Table of Contents
Project Timing – Gantt chart
Project risk and mitigation
The risk management process
Risk response development
Communications management plan
Control and Monitoring
Table of figures
List of tables
Catering terms and conditions
Final menu plan
Marquee terms and conditions
Golf club terms and conditions
Stakeholder management (SM) is an important aspect of project management (PM). This paper aims to identify different SM approaches and the associated methods of analysing stakeholders and strategy to deal with them. Multiple views on SM and best practice will be considered and reviewed with case studies being used to highlight the theory-practice gap.
Over the last few decades there has been a shift in managerial thinking that has markedly changed the business landscape. Historically, many managers focused on increasing owners’ value, which has been criticised given the myopic view also known as “shareholder model of governance” (Johnson et al., 2008). Given today’s global and fast-changing environment managers tend to adopt a more holistic view of the purpose of the organisation. Therefore, business ethics concepts have gained greater significance in recent decades. The core of these concepts is SM, which is considered a key lever for achieving project success (Burke and Barron, 2007).
SM can be defined as “the systematic identification, analysis and planning of action to communicate with, negotiate with, and influence stakeholders. Stakeholders are all those who have an interest or role in the project or are impacted by the project” (APM, 2011). Without question, a sound understanding of the issues involved is crucial since “all businesses operate in a complex system of interests and influences” (Recklies, 2001).
Figure 1 shows various key stakeholders as identified by Karlsen (2002).
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The goal of SM is to identify stakeholders and analyse their needs, expectations and interests and determine ways of satisfying and influencing them (Burke and Barron, 2007). For this purpose, a distinction can be made between internal and external stakeholders (e.g. employees and customers) as well as contractual and community stakeholders (e.g. suppliers and citizens) (Johnson et al., 2008). Savage et al. (1991) suggested classifying stakeholders depending on their level of threat and cooperation. Mitchell et al. (1997) classified stakeholders according to their power, the legitimacy of their relationship and urgency of their claim in order to determine importance and salience. The latter has been researched by Karlsen (2002) whose findings confirmed that clients and end-users are regarded most important.
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Turner et al. (2002) stressed the need to develop a stakeholder register that shows stakeholders’ objectives, awareness, support, influence and the respective strategy to satisfy them. He further referred to the need to determine their view of the project outcome and their level of commitment and knowledge. In addition, project managers should determine how inclined each stakeholder group is to impose their interests and their power to do so (Recklies, 2001).
In effect, the information gained from stakeholder analysis enables project managers to learn about and better understand stakeholders’ positions. Furthermore, they are enabled to develop a sound strategy and communication plan, create a priority list of needs and expectations and define actions to reposition stakeholders if necessary (Johnson et al., 2008; Burke and Barron, 2007). However, managing stakeholder expectations may be difficult as stakeholders often have differing interests and demands so may come into conflict (Ward and Chapman, 2008; Aaltonene, 2010).
Olander (2006) argued that project managers therefore need to make trade-offs so that project objectives are met. He further stresses that it is pivotal considering the negative effects of failure to satisfy stakeholders. Also, potential conflicts between stakeholders and their role in project life cycle stages should be identified (Burke and Barron, 2007). In this regard Dess et al. (2010) contend that a “zero-sum-game” where only one stakeholder benefits is detrimental.
Bourne (2011) argues that pragmatic leadership provides the appropriate approach to establish a “balance between managing and leading” and foster stakeholder commitment, which is particularly important at the planning stage of projects.
Figure 3 illustrates the key steps in effective SM strategy development as identified by Sutterfield et al. (2006).
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It is worth noting that there are different perspectives of SM. As a proponent of the shareholder model of governance Friedman (1970) argued that stakeholders benefit by an organisation’s success, since employees receive wages and secure jobs, suppliers and contractors receive money in exchange for goods and services and the local community receives taxes. Friedman further argued that since a business is an artificial person it cannot have responsibilities that go beyond legal boundaries and ethical norms. Essentially, this notion neglects the broader impact organisations can have on their environment, which was exemplified by the recent catastrophe in Japan.
Freeman et al. (2007) argued that due to the interrelatedness of stakeholder interests, managers need to adopt an enlightened approach in order to create and sustain value for all stakeholders. They believe that business is all about mutual benefits and collaboration. Dess et al. (2010) proposed a similar notion which they refer to as “stakeholder symbiosis”. Indeed, there is evidence that both customers and employees are attracted to those organisations that are considered to behave ethically (Jobber, 2010).
Boatright (2006) confirms Freeman’s view has influenced managerial thinking, yet questions whether satisfying all stakeholders is a task of managers. He further argues that stakeholder management is not about satisfying all stakeholders. Rather, emphasis should be placed on meeting needs and ethical norms sufficiently to encourage commitment. Despite the challenges to meet the needs of all stakeholders involved, it is essential to make an effort finding ways of mitigating or avoiding any adverse effects on individual stakeholders given the importance of ethical behaviour today.
PM offers organisations the means to be efficient, effective, and competitive in a shifting, complex, and unpredictable environment (Lavagnon, 2009). As projects operate in an environment broader than that of the project itself (Duncan, 1996), almost every project takes place in a context where stakeholders play a major role in the accomplishment of the project with projects being sensitive to actions and decisions taken by the stakeholders. (Karlsen, 2002; Ward and Chapman, 2008). Furthermore, if stakeholders are not fully committed to the project they may withhold essential resources, defect or adversely influence other stakeholders (Duncan, 1996; Kappelman et al, 2006).
Therefore, in PM it is commonly accepted that the interests of stakeholders need to be dealt with using stakeholder management to support the success of a project (Achterkampe and Vos, 2008; Assudani, 2010).
SM consists of identifying and prioritising key stakeholders (Duncan, 1996; Assudani, 2010). Analysing the needs of various stakeholders to ensure they are met, managing robust relationships with them by facilitating communication and information distribution, making decisions that satisfy stakeholder objectives and leveraging the resources necessary to achieve the objectives (Achterkampe, 2008; Assudani, 2010).
PRINCE2, a highly regarded PM methodology, emphasizes the importance of establishing a project board which represents key stakeholders who direct the project, because this fosters sharing knowledge and different views (PRINCE2, 2011).
Given the importance of SM it has become integral in PM and adopting its principles is considered best practice.
1) In 2006, the UK government planned to issue identity cards with the aim to better protect personal identity, tackle illegal working and immigration abuse and prevent crime. External organisations would collect the 'sensitive' personal data of citizens to be stored on a central database (Heath, 2009; BBC, 2009; ITPRO, 2008).
Furthermore, the government decided to rely on existing technology instead of implementing new IT-systems (BBC, 2009d; McCue, 2009).
Questions were raised by official bodies, politicians and experts about the scheme’s usefulness, data security and the government’s ability to run the scheme (Heath, 2009; Ferguson, 2009; Ibrahim, 2009; Privacy International, 2004; Bell, no date). Surveys indicated 9 in 10 citizens worried about data security, no surprise given that the technology had been breached several times (Dean, 2009; Ballard, 2009; Charette, 2009; Kirk, 2007).
Although key stakeholders lacked commitment the labour government began implementation of the project which was then scrapped the Tories in 2010 as it was seen as too expensive (Travis, 2010). The project had cost the tax payers millions and failure could have been avoided had the government truthfully answered three simple questions:
“Do we understand what is needed? Is the knowledge available or can it be procured within ‘the state of the art’? And does the solution fit, or does it violate the morals and values of the intended users?” (Drucker, 1985, p. 68).
2) NASA conducted the Mars Surveyor '98 program which was comprised of two spacecraft launched separately, the Mars Climate and the Mars Polar Lander. The purpose of the mission was to study environmental and weather data. Ultimately, the Mars Climate Orbiter was destroyed due to a navigation error that caused it to miss its target altitude by 80 to 90 km, instead entering the Martian atmosphere at an altitude of 57 km during the orbit insertion maneuver. This failure caused a loss of $125 million (Grayzeck, 2011). The cause identified by NASA was that there were two teams involved in the Space probe development which were using different systems of measurement and thus they failed to convert metric and English units correctly. The project had failed to set clear success criteria for the project outcomes and was lacking effective communication and team working as well as adequate and appropriate staffing. This shows that it is crucial to conduct continuous risk analyses, emphasize clear communication and discuss potential issues throughout the project phases (Shore, 2009b).
3) The Nam Theun 2 (NT2) Hydropower Project in Laos began operation in April 2010 (NTPC, 2010). Development was backed by stakeholders such as the World Bank (WB) (DeLauney, 2011). The revenue created will support Laos’ poverty reduction and biodiversity conservation efforts (Bank, 2005; NTPC, 2010; DeLauney, 2011).
Questions were raised by NGOs as to whether all stakeholders, particularly the 100,000 local people affected by the dam, had their views and concerns heard (Montlake, 2004).
The WB and its partners attempted to incorporate stakeholder participation by setting up independent assessments. NGOs highlighted how these assessments where fundamentally flawed (IRN, 2007). It was not until NGOs where identified as stakeholders and transformed into constructive participants that an increase in transparency and a decrease in conflict were observed (AUSAID, 2005). However, it was very difficult for unbiased assessments to take place as a NGO forum in 1998 was banned after it criticized NT2 (DeLauney, 2010; Singh, 2008).
Furthermore, NGOs argue that there was no true participation of local stakeholders in public consultations because the political climate in Laos does not allow it (IRN, 2007). Furthermore, consultations on a village level where fundamentally flawed as villagers lacked the education to understand the consequences or even what the consultations were about (Woods, 2004).
In NT2 the WB and its partners perused ideas of incorporating stakeholder participation. However, NGOs and local people were never fully incorporated into development strategies (IRN, 2007) and as a result, local people are struggling to adapt to the change imposed upon them (DeLauney, 2010; DeLauney, 2011).
4) When Boeing developed the 777 plane, the guiding principle, “working together” fundamentally contributed to the successful project. Boeing designed the 777 aircraft with the most powerful engines ever built and 20 percent more fuel-efficiency compared with its predecessors. Boeing spread the financial and marketing risk of the $6 billion project by subcontracting 70% of the project to suppliers and involving strategic partners. Since the 777 project involved 10,000 people from different areas and industries it required an enlightened approach towards SM that reflected the company’s policy of openness and non-competitiveness (Shore, 2009a; Boeing, 2011). The creation of a new collaborative approach to teamwork significantly enhanced both design and manufacturing processes by radically changing the way the workforce worked with management (ADA, 2011).
It was seen that developing an open team concept, one that emphasizes the representation of many functional areas of the organisation whilst involving key stakeholders, helped prevent project failure but also proved to be instrumental in changing the basic project management culture. Involving multiple stakeholders over the life cycle of any project can entail significant costs and challenges, yet opening a PM process to stakeholders can be advantageous as it focuses the project squarely on business objectives and allows collective wisdom to be tapped (Shore, 2009a).
SM has been shown to be crucial in PM. Nowadays, the importance of the triple bottom-line of financial, environmental and social performance requires project managers to rethink and adapt their approaches if projects are to succeed. Project success is dependent on the ability of a project to satisfy stakeholders and avoid any adverse effects on the micro and macro environment. Although best practice stresses the importance of SM, there is ample evidence that it is not always effectively applied in practice. Individual stakeholders may use their power in order to pursue their own interests to the detriment of other stakeholders. Poor communication between stakeholders and the lack of stakeholder commitment are further barriers that inhibit project success. It can be argued that true project success is only possible with stakeholder symbiosis where stakeholders share a common goal and vision. In reality this is difficult to achieve even using the most experienced and skilled project managers given the wide range of conflicting interests.
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