A project is a teamwork effort. However, for the success of your project, you must trust and depend on your teammates. Those involved in managing a project are your team, clients, sponsors, and other divisions within the company. These individuals are your project stakeholders.
But, the question is who exactly are the stakeholders in a project? What are the types of stakeholders? Who are key stakeholders? – Find out in-depth answers to these questions in this blog!
Definition: Project Stakeholders
A formal definition of a stakeholder is “individuals and organizations who are actively involved in the project, or whose interests may be positively or negatively affected as a result of project execution or successful project completion”.
In simpler terms, individuals or organizations are project stakeholders who have to bear the project’s output, either loss or gain. Your stakeholders are different personalities and have different tastes or interests in your project. It does not end here, your stakeholders’s list shall vary from the start till the end of your project. There will be few stakeholders whose interests would be more or less different depending on what phase the project is on.
So naturally, it is a challenge to manage these stakeholders. However, managing these stakeholders efficiently shows your skills and knowledge as a project manager. It is not a piece of cake to deal with and manage a maximum number of people and groups at the same time.
Who Are Stakeholders In A Project?
So now it is clear with the definition above that the project stakeholder is anyone with an interest in your project’s outcome. Generally, they are part of your project team, project managers, executives, and/or project sponsors. However, if you go in-depth, you will know that the list is quite long. The reason for this is because investments in projects can take many forms. It could be business capital, executive assistance, or a manager’s assets. Furthermore, it can apply to everyone, including clients and users, whose needs may differ and are crucial in any project.
Let’s explore the different types of stakeholders in a project:
There are two types of stakeholders in project management – internal and external stakeholders.
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Who are the internal stakeholders of the company?
The internal stakeholders are the members of the organization who work within it. These stakeholders are affected directly by the project’s outcome as they are directly related to it. Internal stakeholders include employees, owners, the board of directors, project managers, investors, and others.
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Who are the external stakeholders of the company?
External stakeholders are indirectly affected by the outcome of the projects and are outsiders to it. The project results affects them even though they are not members of the organization. External stakeholders can be customers, clients, intermediaries, competitors, society, government, and others.
Knowing the value of the internal as well as external stakeholders is quite crucial for the growth and development of any organization. Engaging and involving them, creates a strong bond between the stakeholders and the organization. Furthermore, it helps in reducing or eliminating risks and enhances the overall reputation and performance in the long run.
Who are the Key Stakeholders in a Project
The key stakeholders have the most important role to play in your project. They have the power to conclude whether the project has met all its goals or not. Whether the primary or secondary goal has been fulfilled are not, are all dependent on these individuals or groups. Even if the project attains success and has been completed under budget, and all the project management deliverables are met, it can not be considered a success if the key stakeholders are not happy with the outcome.
Here are some instances of key stakeholders in a project that you should consider:
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Customers:
Customers are the key stakeholders because they are the end users of the project’s final results. A project’s success is dependent on the customer’s needs, expectations, and satisfaction. Customer’s opinions and suggestions matter to provide them with the service or the product that meets their expectations.
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Project manager:
A project manager is an integral part of a project. They are considered the important stakeholders as they have a significant stake in the project’s success which they are leading. The project manager is responsible for organizing, supervising, and carrying out the project successfully. The outcome of the project has a major effect on their performance and reputation – further emphasizing their stakeholder role.
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Project team members:
Project team members are key stakeholders in a project. They are highly active in the performance of project tasks and achieving the goals. Moreover, their skills, expertise, and dedication affect the project’s success. The project team members are crucial for meeting project goals and make sure about the overall success of the project.
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Project sponsor:
Project sponsors are the project’s financier. They are one of the key stakeholders as they provide the necessary funds and resources for the project for its execution. They hold the decision-making authority. They are the ones who are affected by the project’s success or failure, as they are the investors in the project and play a very important role in supporting and overseeing progress.
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Steering committee:
The steering committe includes project sponsors and executives. They are the advisory group in the project that provides necessary guidance on important decisions.
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Executives:
They are the ones who are the top management in the company and have a say in the project execution. They direct the organization’s strategy, and compliance with their expectations is a must for your projects. If it doesn’t, the project isn’t a successful one.
There are many more examples of project stakeholders, including sellers/suppliers, contractors, owners, government agencies, media outlets, and even society at large.
Hence, figuring out the internal and external stakeholders in project management is a crucial part as it will allow you to create better project planning for execution. Moreover, make sure that each of your project stakeholders is informed and satisfied with the results. By identifying the stakeholders it becomes easy to create an accurate project management plan for attaining the goals of the project.
Importance of Project Stakeholders
As previously discussed, stakeholders play an important role in project management. Furthermore, the project’s success or failure is majorly influenced by the satisfaction of its stakeholders. Therefore, to ensure a project’s success, it is critical to understand the project stakeholders’ requirements.
Stakeholders play a significant role in the project management framework for several reasons, including:
- They are experienced: Stakeholders are experienced and know a lot about the work of the project. They provide clear directions and point out uncertainties. With the help of the suggestions and expertise of the stakeholders, it becomes easier to solve or avoid problems that project managers might not be aware of.
- They identify risk: To avoid risks, first identify them. Stakeholders come to the rescue in this situation, providing helpful suggestions and solutions to avoid or resolve such hazards. Identifying risk at an early stage allows you to prepare and plan for what to do if an unavoidable danger happens. You can have a proper risk management framework in place to include project stakeholders in risk mitigation.
- They help in the success of the project: First find out who is involved in the project from the start, to know who cares the most about the project and how much it will affect or influence them. By identifying your stakeholders it becomes easier to incorporate their suggestions or opinions into the project execution.
What is a Stakeholder Analysis?
Stakeholders in the project are individual persons or any groups who are involved and more likely to be affected by the outcomes of a project. A stakeholder analysis is a process of finding out these individuals or groups before the initiation of the project by classifying them based on their interests, involvement, and impact and figuring out the most important way to interact with these individuals and groups.
Why Should Project Managers Conduct a Stakeholder Analysis?
Stakeholder analysis is a crucial tool that is always a part of a project manager’s strategies for complicated projects. Your project’s chances of success increase with the number of stakeholders you can identify early and the degree to which you can modify your communication to gain the acceptance and support of different project stakeholders.
When you consider how much of an organization is affected by contributions from different teams like engineering, design, procurement, sales, marketing, finance, accounting, and so on, you can see why stakeholder analysis is such an important exercise. A proper stakeholder analysis helps you to know the difference between these stakeholders as who is helping your product’s development and who is trying to block its progress. In any case, it adds up to a project manager’s strengths – because you get a clearer picture of the end results.
How to Conduct Stakeholder Analysis in Project Management
Stakeholder analysis exercises may vary depending on the firm, industry, types of projects, and team conducting them (for example, project management versus product management). However, there are useful steps common to most of these types of analysis.
Here is the ideal practice and set of steps for stakeholder analysis:
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Identify Your Stakeholders
You must sit and start evaluating with your team, the list of all possible stakeholders involved in the project. However, you can reduce this list later, but you don’t want to miss potentially important stakeholders at this early stage.
The list of potential stakeholders could include:
- Executive Staff
- Marketing
- Sales
- Finance
- Product
- Development/engineering/manufacturing
- Procurement
- The heads of all affected business units
- Consultants
- Operations/IT
2. Organize and prioritize these stakeholders
After identification, you should begin classifying the individuals and groups that will actually be stakeholders based on their levels of participation, impact, and interest in the project. The power-interest grid is one method for doing this. There are four categories into which you will categorize stakeholders:
- High power, high interest: These are your most essential stakeholders, and you should emphasize keeping them satisfied as your project progresses.
- High power, low interest: Because of their influence in the company, you should strive to keep these people happy. However, as they have low interest in the project, there’s no point interacting with them much as it might result in pushing them more far.
- Low power, high interest: You will need to check on them and keep them informed about each task to ensure their satisfaction with the results obtained in the project.
- Low power, low interest: Simply keep these folks informed on a regular basis, but don’t overdo it.
3. Determine ways to communicate and gain agreement from each sort of stakeholder
Once you have made a list of stakeholders and figured out how they fit into each category, the next step is to plan how to keep them involved and gain their support for the execution and proper functioning of the project. First, you should ask yourself questions about your stakeholders, such as:
- What motivates these stakeholders?
- What other priorities do they have, and how can we align our project with them?
- Will this stakeholder likely have a positive attitude toward our project? If not, what can be done about it?
Once you have formed profiles of all the types of stakeholders, you are all set to move to the next process i.e., designing a stakeholder communication plan.
How to Effectively Manage Project Stakeholders
Handling and managing stakeholders is essential for your project’s victory. It is one of the key project manager qualities to be able to do it “effectively” as well. Ensure that you handle your stakeholders and involve them well. Any mistakes in this part such as lack of transparency, providing poor insufficient updates about the project, etc., can cause serious problems in the later stage.
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Allow participation of all Project Stakeholders from the start of the project
Develop a stakeholder management strategy by figuring out their types, interests, and other important things necessary. Start interviewing them and take surveys on a daily basis. If the stakeholders are external, add them to your project dashboard (A project dashboard provides a 360° view of a project’s progress, insights, and data points) so they can see the progress in realtime. Also, they should be able to provide input on the project’s deliverables.
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Have your Project Stakeholders agree on the deliverables
From the beginning, all the project stakeholders must have the same opinions on the deliverables of the project. It is important to identify each person’s roles and responsibilities clearly, to avoid any later confusion in the project execution. By doing so it avoids any project failure, delays, and overspending.
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Describe the system that governs changes
Request for changes often occur in a high-level project. Usually, certain things that were decided earlier, might change in the later stage of the project. So it is really crucial to formulate a set of steps to deal with these changes. Or else, there are chances of scope creep to take place, which can mess up your work and make your team less productive.
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Ensure Good communication
Good communication skills are always a preference for a project’s success. When choosing a mode of communication, prioritize stakeholders’ involvement and interest. Keeping a record of all the stakeholders from the beginning is one of the many tried-and-true methods to figure out how often and how each stakeholder should be contacted.
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Consider things from their point of view
Seeing the problem from their point of view is a necessary component of managing the stakeholders. You must comprehend the individual settings of each stakeholder and what they committed to. You will be more equipped to handle them and their expectations if you can relate to how they see the project affecting them.
Conclusion
The takeaway is that project stakeholders play an important role in the project to make it fruitful by investing their valuable input, resources, and knowledge effectively. Identifying and managing stakeholders is essential to deliver projects effectively and efficiently. By involving the project stakeholders throughout the project and by addressing their needs and concerns, project managers can improve collaboration, build trust, and ultimately achieve project success.
