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Key Performance Indicators of Stakeholder Management in Construction

Projects: International Experts Perspective

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KEY PERFORMANCE INDICATORS OF STAKEHOLDER

MANAGEMENT IN CONSTRUCTION PROJECTS:
INTERNATIONAL EXPERTS' PERSPECTIVE

Goodenough D. Oppong1 Albert P. C. Chan2 and Ayirebi Dansoh3

1
Hong Kong Polytechnic University, Department of Building and Real Estate, 11 Yuk Choi
Rd., Hung Hom, Kowloon, Hong Kong. Email: goodenough.de.oppong@connect.
polyu.hk
2
Hong Kong Polytechnic University, Department of Building and Real Estate, 11 Yuk Choi
Rd., Hung Hom, Kowloon, Hong Kong. Email: albert.chan@polyu.edu.hk
3
Kwame Nkrumah University of Science and Technology, Department of Building Technology,
Private Mail Bag, University Post Office, Kumasi, Ghana. Email: adansoh@consultant.com

ABSTRACT

Stakeholder management (SM) has become a widely recognized topic in

construction due to the impact that stakeholders could have on projects and vice
versa. Over the years, construction SM has performed poorly when compared to
other industries like manufacturing. It has therefore become imperative to develop
tools that will help quantify and improve stakeholder satisfaction, which is the
eventual outcome of the SM process. An evaluation of the performance indicators
(PIs) that are crucial for measuring SM performance in construction project delivery
is presented. Accordingly, an international questionnaire survey was conducted on
academic and industry experts who are authors of publications, and/or are affiliated
to Project Management Institute, International Project Management Association, and
Co-operative Network for Building Researchers yahoo group. The respondents were
invited through purposive sampling based on pre-defined criteria and snowball
sampling opportunistically. The analysis of 67 responses showed that 10 PIs are key
for measuring SM performance. The 10 Key Performance indicators (KPIs) are
useful and adequate to quantify the mutual satisfaction accruing to the project
stakeholders. Consequently, mutual stakeholder satisfaction could be benchmarked,
monitored and improved in projects. Some of the KPIs are subjective in nature and
therefore, future studies should explore more objective measures for easy
application. The relationship between objectives, success factors and KPIs should
also be explored for academic and industrial use.

Keywords: construction projects, key performance indicators, project management,

stakeholders, stakeholder management.

INTRODUCTION

Over the years, many governments, corporate bodies and individuals have been
working hard to meet the construction and infrastructure supply deficit facing the
world at large caused by rapid population growth. The projects that are developed
have the potential of affecting the social, environmental and economic conditions of
people and communities. Those people and communities who are affected, have
influence, or have interest in projects are referred to as stakeholders (Littau, et al.
2010). Construction project stakeholders include clients, financiers, consultants,

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contractors, subcontractors, suppliers, government authorities, social and political

organizations, local communities, the general public, environmentalists, trade and
industry, and the media (Cleland 1999; Olander 2003). Stakeholders raise concerns in
line with their interests and expectations which are required to be met during project
delivery (Chan and Oppong 2017). Failure to meet such concerns could lead to
protests, vandalism, litigation, or even picketing as an indication of the dissatisfaction
of project stakeholders. Stakeholder dissatisfaction could eventually result in excess
delays or project failure altogether. This makes SM extremely important for the
successful delivery of construction projects.

In the past decades, SM in construction project delivery has performed below

expectation (Loosemore 2006). Random SM approaches are commonly used in the
construction industry even though they are ineffective (Yang and Shen 2015). There
has been limited research on comprehensive models for managing construction SM
performance. This has made it difficult for SM performance to be properly evaluated,
monitored, improved and benchmarked during project delivery (Oppong, et al. 2017).
In order to properly manage SM performance in the industry, Oppong, et al. (2017)
developed a dynamic model that incorporates performance objectives, success factors
and PIs as a comprehensive guide for project managers. The PIs are “signs and
symptoms” of stakeholder satisfaction with project (Oppong, et al. 2017). The interest
of this study is to evaluate and establish the PIs that are key for measuring SM
performance in construction project delivery. This study therefore seeks to answer the
question “what performance indicators are key for evaluating the performance of
construction SM?”

LITERATURE REVIEW
Stakeholder Theory
Stakeholder theory commenced through a seminal work at Stanford Research Institute
(SRI) in 1963. Accordingly, “stakeholders” was defined as “entities without whose
support the organization will cease existence”. Since this definition was inherently
broad in nature, Freeman (1984) redefined “stakeholders” narrowly to be “any group
or individual who can affect or is affected by the achievement of the firm’s
objectives”. Beyond those two definitions, numerous scholars have also defined
stakeholders from different perspectives. Regardless of the perspectives, all the
definitions of “stakeholders” have three common themes running through: (1) have
capacity to affect or be affected by the project, (2) have vested interest in the project,
or (3) a combination of the previous two themes (Littau, et al. 2010). As such, this
study redefines “stakeholders” as “any individual(s) or entities that affect or can be
affected by, have a significant stake (interest, right, ownership, knowledge, influence,
or contribution) in, or are generally indispensable to the accomplishment and survival
of, the construction project”. The literature map by Elias, et al. (2002) revealed that
between the works of SRI and Freeman (1984), the theory diversified into corporate
planning, corporate social responsibility, systems theory, and organizational theory.
After 1984, the theory has been looked at from the normative, descriptive and
instrumental perspectives. Moreover, the concept of stakeholder dynamics gained
recognition in stakeholder theory from 1997 (e.g. Roley 1997). Recently, there have
been numerous empirical studies to explore stakeholder theory and models.

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Stakeholder Satisfaction
The satisfaction of stakeholders is very important in assessing the success of
construction projects. This is because every project delivers not only benefits but also
costs to its stakeholders. Whiles stakeholders may benefit from new employment
opportunities and improvement in social wellbeing, the costs may also include
relocation of residence, different forms of pollution and diversion of vehicular and
pedestrian traffic. The satisfaction of stakeholders depends on the trade-offs between
the costs borne by the stakeholders and the ultimate benefits accruing to them. By
extension, the satisfaction of the stakeholders results in the satisfaction of the project
organization. Hence, the level of SM performance is reflected in the extent of
stakeholder and organizational satisfaction (Oppong, et al. 2017).

Stakeholder Management Performance Indicators

SM performance assessment is an area of construction management research that is
gaining popularity. This may be an effort to help the construction industry to recover
from its poor performance in SM (Loosemore 2006). In the typical social project
setting, consensus building is key to achieving collaborative project planning and
implementation among stakeholders. Accordingly, Innes and Booher (1999) reported
on the public participation practice in the US for project delivery. They realized that
the whole consensus building process results in three levels of outcomes. At the first
level, consensus building leads to innovative strategies, quality agreements, and
generation of political, intellectual and social capitals. These enhance trust in
relationship, mutual understanding, and ability of stakeholders to work together. At
the second level, the emanating effects include changes in perceptions and practices,
joint learning and improved actions, new partnerships, and implementing the
agreements reached. The third level effects are realized through new norms, heuristics,
discourses, collaborations, adaptations and reduced conflicts (Innes and Booher 1999).
Rowlinson and Cheung (2008) developed a model that relates the concepts of
engagement and empowerment in SM process of construction and real estate projects.
They suggested that the performance of the SM process could be evaluated by
observing the level of empowerment of stakeholders. This is because the objectives of
engagement cannot be achieved unless stakeholders are rationally empowered to
participate effectively (Rowlinson and Cheung 2008). An effective engagement
process ensures that the needs and concerns of stakeholders are well monitored and
promptly responded to (Wang 2001). This is important in gaining stakeholder buy-in
as it increases stakeholders’ sense of belongingness in the project.

The media perception of projects highly influences stakeholders’ acceptance and

support of a project (Manowong and Ogunlana 2006). Upon analyses of two
infrastructure projects in Sweden, Olander and Landin (2008) asserted that proactive
SM through good relationship resulted in stakeholders’ high acceptance and support of
one project whiles the second project lost public credibility due to poor
communication. Consequently, the public used the media as a tool to oppose and delay
the second project for 6 months. In another case, El-Sawalhi and Hammad (2015)
identified that the public accepted an infrastructure project in the Gaza Strip because it
was designed to be labour intensive instead of capital intensive. This kind of
collaborative mechanism induces satisfaction in stakeholders.

Bal et al. (2013) developed an engagement framework for driving sustainability in the
construction industry. They stated that engaging stakeholders to achieve sustainability

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goals is beneficial in terms of improved understanding of the market conditions,

building firm reputation and trustworthy relationships, establishing long-term
partnerships and collaborations, sharing skills and experience, understanding key
stakeholder needs, and mitigating risk and uncertainties. Stakeholders possess a wealth
of information and resources that could be important for successful project delivery
(Bal, et al. 2013). Additionally, decision-making through stakeholder engagement is
vital to protect individual and minority rights, attain sustainability performance goals,
achieve collaborative governance, facilitate smooth project implementation, and
ensure mutual learning during the project (Plummer and Taylor 2004; Varol, et al.
2011; Enserink and Koppenjan 2007; Innes and Booher 1999; Mahato and Ogunlana
2011).

Chinyio and Akintoye (2008) advocated that project organizations should fully exploit
SM processes in order to obtain their full benefits. They summarized from literature
some benefits accruing to the project organization comprising increased relational
wealth, process and organizational efficiency, cost performance, better market
positioning and business opportunities, improved foresight on impending issues, first
class public image, and reduction in risk and litigation. Manowong and Ogunlana
(2006) and Orr and Scott (2008) also asserted that project organizations engage
stakeholders to reduce project risks, cost related to institutional exceptions, and
opportunity losses that accompany stakeholder opposition and disruption of projects.
The implication is that project organization also attain satisfaction in terms of benefits
when stakeholders are well managed in project delivery. Some of the identified PIs are
objective in nature whiles the others are subjective in nature and rely solely on the
perception of the assessors.

METHODOLOGY
Prior Literature and Pre-testing

This study constitutes part of a larger research into SM performance attributes in

construction projects, drawing on global experiences. The initial objective was to
review broader literature on construction SM in order to produce a consolidated list of
PIs. A lot of factors were initially identified in literature from contexts such as
outcomes, outputs, benefits, effects and results of managing construction stakeholders.
Overall, 22 factors were consolidated as PIs through content analysis (open coding
method). Subsequently, a list of performance attributes of construction SM (including
PIs) were emailed to researchers who have done related scholarly works. They were
invited to review the draft questionnaire in terms of structure, clarity and
comprehensibility of the questions. Five responses were received through the pilot
study. The questionnaire was deemed appropriate for the purpose of the survey after
the revisions were made.

International Expert Survey

The questionnaire was issued to targeted industry and academic experts globally. The
experts were invited to rate their perception of the SM PIs on a 5-point scale (i.e. 1=
least important to 5= most important). Two methods were employed in sampling the
experts. First, a purposive sampling method was used to identify potential respondents
by meeting at least two of the following four pre-defined criteria: (1) knowledge and
in-depth understanding of the SM concept; (2) current/recent practical experience in
construction SM; (3) extensive involvement in construction project management

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generally; and (4) participated in related conferences or published related

journal/conference papers. The criteria were adapted from earlier studies on other
construction topics and thus, believed to be appropriate for inviting experts to
participate in the empirical survey (e.g. Ameyaw and Chan 2015).

Based on the criteria, the experts were invited through four platforms: the local
chapters of Project Management Institute (PMI); regional and country affiliates of
International Project Management Association (IPMA); Co-operative Network for
Building Researchers (CNBR) yahoo group; and from author list of related
publications. Emails were directly sent to over 200 identified publication authors and
the CNBR platform. Also, emails were sent to the presidents or correspondents of
IPMA and PMI chapters and they were requested to forward the questionnaire to their
registered members. The respondents had the option of filling the attached Word
version and returning by email, or completing it online through “Survey Monkey”
link. Second, the snowball sampling method was adopted by opportunistically
requesting the respondents to forward questionnaire to other willing and qualified
experts. As such, the overall identified experts for the survey could not be ascertained.

Table 1: Profile of experts

Demographic variables No. of Demographic variables No. of
experts experts
Nature of knowledge/Experience Position in organization
Academia/research 37 Professor/lecturer 26
Industry 30 Researcher 10
Total 67 Director/CEO 10
Nature of Project Project manager 10
Building work 38 Senior manager 4
Civil work 21 Others (including quantity 7
surveyor, risk manager etc.)
Both 8 Total 67
Total 67 Level of Related Experience
Sector of Project 1-5 years 15
Public 36 6-10 years 16
Private 25 11-15 years 14
Both 6 Above 15 years 22
Total 67 Total 67
Nature of Organization World Regions
Academic/research institution 37 Africa 17
Consultant organization 12 Europe 16
Contractor organization 10 Americas 14
Client organization 6 Asia 10
Public sector agency 2 Middle East 7
Total 67 Australia and Oceania 3
Total 67

The respondents were entreated to return completed questionnaires within two weeks
of issue. Email reminders were sent to the respondents and presidents/correspondents
in the fourth week after the issue of questionnaire. The entire survey spanned mid-
November 2016 to mid-January 2017. Out of the total of 76 responses received, only
67 were appropriate for analysis. Small sample sizes are common with email/web-
survey based studies and hence, 67 responses are good for further analysis (e.g.
Ameyaw and Chan, 2015). The profile of the respondents show a mix of academia and
industry experience, positions in organizations, geographic regional backgrounds, and
project type, which augment the reliability of findings (see Table 1).

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Analytical methods
The agreement and consistency analysis of responses, reliability analysis, and ranking
of PIs were performed on IBM SPSS 20. The analysis techniques employed include
the Kendall’s coefficient of concordance (W), Cronbach’s alpha (α), and the mean
score (MS) ranking. A (α) value of more than 0.7 is satisfactory, and also shows that
the set of responses is reliable and internally consistent (Nunnally 1978). The
agreement of the respondents on the ratings of the PIs increases when the (W) value
increases from 0 to 1. A null hypothesis that “there is no significant agreement among
experts on the rankings of PIs” was set at a 0.05 significance level. As the (W) value is
limited to only 7 attributes (N), Siegal and Castellan (1988) recommended the chi-
square (X2) test value as a near approximation where the (N) is more than 7.
Therefore, if the computed (X2) value exceeds the tabulated value (critical X2 value),
then the set null hypothesis should be rejected.

The MS technique has been extensively used in construction SM research to rank the
relative importance of a list of factors. This technique was similarly adopted to
establish the relative importance of the 22 SM PIs based on the international survey
dataset. The ranking was complemented by the standard deviations.

RESULTS AND DISCUSSION

Reliability and Validity of Data
Upon the reliability test, the 22 PIs attained an (α) value of 0.887 indicating the
suitability of the scale for further analysis (Nunnally 1978). It suggests that the
questionnaire is reliable and the experts responded quite uniformly.

Agreement and Consistency of Responses

The (W) value was 0.221 with a significant test value of 0.000. Because the (N) value
exceeds the requirement of 7, the (χ2) value is instead used as near approximation of
the agreement among perceptions of experts (Siegel and Castellan 1988). At 95%
confidence interval, the calculated (χ2) value of 301.53 exceeded the tabulated
(critical) (χ2) value of 32.67 at 21 degree of freedom. Accordingly, the null hypothesis
is not supported since there is significant level of agreement among the perceptions of
the experts on the SM PIs. Altogether, it confirms the validity of the data for further
analysis.
Ranking of the Stakeholder Management Objectives
The MS was computed for each PI rated by the experts and formed the basis for
establishing the KPIs. It can be observed from Table 2 that the MS ranges from 4.36
(communication effectiveness) to 2.91 (human capital building). The normalization
mechanism was further adopted to help in establishing the PIs that are key for
evaluating SM performance. As such, only the PIs with normalized values of at least
0.50 are retained. This mechanism allows only the most significant PIs to be selected.
Based on this analysis only 10 out of the 22 PIs are key for the evaluation of SM
performance.
In project delivery, communication is crucial for success. The level of communication
could be a good yardstick to measure how well the stakeholders are involved in
project planning and implementation. This is in line with Rashvand and Majid’s
(2014) suggestion that communication effectiveness is a key criterion of client and
customer satisfaction as it potentially improves relationship with stakeholders. The

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communication system adopted should allow for easy tracking of feedback to and
from stakeholders. When this is in place, project managers could depend on the
amount of feedback in assessing the effectiveness of communication. It has been
continuously asserted in literature that stakeholder buy-in is crucial for the success of
projects (Manowong and Ogunlana 2006; Olander and Landin 2008). For instance,
without stakeholders supporting a social project surrounded by controversy, it
becomes impossible for the government to implement it. This is due to the political
consequence that it may bring as stakeholders could fall on a strong powerbase to
oppose project. Stakeholders will more often support a project if their requirements
and interests have been well considered in project delivery. Hence, if project managers
are able to assess the level of stakeholder support of project (e.g. by voting of
representative groups), then they could be informed on how well stakeholders have
received the project and are willing to support its implementation.
Table 2: Ranking of the Performance Indicators of Construction SM
SM Performance Indicators N Mean Standard Rank Normalizationa
Deviation
Communication effectiveness 67 4.36 0.83 1 1.00
Stakeholder support of project 67 4.33 0.89 2 0.98
Conflict mitigation 67 4.18 0.94 3 0.88
Trust and respect in relationship 67 4.10 0.96 4 0.82
Smooth project facilitation 67 4.07 0.91 5 0.80
Uncertainty and risk mitigation 67 4.06 1.01 6 0.79
Management monitoring and response 67 3.91 0.92 7 0.69
Cost savings 67 3.85 0.89 8 0.65
Better service delivery 67 3.85 0.93 9 0.65
Sustainable lifecycle performance 67 3.81 1.08 10 0.62
Partnerships and collaborations 67 3.63 0.98 11 0.49
Implementing collective agreements 67 3.58 0.91 12 0.46
Stakeholder relational benefits 67 3.45 0.89 13 0.37
Stakeholder rights protection 67 3.45 0.94 14 0.37
Stakeholder empowerment 65 3.38 1.06 15 0.33
Potential for marketplace success 67 3.33 1.02 16 0.29
Enhanced organizational motivation 67 3.24 1.10 17 0.23
Improved organizational foresight 67 3.22 1.04 18 0.22
Mutual learning 67 3.18 1.01 19 0.19
Public image creation 67 3.04 1.05 20 0.09
Innovation enhancement 67 2.97 1.11 21 0.04
Human capital building 67 2.91 1.18 22 0.00
a
Normalization value = (Actual value – Minimum value)/(Maximum value –
Minimum value)

It is impossible to totally avoid conflict where a group of diverse people are involved
or have to be considered in decision making. The level of conflict to be encountered
depends on the complexity of project, the number of stakeholders and decision
makers, diversity of concerns to be addressed, and the power distribution among
stakeholders. Conflict has the potential to delay the progress of work if no

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considerable agreement is reached. While it is argued that conflict is somewhat

necessary for better decision making, destructive conflicts should be avoided by
project managers as much as possible. Consensus building ensures that destructive
conflict and misunderstanding among stakeholders and decision makers are minimized
(Innes and Booher 1999). Hence, project managers should use the extent of conflict
mitigation as a criterion for judging the success of construction SM. The outcome of
effective communication and transparency in decision making is the long-term trust
and respect the stakeholders develop for each other (Bal, et al. 2013; Mahato and
Ogunlana 2011). In an atmosphere of trust and mutual respect, stakeholders will not
withhold important information from project managers or other stakeholders, thus,
facilitating project success. This is a very subjective indicator of the level of SM
performance.

Time delays are prevalent in construction project delivery. This may be partly due to
stakeholder disruption through protests, litigation, picketing or vandalism, and could
end in project failure (Olander and Landin 2008). Effective SM will ensure that the
concerns of stakeholders are well addressed and stakeholder support is gained.
Eventually, such a collaborative and integrated strategy could facilitate smooth project
delivery i.e. reduction in wastage of time, resources and effort (Smith and Love 2004).
Hence, the extent to which project facilitation is effective and efficient is a good
criterion to judge SM performance. Uncertainties and risks are a common source of
problems for project implementation. Usually, uncertainties abound more at the early
stage where project information is scanty, especially if feasibility studies are not well
conducted. Moreover, failure to identify all key stakeholders during this stage could
prove costly for the project at the later stages. Unidentified stakeholders may later
raise concerns that the project might not be able to meet and lead to unnecessary
delays. Hence, effort must be made to engage relevant stakeholders at the early stage
to minimize uncertainties and related risks (Bal, et al. 2013; Manowong and Ogunlana
2006). Proactive risk management plans are also very necessary to handle unavoidable
risks in projects and also brace up to take advantage of impending opportunities.
Project managers should be able to measure the extent of risk and uncertainty
reduction as a criterion of SM performance.
Project managers must be vigilant and focus on stakeholder dynamics. Some
stakeholders’ needs and interests could change over time in the course of a project. It
is important to consistently engage stakeholders, understand their expectations, and
also monitor their satisfaction with the project progress (Wang 2001; Bal, et al. 2013;
Chan and Oppong 2017). Moreover, project managers need to respond promptly to
stakeholders in order to induce satisfaction. The effectiveness of project managers in
responding to stakeholders concerns is a good measure of SM performance. Moreover,
effective cost engineering on stakeholder requirements could lead to cost efficiency.
For instance, Orr and Scott (2008) and Chinyio and Akintoye (2008) identified that
effective SM leads to savings on direct operational cost due to stakeholder exceptions,
and reduction in transaction costs and insurance premiums. Project managers could
estimate such cost savings as a measure of SM performance. Additionally, effective
SM leads to better service delivery to end users. The requirements will be well
incorporated in deliverables if stakeholders are well managed (Chinyio and Akintoye
2008). Project managers should measure the level of service improvement as a
criterion of SM performance in construction project. The last KPI of SM is sustainable
lifecycle performance. Meeting sustainability-related targets has become one key
performance driver in the construction industry (Bal et al., 2013). There are many

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rating systems used to assess sustainability performance such as LEED, BREEAM and
CASBEE. The overall ratings could indicate to project managers how stakeholders’
environmental, social and economic objectives have been met through project
delivery.

CONCLUSIONS AND RECOMMENDATIONS

This study sought to empirically evaluate 22 indicators of SM performance through a

questionnaire survey drawing on international experience. Only 10 PIs were found to
be key for evaluating SM performance, namely; communication effectiveness,
stakeholder support of project, conflict mitigation, trust and respect in relationship,
smooth project facilitation, uncertainty and risk mitigation, management monitoring
and response, cost savings, better service delivery, and sustainable lifecycle
performance. It is important for project managers to focus on the ten established KPIs
in evaluating SM performance. This is because the KPIs distinctly explain the major
SM outcomes and therefore, they would be useful and adequate in modelling SM
performance in construction projects. The level of SM performance based on the KPIs
is representative of the extent of mutual stakeholder satisfaction in project.
The study has also identified that some of the KPIs are subjective in nature, thus, they
depend solely on the perception of the assessors e.g. trust and respect in relationship,
and stakeholder support of project. Combinations of objective and subjective criteria
have been commonly used to assess overall construction project success. However,
developing more objective measures for the subjective KPIs is still crucial. This will
ensure that the level of stakeholder mutual satisfaction in construction projects is
practically, reliably and objectively measured. Consequently, comparisons could be
made on the levels of stakeholder satisfaction among a cross-section of construction
projects.
Since the international survey was open to all types of construction projects, it will be
important for future studies to explore how the KPIs are applicable to specific projects
e.g. buildings, railway or roads, and specific local construction industries. Moreover,
the relationships between the performance objectives, success factors and KPIs should
be explored so that the overall SM performance (i.e. mutual stakeholder satisfaction)
can be properly managed (evaluated, benchmarked, monitored and improved) in
construction project delivery.

ACKNOWLEDGEMENT

This article forms part of a larger research hence, it may share methodology or
objectives with other articles. However, the findings presented here are believed to
add to knowledge uniquely in the field of SM. The authors appreciate the Department
of Building and Real Estate of the Hong Kong Polytechnic University for funding this
study, and all experts involved in the survey.

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