Who are the stakeholders in project management?

When managing a project, you need to balance the desires and requirements of many stakeholders.

A stakeholder in a project is anyone impacted by its outcome. Internally, this includes people like managers, shareholders, and developers. Externally, it includes people like customers, suppliers, and outside investors.

Although the weight of each stakeholder’s input varies, a project’s success depends on keeping each as happy as possible. Project managers need to identify each stakeholder and gather their feedback to ensure the project aligns as closely as possible with their aims.

In this article, you’ll find out how your project can benefit from stakeholder engagement and how to balance the often conflicting requirements.

The term “stakeholder” is broad. It includes anyone who may be impacted by the project.

This definition includes many people without any direct say or influence over its success. For example, suppliers want your project to be successful so they can keep your business. Competitors want your project to be unsuccessful so they can keep their business. Neither of these groups will be driving day-to-day decisions.

In contrast, customers and management play a larger role in day-to-day project management. A project that doesn’t fulfill customers’ needs won’t succeed, while a project that doesn’t fulfill managers’ needs won’t be prioritized. Stakeholders with this level of influence over a project are the key project stakeholders.

Although it’s good to meet every stakeholder’s needs, understanding who the key project stakeholders are will make it easier to decide which needs take priority over others.

You’ll also find it helpful to understand the difference between internal and external stakeholders. The constraints they place on a project differ, but each can significantly impact a project’s success or failure.

Internal stakeholders

These are stakeholders that come from within the organization. They have a vested interest in the project’s success because it impacts their work environment, job security, and career growth potential.

Internal stakeholders have a deep understanding of the company’s culture, processes, and goals. This knowledge enables them to make suggestions that shape the project’s direction, keeping it aligned with their departmental goals as well as the broader goals of the company.

External stakeholders

External stakeholders are individuals or entities outside of an organization who are affected by or can influence its projects and outcomes.

These stakeholders bring diverse perspectives, resources, and constraints to the table, impacting the project from outside the company’s immediate control.

You should carefully balance their interests and requirements to help drive the project’s success by ensuring it is positively received within the wider community and market.

Let’s take a closer look at how a project can benefit from listening to a broad range of stakeholders.

Experience and expertise

Stakeholders at all levels can provide insights that contribute to the project’s success. For instance, the IT department can provide insights on how new technologies can be best implemented. A supplier can help you decide which of their products best suits your needs. And, of course, customer feedback is one of the most valuable tools available to a project manager.

The key to successfully leveraging this knowledge is to properly identify the stakeholders, their level of expertise, and how that relates to the project at hand. (More on this later.)

Risk identification and mitigation

Risk management can be one of the hardest parts of project management. An unplanned disruption can cost a lot of money and delay project development. The more diverse voices you have helping you identify these problems ahead of time, the better you’ll be able to plan for as many contingencies as possible.

For example, suppliers may have better insight into potential supply chain disruptions, while local community leaders may know about the environmental or social risks of a new construction project that you may have overlooked.

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Perform a stakeholder analysis to get the most value from your project’s stakeholders. This will identify the stakeholders and provide an outline for prioritizing them and incorporating their input. For any reasonably sized project, it should be among the first things you do.

How to identify and analyze stakeholders

The first order of business in stakeholder analysis is to determine who they are and document as much as possible about them and their role in the project. Here are the basic steps for doing this:

1. Initial identification: start by brainstorming a large list of the people the project may impact. Try to think of obvious as well as not-so-obvious people to ensure comprehensive coverage.

2. Use tools and frameworks: stakeholder maps and matrices are just some of the tools designed to help project managers organize stakeholders. Find one that suits your needs and use it.

3. Analyze stakeholder characteristics: evaluate each stakeholder’s level of influence, power, and interest in the project. Use that to prioritize engagement efforts and tailor communication strategies.

4. Conduct interviews and surveys: gather detailed insights about stakeholder expectations, concerns, and suggestions through interviews and surveys. Use that data to guide project decisions.

5. Review past projects: past experiences can help guide efforts for the current project. You can tweak your strategy in response to data about what did and didn’t work well. This can be data about a specific stakeholder or generic lessons learned.

Prioritizing stakeholders based on influence and interest

When dealing with multiple stakeholders, you might feel you’re being pulled in all directions at once.

Everyone with any interest in the project will have a different vision of what the project should be. It’s the project manager’s job to know which voices should be listened to first. Sometimes, this is obvious. Upper management, for example, has a large say in how the project unfolds. Other times, it isn’t so easy.

A common tool for understanding the intersection of stakeholder power and interest is called the power–interest grid, somewhat unsurprisingly. The grid places stakeholders in one of four quadrants:

• High power and high interest

• High power and low interest

• Low power and high interest

• Low power and low interest

Prioritizing stakeholders by their quadrant in the order listed above will ensure the most important voices are heard first. The highest-ranking stakeholders typically include upper management, major clients or customers, and regulatory bodies.

Take care not to ignore stakeholders in the lowest tier. Everyone with an interest in the project has something to contribute. That being said, more time should be allocated to communicating with the higher-ranking stakeholders, and their concerns should typically win out in any conflict.

Understanding stakeholder needs and expectations

Once you understand who to listen to, you need to learn how to listen to them. Getting the best feedback from a stakeholder requires you to take the time to fully understand their perspective. That isn’t always as easy as it sounds, but you might find the following techniques helpful:

• Active listening: actively listening to someone involves fully concentrating on what they have to say. If something is unclear, ask clarifying questions. Repeat back what they have said to ensure you understand them correctly.

• Engaging in dialogue: as vital as listening is, it’s only one part of effective communication. To ensure the feedback gathered from a stakeholder is as impactful as possible, communicate the goals and constraints of the project to them.

• Conducting needs analysis: find a structured method to collect feedback from stakeholders that’s convenient to them. Use that method to collect as much information as possible about their needs and priorities as they relate to your project.

• Feedback mechanisms: the feedback method you choose for the needs analysis can extend to other communications as well. For customers, this may be a survey or another mechanism they can complete on their own time. For internal stakeholders, it could be meetings or suggestion boxes.

• Empathy mapping: this is a visual tool that helps teams understand stakeholders’ experiences and perspectives. Mapping out what stakeholders say, think, do, and feel gives you greater insight into their motivations, allowing you to devise more responsive and empathetic solutions.

Many challenges and pitfalls can prevent stakeholder management from providing the maximum benefit. Some of these challenges can even harm the project, making it worse rather than just failing to make it better.

Below, you’ll find some of the most common challenges and how to deal with them.

Conflicting priorities among stakeholders

Two different stakeholders may have conflicting goals for a project. As a simple example, customers would love a free product—but investors need to make their money back.

Properly prioritizing stakeholder input can solve this conflict. The analysis method above can be a blueprint for doing so.

Misaligned stakeholder goals and project objectives

Sometimes, stakeholders’ aims conflict with the project itself. To avoid this trap, clearly define the project’s goals upfront and communicate them to all stakeholders. Then, ensure stakeholder input aligns with the project goals before acting on it.

Inadequate stakeholder engagement

Many project managers make the mistake of only engaging with stakeholders a few times during the project. This isn’t ideal since situations arise throughout the development cycle where stakeholders may have valuable input.

Engagement with stakeholders, especially key project stakeholders, should be as continuous as possible.

Communication barriers

Although internal stakeholders are likely to speak the same language as the project manager, external stakeholders might not. This is also true for a global product’s customers.

However, it’s important to understand what customers from around the world are saying. Cultural differences can vary dramatically; what may be innocent in one culture could be taboo in another. Be sure to learn about these differences at the beginning of your project so that you can ensure the project has global success.

Managing stakeholder expectations

Many companies find their products fail miserably after promising more than they can deliver to customers. Negative word-of-mouth spreads quickly when a product is released that doesn’t live up to expectations. From customers to investors to the management team, everyone needs to be aware of the project’s constraints and realities.

Resistance to change

Some amount of change is inevitable during the project development process. However, if the change deviates too far from a given stakeholder’s vision, they may be resistant to it.

Communication plays a key role in this scenario. Transparency helps stakeholders understand why the change is needed and also allows them to provide their input and insights into how to best make the change.

Stakeholder turnover

Some key stakeholders may leave the team—especially during a lengthy project. This can be highly disruptive if you don’t plan for it. When the stakeholder leaves, they may take valuable knowledge about the project with them, leaving gaps you need to fill quickly. Ease the transition by documenting the knowledge of all stakeholders and having an efficient onboarding process for their replacements.

Measuring and demonstrating value to stakeholders

The continued support of key project stakeholders is vital to keeping the project going. Creating a list of key performance indicators (KPIs) representing each stakeholder’s goals when planning the project can help ensure that support. Provide regular progress updates with these metrics to show the stakeholders that the value they expect from the project is being realized.