Recent research by KPMG International states that 55% of CEOs understand that their long-term success depends on more than financial growth. As a result, many of today’s business leaders look to their key stakeholders to identify their individual needs, gauge project performance, and fill-in the gaps as needed.
But, how do you begin the process of stakeholder identification? What is a stakeholder? How do you distinguish between negative stakeholders, potential stakeholders, and your most important stakeholders? And what is the purpose of a stakeholder analysis in project management?
Benefits and Advantages
A comprehensive stakeholder examination benefits everyone involved, including your organization, your project team, and your stakeholders. Some primary advantages include:
- Structuring and Organizing Projects: Streamline the process of structuring, organizing, and executing your next project.
- Allocating Resources: Learn exactly what resources are needed, and if necessary, increase the amount of available resources.
- Fostering Communications: Build open lines of communication with your key stakeholders, and strengthen visibility for everyone.
- Strengthens Accountability: Maintain a strong sense of accountability and responsibility right from the start of your project.
- Identify Risks: Enable accurate risk identification and response planning for your project.
There are other, project-specific advantages to consider, too. Strategic stakeholder analysis lets you forecast potential challenges and obstacles further down the project life cycle, ensure accurate budgeting, and meet stakeholder expectations.
Who Are Your Key Stakeholders?
Begin your analysis by identifying your key stakeholders. It’s easier to separate them according to internal and external stakeholders, but you can add further classifications, too. Not only does it help you identify the most important figures, but it also helps when prioritizing their individual needs.
Your immediate team, including individual team members, project managers, and organizational leaders comprise your internal stakeholders. They also count as some of your most important stakeholders. Failing to meet the needs of your company’s CEO, for example, could lead to serious repercussions.
Other internal stakeholders might include:
- Internal data and business analysts
- Project sponsors
- Interdepartmental co-workers
But, internal stakeholders aren’t your only concern. Depending on the project, your overall success depends on the approval of additional external stakeholders.
Investors, potential customers or users, contractors, and suppliers all count as external stakeholders. Depending on their role and level of involvement, some of these external stakeholders have greater influence than others.
Organizational and project investors, for example, have a high interest level and, as such, generally maintain a lot of power over decision-making. While it’s also important that you make the effort to keep your customers happy, their needs sometimes fall to the wayside.
Some other external stakeholders might include:
- External partners
- Governmental and regulatory agencies
- The general public
- The press
It’s important to balance the needs of internal and external stakeholders alike, but some trade-offs might be necessary. Performing a comprehensive stakeholder analysis ahead of time will help you weigh these needs and make the right decisions.
Creating a stakeholder map
Also known as a stakeholder matrix or a project stakeholders diagram, a stakeholder map helps you identify your most important or powerful stakeholders, ensure their needs are being met, and plan your project accordingly. It also provides a general stakeholder analysis example to follow when building out the rest of your examination.
Start by categorizing each stakeholder into one of four quadrants. This provides two lines of measurement across the left side and across the bottom of your grid. Respectively, these represent the overall power of your stakeholders and their level of interest.
Those with the most amount of power but little interest fall in the top-left of your grid, while those with high levels of power and interest are categorized into the top-right. Stakeholders with little power and a high amount of interest belong in the bottom-right, while the remaining fall into the bottom-left.
Stakeholder mapping is an effective means of organizing and managing your project stakeholders. To make the most of this information, however, it’s vital to create your matrix at the right time.
When to Perform Stakeholder Analysis
Your initial stakeholder analysis should come as early on in the project life cycle as possible. Since the primary purpose of a stakeholder analysis is to identify stakeholders and meet their expectations, the examination itself is a critical part of the project planning and management process.
Ongoing stakeholder analyses, performed at various points throughout the project, are a great way of tracking productivity and monitoring project progress. It also guarantees easy access to these metrics when it comes time for reporting.
Perform a final stakeholder analysis upon project completion. This gives your entire team, including organizational leaders and external partners, a better idea of the project’s performance. Not only does this highlight project-specific accomplishments and shortcomings, but it can be used to inform and guide future projects.
Critical Mistakes to Avoid
Effective stakeholder management and analysis are vital to project success. However, there are some critical and common mistakes to avoid at all costs.
- Relinquishing Too Much Power: While some stakeholders do wield a lot of power, you still need to maintain control over your project at all times.
- Incorrectly Identifying Stakeholders: Take care when categorizing primary and secondary stakeholders, as this causes you to prioritize the wrong parties.
- Stalling Project Progress: Stakeholders who take too long to make decisions and those that focus on their own interests can create serious project roadblocks.
- Setting Unrealistic Expectations: Be honest with your stakeholders, and avoid setting their sights too high.
- Ignoring Project Risks: Never underestimate or ignore known project risks, even at the behest of key stakeholders.
- Failing to Update Shareholders: It’s vital to keep your shareholders updated throughout the entire project life cycle, even if this means sharing the bad news when it occurs.
While individual mistakes can usually be overcome by an effective project manager, making too many mistakes could result in mistrust, anger, or confusion from your team. In extreme cases, it might result in project reassignment or termination of your job.
Meeting the Needs of Your Stakeholders
Whether you’re catering to your most powerful stakeholders, strengthening engagement with a secondary stakeholder, or just trying to bolster your current level of customer service, efficient stakeholder management is the key. Not only does this entail a comprehensive stakeholder analysis, but it requires communication – on your behalf and from the different stakeholders themselves – to ensure success.