CONSTRUCTION PROJECT MANAGEMENT

6. PROJECT STAKEHOLDER MANAGEMENT

DDIT DIRE DAWA INSITUTE OF TECHNOLOGY

 6. Project stakeholder management
Stakeholders are individuals or groups that benefit from an
organization.

Stakeholders can be harmed or have their rights affected by an

organization.

Stakeholders can affect an organization's functioning, goals,

development and even survival.

Stakeholders are beneficial when they help you achieve your goals and
they are antagonistic when they oppose your mission.

In most construction projects, there will be many stakeholders and their

presence in itself is a potential conflict of interests.

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 6. Project stakeholder management
If stakeholders can have a negative influence on us, why should
we deal with or bother about them? Let you discuss with your
group member!

The reason is that most often you cannot do without them.

Organisations often depend on external stakeholders for

resources, services, information, etc.

Thus, stakeholders must be managed in each undertaking to avoid

any of their negative influences, especially those that could be

contrary to a firm’s objectives.

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 6. Project stakeholder management
A contractor usually executes construction projects for an owner,
with the assistance of an engineering designer as an intermediary.

Both the owner and contractor bring other stakeholders to the

project, as described in the following:

The owner typically mobilizes the following stakeholders:

 Financing institutions;

 Professional designers and technical consultants, architects,

and engineers;

 Agency construction manager (CM); Inspection third parties;

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 6. Project stakeholder management
 Licensors of proprietary technology and process engineers;

 Lawyers and external legal advisors;

 Insurance companies; and

 Administrative and regulatory organizations.

The contractor typically mobilizes the following stakeholders:

• Subcontractors,

• Lawyers and external legal advisors,

• Insurance companies, and

• Equipment and material suppliers.

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 6. Project stakeholder management
Some of the most common stakeholders in construction projects

are the community, labor unions, insurance providers, financial

institutions, and regulatory agencies.

a. Community: Hiring unemployed workers from the community

benefits both the community and the project.

However, it may also negatively impact the community.

The ability to create videos and share them via social networks

has increased the impact of public groups on projects.

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 6. Project stakeholder management

b. labor unions: Labor unions negotiate work parameters for the

execution team, such as daily work hours, compensation for extra

hours, transportation, catering, site conditions, and other issues.

c. insurance providers: The possible impact of risk events may be

high due to the nature of construction activities.

The project management team should be aware of their

requirements.

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 6. Project stakeholder management
d. Financial Institutions: They play an important role in
construction projects and may impact the project outcomes.

e. regulatory agencies: Construction projects usually require

permits and certifications of various types.

The requirements and conditions of the permits and certifications

should be administered in order for the project to move forward.

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 6. Project stakeholder management
Government as a stakeholder: Governments can be counted as
stakeholders in some way as they certainly affect organisations
through their fiscal and regulatory policies.

Governments could have an interest in the operations and

existence of certain organisations.

Government is a type of stakeholder with unique interests. Their

involvement with firms is on a different level and scale.

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 6. Project stakeholder management
Types of stakeholders: Generally, project stakeholders in the
construction industry can be classified as direct or indirect, according
to their level of involvement in the project execution.

Direct: Project owners, A/E, Contractors, Subcontractors, and etc.

Indirect: Professional associations; Labor unions; Media; and etc.

The stakeholders can also be divided into:

– Internal stakeholders, that is those who are members of the project

coalition or who provide finance.

– External stakeholders, that is those affected by the project in a

significant way.

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 6. Project stakeholder management
.

External stakeholders
Institutional forces Environmentalists
Client
Government authorities
Conservationists
Trade unions

Social community Contractors Consultants Archeologists

Internal stakeholders Local residents

Others

Interplay between some key stakeholders.

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 6. Project stakeholder management
Stakeholder management involves identifying and classifying

stakeholders, and subsequent engagement with them in a timely,

planned and coordinated manner.

A primary stakeholder is one without whose continuing

participation the corporation cannot survive, whereas secondary

stakeholders are those who influence or are influenced by the

firm, but who are not essential to its survival.

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 6. Project stakeholder management

In terms of decision-making, it is worthwhile to consider

stakeholders as being supportive, neutral, or anti.

The anti’s are often in the minority but can be very vocal.

The idea is to endeavour to shift stakeholders from the neutral

and especially anti side of the fulcrum to the supportive side.

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 6. Project stakeholder management
As stakeholders have claims, rights and expectations,
they must be managed in each project to avoid any of
their influences that could be contrary to a firm’s
objectives.

The ideal is to optimize by maximizing the benefits that

are derivable from stakeholders while minimizing their
potential negative impacts.

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 6. Project stakeholder management
In running projects, organisations may often act in a tolerance

zone.

As projects can swing out of this tolerance band, there is a need to

monitor their progress continuously.

The saliency and dynamism of stakeholders: Saliency (urgency)

is the intensity of claim, attention and priority attached to a risks.

It is also the degree to which a claim demands immediate

attention.
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 6. Project stakeholder management

• The urgency associated with risks is often not static but

dynamic.

• The levels of power and saliency of stakeholders may change

with the passage of time.

• In each project therefore, there is a need to monitor the

stakeholders and respond to their dynamism in order to avoid

any negative effects.

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 6. Project stakeholder management
• As stakeholders are dynamic, the choice and use of any
engagement approach or combination of approaches is always
circumspect.

• When the differing expectations of all stakeholders cannot be

achieved at the same time, compromises become worthwhile.

• In this regard, an organisation may sometimes have to trade-

off the needs of one stakeholder against another.

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 6. Project stakeholder management
A dynamic matrix is essentially not an answer to everything,
rather it helps to:

– bring order to a very complex situation,

– bring collective understanding if compiled by a group,

– suggest up-to-date strategies for management and

communication between the various groups,

– manage resources and time and use these where most benefit
will be derived.
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 6. Project stakeholder management
Stakeholder management: Stakeholders need to be managed in

order to minimise their negative impacts and ensure that they do

not hinder the achievement of goals by individuals and

organisations.

As stakes are not static but dynamic, there is a need to manage the

constantly shifting balance between the interests of stakeholders.

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 6. Project stakeholder management
Stakeholder management dictates that an organisation should relate
with many constituent groups and should engender and maintain the
support of these groups.

Differing stakes can become a major source of conflict between

stakeholders and hence it is worthwhile to manage stakeholders in most
undertakings.

Stakeholders’ influences are varied hence the need to respond to

different stakeholders in different ways.

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 6. Project stakeholder management
A proactive approach is needed in dealing with stakeholders as
opposed to being reactive.

The differing claims, rights and expectations of stakeholders can exert

tangential forces in different directions.

This effect must be countered by managing stakeholders collectively in

accordance with the objectives of a given cause.

Firstly, each stakeholder should be managed uniquely on the basis of

their character.
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 6. Project stakeholder management
That way, the missions, strengths, weaknesses, strategies and
behaviour of the different stakeholders will be engaged carefully
to avoid any threats they may pose to projects and corporate
governance, processes and outcomes.

Secondly, each project-based set of stakeholders must be

managed as a cohort.

This activity extends beyond the construction phase of a project.

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 6. Project stakeholder management
Need for construction stakeholder management: Modern construction
clients tend to manifest as dynamic configurations of stakeholders who

engage with a multifaceted market.

In projects involving multifaceted clients, large project teams and many

other stakeholders, there is a dire need for effective coordination and
general management of the different stakes, and this warrants effective
client leadership.

Stakeholder management enhances greater competency in relational

issues and minimizes risks therein.

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 6. Project stakeholder management
Aspects of stakeholder theory: A stakeholder management approach
takes many factors into account, for example moral, political,
technological and economic interests.

Three approaches are useful for dealing with stakeholders:

1. Strategic approach – This approach allots shareholders’ profit a

greater priority above the interests of other stakeholders.

2. Multifiduciary approach – This assumes a fiduciary responsibility to

stakeholders, allotting them equal stakes with shareholders.

3. Stakeholder synthesis approach – This approach assumes a moral

but non-obligatory responsibility to stakeholders, e.g. dealing with
them ethically.
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 6. Project stakeholder management
To an organisation, the key considerations in practical stakeholder
management should include the following:

1. Who are our stakeholders?

2. What are their risks?

3. What opportunities do they present?

4. What challenges or threats do they present?

5. What responsibilities do we have towards our stakeholders?

6. What strategies or actions should we use to engage our

stakeholders?

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 6. Project stakeholder management

Caroll and Buchholtz (2006) elaborated as:

– Should we deal directly or indirectly with our stakeholders?

– Should we be aggressive or defensive in dealing with

stakeholders?

– How and when should we accommodate, negotiate, manipulate

or resist the overtures of our stakeholder?

– How and when should we employ a combination of the above

strategies or pursue a singular course of action?

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 6. Project stakeholder management
The principles of stakeholder management: The basic principles
include:

1. Acknowledge and actively monitor the concerns of all legitimate

stakeholders, and should take their interests appropriately into
account in decision-making and operations.

2. Listen and openly communicate with stakeholders about their

respective concerns and contributions, and about the risks that they
assume because of their involvement with the corporation.

3. Adopt processes and modes of behaviour that are sensitive to the

concerns and capabilities of each stakeholder constituency.

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 6. Project stakeholder management
4. Recognise the interdependence of efforts and rewards among
stakeholders, and should attempt to achieve a fair distribution of the
benefits and burdens of corporate activity among them.

5. Work cooperatively with other entities, both public and private, to

ensure that risks and harms arising from corporate activities are
minimised.

6. Avoid altogether activities that might jeopardise inalienable human

rights (e.g. the right to life).

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 6. Project stakeholder management
7. Acknowledge the potential conflicts between (a) their known roles as
corporate stakeholders and (b) their legal and moral responsibilities for
the interests of stakeholders.

Engaging with stakeholders: An organisation has to engage with its

stakeholders during normal and difficult times.

There are different avenues for engaging with stakeholders and these
include consultation, dialogue, partnership and regular supply of
information.

Channels of communication could also be exploited, such as uses of

posters, websites, newsletters and emails.
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 7. Health and safety management
The construction industry is characterised by a hostile and
uncontrollable production environment, a complex product, a
fragmented structure, and increasing economic constraints.

The industry has more accidents of greater severity than any other
industrial sector.

To improve performance through self-regulation has led to the

introduction of new health and safety regulations (OHS 2001)
which impose far more stringent requirements on project
participants.
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 7. Health and safety management

Health and Safety Management for Construction: Effective health

and safety management is founded on the provision of a safe and

healthy working environment with safe systems of work at its core.

The key to success is to ensure that health and safety aspects are
carefully considered

– planned, organised, monitored, controlled and reviewed

– and that the risk of danger and hazard to persons, as a result of

site activities, is systematically safeguarded.
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 7. Health and safety management
SAFETY ATTITUDES AND THE CONCEPT OF VALUE: Despite
its poor record, the construction industry’s attitude towards OHS
appears to be unconcerned.

Managers display complacency and a lack of concern for the

safety of their workforce.

This attitude extends beyond an individual’s personal sense of

safety to their treatment of others.

For example, Nabarrow & Nathanson (1996) found that 60% of

the respondents did not consider the risks to the general public
arising from their activities.
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 7. Health and safety management
It estimated that accidents on construction sites might account for up to
8.5% of tender prices.

It appears that greater attention to OHS issues could contribute

significantly to securing greater value for money from the construction
industry.

Decisions on OHS provisions are not based on ethical considerations

about people’s basic rights to health and safety at work, but on
economics.

Economics driving OHS decision-making and cited other problematic

constraints such as time pressures and the short-term nature of
contracting relationships.
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 7. Health and safety management

INVESTING IN SAFETY: Few would debate that in a

construction environment, absolute safety is a ultimate ideal.

Irrespective of the precautions taken or finance expended, no

project can be totally free of risk.

It is accepted that it can reduce the likelihood and severity of

accidents.

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 7. Health and safety management
Although statutory instruments require risks to be as low as reasonably
practicable, fines and punishments remain relatively small-scale in the
area of safety.

HEALTH AND SAFETY CULTURE: Thus it seems that the economic,

macho, adversarial and selfish values that guide managerial decision-
making in the construction industry lie at the heart of its poor safety
record.

It follows that a change in OHS performance would require a change in

managerial values and culture within the construction industry.

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 7. Health and safety management
Seymour and Rooke (1995) point out that the research community’s

values reflect those of the construction industry, and in this sense it is

not surprising that OHS research has been neglected infavour of more

economically oriented research.

LEGISLATION AND SAFETY: In recent years there has been greater

emphasis given to the role of legislation in managing OHS in the
construction industry.

Largely brought about by the industry’s seeming inability to control its

accident rates voluntarily.
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 7. Health and safety management
PREVENTIVE MANAGEMENT OF ACCIDENTS: It is possible to
classify accidents along a continuum from ‘sudden’ to ‘creeping’,
depending on the length of the chain of events that cause them.

Sudden accidents have relatively short accident chains and normally

demand an element of reactive management.

In contrast, creeping accidents present numerous opportunities for

prevention along their accident chain.

For a manager, it is more desirable to prevent accidents by tackling the

events in an accident chain.

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Thank you !!!

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