Stakeholder Management

PMI defines the stakeholders as: “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. Another more concise definition of the
stakeholders is “those groups or individuals with whom organization
interacts has interdependencies”. Any individual or group who can
affect or is affected by the actions, decisions, policies, practices or
goals of the organization”. The third definition of Stakeholders is
“those groups without whose support an organization would cease to
exist” and they have specific interest in the organization and exercise
power over it.
people affected by the project in some significant way.
In the majority of projects from the construction sector there will be
a lot of stakeholders and the diversity of its nature and demands
produces conflict of interests. The checklist of stakeholders in a
construction project is often large and includes the owners, facility
users, project management, team members, facilities managers,
designers, shareholders, public administration, workers,
subcontractors, services suppliers competitors, banks insurance
companies, media, community representative, neighbors, general public,
clients, regional development agencies, Each one of them has influence
in the course of the project at some point in time. Even though some
have influence in the project more than often, the majority of them
will do so at a set time.

Initially the companies are concerned about registering the

stakeholders who in their opinion are risky to the project having a
negative influence; while the stakeholders who make the project easy,
are not even registered. In this sense it is normal for the organizations
to worry more about Stakeholders who have a great influence and
power over the success of the project and considering that project
could not go through without their consent. The organizations are also
dependent on external stakeholders for financing, licenses, services,
resources etc.

Stakeholders register in a project is a Power–Interest Matrix, that

puts them in groups depending on their level of power, influence, and
interests depending on the nature of the project.

As projects can create unexpected situations from the stakeholders it

is necessary to monitor the progress and the development of the power
of influence, and the stimulation that can originate from the associated
reactions. Therefore, the urgency of which each stakeholder should be
kept informed and treated is dynamic throughout the development of
the project and therefore the stakeholders have to be monitored and
controlled regularly to detect and address all the important changes /
requirements.

The special nature of the construction projects has to take into

account the special factors, such as the types of contracts or the
nature of the project. The organizations in the construction sector
operate in a globalized market, with large project teams and projects
linked with international companies in which there are cultural
differences, professional ethics, and different modus operandi as to
how to conduct the business.

The relationships between various stakeholders in the construction

sector is regulated via contracts, for example between the client and
the builder, the obligation to finish a job within a limited time and
budget thus making stakeholders management work more effective
within the circumstances and environment.

In order to achieve a more successful project result, the skillful

management of the various stakeholders is required during the whole
process of the project - from the beginning until after the completion.
Proper and regular communication with the stakeholders thereby
ensures effective and efficient management of all the diversified
stakeholders
Impact of Stakeholders on Projects & Organization

From experience, we infer that probability of project success is

greatly reduced if stakeholders are ineffectively managed specially the
aspects that are considered and tied with the project’s objectives &
the ones that are affected by lack of participation from the
stakeholders. Thus, the need to clearly define the objectives of the
project is of paramount importance since without the clear and precise
objectives neither the project management team nor the rest of the
stakeholders will know as to when the project will have accomplished
its objectives. Even though the project may be successful from
Company’s management’s point of view, except that the project does
not fit the demands of the objectives of both parties, the
stakeholders would not be satisfied with the project results.

Stakeholder management is also related to corporate social

responsibility as moral obligations based on ethics, social and economics
have to be catered for. The social corporate responsibility determines
the actions that are demanded from society e.g. cheap labor, fair
trade, etc. However, it is to be noted that in the construction sector,
morality and ethical responsibility are less defined.

Companies are also bound by defined requirements from the

shareholders to build projects as soon as possible, within a budget,
while they have to attend and meet the demands of other stakeholders
as well. Bottom line for Stakeholder management is to derive a happy
medium between their different interests. identify the interests from
all areas of organizations and clients and look for an optimal balance
that satisfies all stakeholders within the circumstances. Development
of a comprehensive consolidated stakeholder identification matrix
coupled with risk matrix is a must for Project’s success. The main
outcome is related to the importance of establishing actions and
strategies for all the stakeholders.

Stakeholder mapping is a collaborative research process of debate and

discussion drawn from multiple perspectives for determining the key
listing of stakeholders by analyzing the four stages - identify, analyze,
map out and prioritize. The first one lists groups, organizations, and
relevant people; the second one understands the stakeholder’s
perspective and relevance; the third stage visualizes relationships with
objectives & other stakeholders whereas the fourth stage classifies
the stakeholder’s relevance and identities problems. The stakeholders
identified for construction projects are clients, community, suppliers,
projective operative and technical team, financial entities, and
government agencies. These key stakeholders are derived from the
short- and long-term analysis, and despite there being displacements in
the dependency / influence relationships of each one of them, they all
remain the key variables quadrant - high dependency and high
influence.

Identifying its stakeholders, as well as understanding their interests,

is fundamental for the construction sector and, specifically, the
management of its projects, to optimize the management of its
interested parties with the purpose of meeting its objectives in terms
of reach, budget, schedule and quality. Therefore it is important to
establish specific actions and strategies in order to manage each key
stakeholder, since their high mobility and high dependency character
might cause disturbances to the system’s balance, and due to high
instability they require permanent challenges that contribute to
optimizing the system being part of a project. Adaptation of RACI
matrix is of absolute importance for keeping the stakeholders
informed and involved in the Project.

Projects have their own characteristics that make them different to

the organizations and characteristics are incorporated into the
management of projects which recognize the reach, cost, and time of a
project to opportunities of attaining advantages for the success of the
projects. Reach is referred to deliverables required by the client,
customer, or owner of the project, which means satisfaction and
complying with required budgets / costs and time. These elements
correspond to those commitments to budget and duration agreed upon
with the client or the owner of the project. In view of above,
stakeholders may be further classified into three levels as:
consubstantial, contractual, and contextual. The first ones are those
stakeholders without which a company’s existence would be impossible;
contractual stakeholders correspond to those with whom the company
has some sort of formal contract; the contextual ones are those who
perform a role in achieving the organization’s credibility and the
acceptance of its activities.

“Kerzner (2001) classifies stakeholders into three categories: financial

(shareholders, financial institutions or capital suppliers, and creditors),
product/market (clients, suppliers, competitors, unions, governmental
agencies and local government committees) and organizational (official
executives, board of directors, employees in general, and
administrators).”

“Navarro (2008), in turn, stablishes the classification into two large

groups: internal ones, linked directly to the company or organization,
whether as shareholders, partners, heads, unions, workers, strategic
partners, etc. and external ones; groups of interest not organically
linked to the company such as authorities, pressure groups, NGO,
competitors, consumers, etc.”.

Keeping all these stakeholders involved and informed is the corner

stone of successful stakeholder’s management for project success.