Stakeholder management

Conference Paper 2009

By Serrador, Pedro

Abstract

Stakeholder management is one of the key soft skills a project manager needs. Keeping the
stakeholders engaged and happy is critical to project (and project manager) success. Those
who have failed know the pitfalls. This paper will give an overview of stakeholder
management as well as provide some practical tips to improving communication and
relationships with stakeholders. It will cover the following areas: identifying and analyzing
stakeholders, managing stakeholders, dealing with problem stakeholders, and listening to
stakeholder concerns.

Introduction

The following is how A Guide to the Project Management Body of Knowledge (PMBOK®
Guide)—Fourth Edition (Project Management Institute [PMI], 2008) defined stakeholder
management:

Stakeholders are persons or organizations (e.g., customers, sponsors, the performing

organization, or the public), who are actively involved in the project or whose interests may
be positively or negatively affected by the performance or completion of the project.
Stakeholders may also exert influence over the project, its deliverables, and the project
team members. The project management team must identify both internal and external
stakeholders in order to determine the project requirements and expectations of all parties
involved. Furthermore, the project manager must manage the influence of the various
stakeholders in relation to the project requirements to ensure a successful outcome. Exhibit
1 illustrates the relationship between the project, the project team, and other common
stakeholders. (PMI 2008, p. 23)

Exhibit 1: Project relationships (PMI, 2009, p. 24)

What Are Other Definitions of a Stakeholder?

Here are some other definitions of stakeholder:

1. A person, group, organization, or system who affects or can be affected by a

project's actions. (Wikipedia 2009)
2. Stakeholders are the specific people or groups who have a stake, or an interest, in
the outcome of the project. (Visitask, 2009)
 3. A person, group, or authority who is involved in or may be affected by project
activities and who could act against the project if their needs are not considered.
(Wideman, 2002

To me the last one is the best definition: “Someone who could act against the project if
their needs are not considered.” (Wideman, 2002)This type of stakeholder needs to be kept
happy by delivering a successful project to him or her.

Failures in Stakeholder Management

Failure to identify stakeholders, understand stakeholder needs, and meet their needs can
result in spectacular project failures.

Here are some publicized examples taken from an article by Jake Widman (2007) in CIO
magazine.

FoxMeyer ERP Program

In 1993, FoxMeyer Drugs was the fourth largest distributor of pharmaceuticals in the
United States and was worth $5 billion. In an attempt to increase efficiency, FoxMeyer
purchased an SAP and a warehouse automation system and hired Andersen Consulting to
integrate and implement the two in what was supposed to be a $35 million project.

One of the reasons for failure was the warehouse employees whose jobs were affected—
more accurately, threatened—by the automated system were not supportive of the project.
After three existing warehouses were closed, the first warehouse to be automated was
plagued by sabotage, with inventory damaged by workers and orders going unfilled. By
1996, the company was bankrupt; it was eventually sold to a competitor for a mere $80
million.

Canada's Gun Registration System

In June 1997, Electronic Data Systems and U.K.-based SHL Systemhouse started work on
a Canadian national firearm registration system. The original plan was for a modest IT
project that would cost taxpayers only $2 million—$119 million for implementation, offset
by $117 million in licensing fees.

Then politics got in the way. Pressure from the gun lobby and other interest groups resulted
in more than 1,000 change orders in just the first two years. The changes involved having to
interface with the computer systems of more than 50 agencies, and since that integration
was not part of the original contract, the government had to pay for all the extra work. By
2001, the costs had ballooned to $688 million, including $300 million for support.

However, that was not the worst part. By 2001, the annual maintenance costs alone were
running $75 million a year. A 2002 audit estimated that the program would wind up costing
more than $1 billion by 2004 while generating revenue of only $140 million, giving rise to
its nickname: “the billion-dollar boondoggle.”

Homeland Security's Virtual Fence

The U.S. Department of Homeland Security is bolstering the U.S. Border Patrol with a
network of radar, satellites, sensors, and communication links—what is commonly referred
to as a “virtual fence.” In September 2006, a contract for this Secure Border Initiative
Network was awarded to Boeing, which was given $20 million to construct a 28-mile pilot
section along the Arizona-Mexico border.

Congress learned that the pilot project was being delayed because users had been excluded
from the process and the complexity of the project had been underestimated. In February
2008, the Government Accountability Office reported that the radar meant to detect illegal
aliens coming across the border could be set off by rain and other weather, and the cameras
designed to zoom in on the subjects sent back images of uselessly low resolution for objects
beyond 3.1 miles. In addition, the pilot's communications system interfered with local
residents’ WiFi networks. The project is already experiencing delays and cost overruns,
SBInet program manager Kirk Evans resigned citing lack of a system design as just one
specific concern—not an auspicious beginning.

Not all projects are large enough to get into the headlines but smaller projects also fail due
to lack of stakeholder management. Failure of stakeholder management can result in issues
that are more mundane: a project being delayed a few months for rework or a key
stakeholder being unhappy with the project. It can also cause an unhappy stakeholder to ask
for the project manager to be replaced.

Identifying and Analyzing Stakeholders

The first step in a successful stakeholder management strategy is identifying and analyzing
stakeholders. Follow these steps.

 Identify the stakeholders,

 Understand their needs,
 Manage all stakeholders, and
 Confirm that stakeholder roles or needs have not changed.

Identify the decision makers. Then identify who may be impacted by the project. Who are
the key subject matter experts? Who will be impacted? Who are the decision makers in that
area and who are the subject matter experts? A good technique to apply to identifying
stakeholders is to ask each one found to nominate others.

Understand: The project manager should take some time to understand and analyze the
stakeholders and their potential impact on the project. What are the impacts? When do they
occur? How does the impact affect the stakeholder?
Manage: Project managers need to manage stakeholders’ requirements and manage them
through the constraints (time, budget, etc.) They need to make sure their expectations are
set appropriately and that the team does not over promise on the solution. Project managers
should get commitment from key stakeholders and work to have them sign off on the
charter or some other document stating they agree with the approach.

Check: On a regular basis, project managers need to go back and check with existing
stakeholders whether anything has changed. Are there new stakeholders? Have impacts
changed? Have priorities changed? The more frequently project managers check, the
quicker they will pick these issues up and be able to deal with them.

As Freeman and McVea (2001, p. 12) stated, stakeholder management is a never-ending

task of balancing and integrating multiple relationships and multiple objectives.

Project managers need to ensure criteria for success has been defined and agreed to. Getting
this defined early will make the final phase run more smoothly. As well, the process itself
may expose new stakeholder needs.

Listening to Stakeholder Concerns

Project managers need to take stakeholder concerns seriously, which on some project does
not happen. Some project managers fall into the trap of thinking concerns come about
because they are dealing with a problem stakeholder. A project manager is best advised to
understand the issue first before coming to that conclusion.

 Remember that stakeholders probably have extensive experience;

 Listen to their concerns; and
 Understand the concern and reassure.

If they are concerned about an aspect of the project, even if the team is not concerned about
the issue, the issue needs to be reviewed. The project manager should explain to them why
the team is not concerned and why they should not be concerned. However, the project
manager should also realize that the stakeholders may have been in the business for a long
time, might understand the environment better, and might know some things the project
manager does not.

Often stakeholders may not understand the project management process. If it is an IT

project, they may know little about IT. Some of their concerns may be based on that
unfamiliarity. Not all their concerns will be valid in other words. However, the project
manager must take the time to educate them and confirm that their concerns are unfounded.
Remember, if someone is a senior businessperson, he or she understands the environment
and production intimately, wouldn't it be foolish not to make use of his or her knowledge?
References

Berman, S. L., Wicks, A. C., Kotha, S., & Jones, T. M. (1999). Does stakeholder
orientation matter? The relationship between stakeholder management models and firm
financial performance. Academy of Management Journal, 42(5), 488–506.

Brown, C. (2007). An introduction to stakeholder management. Retrieved from

www.pmhut.com

de Bernardy, R. (2004). Glossary of project management terms. Retrieved from

www.visitask.com/stakeholder-g.asp

Freeman, R. E., & McVea, J. (2001). A stakeholder approach to strategic management,

handbook of strategic management. Oxford: Blackwell Publishing.

Guest, P. (2007). Stakeholders and project management. Paper presented at the Businet
Conference, Riga, Latvia.

Hodgkinson, G. P., Herriot, P., & Anderson, N. (2001). Re-aligning the stakeholders in
management research: Lessons from industrial, work and organization psychology. British
Journal of Management, 12,S41–48.

Pritchard, C. (2006). Ten steps to effective stakeholder management. Frederick, MD:

Pritchard Management Associates.

Project Management Institute. (2008). A guide to the project management body of

knowledge (PMBOK® guide) (4th ed.). Newtown Square, PA: Project Management Institute.

Visitask (2009) Stakeholder Retrived from

http://www.visitask.com/Glossary.asp?criteria=stakeholder&allwords=0

Wideman, M. R. (2002). Wideman comparative glossary of common project management

terms v3.1. Retrieved from www.maxwideman.com/pmglossary

Widman, J. (2007). The tech disaster awards: What you can learn from IT's biggest project
failures. Retrieved from www.cio.com