Stakeholder management is considered the foundation for the success of any business or organization. However, not everyone has a deep knowledge of the importance of this type of management as well as how to build an effective Stakeholder management framework. Let’s follow this article for more beneficial information.
Background and principles of Stakeholder management
Stakeholders are individuals, groups, and organizations that have an interest or can share resources, influence and/or at the same time suffer direct or indirect effects on business operations in terms of strategies, plans, business activities, portfolio, project…
The impact of Stakeholders is often most significant in the first stages of the project. At this stage, the project is often flexible and can be changed so that almost all stakeholders can clearly be aware of this. The influence of Stakeholders often drops off remarkable when starting the construction, but will boom again during the project handover period. Therefore, the most effective principle of Stakeholder management is that project managers/leaders should manage stakeholder expectations continuously to ensure that their project results meet the demand and expectations of Stakeholders.
The definition of Stakeholder
“Stakeholder” is a term used to refer to individuals, groups, and organizations that have a close relationship with an enterprise, especially in projects. This is an audience that has an interest, can share resources, influence, and/or at the same time suffer direct or indirect impacts on business operations in terms of strategies, plans, business activities, portfolio, project… Stakeholders also include a group of important stakeholders who have the ability to influence or decide on the existence and development of the business.
Distinguish between internal and external stakeholder
Internal Stakeholders are individuals who benefit from an enterprise through direct contacts. For example: having a job, ownership, shares can also be an investment in that business. In contrast, external stakeholders are those who do not have any direct relationship but influence the business. It can affect in some way by action the business results.
Investors are the image of internal stakeholders and are greatly influenced by business results. For example, when an investor decides to invest 10 million in a startup in exchange for a 10% share a year.
An internal stakeholder can be a shareholder that brings benefits to the business. At that time, the investor officially becomes an internal stakeholder. The return on investment is completely dependent on the success or failure of that company.
External stakeholders belong to individuals who do not have any direct connection with the business. Instead, these stakeholders belong to a certain person or group of people or organizations directly affected by the activities of the business.
It can be understood simply as a business that begins to exceed the allowable carbon emissions limit. The people living around the area where the business operates are external stakeholders. Because they have suffered bad effects from pollution activities.
External stakeholders sometimes also directly influence the business. But not directly related to that business or unit. One of the stakeholders for this is the government because every decision or policy that the government makes is from time to time. It will make a significant impact from small to large in the operation of the business.
The roles of Stakeholders
The roles of stakeholders vary among businesses, depending on the rules and responsibilities of the company. Here are some typical roles of Stakeholders in the project:
The most common set of Stakeholders in a publicly-traded company is the board of directors, which consists of senior executives and outsiders who sometimes hold large amounts of equity in the company.
Although the board of directors is a more “hands-on” approach to controlling the company, some stakeholders prefer a “hands-on” approach by taking up management positions directly. Stakeholders may take over certain departments in the company or organization – such as R&D or Marketing – to manage the business and ensure that the organization can achieve the success. In privately held and publicly traded companies, large investors are often directly involved in business decisions at the management level.
Stakeholders are considered major investors who will increase or decrease their stake in your company according to your financial performance. Certain stakeholders, known as activist investors, will make extremely unpredictable investments and divestments to move stock prices and draw media attention to a given issue.
Major stakeholders are often highly qualified investors and want to stay away from companies that trample on human rights and environmental laws. They monitor your company’s outsourcing activities and globalization initiatives and can vote against your business decisions if they are deemed harmful to the company’s long-term goals. company.
Of course, this is just a broad description of the responsibilities of the parties involved. Ideally, you’ll have stakeholders that care about these four issues, but more often than not, short-term profits take precedence over long-term sustainability.
Why is project stakeholder management necessary?
With the above analysis, stakeholders can be considered the foundation for the success of any project. The implementation plans, the factors of input demand, the way to deal with the outputs… are all quite important links with stakeholders and bring benefits for the mutual connection in the process of completing the project.
Having a group of stakeholders is regarded as having a strong resource. In the case of unilateral implementation, the success rate is also there but accounts for quite a bit. Therefore, when planning the implementation of the project, please invite the stakeholders to cooperate with each other. There will be difficulties, but it will be more effective than doing it on your own.
You can treat your potential stakeholders by classifying and prioritizing them. Over the course of a project, one stakeholder might be more valuable in terms of the project objections than another, while some stakeholders might demand more attention than others.
Since stakeholders play a vital role in the development of any project or company, stakeholders management can be considered a particularly important task. When talking about stakeholder management, we should create a bidirectional and positive relationship with our stakeholders. In order to do that, we have to meet their expectations or objectives during the cooperation process. It is possible to build trust with stakeholders by communicating and recommending they join your working process.
To be effective in project stakeholder management, it is important that you help stakeholders get to the core information quickly and accurately. Many project managers or leaders try to hide related problems in the belief that everything will be resolved soon. However, in case you hide the current status of the project, you will lose the trust of the stakeholders.
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Stakeholder Analysis: How to identify potential Stakeholders?
This is one of the most difficult aspects of the project development process.
Stakeholders are classified as follows:
- Partners: Work together with the project team during the development of the project and have a direct or indirect influence on the progress of the project.
- Vendors: The third parties, who work in the field of outsourcing or providing support for specific areas such as infrastructure management…
- Leading bodies: Legal or regulatory agencies, who are involved in the assessment and making of regulations.
- Managers: People who have a role in managing the progress of the project.
- Owners: Primarily responsible for approving feature development and finalizing project requirements.
- Competitors: They compete for customers with us in the market.
- Customer: A person who directly uses the product created by the business.
To identify stakeholders we reward based on the following points:
- Participate in product development
- Manage product development
- Working with products
- Directly or indirectly related to the rules and regulations of the use of the product
- Owner of the products
- Influenced by product development
It can be concluded that, no matter what project, there are always stakeholders, so it is the task of the business analyst or project manager to identify these stakeholders, analyze their needs and get the job done with them.
Once stakeholders have been identified, it is important to pay attention to the power and interests of the stakeholders. Any stakeholder should not be overlooked throughout the management process, but the approach to each should be different.
Depending on the characteristics and needs, each project/company can identify its own group of stakeholders, classify and find key stakeholders – the person/organization with the most potential. Therefore, the project/company can come up with suitable projects to connect to these objects.
Stakeholder Mapping and How to Do It
Mapping is becoming an important technique in analyzing stakeholders. Before starting to find and invite stakeholders, you should consider the focus of the project. This will help you determine who is the most important stakeholder. Afterward, you can follow these below steps:
List the potential Stakeholders
Remember that Stakeholders come in all shapes and sizes around you. At this moment, your responsibility is to list everyone who can be considered a stakeholder, no matter how important they are to your project. After listing stakeholders, you should divide them into two main types of Stakeholders: people affected by your project and those who can contribute to it.
Analyze carefully Stakeholders
What are the importance and expectations of all the stakeholders listed? Keep in mind that some stakeholders are expected to have deeper importance to your project and have a more significant impact than others. Therefore, you should make correct and suitable determinations that can significantly affect your project.
When having a list of Stakeholders, you can start with prioritizing them in regard to the importance, influence, and contribution to your project. Decide who can have the most significant impact on the project. Also remember that the status of stakeholders can fluctuate during your working process, depending on your performance, potential, or even the status of your competitors. Therefore, Stakeholder analysis should be done and continue throughout the project.
Engage the Stakeholders
With the above information, you should figure out whether your stakeholders can be engaged with your project and how to motivate them. This is the process that you should know their understanding, expectation, and insight in order to support them.
How to build up a Stakeholder Management Plan?
Identifying the Stakeholders
Identifying Stakeholders is the process of identifying individuals, groups, or organizations that may influence or be affected by a project decision, activity, or output. Analyze and document relevant information regarding benefits, participation, interdependencies, impacts, and potential effects on project success. The inputs, tools and techniques, and the outputs of this process are shown as shown below.
Stakeholders in a project or more specifically include customers, sponsors, project team, and the public who are actively involved in the project can be positively or negatively affected by performance and output. They can influence the project and its deliverables. Stakeholders have different levels in the organization and also hold different powers.
Identifying project stakeholders from the beginning, phase and analysis of their benefits, desires, and influence is very important to the success of the project. Most projects have a number of Stakeholders depending on their size, type, and complexity. While the project manager’s time is limited and needs to be used as efficiently as possible, it is important to categorize stakeholders according to their interests, influence, and involvement in the project, it is also important to take into account the fact that Stakeholders’ influence or effects may not occur or become apparent in the later stages of the project.
Planning to manage Stakeholders
Stakeholder management planning is the process of developing a suitable management strategy to engage the Stakeholders most effectively throughout the project based on an analysis of the needs, benefits, and impact on the success of the project. One of the most significant advantages of this process is providing a clear plan for interacting with potential stakeholders to serve the project’s development.
Stakeholders engagement management
Stakeholder engagement management is the process of communicating and working with Stakeholders to achieve their needs and desires, address issues, and promote stakeholder engagement throughout the project. One of the most significant advantages of this process is that it allows the manager/leader of the project to increase the support and reduce the obstacles of Stakeholders which can remarkably increase the opportunities for project success.
Control stakeholder engagement
Control of Stakeholders’ commitment/binding is the process of the overall management of the Stakeholders’ relationship in the project and the adjustment of strategies and plans to align with the Stakeholders. The main benefit of this process is that it maintains and increases the efficiency and effectiveness of Stakeholders’ activities as the project progresses and its environment changes.
Why is a Stakeholder Management Plan Important?
Stakeholders play an important role in the development of each project. However, Stakeholders management is not an easy task. If you don’t have a suitable and effective management plan, it is possible that you can miss the resources from Stakeholders.
How to deal with difficult Stakeholders?
What do you do to deal with difficult stakeholders? Below are several tips to support you:
Accept their authority of Stakeholders
There will always be disagreements during negotiations with Stakeholders. Instead, oppose, give in on their requests. Remember, Stakeholders are the people who have power and influence over your project. Any mistrust or contradiction will lead to unnecessary failures.
Eliminate negative emotions
It’s not unsuitable to feel mad when working with Stakeholders, however, remember to calm down. Don’t destroy your relationship with your important stakeholders as well as the entire project with it.
An indispensable part of developing a positive relationship with Stakeholders is having empathy. Empathy is the ability to feel the emotions of others and it should be involved in any stakeholder management plan. If you understand the expectation, insights and problems of your Stakeholders, you’re going to achieve a successful project.
Many project managers or leaders try to hide related problems in the belief that everything will be resolved soon. However, in case you hide the current status of the project, you will lose the trust of the stakeholders. Be honest with Stakeholders. However, in order to get the idea across, should be tactful.
Theory of Stakeholder management
Stakeholder theory originated from Freman’s (1984) study on organizational management and business ethics “Strategic Management: A Stakeholder Approach”.
This stakeholder theory holds that the organization has an obligation to treat its stakeholders fairly, and in the event of a conflict of interest, the business has an obligation to strike an optimal balance of the advantage between them.
Because the needs of stakeholders are different and ever-changing, the organization will focus on meeting the needs of stakeholders with a large and direct interest. It is also assumed that the interests of the other parties are met satisfaction through the organization’s pursuit of business strategy and reporting information consistent with societal norms and values.
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The above article has provided an overview of Stakeholder management as well as its influence on the development of businesses or projects. Hope you guys can have better information in this field and achieve career success.
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