Best Practices for Stakeholder Analysis

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Best Practices for Stakeholder Analysis

Author: Suresh Jayaram

Who are Stakeholders?

Stakeholders are all people, both internal and external to your organization, who could impact the outcome of your project or who are impacted by the outcome of your project. In this analysis we focus on those stakeholders who could impact the outcome of our project both in a positive and negative way. We use another tool called Impact Analysis to determine the impact of our project on the stakeholders.

Depending on the size and scope of the project you are working on, the number of stakeholders could range from a small set of people to a fairly large set of people. If you are working on a small project impacting only a few stakeholders then performing the Stakeholder Analysis may not be that critical. However, if you are working on a large size project impacting a large number of people then Stakeholder Analysis becomes critical.

The following graphic shows a sample list of groups that could be potential stakeholders for your project.

For example, if you are working on a project to introduce a new software to track the status of a shipping package to your customers, the list of stakeholders could be all the employees who would have to use this software to track packages, the IT team that is tasked to build this software package, the vendors who would be delivering the packages, suppliers of status information such as telecom providers, all the customers who are impacted with this new software, the managers who need access to the status data of the packages, the senior management team of the company, possibly the government who may have some laws and regulations in this regard, etc.

Why do we need Stakeholder Analysis?

According to a research conducted by KPMG, 70% of organizations have suffered at least one project failure in the prior 12 months. According to executive leaders, one of the main reasons for the projects not being successful was a lack of clear goals.

When you are working on a large project, the success of your project does not only depend on the quality of your solution and/or the implementation team. The success of a project also depends on your ability to “sell” the solution to other stakeholders and be able to convince them of the project need, importance, quality of the solution, and the perceived benefits. The resistance to your project may not be overt but the “passive-aggressive” behaviors of the key stakeholders may cause your project to fail. For example, a key stakeholder may say that they support the project but behind the scenes do not provide the resources or time required for you to succeed on your project. In the worst cases, these stakeholders may actively canvass other stakeholders to ensure the project failure.

Some of the symptoms that we may observe on project where we do not do a good job of stakeholder management are:

Projects take too long to complete due to resistance from stakeholders,
Project key recommendations are not implemented making the project outcomes weak
Projects that are canceled as no progress is being made on the project
Projects whose scope had to be significantly altered or changed due to resistance.

Having poor stakeholder engagements can result in project cost overruns, take longer to finish the projects, require significant changes to the project scope or just result in a failed or canceled project.

Hence, it is very important that you perform a stakeholder analysis to “really” understand the positions of your stakeholders on your project and if you determine that not all the key stakeholders are supporting your project, determine what actions you and/or your team can take in order to establish a successful project outcome.

What is Stakeholder Analysis?

Stakeholder Analysis is a structured process to identify the stakeholders on your project, ideally before you begin working on the project, grouping the stakeholders according to their level of influence and interest, determine their “perceptions” about the project and determine a course of actions that can help overcome their resistance and “win” these critical stakeholders over to your side so that your project is successful.

Stakeholder Analysis is a proactive methodology to gain the support of stakeholders for critical projects. Even though this is something that should be done at the beginning of every project, you may want to revisit this exercise through the course of your project since the stakeholders involved in your project may change and/or the perspectives of the stakeholders engaged in the project can change over time.

How to Perform Stakeholder Analysis

There are five steps to perform the stakeholder analysis.

5 Step Process

Identify Stakeholders:The first step is to identify all the stakeholders involved in your project. This is to ensure that you do not forget key groups of people who could impact your project. You can have a brainstorming session with your team to identify the stakeholders and also have a discussion with your identified stakeholders to see if you are missing any key set of stakeholders. Some of the tools such as project charters, SIPOC, process maps, etc. can also help guide with the identification of stakeholders.
Determine Influence: On a large project, there are typically a large list of stakeholders and it would be impractical to consider the views and perceptions of all of them. In addition, if there are a large list of stakeholders, the needs, and priorities among them will probably be different or even conflicting. Hence, it is impractical to simultaneously meet the needs of all stakeholders. In this step, we first group all the stakeholders who are similar into one group – so we can come up with common plans for each group. For example, we may have a stakeholder group for all IT manager, or all salespeople in the organization instead of managing each stakeholder individually, we come up with plans to address the entire stakeholder groups. Next, we prioritize our stakeholder groups by considering the influence of the stakeholders. If a stakeholder group has a high influence on your project, then we consider these as important stakeholders and determine if an action is required. If the stakeholder group is not influential enough to change the outcome of our project, then we may choose to ignore this stakeholder group if we are short on resources. Note that influence and power can come from a variety of sources and is not based on positional authority alone. Stakeholder group may have influence if they have expert power derived from knowledge or skill, referent power, legitimate power, information power, charismatic power, etc.
Understand Stakeholder Perspectives: Once we have a good handle on which stakeholder groups we are going to consider for our project, we need to determine their perspectives, perceptions, and needs. This requires that we have an active discussion with the stakeholders to understand where they are coming from. Without active stakeholder management, project leaders may often not perform this valuable activity to gather stakeholder insights. Note that gathering the insights does not only mean documenting the needs and concerns of the stakeholders because something what the stakeholder says may be different from what they are actually thinking – so watching their behaviors and actions and getting inputs from other team members within the organization is critical to truly understand the perspectives of the stakeholders. Based on this perspective, we can place the stakeholder groups into one of four categories.
- Stakeholders who have high influence and are supportive of our project.
- Stakeholders who have high influence and are NOT supportive of our project.
- Stakeholders who have low influence and are supportive of our project.
- Stakeholders who have low influence and are NOT supportive of our project.
Determine Actions: Our biggest focus should be on those stakeholders who have a high influence and who are not currently supportive of our project as they could derail our project and can cause the project to fail. In order to determine the actions to address these stakeholders we first need to clearly understand the source of their resistance. The resistance to the project can come from several sources. The four main reasons are:
- They do not understand what the project is all about.
- They are resistant to change and would like to continue with existing practices.
- They disagree with the methodology/recommendations and feel the project may have negative impact for the company.
- They internally know that the project is good for the company but want to oppose the project for personal reasons – such as protect their turf.
Once we understand the source of resistance from the stakeholder groups, then we can come up with an effective strategy to bring these stakeholders on board. Some of the possible actions are:
- Improve communications to the stakeholders so that they clearly understand what the project is all about and why the project is beneficial for the company.
- Provide training and support to the stakeholder group so that they are more comfortable with the change.
- Enroll the stakeholders as team members on our project so that they can contribute to the development of solutions/recommendations for the project.
- Use other stakeholders with more influence and power to overcome the objections of the stakeholder group. In the worst case, we may even need to replace the stakeholders who are resistant to change with other team members who are more supportive.
Close the Loop: The last step of our process is to deploy the recommended actions and monitor the stakeholders for changes in their behaviors and actions. The deployment of actions can either come from the project team or you can deploy the right resources within the company to implement the recommendations. This step in the process is vital as it provides input to the stakeholder management team whether the actions, they have deployed are successful or if they need additional actions. Note that stakeholder analysis is a circular process. As we deploy the actions, we repeat the cycle again to determine new issues and concerns of the stakeholders. This is a process that we have to continue to use through the course of the project as the stakeholders may change due to organizational changes, the perspectives and thinking of the stakeholders may change as well.

Example

In the example below, we have identified 4 stakeholder groups and mapped them on a scale of impact, commitment, and influence. Actions have been defined for those stakeholders who have a large influence but are low on commitment.

Stakeholder Analysis Example