Stakeholder Analysis Process
Developed by Charlotte Gram Hartlev
Competent managing of different stakeholders is a crucial part of projects, programs or portfolios management. A project success depends exclusively on the stakeholders satisfaction, which makes the handling essential. Stakeholder has different influence and interest in projects and must therefore be treated in individual ways. Stakeholder analysis process consists of a number of steps including a large variety of methods and tools that establish a broad foundation of knowledge and understanding of the different stakeholders behavior. The stakeholder analysis is a dynamic process through a project, as stakeholders are changing character, new are acceding and old are leaving. The stakeholder analysis is overall creating groundwork for evolving a decision and conduct strategy of managing the stakeholder. A stakeholder analyses is a simple and helpful approach for creation of a managing strategy, but it is also providing some distortion view of the reality.
The term “stakeholder” appeared for the first time in 1963 in management literature at the Stanford Research Institute . The stakeholder concept has since been modified and expanded to a number of disciplines over its lifetime. The original way of thinking of stakeholders was as shareholders or stockholders – considered as the only group that management was responsible to. The stakeholder theory was for the first time detailed described in the book Strategic Management: A stakeholder Approach by R. Edward Freeman (American Philosopher and Professor of Business Administration) in 1984 where the term stakeholder became specified as everyone who has the possibility to affect or may be affected by the action of a corporation. Later on was the stakeholder theory combined with strategy theory and together was the stakeholder management approach formed. The leaders in the development and integration of the stakeholder approach in strategy theory (stakeholder management) were Harrison (Professor of Finance and Strategic Management) and St. John (Professor of Management) . In addition, the stakeholder theory was discussed by Donaldson (Professor in Ethics and Law) and Preston (Professor in Business) in 1995 not to be a single theory, but a set of theories for the management of stakeholder, covering two over all dimension: the descriptive and instrumental perspective .
The stakeholder analysis is a process that systematical gathering and analyzing all the necessary information in order to create a deep understanding of the different actors (organizations and individuals) behavior, relationship, interests etc. to a given project . Stakeholder analysis is used to increase the chance of project success in project management through directly or indirectly handling of the stakeholders. The stakeholder analysis is therefore an important part of the Risk management in project. It is essential to identify the stakeholders level of influence, interest and priority them in order to manage them optimal and in the right context. Based on the analysis it becomes possible to develop an appropriate strategy to build and maintain the networks to stakeholders, which are required for the success of a project.
The stakeholder analysis is a continuing and repeating process in the project planning and execution, as composition of the stakeholders are dynamic and change though the project . Stakeholder interest and level of influence can change as the project evolve, as well as new stakeholder may join and old my drop out.
The development of the stakeholder analysis should take place in the beginning of the project as it is used as a foundation for the whole project. Based on the stakeholder analysis it also becomes possible to perform a risk analysis, plan the entire project approach, plan the communication and implementation approach and develop objective in cooperation with the key stakeholders.
Stakeholder Analysis Approach
There exist several different stakeholder analysis approaches, but the basic philosophy is almost the same. A more generally stakeholder analysis process for mapping the staleholder is discussed below. The process consists of four steps and is describing the main characteristic in the steps.
Generally Stakeholder Analysis Approached .
- 1.Identify stakeholders
- 2.Prioritize stakeholders
- 3.Profile stakeholders
- 4.Strategy for managing stakeholders
1. Identify stakeholders
Stakeholders are persons, group or organizations that can affect or can be affected by the action of a corporation. Recapitulative stakeholders are all relevant actors that could have an active or passive influence or interest in a given project. The stakeholder exists throughout the entire project and in the outcome of the project. The identification of the different stakeholders is particularly important to the success of the stakeholder analysis. If all possible stakeholders are not embraced, it can lead to major consequences for the projects outcome.
The identification of different stakeholders is based on existing knowledge and associations. A broad approach is of great important when stakeholders are identified. The stakeholder search can be clarified from four different perspectives: Upward, External, Inward and Program . The stakeholder that are located “Upward” are the task author and among them are the board, senior manager and the steering committee. External stakeholders consist of government, colleagues, external customers, suppliers, partner, competitors etc. The Inward perspectives are considering the stakeholder within itself. This could be stakeholder as internal customers, staff functions, line managers etc. The last perspective is the “Program” and is containing stakeholders as project teams and program leadership team.
The identify stakeholders can be presented in a table, see figure 1. The found stakeholders can now be mapped in step 2.
2. Prioritize stakeholders
When the stakeholder is identified it becomes possible to prioritize them according to their significance in relation to the project. The prioritization generates a decision making ground and a focused strategy for management the stakeholders. A broad selection of different techniques and tools exists for creating and visualizing the categorizing and prioritizing of the stakeholders.
One approach to priority the stakeholders is based on stakeholder importance and influence (power) for the project . Each stakeholder importance and influence to the project is assessed and then plotted into an importance-Influence matrix, see figure 2. The stakeholder positions in the matrix represent a fitting management approach that increases the chance of a successful outcome of the project.
The importance describes stakeholder influence relative to the delivery of the outcome of the project. Stakeholder knowledge can be a critical resource in a project and will therefor be of high importance. The influence (power) describes stakeholder level of direct or indirect power of the project feasibility. The word power (influence) in this context is to be understood as the probability of one actor/stakeholder being in a position that gives them the opportunity to deice the outcome of the project based on their own desire. The power to change the outcome against other stakeholders wishes. In short, power is to make people do something they normal would not have done. Amitai Etzioni (an Israeli-American Sociologist) categorizes three different type of power: coercive power, utilitarian power and normative power . These three categories can be used as guidelines when stakeholders power has to be identified. Coercive power is the physical resource of force, utilitarian power is based on the financial or material resource and normative power is symbolic resource such as social symbol that can lead to accept among people.
The importance-Influence matrix divides the stakeholders into four main categories, requiring different approached for optimal managing.
HH (High importance and High influence): The stakeholders have to be fully engaged and fell safety with the project. It is essential to establish a good and close working relationship with these stakeholders. These stakeholders are often referred to as key stakeholders and will require a large amount of communication and management through the whole project.
LH (Low importance and High influence): The stakeholders must be careful monitored and managed in order to keep them satisfied. These stakeholders carry a high risk of the success to the project.
LL (Low importance and Low influence): The stakeholder has low priority. Minimum effort is required to keep them involved in the project.
HL (High importance and Low influence): The stakeholder contribution is important for the completion of the project. The stakeholders need special and targeted embracing to keep them interests.
3. Profile stakeholders
When different stakeholders are identified theirs values, needs, interests, feelings, level of importance, engagement, negative impact, motivation etc. in relation to the project is defined in order to fully understand the stakeholders and thereby management them correct. By doing a stakeholder profile, instantly assumptions about the stakeholders are avoided and a more credible foundation established.
When the stakeholders are investigated it becomes clear which stakeholder groups consist of homogeny and heterogeneous stakeholder. Stakeholder groups containing of stakeholders with heterogeneous attitudes and values have to be separated. It is essential that the stakeholders are grouped homogeny in order for the determined approach to work optimally.
The profiles have to be credible and give a true impression of how the stakeholders are. This can be very difficult to fully achieve, as some aspect of the profile is based on the stakeholders opinions and values. This information and knowledge is not to be funded physical but psychical. This can lead to insufficient information and assessments/assumptions become necessary in order to complete the profile. The collecting of the different types of information and data can be done through two approaches: primary sourcing (face-to-face interview, letters, mail, phone call) and secondary approaches via sourcing (documents, reports, webpages). The primary sourcing creates an opportunity for a deeper exploration of the stakeholder inner feelings and values. In order to optimal interact and collect the data, it is important to recognize the underlying culture  and create a confident/comfortable environment during the interview.
There is no wrong or right way of structuring the stakeholder profile. The profile structure should just be appropriate for creating a fast overview and impressing of the different stakeholders and with the possibility for a deeper investigation leading to a deeper understanding. Figure 3 presents a proposal for a stakeholder profile.
4. Strategy for managing stakeholders
The stakeholder management strategy builds on the identification, prioritization and profile customization of the stakeholders. The overall stakeholder management strategy documents the strategy for the approach for managing and communicating with the stakeholders. The frequency of communication and managing depends on the prioritization of the stakeholders. Higher priority cause higher management attention. The key stakeholders have the greatest impact on the success of a project and are therefor requiring most communication and management attention.
Developing a communication strategy is based on the stakeholder prioritization and profile to ensure optimal communication. The stakeholder profile gives a decision ground of how to target the communication, contents and means of communication, and the prioritization gives an impression of the frequency of the communication and also the communication means. Key stakeholders feedbacks are important to involve in the communication to ensure their satisfactions with the project and discover possible dissatisfactions. Based on the feedback it can be determinate if the key stakeholders need to be more involved in the project.
The execution of communication can cause huge challenges and result in misunderstandings, unsatisfactory, lack of control, inaccurate and inappropriate information. A management communication plan breaks the communication down into smaller pieces and thereby controls and optimizes the preferred communication . The plan includes a communication approach for all the stakeholders. The plan structures the required communication approach in different parameters. The parameters could be: Stakeholder, context, preferred medium, timing, and responsible person for doing the communication, see figure 4.
Stakeholder analysis theory and process is a systematic way of clarifies and understands what is going on in reality and thereby try to managing it. When models/process is created they necessary have to become simple, in which much of the complexity is neglected. This constructs a distorted picture of the reality.
One of the aspect the stakeholder analyses do not provide is an understanding of the operation of the overall system that includes the environment where the project arising from (firm) .The inadequately address of the firms environment contributed to a lack of fundamental understanding of the project, which create challenges and complexity when the stakeholder has to be identified and managed. As the firm environment is not taking into account it is indirectly addressed as a stable element that does not changes over time. However the firms environment is changing over time, which will continuously modify the perspective and approach of the stakeholder analyses. The stakeholder analyses establish a good understanding of the different stakeholders and the overall approached to management them, but it is important to not be naive and think that the stakeholder analyses shows a complete picture of the reality.
Another aspect the stakeholder analyses do not approach is the complexity of stakeholders stakeholder. The identified stakeholders related to the project also have its own stakeholder network. This network can have different level of power and influence on the stakeholder and thereby affect the stakeholders actual standpoint in the project. A complete stakeholder network will ideally consist of nearly all actors in the world, which off course is an extreme exaggeration, but the idea of see which stakeholders that are behind the analyzed stakeholder to a certain extent could provide benefits.
The benefits with the stakeholder analyses is that it highlights potential risk factors and thereby makes it possible to react on them before it is to late. In addition, the analyses create an understanding of where to place the effort in relation to provide a successful outcome of the project. Another way to look at it is that the stakeholder analyses make it possible to perform cost/benefits analyses on the different stakeholders. It is not that simple to use the cost/benefit analyses on stakeholders, as it can be difficult to identify and measure the actually achieved benefit relative to the cost in this context. The stakeholder communication strategies systemize and make the communication flows transparence, which resulting in correct communication, provided to the right stakeholders at the right time.
- ↑ 1.0 1.1 Edward Freeman, R. “Strategic Management: A Stakeholder Approach” page 31 section “History of Stakeholder”
- ↑ Harrison S. J. and John H. St., “Managing and partnering with external stakeholders” The Academy of Management Executive (1993-2005)
- ↑ Donaldson T. and Preston F. L., “The Academy of Management Review” section “The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications” Academy of Management 1995
- ↑ Varvasovszky, Z. and Brugha, R. “How to do (or not to do)… A stakeholder analysis” Oxford University Press 2000.
- ↑ Elias A., A., Cavana Y., R. and Jackson S., L. “Stakeholder Analysis to Enrich the System Thinking and Modelling Methodology” page 4, 2001
- ↑ 6.0 6.1 Attrup L., M. and Olsson R., M., “Power i projekter & portefølje” Jurist-og Økonomforbundets forlag 2008
- ↑ APMAS knowledge Network, http://www.apmasnetwork.org/node/80, Importance-Influence Matrix in Stakeholder Analysis, 2010
- ↑ Mitchell K., R., Agle R., B. and Wood J., D. “The Academy of Management Review”, section “Toward a Theory of Stakeholder Identification and Salience: Defining the Principle of Who and What Really Counts” Academy of Management 1997
- ↑ Varvasovszky, Z. and Brugha, R. “How to do (or not to do)… A stakeholder analysis” Oxford University Press 2000.
- ↑ Welch M. and Jackson R. P. “Rethinking internal communication: a stakeholder approach” Rethinking internal communication, 2007
- ↑ Key S. “Toward a new theory of the firm: a critique of stakeholder “theory”” Management Decision 1999