Identifying, prioritizing, and involving stakeholders throughout the product development process is called stakeholder management. As an essential component of product management, stakeholder management requires Product Managers to accurately identify their key stakeholders and nurture strong stakeholder relationships while completely understanding the unique needs and viewpoints. Ongoing strategic engagement and diligent effort are critical to effective stakeholder management. 

What Is a Project Stakeholder?

Stakeholders are individuals, groups, or organizations who impact the execution or success of a product. They can be external or internal to the organization sponsoring the project. Stakeholder relationships can positively or negatively influence the project life cycle. Therefore, it is crucial to identify your key stakeholders and formulate a proper stakeholder management plan to cater to their requirements.

The following people can serve as project stakeholders: 

  • Project manager
  • Project team members
  • Government agencies
  • External customers
  • Investors
  • Contractors and subcontractors
  • Suppliers

Difference Between Internal and External Stakeholders

Project stakeholders can be internal and external. The two categories differ from one, and so does the stakeholder management process for each group.

Internal Stakeholders

A person who is a part of the organization managing that project. An internal stakeholder aims to achieve the business goals and the project's strategic objectives. Internal stakeholders can belong to the following categories:

  • Team members
  • Project managers
  • Sponsors
  • Owners 
  • Investors from the organization

External Stakeholders

These stakeholders are not directly related to the organization. Rather, they hold key value in the business or are impacted by the project. They usually belong to the supply chain, creditors or public groups.

What Is Stakeholder Management?

Stakeholder management is typically a part of the project management process comprising the crucial tasks of managing the requirements and expectations of internal and external stakeholders. Effective stakeholder management entails a proper stakeholder management plan that illustrates the stakeholder management strategies for the project.

It is worth understanding that the term stakeholder management is not limited to project management; it can also relate to business administration. Moreover, stakeholder relationship management or SRM, is equivalently important for large corporations, small businesses, medium-sized companies, and NGOs. 

What Is a Stakeholder Management Plan?

A project management document useful for identifying project stakeholders and the techniques that an organization would use to communicate with them in order to fulfill their requirements is called a stakeholder management plan. It includes the following key elements:

  • List of all project stakeholders and their basic information
  • A power interest matrix or a stakeholder map
  • Stakeholder prioritization section
  • A communication plan
  • A section with various stakeholder management strategies for different situations 

Benefits of Stakeholder Management

A solid command of actively developing and retaining optimal relationships which stakeholders have helped companies reap substantial benefits in terms of improved risk management, augmented stakeholder support, and better results. 

Sound stakeholder management helps understand the stakeholders' concerns and leads to better ideas that address stakeholder needs. It enables companies to minimize costs while maximizing value. Stakeholder management helps organizations with the following aspects:

  • Social license to operate
  • Competitive advantage
  • Stronger reputation
  • Corporate governance
  • Risk management

CRMs vs SRMs

Project management often requires CRM and SRM software tools. Understand the difference between the two to be able to use them better.  

Customer Relationship Management (CRM) Software

CRMs are designed to simplify sales processes. These are significantly different to an engagement process.

When managing your engagement and understanding of stakeholders' needs and feedback, the use of CRM is likely to make things trickier. Therefore, you must opt for an SRM.

Stakeholder Relationship Management (SRM) Software

This software specifically caters to the needs of stakeholder engagement. Although both CRM and SRM can track stakeholders, an SRM is designed to track as well as analyze the intent and content of stakeholder engagement. It assists in comprehending what stakeholders are saying, their needs, worries, and priorities. 

How to Make a Stakeholder Management Plan? 

Although every stakeholder management approach needs to be customized per your project's requirements, the following are the five steps to cover all the important aspects of a stakeholder management plan.

  • Determine Your Stakeholders

Stakeholder identification is the first step for an effective stakeholder management plan. Identify the key individuals or stakeholder groups for your project/ business. 

  • Prioritize Your Stakeholders

After determination comes prioritization, you must acknowledge the key stakeholders who would have a bigger influence over the project. Also, consider at which stage their influence would increase or decrease. An onion diagram helps in the stakeholder prioritization process. 

  • Interview Your Stakeholders

You must interview your stakeholders to know them better for a seamless workflow. You can put forth the following questions for a clearer understanding: 

  • Which deliverables interest you the most?
  • What expectations do you have for this project?
  • How quickly do you envision this project rolling out?
  • What have been your primary concerns/ worries about this project? Why?
  • Create a Power Interest Grid

Also called a project interest matrix, a power interest grid is a chart for determining the power and interest of your stakeholders in the project. This tool is quite helpful in stakeholder analysis.

You must define the following four stakeholder groups using this tool: 

  • High-power, low-interest stakeholders
  • High-power, high-interest stakeholders
  • Low-power, low-interest stakeholders
  • Low-power, high-interest stakeholders
  • Set and Manage Expectations

Clarity is the key to stakeholder management. You must identify the stages each stakeholder would contribute to as well as the ones that would require their feedback. Formulate a stakeholder engagement/ communication plan while being realistic, honest and transparent at various project management phases.

Understanding the Stakeholder Management Process

The following points will give you insights into the stakeholder management process:

Stakeholder Analysis

The analysis involves a series of steps involving understanding the project stakeholders, their level of involvement, and their influence on your project's success. 

Stakeholder Identification

This step forms the base of your stakeholder management plan. It requires you to identify all internal and external stakeholders only to analyze, prioritize and engage them in consecutive steps.

As a project manager, you must consider the following points during the stakeholder identification: 

  • Thoroughly scan the project planning documents, like the project charter, to find stakeholder information.
  • Look for government regulations that can relate to your project. 
  • Gather feedback from your internal stakeholders.
  • Determine people and organizations linked to your supply chain.

Stakeholder Mapping

Once you complete the identification process, it's time to determine the interest level and the extent of influence of the stakeholders over the project. You can employ a power interest grid for this purpose. 

Stakeholder Prioritization

With a list of stakeholders in hand, you must begin prioritizing them by their significance to the project. Determine who would have the maximum influence on the project and who is likely to be affected by it.

With effective prioritization, it will be easier for you to keep a tab on various stakeholders. Additionally, it would also help you determine the best stakeholder management strategies that add to their satisfaction. 

Stakeholder Engagement

Finally, with all the information assimilated, you must devote time to figuring out the best ways to engage your stakeholders. Decide what practices would ensure effective communication with project stakeholders.

How Can a Software Help with Stakeholder Management?

Stakeholder management, analysis and communications can be tricky and complex to execute. Using project management software tools can simplify the stakeholder management process by organizing your projects, teams and stakeholders.

The following steps will help you learn how good project management software can help with stakeholder management:

Make a Schedule

Efficient stakeholder management demands a proper schedule that helps capture activities and creates a space wherein everyone can add their input.

The interactive Gantt chart available in project management software allows you to present stakeholders with a schedule. Moreover, easy access-sharing encourages active collaboration and also saves time. 

Assign Work

A schedule holds no meaning and serves only as an abstraction until it is strategically executed. This process involves your team. Although stakeholders aren't directly involved in these details, giving them viewing access via project management software can help avoid confusion.

Monitor Progress

Project management software provides interactive dashboards to view key metrics of a project. Use it to satisfy stakeholders interested in how the project is progressing. 

Balance Workload

Enhancing the productivity of your teams helps keep stakeholders happy. With project management software tools, you can closely monitor the workload of team members, adjust it when necessary, and keep them from burning out.

Print, Share, Gantt and Reports

Updating stakeholders is the stakeholder management cornerstone. Project managers require a tool that gives them the flexibility to share data with stakeholders in an easy-to-understand format. Often a stakeholder might not be able to understand your detailed data, but a simpler version of reports facilitates better comprehension. 

Manage a Portfolio

Stakeholders are often a part of a similar program or even a portfolio. This aspect raises a need for a scalable project management tool that can help track projects, programs or a portfolio.  

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Conclusion

63% of companies have already employed stakeholder management strategies to level up their business. Managing the stakeholders' expectations throughout the project life cycle is paramount to the project's success. It's time project managers adopt the best project management practices, acquire the most in-demand skills and outperform the competition. Become a digital leader with our PGP Project Management in collaboration with UMass Amherst. Attend live online interactive classes, masterclasses from UMass Amherst, Harvard Business Publishing case studies, and capstone projects. Enroll today.

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  • *According to Simplilearn survey conducted and subject to terms & conditions with Ernst & Young LLP (EY) as Process Advisors