Stakeholder Management

Who are Project Stakeholders?

A project stakeholder is any individual, group, or organization that can affect, be affected by, or perceive itself to be affected by the project or its outcomes.

This definition is widely used in modern project management and is described in the A Guide to the Project Management Body of Knowledge (PMBOK Guide)

Stakeholders may influence:

• Project objectives

• Project resources

• Project decisions

• Project success or failure

Because of this influence, effective stakeholder identification and engagement is a critical responsibility of the project manager.

Stakeholder management 

Stakeholder management happens throughout the project. During project initiation a stakeholder register is prepared for the first time and gets updated throughout the project. During Project Planning phase of the project, the stakeholders are analysed, classified and stakeholder management strategies are identified. During Project execution phase, the stakeholder management strategies are implemented. Project monitoring and controlling focuses on ensuring appropriate levels of stakeholder engagement levels. 

Types of Stakeholders 

Stakeholders are generally categorized as internal or external.

Internal Stakeholders

These stakeholders belong to the project-performing organization.

Examples:

• Project sponsor

• Project manager

• Project team members

• Functional managers

• Senior management

• Project Management Office (PMO)

Internal stakeholders usually have direct involvement in project execution.

External Stakeholders

These stakeholders are outside the organization but are affected by the project.

Examples:

• Customers or clients

• Suppliers and vendors

• Government agencies

• Local communities

• Regulatory authorities

• Investors

• Media

External stakeholders often influence approvals, regulations, funding, or public perception.

 Key Stakeholders in Most Projects

• Project Sponsor - Provides financial resources, strategic direction, and executive support.

• Project Manager - Responsible for planning, executing, monitoring, and closing the project.

• Project Team - The people who perform the project work.

• Customers / Users - Those who use the final deliverables of the project.

• Functional Managers - Managers responsible for departments such as engineering, procurement, finance, or HR.

• Regulators - Government bodies that ensure legal and environmental compliance.

Stakeholder Classification Methods

To manage stakeholders effectively, project managers classify them based on power, interest, influence, or impact.

1. Power–Interest Grid (Most Common Method)

Stakeholders are classified based on:

• Power (ability to influence the project)

• Interest (level of concern about the projects

                  Category

• High Power – High Interest (Manage Closely)

• High Power – Low Interest (Keep satisfied)

• Low Power – High Interest (Keep informed)

• Low Power – Low Interest (Monitor)

2. Power–Influence Grid

Classifies stakeholders based on:

• Power

• Influence over project decisions

Used often in large infrastructure or government projects.

3. Influence–Impact Grid

Classifies stakeholders based on:

• Ability to influence decisions

• Degree to which the project affects them

Useful for public projects and social projects.

4. Stakeholder Salience Model

Stakeholders are classified based on three attributes:

• Power -  Ability to influence the project

• Legitimacy - Valid involvement in the project

• Urgency - Need for immediate attention

Stakeholders with all three attributes receive highest priority attention.

Importance of Stakeholder Management

Effective stakeholder management helps to:

• Reduce project resistance

• Improve decision-making

• Increase project acceptance

• Prevent conflicts and delays

• Improve communication and transparency

Poor stakeholder management is one of the most common causes of project failure.

Stakeholder Management Activities

Typical activities include:

1. Identify stakeholders

2. Analyze stakeholder expectations

3. Classify stakeholders

4. Develop stakeholder engagement strategy

5. Manage and monitor stakeholder relationships

Different types of powers

1. Legitimate Power (Formal Authority)

This power comes from a person’s official position in the organization.

Examples

• CEO

• Project sponsor

• Functional manager

• Government authority

Example in projects:

A project sponsor can approve budgets and major project decisions because of their formal authority.

2. Reward Power

This power comes from the ability to provide incentives or rewards.

Examples

• Salary increments

• Promotions

• Performance bonuses

• Recognition

Example in projects:

A functional manager may reward team members who perform well on a project.

3. Coercive Power

This is the ability to punish or impose penalties.

Examples

• Disciplinary action

• Removal from project

• Negative performance review

• Contract penalties

Example in projects:

A contract manager may impose penalties if a vendor fails to meet deadlines.

4. Expert Power

This power comes from knowledge, skills, or expertise.

Examples

• Senior engineers

• Subject matter experts

• Technical consultants

Example in projects:

A BIM expert or cybersecurity specialist may strongly influence project decisions because of their expertise.

5. Referent Power

This power comes from personal charisma, reputation, or relationships.

Examples

• Respected leaders

• Influential senior professionals

• Well-known industry experts
  
  

Example in projects:

A highly respected architect may influence decisions even without formal authority.

6. Informational Power

This power comes from access to important information.

Examples

• Market analysts

• Financial analysts

• Data scientists

Example in projects:

A stakeholder who controls critical market data or customer insights can influence strategic project decisions.

Stakeholder Engagement Metrics 

Stakeholder engagement levels 

• Unaware - Not aware of the project

• Resistant - Opposes the project 

• Neutral - Neither supports nor opposes 

• Supportive - Supports the project 

• Leading - Actively promotes the project 

Comple the assessment given below