What is a risk in stakeholder management?

Welcome, in this session I want to build on what I’ve talked about before around communication in the risk management process. I want to talk specifically about stakeholder management and not only the stakeholder management through the process as we’ve talked a little bit about or communication throughout the process but also communication as a risk mitigation strategy and one of the greatest tools that you have to reduce conflict in your organisation.

Now, there are few elements to stakeholder management. What’s a stakeholder? Well a stakeholder is someone who has got an interest in the outcome, the activities, of an organisation, or they might have a perceived interest. We have two types of stakeholders – we have a primary stakeholder and they’ve got extensive influence over the organisation and the interest in it as well. Then you’ve got the secondary stakeholders – they’ve got no influence but they have an interest in the outcomes of the particular organisation.

Now, I’ve seen many organisations whereby communication has been conducted with the stakeholder community in the same manner right across the board and that doesn’t work. You really need to focus your communication efforts and make sure that they are tailored for the particular stakeholder and the stakeholder group. So how we do this, this first that we do is identify our stakeholders and we do this through the development of a stakeholder map. Now I’m going to put a stakeholder map example onto the website so you can have a look. But ideally we capture both our secondary and our primary stakeholders by putting them on the one page you identify the whole of our stakeholder group. Now we can do this for an organisation that is doing operational work or we can do it for an organisation doing a project, the idea is to make sure that we do not leave out any of our stakeholders.

So that’s the first part, the identification, the second part and this is the most important part is the identification, the sign off, and agreement of expectations. Each stakeholder has an expectation of each other; the problem is if we don’t understand those expectations and don’t know what they are than how can you meet them. So part of the problem and a lot of the conflict resolution stuff I have done in the past has revolved around the fact that the stakeholders had differing expectations. So if you have a stakeholder who’s expecting a Rolls Royce and you deliver a mini, well of course they are going to be disappointed. If they have an expectation for a mini and you deliver them a Rolls Royce, well they are delighted but you’ve actually consumed more resources than you anticipated. So we need to understand what those expectations are, because if you fail to deliver against those expectations than you are going to cause yourself potentially conflict in your organisation; and the problem is often we assume we know what those expectations are and that can be just as dangerous as not understanding them at all. Because if we assume that they have these certain expectations and we move towards those and we develop our products and services to those expectations well than we can get ourselves in trouble.

We also need to prioritise our stakeholders and we do this by assessing their level of influence, and also their level of interest; because the way that we deal with each stakeholder needs to be tailored to where they sit on a particular spectrum around influence and interest. And once again I will include a diagram onto the website so you can understand what I talk about. So the way that I do it when I am dealing with stakeholders is I chart each stakeholder onto the matrix based on their level of interest and their level of influence. Those that have a high level of influence and a high level of interest, well you want to engage, consult, you want to make sure they are in the tent; they are part of your major stakeholder group. Those that have a high level of influence but not so much of an interest well you need to just keep them satisfied, you need to make sure that you are communicating with them, but there is no real expectation that they are going to be involved in the process. Those with low level influence and low level interest, well you just keep monitoring and reviewing those because overtime like any other part of the risk management process that could change.

But then we get to the problem children, those with a high level of interest but no influence because they are usually the loudest and they are your lobby groups, they are your dissenters, they are the people out there in the media who are making claims against what you’re doing. Now the difference is they do not have any influence and I’m often told that the media has a lot of influence, well the media is not necessarily the influence themselves because they can’t make the decisions, what they are doing and it is a very subtle difference, what they are doing is attempting to influence the influencers to make them change their mind or to change their policy or their procedure or their strategy.

So, what we find here is that we really need to nurture those guys as well, understand what their expectations are, of course you are not going to be delivering or be able to deliver against a lot of those expectations but by understanding what those expectations are maybe you can give ground on some of them and maybe they become less hostile.

So, understanding our stakeholder community, who they are? What their expectations are? And what their prioritisation is? Is going to reduce the level of conflict in our organisation significantly. If you have a happy stakeholder community whereby you have met their expectations than of course the level of conflict is going to be reduced, your level of crisis management is going to be your reduced, your level of staff dissatisfaction is going to be reduced, your level of stakeholder dissatisfaction is going to be reduced and more importantly in this resource constrained environment, your level of resource expenditure is also going to be reduced.

So this is a really, really important mitigation strategy to ensure that we reduce the level of crisis in our organisation. Have a look at the website, have a look at the two power-point slides I have put up on there and if you do have any questions, please do not hesitate to contact me.

That is all for this session and as always, let’s be careful out there.

Stakeholders Influence Your Project, Positively or Negatively

Stakeholders of your project are people, groups and organizations that are actively involved in the project, exert influence on the project or its results or whose interests may be influenced positively or negatively by the implementation or completion of the project. These are for example: the client, senior management, project team, customer, departments within the company and—depending on the project—for example the residents near your construction site, authorities or governments.

Never underestimate the ability of stakeholders to ruin your best plans!

At the beginning of the project you do not know too much about the stakeholders. There is also great uncertainty about how the stakeholders will behave in the next weeks and months. Their behaviour can be: destructive, positive, supportive, negative, obstructive, delaying, irritating, damaging to your reputation. Therefore, you should engage with the stakeholders at the start of the project. There are two methods to reduce these stakeholder risks and to get the stakeholders on your side: Stakeholder Management and Risk Management.

Stakeholder Risk Management

The following three questions are central to stakeholder management:

• who is affected by the project or who is interested?
• what concerns the stakeholders?
• what measures are we taking?

With these three simple questions, you try to understand the stakeholders and, if necessary, take actions so that the stakeholders are well-disposed towards the project and support it in various ways.

Stakeholder management is an essential input for your risk management. In the figure below you see the usual risk categories for a project, with stakeholders being a subcategory of project environment risks. Although this is not entirely correct, since there are not only stakeholders in the project environment, but the project team and the client, for example, are also stakeholders. Stakeholders deserve more attention, even if they are slightly out of place in the lower right-hand corner of the following figure.

A typical project risk breakdown chart with risk categories

The Three Steps in Stakeholder Risk Management

Step 1: Who is Concerned or Who Is Interested?

It’s like in risk management, we can only manage stakeholders that we know, so be creative in identifying stakeholders. These can be members of the steering committee, the CFO, regulators, end users, customers of the customer, internal support staff, and accounting or procurement. In risk management we identify threats and opportunities. Stakeholders can be both opponents and supporters of the project.

Step 2: Analyze and Quantify the Risk (What Is on Their Mind)

In risk analysis, you evaluate the risks according to the probability of occurrence and impact. We can evaluate stakeholders in a similar way – e.g. by influence on the project (authority) and interest. In the matrix below you can already see the appropriate actions in the fields. The matrix can also consist of 5×5 fields in which you place your stakeholders with their names. This allows you to quickly identify the importance of the stakeholders and assign appropriate actions to them.

Stakeholder matrix (influence/interest)

When you analyze and evaluate the most important stakeholders, these questions are important:

• What is their interest?
• How can they influence the project (positive/negative)?
• How does the project fit into their priorities?
• What do you need from them to make the project run smoothly?

Step 3: Developing Actions

What are you doing to make better use of your supporters and minimize the impact of your opponents? The more you know about your stakeholders, the better you can work with them and “influence” them. One thing is for sure: If you ignore them, their support may dwindle and their opposition may grow. The most important measure in stakeholder management is communication. The following questions are the basis for communication:

• Who needs information?
• What information?
• How often and when?

How Do You Combine Stakeholder Management and Risk Management?

I recommend that you carry out stakeholder management according to your processes and methods and then incorporate the most important risks from this into the risk management of your project. In this way, all risks of the project are discussed together and further actions from this can flow back into stakeholder management.

The Secret of Success in Stakeholder Management Is Simple

The secret of success in stakeholder and risk management is very similar. Especially with these two “immaterial” project management topics, the following four important points make your activities even more successful:

• Do it
• Do it with conviction
• Start early
• Stay tuned (do it continuously)

What experience have you had with Stakeholder Management and Risk Management? Do you agree or disagree with my statements? Share your experience with a commentary so that we can all get to know another point of view. Thank you!

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