processes and activities that enable the project leader to ensure that the needs and expectations of the project stakeholders and interested parties are being addressed. Th e PMBOK 5ed (2012) has separated stakeholder management from communication

management. Th e main diff erence is that communication is about the mechanics of supplying information (content, timing, medium, etc.), whereas stakeholder management is about engag- ing with the stakeholders and involving them in the decision-making process and activities.

Projects are not performed in a vacuum – they are performed within a company, within an industry and within a market. Th ey involve a wide range of people who have a wide range of needs and expectations. Th ese people are called stakeholders and interested parties. It is, therefore, essential that the project leader understands the characteristics and features of working with stakeholders to be able to identify and determine the stakeholders’ needs and expectations (requirements).

Burke, Rory, and Steve Barron. Project Management Leadership : Building Creative Teams, John Wiley & Sons, Incorporated, 2014. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/snhu-ebooks/detail.action?docID=1635366. Created from snhu-ebooks on 2022-01-10 01:12:11.

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Th is chapter will explain how the project management systems approach can be used to develop a stakeholders’ analysis from the project manager’s perspective. A stakeholders’ analysis is usu- ally approached by subdividing the stakeholders into a number of categories or types and then analyzing their needs and expectations. Th is chapter will take the stakeholders’ analysis a step further and show how there could be diff erent stakeholders in each phase of the project lifecycle, and further, how the stakeholders can be subdivided into the diff erent organizational levels.

It will also explain how each stakeholder brings diff erent skills and expertise, diff erent standards, diff erent priorities and diff erent agendas (needs and expectations) to the project. Th e vast range and complexity of the stakeholder relationships are what distinguish project management from other management systems.

Th e project leader’s challenge is to use a structured approach to identify, infl uence and manage the key stakeholders within each phase. Th is will enable the project manager to encourage the stakeholders and the company to converge on an optimal set of requirements that aligns with their individual needs and expectations.

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1. Who is a Project Stakeholder?

Th e PMBOK 5ed (2012) defi nes a Stakeholder as: An individual, group, or organiza- tion who may aff ect, be aff ected by, or perceive itself to be aff ected by a decision, activity, or outcome of a project.

Projects usually have a wide range of stakeholders with diff erent and sometimes competing inter- ests who can have signifi cant infl uence over the eventual success or failure of the project. Th is chapter outlines a set of techniques that harness the positive infl uences and minimize the eff ect of the negative infl uences.

Th e APM BoK 6ed (2012) defi nes Stakeholder Management as: Th e systematic iden- tifi cation, analysis, planning and implementation of actions designed to engage with stakeholders.

Working with stakeholders comprises four main steps:

1. Identify Stakeholders Th is includes a number of methods: research, interviews, brainstorming, checklists and closeout lessons learned. Th is chapter will show how the stakeholders can be subdivided by project phase and type.

2. Assess their Interest and Infl uence Stakeholders can be classifi ed according to their potential impact on the project. Th is is usually shown in a matrix that estimates interest and infl uence on a simple scale (low/medium/high). Th ose stakeholders with an ability to directly aff ect the outputs or benefi ts are sometimes referred to as key stakeholders.

3. Develop Communication Plans Lines of communication need to be established with the key stakeholders to address what information is required, when it is required and how it should be communicated.

4. Engage and Infl uence Stakeholders Th e process includes communicating and working with stakeholders to meet their needs and expectations, addressing issues as they occur and fostering appropriate stakeholder engagement in project decisions and activities (PMBOK 5ed).

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2. Stakeholders vs. Project Lifecycle

Th is section will show how the project lifecycle can be used to subdivide the stakeholders by project phase (see Figure 11.1). Th is is a logical approach because, by defi nition, each phase produces a diff erent set of deliverables and therefore one would assume a diff erent set of stake- holders. Th is means the key stakeholders associated directly with the work will probably be diff erent with each phase.

Corporate Vision Phase

Corporate Requirements Phase

Business Case Phase

Project Feasibility Phase

Project Defi nition Phase

Stakeholders in this

phase are:

1. The CEO and

senior executives

who develop the

long-term corporate

vision and strategic

direction, together

with corporate

values and ethics

outlining how the

company intends to

do business.

2. Stakeholders

also include the

shareholders and

the market(s) the

company operates

within.

Stakeholders in

this phase are:

1. The portfolio

manager,

operations manager

and the market

research team

who determine

what actions the

company needs

to take to main-

tain competitive

advantage.

2. Stakeholders

also include the

customers,

competitors and

regulatory

authorities.

Stakeholders in

this phase are:

1. The project

sponsor and team

who develop the

business case.

2. Stakeholders

also include the

project steering

board, focus

groups and

external people

who could have an

impact on, or be

impacted by, the

project.

Stakeholders in

this phase are:

1. The project

manager and

project team who

carry out the

feasibility study.

2. Stakeholders

also include the

project steering

board and the

estimating

department.

Stakeholders in

this phase are:

1. The project

design team and

the planning team,

together with

external consultants

and design-specifi c

specialists.

2. Stakeholders also

include the project

steering board,

and the model- and

prototype-testing

companies.

Vision Statement Values Statement

Statement of Requirements

Business Case Feasibility Study Report

Project Design Project Plan

Figure 11.1: Stakeholders vs. Project Phases – shows how the stakeholders can be subdivided by project phase

Th e APM BoK 6ed (2012) defi nes Requirements Management as: Th e process of cap- turing, assessing and justifying stakeholders’ wants and needs.

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Project Execution Phase

Project Commissioning Phase

Operation Start-Up Phase

Project Upgrade Phase

Project Disposal Phase

Stakeholders in

this phase are:

1. The internal

resources and

contractors who

execute the

project, together

with the suppliers

and outsourcing

companies.

2. Stakeholders

also include the

project steering

board (scope

changes) and local

residents who

might be impacted

by the project.

Stakeholders in

this phase are:

1. The project

testing and

commissioning

team, and the

regulatory authority.

2. Stakeholders

also include the

project hand over

team, to

contractually

hand over the

project.

Stakeholders in

this phase are:

1. The project

sponsor and

operation

managers who

implement the

project into the

operating

environment.

2. Stakeholders

also include the

users who will

operate the project,

and the customers

who will buy

products made by

the project.

Stakeholders in

this phase are:

1. The corporate

team who analyze

the market to

determine the

optimal time to

upgrade the

project to

maintain

competitive

advantage.

Stakeholders in

this phase are:

1. The project

disposal team

who decommission

and dispose of the

project and return

the site to its

original condition.

2. Stakeholders

also include the

local residents and

environmentalists'

lobby groups.

Certifi cate of Completion

Client Acceptance Certifi cate

Operations Acceptance Certifi cate

Project Upgrade Proposal

Disposal Closeout Report

Th e project lifecycle shows the relative position of the stakeholders within each phase, and how their needs and expectations within each phase are interlinked by a common thread to produce the phase deliverables. Ultimately, it shows how to implement corporate strategy and achieve the corporate long-term objectives. Th e stakeholders’ analysis identifi es the diff erent stakeholders so that their needs and expectations can be infl uenced, aligned and managed.

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3. Stakeholders and Interested Parties

Th is section will outline how stakeholders can typically be subdivided by type, but it will take the identifi cation a step further and consider how the stakeholders can also be subdivided by organizational level. Figure 11.2 shows how people usually communicate with other people at their own organizational level.

Figure 11.2: Stakeholders’ Organizational Levels

Client

Team Members

Contractors

Team Members

Communicate

Project Sponsor

Project Manager

CEO

Project Manager

Project

Th e PMBOK 5ed (2012) defi nes Identifying Stakeholders as: Th e process of identifying all relevant people or organizations impacted on by the project, analyzing and document- ing relevant information regarding their interests, involvement, interdependencies, and potential impact on project success.

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Consider the list of project stakeholders from the project manager’s perspective shown in Table 11.1.

Table 11.1: Project Stakeholders

Client Project Sponsor

The project manager reports to the project sponsor. The project manager needs to work closely with

the project owner to ensure the project is satisfying the owner’s requirements and business case.

Project Steering Board

The project manager needs to work with the members of the project steering board, who are

a collection of eminent, experienced practitioners who are able to look at the big picture from

the company and market perspective. With these mentoring skills they are able to help and

guide the project manager to produce the deliverables.

Project Team The project manager might employ project team members to carry out project offi ce work. The project team members would then be responsible for project administration and producing the

project’s planning and control calculations. For the project team to work effectively, the project

manager must ensure the individual member's needs and personal goals are being met and,

collectively, the team’s needs are being met. It is also the project manager’s responsibility to

set up an effi cient Project Management Offi ce (PMO) facility.

Functional Managers

The project execution strategy might use internal resources that are generally supplied by the

functional managers who ‘own’ the company’s resources, machines and equipment.

When the project uses internal resources, the project manager has to negotiate with the

functional departments at the operational management level for the use of their resources.

The project manager/functional manager interface is one of the weak links in the matrix-type

organization structure, because the project manager is not in a position to order and demand

the supply of resources but, rather, has to request and negotiate with the functional managers

for the use of their resources.

The quality of this relationship will obviously infl uence the success of the project. The project

manager, therefore, needs to develop a negotiation strategy. Project managers often use a

trade-off approach where they acknowledge that the functional managers are the technical

experts responsible for the ‘who and how’ (resource and build method) and, in return, the func-

tional managers acknowledge that the project manager controls the ‘what and when’ (scope of

work and the scheduling) – and also the budget!

Contractors The project execution strategy might use outside contractors to perform some or all of the pro- ject work. This enables the project to access a large pool of resources, and tap into a wealth of

build-method knowledge and experience from previous projects. The contractor is, therefore,

able to advise the project manager of potential problems developing and even to offer solutions.

When a project uses external resources (contractors), the project manager will communicate

with the contractor’s project manager level, and the project’s team members will communicate

at the contractor’s technical members' level.

Suppliers The project execution strategy might engage suppliers, vendors and plant hire companies to sup- ply materials and equipment for the project. Where possible, the project manager should tap into

their wealth of experience and product knowledge from previous projects. The suppliers could

well advise the project manager of potential problems developing and even offer solutions.

When the project procures from external suppliers, the project manager will communicate

with the suppliers' project manager level and the project’s team members will communicate at

the suppliers' technical members' level.

(Continued)

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Consultants The project execution strategy might engage outside consultants to provide expert advice on technical and professional matters. The client’s company might be an expert in supplying a cer-

tain facility but not in the building of the facility. For example, one would not expect a telecom-

munications company to be expert at launching a satellite into orbit.

Regulators The regulators are the government departments and other national and international statutory bodies that have the authority to impose their rules and regulations on the project. It is the project manager’s

responsibility to identify these rules and regulations and ensure the project complies with them.

Users The users are the people who will operate the project or facility on behalf of the owner of the facility (not to be confused with the customers who buy the product). For example, the project

might be to build a power station, a mine or a manufacturing facility. The project manager

should involve the users as early as possible in the design process so that they can discuss

items of the project that impact on them personally, such as the ergonomics of the operators'

seats and controls. This involvement will help to address any resistance to change and also

gain the users’ commitment to accept the new facility.

The project manager will communicate with the users' operational management level and

the project’s team members will communicate with the operators themselves.

Customers The customers are the people who receive and pay for the benefi t of consuming the project (product, facility or service). For example, we are all customers for electricity (supplied by elec-

trical companies), telephones and mobile phones (supplied by telecommunication companies),

travel and accommodation (supplied by travel agents) and clothing (supplied by fashion retail-

ers). To gain customer feedback during the design phase the project manager could organize a

prototype for customer focus groups to discuss.

Lobby Groups

Lobby groups are special interest groups that might have an impact on the project or be

impacted upon by the project. It is the project manager’s responsibility to identify these lobby

groups and manage their concerns, because these are the very people who could derail the

project. For example, as a form of protest to prevent a project from starting, the Green environ-

ment supporters have been known to take drastic action by chaining themselves to trees to

prevent the contractors removing the trees and working on site.

'Hey, we're building a retirement home here; the nuclear power station is down the road!'

Reproduced with permission of Rio Tinto

Table 11.1 (Continued)

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Local Residents

Local residents who live in close proximity to the project are stakeholders and, therefore, can

be impacted upon by the project or have an impact on the project. For example, a power sta-

tion upgrade might increase the local traffi c, with an associated increase in traffi c noise, dust

and fumes.

Those who are negatively impacted upon by a project might be naturally inclined to oppose

the project if presented with the opportunity (during a planning submission). However, their

opposition might be turned around to become supportive if the issues are discussed and they

are appropriately compensated.

The project manager’s challenge is to arrange for those who gain to compensate those who

lose. This is one of the project selection economic tests – do the aggregate gains of a project

exceed the aggregate losses? If they do, then the people who gain are in a position to com-

pensate the people who lose. For example, the company that builds a dam will gain from the

hydroelectricity and water supply income and is, therefore, in a position to compensate the

people who live downstream and have lost their fi shing rights.

Competitors Competitors and other companies that are vying for the same market as the project might oppose the project for competitive reasons. If they can dilute, devalue or delay the project this

will give them competitive advantage.

For example, the mobile phone and tablet computer market: Apple, Google, Samsung and

Blackberry all have legal teams looking for potential infringements; court cases are often men-

tioned in the press.

It is the project manager’s challenge to anticipate the competitors’ response to the project so

that the project, in turn, can respond and realize benefi ts for the company.

It is unlikely competitors would communicate with each other with respect to each other’s

projects, but competitors would probably be aware of each other and might have met socially

at professional networking functions.

Support Companies

Project support companies are the organizations that provide goods and services to enable

the project to be built. For example, this could include the suppliers of telephones, electricity,

postal services and banking services. The project manager needs to work closely with these

stakeholders to ensure the services are supplied as and when required.

It is the project manager’s responsibility to identify the key stakeholders and interested parties and determine their needs and expectations. It is then the project manager’s challenge to manage a process of infl uencing and negotiating trade-off s and compromises, to enhance areas of support and negate areas of concern, to be able to move to an optimal alignment.

Th e project manager should ensure that the agreed stakeholders’ needs and expectations align with the proposed business case, the corporate vision statement, the corporate values statement and, in particular, the company’s acceptable level of risk.

Table 11.1 (Continued)

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4. Networking

It is said, ‘It’s not what you know – it’s who you know that opens the doors of opportunity.’ In the project leader’s case, it is having the ability to network with a broad range of contacts who can supply useful information, advice and resources to achieve the project’s objectives.

Th ere will be times during the project’s lifecycle when the project manager will need professional support to sort out a problem, strategy advice to give direction, interpersonal advice to deal with confl ict within the team, bargaining advice to negotiate a better deal with a contractor and, also, customer service advice on how to respond to a demanding client.

A network of contacts and a list of stakeholders are oft en thought of as being the same, and in many cases they are. But, if a distinction is required, then stakeholders tend to be associated with the project, and the network of useful contacts tends to be associated with the project manager and might have nothing to do with the project. Th is means the project manager interfaces with a new set of stakeholders with each project, but the network of useful contacts stays with the project manager from project to project.

Networking skills are possibly the most important entrepreneurial trait to help the project manager achieve the project’s objectives. Th e project manager’s ability to develop a network of useful contacts oft en far outweighs any portfolio of academic degrees and certifi cates of employment (the ‘old-school-tie’ who you know has always been acknowledged as being more important than what you know). Although what you know usually infl uences who you know in the fi rst place!

Th rough a network of useful contacts, the project manager can use the back door to beg, borrow and befriend, to gain access to ideas, information and resources needed to complete the project. Th ese contacts could off er ideas to solve a design problem; they could lend their equipment for free to solve manufacturing problems; or they could delay an invoice to help the project’s cash fl ow.

Networking skills are particularly useful for project managers working in a matrix structure where they do not have formal line authority over the resources they need. By skillfully using their circle of useful contacts they might be able to cut corners, get a better deal on materials and get the job done quicker and cheaper than if they had to rely on the formal structure alone.

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EXERCISES:

1. Discuss why there might be diff erent stakeholders during each phase along the lifecy- cle of the project.

2. Discuss how your stakeholders’ companies can be subdivided into diff erent organiza- tional levels and relate these levels back to your company.

3. You have been appointed as the project sponsor to manage the implementation of a new airport terminal. Discuss how you would conduct a stakeholder analysis to deter- mine the stakeholders’ needs and expectations.

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