2.4 Stakeholder Management

Organizational research and direct experience tells us that organizations and project teams cannot operate in ways that ignore the external effects of their decisions. That is, no manager makes decisions exclusive of consideration of how those decisions will affect external groups (Dill, 1958). One way to understand the relationship of project managers and their projects vis-à-vis the rest of the organization is through employing stakeholder analysis. Stakeholder analysis is a useful tool for demonstrating some of the seemingly irresolvable conflicts that occur through the planned creation and introduction of any new project. An organizational "stakeholder" refers to any individual or group that has an active stake in the activities of an organization. Consequently, when a company makes strategic decisions, they often will have major implications for a number of stakeholder groups; for example, environmental watchdog groups, stockholders, government regulatory bodies, and so forth. Stakeholders can have an impact on and are impacted by organizational actions to varying degrees (Wiener and Brown 1986). In some cases, a corporation must take serious heed of the potential influence that some stakeholder groups are capable of wielding. In other situations, a stakeholder group may have relatively little power to influence a company's activities.

The process of stakeholder analysis is helpful to the degree that it compels firms to acknowledge the potentially wide-ranging effect that their actions can have, both intended and unintended, on various stakeholder groups (Mendelow 1986). For example, the strategic decision to close an unproductive manufacturing facility may make good "business" sense in terms of cost versus benefits that the company derives from the manufacturing site. However, the decision to close the plant has the potential to unleash a torrent of stakeholder complaints in the form of protests from local unions, workers, community leaders in the town affected by the closing, political and legal challenges, environmental concerns, and so forth. Prudent companies will often consider the impact of stakeholder reaction as they weigh the sum total of likely effects from their strategic decisions.

Just as stakeholder analysis is instructive for understanding the impact of major strategic decisions, we are also able to employ project stakeholder analysis for our discussion. Within the project environment, there is also a very real concern for the impact that various project stakeholders can have on the project development process. This relationship is essentially reciprocal in that the project team's activities can also impact the external stakeholder groups (Gaddis 1959). For example, the project's clients, as a group, once committed to a new project's development, have an active stake in that project being completed on time and living up to its performance capability claims. The client stakeholder group can impact project team operations in a number of ways, the most common of which are agitating for faster development, working closely with the team to ease project transfer problems, and influencing top management in the parent organization to continue supporting the project. On the other hand, the project team can reciprocate this support through actions that show their willingness to closely cooperate with the client and smooth transition of the project to its intended user groups.

The key point to bear in mind is that project stakeholder analysis solidifies the fact that in addition to considering all the managerial activities involved in project development, project managers need to be aware of the ways in which attaining the project's goals can impact a host of external stakeholders outside of their authority. Further, project managers must develop an appreciation for the ways in which these stakeholder groups, some of which have considerable power and influence, can affect the viability of their projects. For example, there is an old saying that states, "Never get the accountant mad." The obvious logic behind this dictum is that cost accountants can make the project manager's life easy or very difficult, depending upon the format, frequency, and detail of the reports they request to monitor and control project expenditures.

Stakeholders, while having varying levels of power and influence over the project, nevertheless have the potential to exert a number of significant demands on project managers and their teams. This problem is compounded by the fact that the nature of these various demands quite often places them in direct conflict with each other. That is, in responding to the concerns of one stakeholder, project managers often unwittingly find themselves having offended or angered another stakeholder with an entirely different agenda and set of expectations. The challenge for project managers is to find a way to balance these various demands in order to maintain supportive and constructive relationships with each important stakeholder group.