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Project Stakeholder Management
Article in Engineering Management Journal; EMJ · December 2002
DOI: 10.1080/10429247.2002.11415180
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PROJECT STAKEHOLDER MANAGEMENT
Jan Terje Karlsen, Norwegian School of Management BI
Reference to this paper should be made as follows: Karlsen, J.T. (2002). Project Stakeholder Management,
Engineering Management Journal, Vol. 14, No. 4, pp. 19-24.
Abstract
Today almost every project takes place in a context where stakeholders play a major role in the accomplishment of
the tasks. Often the project is sensitive to actions and decisions taken by the stakeholder. Project stakeholders can
include clients, end users, contractors, consultants, labor unions, line organization, public authorities, financial
institutions, insurance companies, controlling organizations, media, third parties and competitors. A survey was
conducted among project managers in Norway to collect their views on stakeholder management. First, research
results indicate that clients and end users are the most important project stakeholders. Second, collected data show
clients, end users, contractors/suppliers, line organization and public authorities are equal when it comes to causing
problems and uncertainty to the project. Third, the findings indicate that more efforts should be made to provide
new insights into project stakeholder management. Furthermore, the paper describes a formal and systematic project
stakeholder management process. This process includes six steps: initial planning, identification, analysis,
communication, action and follow-up. The results from this paper can be of use for a project manager in several
ways. First of all, we argue that more attention should be paid to the stakeholders. Second, in managing the
stakeholders the project manager can follow the process presented here. Third, the survey results can give the
project manager an idea of which stakeholders to focus on in order to understand them better.
Introduction
Project management is a science and profession that is not very old. During the past 40 years, project management
has undergone rapid and sometimes unpredictable changes while trying to find suitable answers and
countermeasures to the assigned challenges. However, those responses usually had a distinct internal and
quantitative focus on development of tools and techniques to control costs, time and quality (Gilbert, 1983). There
are many examples of project management planning, scheduling, budgeting and control systems and tools which
have been generated to cope with a large amount of data associated with projects. This approach has brought us
some very significant successes, both in theory and practice, but it also has some weaknesses.
The purpose of this paper is to create a more extensive picture of what is included in project management. Past
research has shown that most projects are sensitive to changes in the environment (Karlsen, 1998). On the other
hand, many projects experience that clients, end users and public authorities make tougher demands on project
execution. Hence, it is a mistake for project management to ignore the stakeholders or attempt to impose a rigid
detailed control. These are challenges and demands which the project manager cannot overlook, but has to take into
consideration and manage. It is necessary to develop an understanding which can generate appreciation and trust
and can lead to constructive working relationships. According to Jergeas et al. (2000) and Cleland (1986), efficient
management of the relationship between the project and its stakeholders is an important key to project success.
This paper consists of two parts. In the first part three questions are addressed:
Which stakeholder is the most important to the project?
Which stakeholders cause the most uncertainty and problems to the project?
What should be developed to improve project stakeholder management?
These questions are answered with the data results from a conducted survey. In the second part a project
stakeholder management process is introduced and explained as an expansion of the first part. These two parts are
closely integrated as they both try to find appropriate answers to how projects can improve the management of their
relationships with stakeholders.
Research Questions
The project and its stakeholders can be viewed as a network in which the actors interact with each other and
exchange information, resources and results (Milosevic, 1989). Often the information and the resources that are
input to the project are controlled by stakeholders. This control of information and resources gives the stakeholders
a certain power. Changes in access to information or these externally controlled resources can affect the planning,
organizing, staffing and directing of the project. It is the project’s management process that transforms inputs into
outputs, which implies the achievement of a unique change. This alteration is beneficial either for a single client or
for a group of project stakeholders. According to Jergeas et al. (2000) it is the stakeholder that ultimately
determines whether a project is a success, based on the project results. From this discussion we understand that
some stakeholders have power because they control information and resources, while other stakeholders are
important because they decide whether the project result is a success or not. Hence, the following question is
addressed: Which stakeholder is the most important to the project?
The project environment is complex and changing (Gilbert, 1983). If stakeholder management is not
adequately addressed in the project, this can mean unexpected problems and uncertainty to the project caused by
stakeholders. For instance, a clear and comprehensive definition of project success and failure may not be
determined, and consequently the project manager may strive to meet goals that were never intended by the
stakeholders (Meredith and Mantel, 2000). Additional problems and uncertainty caused by stakeholders that
contribute to project failure include poor communication, inadequate resources assigned to the project, changes in
the scope of work, unfavourable news about the project in the press, and negative community reactions to the
project. During the project some stakeholders will cause high uncertainty. Working proactively to reduce or
minimize the potential for uncertainty and problems caused by stakeholders, it is interesting to consider which
stakeholders that generally cause the most uncertainty and problems to the project. Hence, the following question is
addressed: Which stakeholders cause the most uncertainty and problems to the project?
Results from earlier research have identified that in many projects, management of stakeholders lacks strategies,
plans and methods (Karlsen, 1998). Stakeholder management is often characterized by spontaneity and causal
actions, which in some situations are not coordinated and discussed within the project team. The result of this
practice is often an unpredictable outcome. To meet this challenge, several stakeholder management methods and
guidelines have been introduced (Gilbert, 1983; Cleland, 1986; Savage et al., 1991; Jiang et al., 2002). These
guidelines include the execution of the management functions of planning, organizing, motivating, directing, and
controlling the resources used to cope with stakeholders’ strategies. Despite these methods and guidelines, there
seems to be a need for further development within the field of project stakeholder management. Hence, the
following question is addressed: What should be developed to improve project stakeholder management?
Project Stakeholders
The project environment can be defined in many ways. Daft (2001) defines the environment as “...all elements
existing outside the boundary of the organization that have the potential to affect all or parts of the organization”.
In an attempt to explore this concept, Dill (1958) differentiates between task and general environment. Task
environment is used to describe those actors and stakeholders of the environment that are explicitly relevant for and
involved in the project work, e.g. clients. In exhibit 1 different project stakeholders are illustrated.
Exhibit 1. Project stakeholders
Clients/
customers
Financial
institutions
End
users
Competitors
Press/
media
Public
authorities
Suppliers/
contractors
Project
Controlling
organizations
Line
organization
Insurance
companies
Labor
unions
Third
parties
Consultants/
advisers
There are several definitions of stakeholders. Juliano (1995) defines stakeholders as “…an individual,
individuals, team or teams affected by the project”. PMBOK (1996) defines 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”. These stakeholders are actors outside the authority
of the project manager. The number of stakeholders interested in the project can dramatically increase the
complexity. Each of these stakeholders usually has his/her own interest in the project and this may cause different
priorities and conflicts.
In the literature further attempts have been made to differentiate between these groups e.g. between internal and
external stakeholders, and primary and secondary stakeholders (Cleland, 1998).
The general environment consists of other factors that are also of interest and potentially relevant for the project
organization. Miles (1980) defines the general environment as “…it is those factors that are just out there”. The
general environment includes technological factors, legal factors, economic factors, political factors, physical
factors, supply of labour, cultural factors, environmental factors. Generally speaking, these are factors which can
have an impact upon both the project process and stakeholders, but which cannot easily be influenced by either the
project members or stakeholders. In this paper the focus will be placed on the task environment and stakeholders.
Research Method
The present study consists of a survey conducted in Norway in 2001 to investigate the management of stakeholders
in projects. The first part of the research instrument contained forced-answer questions with a five-point Likert
scale ranging from a high of 5 to a low of 1. In addition, the survey contained open questions where the respondents
were asked to give their comments.
The survey instrument was sent electronically to members of the Norwegian Center of Project Management. It
was assumed that these firms would tend to have project managers with stakeholder management experience. After
a reminder, a total sample of 78 was returned, each representing a specific project. After studying early and late
responses, as well as responding firms, there is no reason to believe that there is any significant non-response bias.
The projects in the sample include construction projects, product development projects, IT/IS projects and
organizational development projects. The sample includes both projects that are characterized by routine work as
well as research projects. The average size of each project in the sample was 50 million US Dollars. The data
indicate that 66% of the respondents were project managers. Two other major respondent groups were project
participants or consultants. Approximately 20% of the projects had a public source of funds, 44% were privately
financed and the rest had a mixed source of funding.
Statistical Data and Results
Exhibits 2 to 4 contain the results of statistical analyses. Means and t-tests (to assess the statistical significance of
the difference between two independent sample means) were used to examine the data from the survey.
Exhibit 2 shows descriptive statistics regarding stakeholder importance, which give an answer to the first
research question. The response scale ranged from 1 to 5 (1 = not important stakeholder and 5 = very important
stakeholder). As we can see from the table, the clients (m = 4.53) and the end users (m = 4.36), are the most
important project stakeholders. Data confirm no significant difference in importance between these two
stakeholders, but both clients and end users are significantly more important than all the other stakeholders. From
the table we can also see that financial institutions and insurance companies are the significantly least important
project stakeholder (m = 1.68). The table shows that there are fifty-two significant differences. An interesting
finding is that consultants and advisors are found to be just as important as contractors and suppliers to the project.
We can also observe from the table that these two stakeholders are significantly more important than public
authorities.
Exhibit 2. Stakeholder importance
Variable
Mean
1 Clients
4.53
2 End users
4.36
3 Contractors/suppliers
3.82
4 Consultants/advisers
3.81
5 Line/base organization
3.77
6 Public authorities
3.40
7 Press/media
2.74
8 Third parties
2.69
9 Controlling organizations
2.53
10 Competitors
2.46
11 Labor unions
2.15
12 Financial institutions/
insurance companies
1.68
t-values
2
3
4
5
6
7
8
9
10
11
12
1.36
5.03**
4.74**
5.91**
6.65**
11.87** 10.34** 11.25** 12.04** 15.52** 20.12**
3.37**
3.57**
3.70**
4.88**
11.13**
8.64**
10.13**
9.13**
12.93** 18.01**
.06
.29
2.01*
6.57**
5.76**
7.02**
7.49**
8.35**
12.75**
.23
2.02*
6.59**
5.99**
6.42**
6.03**
9.73**
12.55**
1.91
7.14**
6.23**
6.12**
7.67**
10.56** 14.18**
3.96**
4.07**
5.23**
4.35**
6.95**
9.72**
.35
1.25
1.55
3.60**
6.95**
.93
1.33
3.37
6.61**
.34
1.98
5.50**
1.65
4.86**
3.11**
Note: The statistical significance of the t-values is ** for p
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