What is a stakeholder in project management?

What is a stakeholder in project management - cover

Stakeholder management is a critical part of project management. The project manager’s ability to pinpoint and engage all stakeholders can make a distinction between project success or failure.

In this guide, we will define the term “stakeholder” and identify different types of stakeholders in project management.

Moreover, we will explain their importance and help you determine all individuals and groups critical for your project’s success.

Who are the stakeholders in project management? 

According to Kerzner’s Project Management: A Systems Approach to Planning, Scheduling, and Controlling, “stakeholders are individuals or organizations that can be favorably or unfavorably impacted by the project.”

In simple words, stakeholders are people interested in a particular project that have an influence on its outcome. And every project has stakeholders, irrespective of its size.

According to the PMI, stakeholders can be passively or actively involved in a project — or can even be unaware of their involvement.

They can be internal or external to the project.

Also, the project can impact them positively or negatively.

So, stakeholders are interested in a particular project and/or have an influence on its outcome. 

But who exactly are they?

And how can we classify them?

Let’s start with identifying types of stakeholders.

What are the types of stakeholders in project management?

We can use project management in all industries. There is no universal list of stakeholders to apply to all projects. Also, projects don’t exist isolated from various influences. 

There are many stakeholders for each project, depending on the project size, type, industry, etc.

Their priority can change during the different project phases.

Their interests can change throughout the project, as well.

Failing to meet the needs of just one influential or powerful stakeholder at a critical time can lead to the project’s failure.

We can classify stakeholders as follows:

  1. Stakeholders vs. key project stakeholders
  2. Internal vs. external stakeholders
  3. Primary vs. secondary stakeholders
  4. Direct vs. indirect stakeholders

Let’s explain these types of stakeholders in more detail.

Stakeholders vs. key project stakeholders

If you want your project to succeed, you need to identify all key stakeholders and learn how to handle relationships with them.

While anyone impacted by the project is theoretically a stakeholder, key stakeholders have the influence and authority to determine whether a project is a success or not.

But, how to recognize key stakeholders?

The Harvard Business Review article proposes five questions to ask in order to determine key stakeholders for your project.

According to their writing, you can identify stakeholders as the key ones if:

  • The stakeholder has a considerable influence on your organization’s performance.
  • You can clearly identify what you want from the stakeholder.
  • Your relationship is dynamic and you want it to grow.
  • You cannot exist without or easily replace the stakeholder.
  • The stakeholder has not already been identified through another relationship.

As stated by the Project Management Institute, “project stakeholders usually include

  • the project manager, 
  • the customer,
  • team members within the performing organization, 
  • and the project sponsor.”

Additional key stakeholders may vary depending on the project’s nature.

For instance, if your project is related to the pharmaceutical industry, one of the key stakeholders will be the government, as the pharmaceutical industry is highly dependent on law regulations.

Internal vs. external stakeholders

As the name suggests, internal stakeholders are employees of the organization or the company carrying out the project.

The project can directly affect these stakeholders — such as project users.

But, internal stakeholders are not limited only to project users.

They can also be other employees or heads of departments like marketing, IT, human resources, etc.

Practically everyone inside the company who has a stake in the project and can affect it can be classified as an internal stakeholder. 

For example, internal stakeholders may include:

  • Top management,
  • Project team members,
  • Resource managers,
  • Internal customers, etc.

On the other hand, external stakeholders are the individuals or organizations outside the company who are interested in the project or can have an influence on it.

External stakeholders: 

  • The government, 
  • Suppliers,
  • Customers,
  • Contractors and subcontractors, etc.

As we can notice, it is quite easy to determine who are the internal and the external stakeholders.

But, there are other, more complex classifications, and we will explain them too.

Primary vs. secondary stakeholders

Primary stakeholders are those with the most impact on your project. They can influence a project positively or negatively.

Some examples of most common primary stakeholders include:

  • Employees
  • Customers
  • Suppliers
  • Business partners
  • Investors

This stakeholders list is not finite.

Depending on your industry and project type, there can be more primary stakeholders.

Secondary stakeholders are not directly involved in the project but can have an influence on it.

Some examples of secondary stakeholders are:

  • Government
  • Trade unions
  • Advocacy groups

Project stakeholders can also be direct and indirect. 

Direct vs. indirect stakeholders

As we can guess from the name, direct stakeholders are directly involved in the project and can change its direction.

In project management, some examples of direct stakeholders include:

  • Project team,
  • Product owners,
  • Managers,
  • Client, etc.

Indirect stakeholders are individuals or groups who are not involved in project activities but care about the project outcome, as they have something at stake.

They care more about the project’s outcome than its implementation.

 For example, in most cases, the government can be identified as an indirect stakeholder.

Direct and indirect stakeholders vary depending on the industry and project type. 

In order to clarify these classifications, we can provide some project stakeholder examples.

Examples of stakeholders in a project

As we have already learned, there is no universal list of stakeholders that we can apply to all projects in all industries.

Let’s mention some of the most common project stakeholders, and explain them in more detail.

They include:

  • Investors
  • Owners
  • Employees
  • Suppliers
  • Creditors
  • Communities
  • Trade unions
  • Government agencies
  • Customers
  • Media

Investors as stakeholders

Projects often require funding.

Project funding is how the money necessary to undertake a project is secured and made available as needed. It can be via a single source or through multiple investors.

Investors can contribute to your project with more than just funding. They can provide ideas or advise you and bring their connections valuable for its success.

We can classify investors according to the previously provided types of stakeholders. They are:

  • External stakeholders —  They are from the outside of the organization or the company.
  • Primary stakeholders —  Investors have a significant influence on your project as they secure funding.
  • Direct stakeholders —  They can have a direct influence on project success. If they stop their funding, the project may fail.

Let’s illustrate their role by providing an example.

Suppose you are a start-up company and want to develop a mobile application as an audio guide for blind people. The application aims to help blind people orient themselves outside by describing what is in front of them. 

As it is non-commercial, you clearly need investment to carry out the project. These investors are people from the outside of your start-up.

They are primary stakeholders as they secure funding and enable your work.

And they are undoubtedly direct stakeholders as your project success depends on their decisions and provided funds.

Owners as stakeholders

One of the most important stakeholders is the company owner. Owners have exclusive rights over a business as they provide capital and decide how everything company-related operates. 

We can classify them as:

  • Key stakeholders —  They own the company and make all critical decisions.
  • Internal stakeholders —  They are, obviously, from the inside of the organization.
  • Primary stakeholders — They can have a significant influence on projects.
  • Direct stakeholders —  Their decisions directly influence the project’s success.

Owners usually have full ownership in terms of the products and services. Also, a company can have more than one owner.

In the end, owners are, without any doubt, one of the most important and most influential stakeholders.

Employees as stakeholders

Employees are one of the most valuable company assets in completing tasks that result in products or services being delivered to clients. 

As they work on projects, their influence is significant. Their performance can affect project output and success. Employees can perform supervisory, managerial, operational, or other functions. 

They are:

  • Key stakeholders — They work directly on project realization.
  • Internal stakeholders — They work for the organization. 
  • Primary stakeholders — Their work can influence a project positively or negatively.
  • Direct stakeholders — Employees undoubtedly have a direct impact on project success.

There is no need for further explanations why employees are critical stakeholders for any project success.

Without employees who work on a project realization, there would be no project at all.

Suppliers as stakeholders

Suppliers are entities who provide goods and services needed for the project realization. They are closely associated with organizations as they are important external stakeholders. 

Suppliers are:

  • External stakeholders — They are from the outside of the company.
  • Secondary stakeholders — Suppliers contribute to the project but are usually not directly affected by the project outcome. 
  • Indirect stakeholders — They are not involved in the daily project activities.

It is obvious that suppliers are external stakeholders.

But why are they secondary stakeholders?

We can use different industries to provide explanations.

For instance, the food and the pharmaceutical industries are highly dependable on their suppliers. The same applies to the chemical industry, as suppliers are those who provide materials for production.

But, in all these cases, suppliers are not directly affected by the final product and its sales, as they are paid for the raw materials they provide.

And they are indirect stakeholders as they are not involved in the production process.

Creditors as stakeholders

According to Investopedia, “a creditor is an entity (person or institution) that extends credit by giving another entity permission to borrow money intended to be repaid in the future.”

Creditors are:

  • External stakeholders — They are from the outside of the company.
  • Secondary stakeholders — Like suppliers, they contribute to the project, but they are not directly affected by the project outcome.
  • Indirect stakeholders — Creditors are not involved in project activities.

A creditor can be a financial institution, like a bank or a credit union, extending a loan required for the project realization.

Communities as stakeholders

Community refers to individuals interested in a project or affected by it. It consists of people who live or work within a particular area that the project impacts. A company’s relationship with the surrounding community can influence whether or not people purchase products and services and contribute to its financial success.

Communities are:

  • External stakeholders — They are not employees of the company who realize the project.
  • Secondary stakeholders — They are not directly involved in a project but can have an influence on it.
  • Indirect stakeholders — Communities are not involved in project activities but care about the project outcome.

Let’s provide an example.

People living near the place of the factory’s construction are certainly interested in the project and affected by it.

Their attitude towards the project can differentiate between its realization or termination.

For instance, they can protest against the construction of the factory if they think it endangers the environment.

Trade unions as stakeholders

Trade unions are also known as labor unions. Investopedia defines a labor union as “an organization formed by workers in a particular trade, industry, or company for the purpose of improving pay, benefits, and working conditions.”

Trade unions are:

  • External stakeholders — They are usually from the outside of the company.
  • Secondary stakeholders — Trade unions are not directly involved in a project but can have an influence on it. For instance, they can have an influence on the company employees who work on the project. And they care about worker safety.
  • Indirect stakeholders — They are not involved in daily project activities, but they are indirectly associated with the project.

Every business has to maintain good relationships with trade unions, as they represent workers, and workers significantly influence a project’s outcome.

Government agencies as stakeholders

Government agencies are one of the major stakeholders. The government is the country’s ruling body in which a business operates and takes taxes out of the company’s revenue and employees’ income. 

Government agencies are:

  • External stakeholders — They are not the part of the organization that works on the project realization.
  • Secondary stakeholders — They don’t hold direct interests in a business but can have an influence over a business’s dealings.
  • Indirect stakeholders — The government collects taxes from the company and may need to act if the company breaches any government regulations that apply to it.

Some industries, like pharmaceuticals, are heavily regulated, and project managers must deal with government regulators and departments.

Customers as stakeholders

Customers are crucial to the company’s success, as their satisfaction can directly influence whether internal stakeholders are satisfied.

They are people who purchase a company’s product or service, and a business doesn’t exist without customers. And, the quality of a company’s product or service directly affects them.

Customers are:

  • External stakeholders — They buy companies’ products or services but do not participate in the production.
  • Primary stakeholders — Customers can positively or negatively impact the project, as they are those who use services or consume products.
  • Direct stakeholders — They use products or services.

Customers buy products or services and expect high-quality and reasonable prices. And businesses need to meet customer needs to ensure success.

Media as stakeholders

The media is another critical project stakeholder that can significantly influence the perception of the project and impact its success.

Companies have to announce their products and services to potential customers.

 The media can contribute to creating positive or negative opinions regarding company activities.

Bad publicity can lead to project failure.

For this reason, establishing and nurturing good relations with the media is essential.

We can classify the media as:

  • External stakeholder — The media is not part of the organization.
  • Secondary stakeholder — The media doesn’t participate in daily project activities but can contribute to its success or failure.
  • Indirect stakeholder — The media cares about the project’s outcome rather than the process of completing it. 

Maybe your company decided to build a new mine and exploit ore. The media coverage can have a significant influence on your project. Bad media coverage can lead to project termination.

Why are stakeholders important in project management?

It’s quite simple — if stakeholders, especially those who are key stakeholders, are not happy, nobody’s satisfied. And the chances are high that the project will fail. 

Stakeholders are vital for any project’s success.

They can provide industry insights or an understanding of current processes. It is important to secure support from people who can offer expert advice, as project managers cannot be experts in every project aspect.

Involving stakeholders can also lessen the risk of project failure.

During discussions on project requirements or constraints, they may discover dangers or issues that can endanger meeting project targets. And, identifying threats on time can help you successfully develop a strategy to mitigate them.

As stakeholders are essential to your project, you must secure their support. And you don’t want to miss someone important. Therefore, you need to identify stakeholders involved in your project carefully.

But, how to do that?

We prepared a brief guide for you.

How to identify stakeholders in a project? 

Don’t be deceived by stakeholders’ opinions regarding their importance to your project.

Some people may have significant roles in the organization, but at the same time, they may not be important to the project you are leading.

Also, some parties may think they are important to your project, but they actually don’t have that much influence.

Don’t decide who stakeholders are based on your or someone else’s opinion.

Determine who they are according to the facts and analysis.

Let’s dive deeper into stakeholder identification.

According to the Project Management Institute Body of Knowledge (PMBOK® Guide —  6th edition), identifying stakeholders is “the process of identifying project stakeholders regularly and analyzing and documenting relevant information regarding their interests, involvement, interdependencies, influence, and potential impact on project success.” This process is conducted occasionally throughout the project, as needed. 

Stakeholder identification usually happens for the first time before or when the project charter is developed and approved. It is vital to perform stakeholder identification at the beginning of each project phase. Also, you have to revisit your stakeholder list when any significant change happens in the project or the organization.

PMBOK Guide determines inputs, tools, techniques, and outputs vital for stakeholder identification. 

Identifying Stakeholders
1. INPUTS
– Project charter
– Business documents
– Business case
– Benefits management plan
– Project management plan
– Communication management plan
– Stakeholder engagement plan
– Project documents
– Change log
– Issue log
– Requirements documentation
– Agreements
– Enterprise environmental factors
– Organizational process assets
2. TOOLS & TECHNIQUES
– Expert judgment
– Data gathering
– Questionnaires and surveys
– Brainstorming
– Data analysis
– Stakeholder analysis
– Document analysis
– Data representation
– Stakeholder mapping/representation
– Meetings
3. OUTPUTS
– Stakeholder register
– Change requests
– Project management plan updates
– Requirements management plan
– Communications management plan
– Risk management plan
– Stakeholder engagement plan
– Project documents updates
– Assumption log
– Issue log
– Risk register
(Source: PMBOK® Guide —  6th edition)

The identification process is necessary because it collects relevant information regarding project stakeholders and monitors their interests.

Let’s explain everything presented in this table.

Inputs for stakeholder identification

Inputs that we need for successful stakeholder analysis include:

  • Project charter
  • Business documents
  • Project management plan
  • Project documents
  • Agreements
  • Enterprise environmental factors
  • Organizational process assets

Let’s get into detail about each one.

Project charter

The project charter determines the key stakeholder list. It can also include information regarding the stakeholder’s responsibilities.

Business documents

The business case and the benefits management plan are important sources of stakeholder identification. The business case determines the project objectives and specifies an initial list of stakeholders affected by the project.

On the other hand, the benefits management plan may identify the individuals and groups that will benefit from delivering the project’s outcomes — and are therefore considered stakeholders.

Project management plan

The communication and stakeholder management plan are parts of the project management plan. 

The communication management plan includes information that provides knowledge about the project stakeholders.

The stakeholder engagement plan identifies the management strategies and actions needed to engage stakeholders.

Project documents

Project documents that can be input for the stakeholder identification include, but are not limited, to:

  • Change log,
  • Issue log, and
  • Requirements documentation.

The change log may present a new stakeholder or change the nature of a current stakeholder’s relationship to the project. 

The issue log records issues that may introduce new stakeholders to the project or change the participation type of existing stakeholders.

Additionally, requirements documentation can provide information on potential stakeholders.

Agreements

The parties of an agreement are project stakeholders.

Enterprise environmental factors

PMBOK Guide identifies the following enterprise environmental factors that can affect the stakeholder identification process:

  • Organizational culture, governance framework, and political climate
  • Industry or government standards 
  • Local, regional, or global trends and practices or habits
  • Geographic distribution of resources and facilities

Organizational process assets

Some organizational process assets that can have an impact on the stakeholder identification process are:

  • Stakeholder register templates and instructions
  • Stakeholder registers from previous projects
  • Lessons learned repository with information regarding the preferences, actions, and involvement of stakeholders

Tools and techniques used for stakeholder identification

Tools and techniques needed for stakeholder identification include:

  • Expert judgment
  • Data gathering
  • Data analysis
  • Data representation
  • Meetings

Let’s explain each of them.

Expert judgment

Those who perform the expert judgment should be individuals or groups with specialized training or knowledge in the following topics:

  • Comprehending the politics and power structures in the organization
  • Understanding the organization’s environment and culture and other affected organizations, including customers and the wider environment,
  • Knowing the industry or type of project deliverable
  • Understanding individual team member contributions and expertise

Data gathering

Data-gathering techniques we can use for stakeholder identification include:

  • Questionnaires, 
  • Surveys, and 
  • Brainstorming.

According to the PMBOK Guide, questionnaires and surveys can consist of:

  • One-on-one reviews, 
  • Focus group sessions, or 
  • Other mass information collection techniques.

On the other hand, brainstorming can include both brainstorming and brain writing

PMBOK Guide defines brain writing as “a refinement of brainstorming that allows individual participants time to consider the question(s) individually before the group creativity session is held.” 

Data analysis

Data analysis techniques include but are not limited to stakeholder and document analysis.

The outcome of stakeholder analysis is a list of stakeholders and relevant information.

It can consist of:

  • Stakeholder positions,
  • Project roles, 
  • Expectations,
  • Levels of support for the project, and
  • Interest in information regarding the project.

On the other hand, document analysis assesses the available project documentation and lessons learned from previous projects.

Data representation

This technique consists of, but is not limited, to stakeholder mapping and representation.

Stakeholder mapping and representation is a form of categorizing stakeholders using various methods. 

These methods include using:

  • A power/interest grid, power/influence grid, or impact/influence grid — Involves grouping of stakeholders according to:
    • Their level of authority (power), 
    • Concern regarding the project’s outcomes (interest), 
    • Ability to influence the results of the project (influence), or
    • Capacity to drive changes to the project’s planning or execution.
  • A stakeholder cube — Involves a three-dimensional model that considers:
    • Attitude, 
    • Power, and
    • Interest.
  • A salience model — Describes stakeholder classes based on assessments of:
    • Their power, 
    • Urgency, and
    • Legitimacy.
  • Directions of influence — Classifies stakeholders according to their influence on the project work or the project team:
    • Upward (senior management, steering committee, project sponsor), 
    • Downward (the project team or experts who work on a project),
    • Outward (suppliers, users, regulators, government departments, the public), 
    • Sideward (other project managers or middle managers).
  • Prioritization — We need to prioritize stakeholders when we have:
  • A large number of stakeholders,
  • Stakeholders who frequently change,
  • Complex relationships between stakeholders and the project team or within the stakeholder community.

Meetings

Meetings as a technique for stakeholder identification can take many different forms. Those could be:

  • Facilitation workshops
  • Small group guided discussions
  • Virtual groups using electronics or social media technologies for sharing ideas and analyzing data

Stakeholder identification outputs

Stakeholder identification outputs include:

  • Stakeholder register
  • Change requests
  • Project management plan updates
  • Project documents updates

Stakeholder register

This document contains information regarding identified stakeholders. It contains but is not limited to:

  • Identification information, like:
    • Name, 
    • Position, 
    • Project role, 
    • Contact details, and 
    • Location.
  • Assessment information related to:
    • Major requirements,
    • Expectations,
    • The possibility for affecting project outcomes, and 
    • The project life cycle phase where the stakeholder has the most power or influence.
  • Stakeholder classification, such as:
    • Internal/External, 
    • Impact/Influence/Power/Interest, 
    • Upward/Downward/Outward/Sideward, or 
    • Any other classification model that the project manager selects.

Change requests

According to the PMBOK Guide, during the first iteration of stakeholder identification, there will not be any change requests.

As it continues throughout the project, new stakeholders, or new information regarding them, may result in a change request.

A change request can be related to the product, project management plan, or project documents.

Project management plan updates

Components that may require a change request for the project management plan, as the project progresses, include but are not limited to:

  • Requirements management plan
  • Communications management plan 
  • Risk management plan
  • Stakeholder engagement plan

Project documents updates

Project documents that we may need to update as a result of carrying out the stakeholder identification process include but are not limited to:

  • Assumption log

A large amount of information about stakeholders’ relative power, interest, and engagement is based on assumptions. It is entered into the assumption log, with any constraints associated with interacting with specific stakeholders.

  • Issue log

Any new issues raised due to this process are recorded in the issue log.

  • Risk register

All new risks identified during the stakeholder identification process are recorded in the risk register. Also, they are managed by using the risk management processes.

Now you have a clear picture of who stakeholders are and their identification process — so you will be able to determine them for your next project.

Wrapping up: Ensure project success by identifying stakeholders adequately

Stakeholders are parties who are interested in a particular project and can have an impact on its outcome.

Take your time to identify all individuals that can influence your project positively or negatively.

And, don’t overlook the fact that stakeholders and their priorities can change throughout the project.

Identify stakeholders at the beginning of each project phase and when any significant change happens to ensure the project’s success.

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