What is Stakeholder Analysis?
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(This post has been updated for 2021.)
Often, a project’s success depends more on stakeholders than getting done on time, budget, and scope. Project stakeholders are individuals and organizations actively involved in the project, or whose interests may be affected as a result of project execution or project completion. Stakeholders are all those who need to be considered in achieving project goals and whose participation and support are crucial to its success. Stakeholder identification and stakeholder analysis are important activities of the project manager to ensure project success.
Stakeholders can be:
- individuals within the project (ex. Project manager, developer, user)
- individuals or departments within the organization (ex. IT manager, accounting department, senior management)
- individuals or groups outside the organization (ex. customers, vendors, consumer association, state regulators)
Before analyzing and managing stakeholders within a project, keep in mind that a good project management tool can actually help managers choose stakeholders for a project. By learning which team members have the bandwidth and skills for a particular project, leaders can locate stakeholders and communicate with them about the project before it’s even begun. We list just five project management software that will help project managers better analyze and implement projects and how those projects will affect stakeholders and the organization.
The stakeholder management processes for a project involves the following seven activities, but may include more:
- Identifying all stakeholders
- Documenting stakeholders needs
- Assessing and analyzing stakeholders’ interest and influence
- Managing stakeholders’ expectations
- Taking actions
- Reviewing status and repeat
Stakeholder analysis is part of stakeholder management and an important technique for stakeholder identification and the analysis of their needs. It is used to identify all key stakeholders, who have a vested interest in the issues with which the project is concerned. Primary stakeholders are those who are most affected either positively or negatively by the project. Secondary stakeholders are those indirectly affected. There can be tertiary stakeholders, who are impacted the least.
The aim of the stakeholder analysis process is to develop a strategic view of the human and institutional landscape and the relationships between the different stakeholders and the issues they care about most. There are a few techniques to help in this process.
After you have identified all stakeholders for your project, documented their needs, and analyzed their interests and influence, you can map their names visually using a power-interest grid to help with your next steps.
By classifying your stakeholder according to their power over the project and their interest on its results, you can allocate a position for each one on the grid. This guides you to the action you need to take.
- For stakeholders occupying the high power, high interest quadrant, you need to manage them closely, engage them fully, and make every effort to satisfy them.
- For those in the high power, low interest quadrant, put enough work to keep them satisfied, but not too much to disturb or annoy them.
- Stakeholders in the low power, high interest quadrant are generally helpful to your goals, so keep them informed of the project’s progress.
- Those in the low power, low interest quadrant require minimum effort on your part. It is enough to monitor them, in case their position on the grid changes to something more significant.
To improve the visual information available in your power-interest grid, color code the names of the stakeholders to show who your supporters are (green), who your critics are (red), and who are neither (yellow, or other color)
Another stakeholder analysis technique is the use of the salience model. It is a Venn diagram where three circles intersect, creating seven regions within, and an eighth region outside the circles.
The three circles represent the following parameters to help categorize stakeholders:
- Power – the ability of a stakeholder to influence the outcome of the project
- Legitimacy – the justified or rightful involvement of a stakeholder in the project
- Urgency – the expectation of a stakeholder for a timely response from the project and project team
The different regions of the diagram can represent a specific type of stakeholder, and these can guide the project manager in how to manage them.
- Core ( or Definitive) – stakeholders that have power, legitimacy, and urgency, and deserve focused attention.
- Dormant – stakeholders that have power, but no legitimacy or urgency. They are unlikely to be involved in the project.
- Dominant – stakeholders that have power and legitimacy, but little urgency. They have certain expectations that should be met.
- Discretionary – stakeholders who have legitimacy, but little power or urgency. Regular status updates will keep them happy.
- Dependent – stakeholders who have legitimacy and urgency, but little power over the project. They need to be managed closely as they can ask another group with more power to push for their requests.
- Demanding – stakeholders who have little power or legitimacy, but always seek immediate attention. You are better off spending more time with other stakeholders with legitimate concerns.
- Dangerous – stakeholders who have power and urgency, but no legitimacy. They are not really pertinent to the project, so the project manager needs to engage them cautiously.
- Non-stakeholders – people or organizations without power, legitimacy, or urgency. They are not relevant to the project.
It is also important in your stakeholder analysis to monitor any changes of the status or classification of a stakeholder, if they move from one category to another.
Benefits of stakeholder analysis
Stakeholder analysis can help a project to identify:
- The interests of all stakeholders, who may affect or be affected by the project
- Groups that should be encouraged to participate in different stages of the project
- Ways to reduce potential negative impacts and manage negative stakeholders
- Potential issues that could disrupt the project
- Communication planning and stakeholder management strategy during project planning phase
- Key people for information distribution during executing phase
Stakeholder management and project success
Engaging stakeholders throughout the project life cycle is key to a project’s success, although not a guarantee. Managing stakeholder expectations and ensuring their active involvement is very much important to a project for the following reasons:
- It is indispensable for the continuation of the project and its successful completion
- It gives opportunity to individuals or groups to express their ideas/issues/concerns over the project
- It gives a sense of accountability and enhances responsibility
- It enables effective risk identification and response planning
- It opens up excellent learning opportunity for both the project team and stakeholders