Are you in charge of a project that involves several parties that could be influenced by its outcomes? If so, let's discuss what stakeholder management is and why it is crucial. To start, let's define a stakeholder.
An individual, group, or organization with a "stake" in the success of a specific project is referred to as a stakeholder. They may be board members, investors, suppliers, or anybody else who may be directly influenced by the results of a project.
What is Stakeholder Management
It is the practice of identifying, analyzing, and prioritizing relationships with internal and external stakeholders who are directly affected by the outcome of a venture or project. It involves proactively implementing the right actions to build trust and foster better communication with multiple stakeholders.
Why is Stakeholder Management Important?
According to Pulse of the Profession (PMI) 2021, 63% of companies have already integrated stakeholder engagement strategies. After all, it enables a deep understanding of stakeholders by establishing trust and strengthening interpersonal communication. Thereby ensuring that all stakeholders have a shared, similar understanding of the organization’s key goals and work together to fulfill these objectives. The main benefits are:
- Ensures robust risk management
- Creates a strong base for social license
- Aligns project concepts with business goals
- Supports conflict management
- Improves business intelligence
What are the Different Types of Stakeholders?
While there could be many types of stakeholders involved in a project, they can be primarily categorized under two heads—internal and external stakeholders.
Internal stakeholders work within the organization and are directly invested in the project’s performance. For example, a company’s employees, top management, team members, and board of directors can all be considered internal stakeholders.
External stakeholders may not be directly employed at the company or engaged with it but are impacted by the project in some way. Customers, shareholders, creditors, and suppliers are a few examples of external stakeholders.
Stakeholder Management Examples
Looking at an example will help answer the ‘what is stakeholder management’ question.
Let’s assume a government agency is working on developing a new policy. While refining a policy or developing a new one, there could be competing interests and varied opinions. Local councils, community groups, or certain businesses may not be supportive of this change. This is where stakeholder management can play a transformative role. Through effective stakeholder management, one can engage with these groups, find common ground, and address key changes that will enable a smooth decision-making process.
What is a Stakeholder Management Plan?
It is a document that outlines core management techniques to effectively understand the stakeholder landscape and engage them throughout the project lifecycle. A stakeholder management plan usually includes:
- All the project stakeholders and their basic information
- A detailed power interest matrix or a stakeholder map
- The main strategies and tactics that are best suited to key stakeholder groups
- A well-laid-out communication plan
- A clear picture of the resources available (budget, expertise, etc.)
Once you get to know what stakeholder management is really about, it’s essential to understand how to create an effective stakeholder management plan.
How to Make a Stakeholder Management Plan?
Typically, a project manager is responsible for creating a stakeholder management plan. However, it is ideal also to involve all the project members to ensure accuracy. These are some steps to be followed while creating a stakeholder management plan:
1. Identify Stakeholders
Conduct stakeholder analysis to identify key stakeholders and how they can impact the project’s scope.
2. Prioritize Stakeholders
Learn which stakeholders have influence over what areas of the project. This can be done by creating a power interest grid—a matrix that helps determine the level of impact a stakeholder has on the project.
3. Establish a Communication Plan
It must include the type of communication, frequency, format, and distribution plan for communicating with each stakeholder.
4. Manage Expectations
Develop dedicated timelines and share them with individual stakeholders to ensure the project is managed smoothly and also remains true to the stakeholders’ expectations.
5. Implement the Plan
Make sure that all stakeholders have the final management plan before it is implemented. This helps build trust among teams and promotes transparency. It is also important to track the accuracy of the stakeholder management plan and make any changes based on the overall requirement.
Stakeholder Management Principles
Now that you have a clear picture of what is stakeholder management, let’s take a look at the Clarkson Principles of Stakeholder Management. Max Clarkson, after whom these principles were named, was a renowned stakeholder management researcher.
First Principle: Actively monitor and acknowledge the concerns of stakeholders and consider their interests throughout operations and decision-making processes.
Second Principle: Have open and honest communication with stakeholders regarding any concerns, contributions, or risks that they may assume because of their association with the project.
Third Principle: Adopt practices and behaviors that are considerate toward the capabilities and concerns of all stakeholders.
Fourth Principle: Recognize the efforts of stakeholders and ensure fair distribution of burdens and benefits of corporate activities while taking potential risks into consideration.
Fifth Principle: Ensure cooperation with public and private entities to minimize risk from corporate activities.
Sixth Principle: Avoid any activity that could potentially threaten stakeholders or jeopardize human rights.
Seventh Principle: Acknowledge any conflicts between the project manager and stakeholders. Such conflict should be addressed with open communication and reporting wherever required.
Stakeholder Management Process
The process is simple to understand once you have in-depth knowledge about what is stakeholder management. These are the five main steps involved:
Stakeholder Identification
It involves outlining key stakeholders and segregating them into internal and external stakeholder groups.
Stakeholder Mapping
Once the list of stakeholders is segregated, you can analyze the stakeholders based on their level of influence, involvement, and importance vis-à-vis the project.
Stakeholder Strategy
Since strategies are formed based on individual stakeholder groups in order of influence, this is your next important step. It defines the type of communication relevant to each stakeholder.
Stakeholder Responsibility
It is essential to determine which team or individual should be responsible for which aspect of stakeholder engagement is essential. A stakeholder communication plan or template can be of great help here.
Stakeholder Monitoring
Decide how to track stakeholder activities and integrate changes with ease. This may also involve using related software to boost convenience.
Stakeholder management plays a vital role in leadership as it enables leaders—or managers in the case of projects—to identify and assess stakeholders’ expectations with a vested interest in a project. They do so by ensuring that everyone involved has a common understanding of the goals and objectives. Furthermore, it enables them to effectively manage any potential conflicts between stakeholders.
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