The Paradox of Project Sponsors to Stakeholders

by DharamCW | Mar 10, 2023 | General

A project is deemed successful when it meets or exceeds the expectations of its stakeholders. Every project has a unique set of stakeholders—sometimes far too many. Trying to meet all of their requirements is more often an impossible task. Nonetheless, the project manager must deal with all stakeholder situations smoothly because the stakeholders and the people they represent often evaluate the project’s success.

Project Stakeholders

But who are the stakeholders? According to PMI, “Project stakeholders are 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.”

Stakeholders can be internal or external to the organization that is carrying out the project.

“Project Sponsor” is also a stakeholder, typically an organization executive with authority to assign resources and enforce project decisions. Project sponsors are called internal stakeholders in the project. Stakeholders include the project manager, project team members, and managers from other departments within the organization. Identifying all project stakeholders as early as possible in a project is critical. Leaving out key stakeholders or the department’s function and not discovering the fault until the project is well underway could be disastrous.

Types of Stakeholders

Types of Stakeholders

There are two types of project stakeholders:

• Internal Stakeholders
• External Stakeholders

Internal stakeholders are individuals or businesses whose relationship with a company is determined by their position within its structure. As the name implies, these individuals are involved in a project from the inside. They are as follows:

• A project sponsor
• An internal customer or client
• A project team
• A program or portfolio manager
• Management
• Another team’s manager of the company

External stakeholders are those interested in a company’s operations. Still, they do not necessarily have a role in the decisions of the business. However, they can influence success or failure based on their vested interests. They can be just as powerful as internal stakeholders. These stakeholders are not directly involved in the project but are affected by its outcome.

• An external customer or client
• An end-user
• Subcontractors
• A supplier
• The government
• Local communities
• Media

Characteristics of Stakeholders in a Project 

• When contributing to a project, stakeholders have varying levels of responsibility and authority. This level may change as the project progresses. It can range from one-time contributions to complete project sponsorship.
• Some stakeholders may also actively or passively undermine the project’s success. These stakeholders require the project manager’s attention throughout the project’s life cycle.
• Stakeholder identification is a continuous process throughout the project’s life cycle. Identifying them, understanding their level of impact on a project, and meeting their demands, needs, and expectations are critical to the project’s success.
• Just as they can positively or negatively impact a project’s objectives, stakeholders can perceive a project to have positive or negative outcomes.
• A project manager’s most important role is managing stakeholder expectations, which can be challenging because stakeholders often have different or conflicting goals.

Stakeholder Management

Stakeholder management is the process of organizing, monitoring, and improving relationships with stakeholders. It entails systematically identifying stakeholders, analyzing their needs and expectations, and planning and carrying out various tasks to engage them. In addition, a good stakeholder management process will allow them to coordinate their interactions and evaluate the status and quality of their relationships with various stakeholders.

A critical component of running a successful project is developing and maintaining positive relationships with the affected communities and other stakeholders.

Investing time in identifying and prioritizing stakeholders, as well as assessing their interests, provides a solid foundation on which to build the stakeholder engagement strategy. In addition, good stakeholder management includes ‘business intelligence.

Benefits of Stakeholder Management

Benefits of Stakeholder Management

• Build Reputation
• Competitive advantage
• Corporate governance
• Risk management
• Social license to operate

7 Principles of Stakeholder Management

7 Principles of Stakeholder Management

Clarkson Centre created the seven principles of Stakeholder Management for Business Ethics under the leadership of Max Clarkson. The Clarkson Principles are, in many ways, “meta-principles” that encourage management to embrace specific stakeholder principles and implement them according to the norms.

1. Managers must acknowledge and actively monitor all legitimate stakeholders’ concerns and consider their interests in decision-making and operations.
2. Managers must listen to and communicate openly with stakeholders about their respective concerns and contributions and the risks they face from their involvement with the corporation.
3. Managers must implement processes and behaviors sensitive to each stakeholder constituency’s concerns and capabilities.
4. Managers should be aware of the interdependence of stakeholder efforts and rewards and make an effort to fairly distribute the costs and benefits of corporate activity among them while taking into account their risks and vulnerabilities.
5. Managers should work with other public and private entities to ensure that risks and harms resulting from corporate activities are minimized and compensated appropriately where they cannot be avoided.
6. Managers should avoid activities that could jeopardize inalienable human rights or create risks that, if clearly understood, would be patently unacceptable to relevant stakeholders.
7. Managers should be aware of potential conflicts between their role as corporate stakeholders and their legal and moral obligations to all stakeholders and address such conflicts through open communication, appropriate reporting and incentive systems, and, if necessary, third-party review.

Understanding the Stakeholders

A good understanding of the stakeholders is the key to successful stakeholder engagement. In addition, understanding stakeholder concerns and interests can lead to product or service ideas that address stakeholder needs while allowing the company to cut costs and maximize value.

1. What else can you learn about stakeholders to better understand their needs, priorities, preferences, and concerns? Consider:

• Demographic data- Ensure to engage with a diverse community and stakeholder groups.
• Social networks- Focus on the important, often undocumented, social connections between stakeholders.

2. Stakeholder Mapping – Stakeholder mapping is the visual process of depicting all stakeholders of a product, project, or idea on a single map. The main advantage of a stakeholder map is that it provides a visual representation of all the people who can have an impact on your project and how they are connected.

3. Salience model – investigate the power, urgency (need for immediate action), and legitimacy (appropriate stakeholders), as well as the interaction or groups of stakeholders that result.

4. Determine stakeholder expectations and compare them to the scope and expectations of the project or organization for which the engagement program is being run. Is there a mismatch in expectations, and how will this be addressed? Consider the following:

• What information do they need from you, how often, and in what format/channel do they want it?
• What is their financial/social/emotional stake in the outcome of the work? Is it favorable or unfavorable?
• What primary motivations will shape their perceptions of your project or organization and their interactions with you?
• What are their current feelings about the organization and project? Is it founded on reliable data?
• Who influences their thoughts, and who are they influenced by?

Ways to deal with common stakeholder problems and challenges

• Stakeholder conflict occurs when different stakeholders have incompatible goals. It causes a “problem” for the company because it can impact its performance and success.
• Conflict necessitates that businesses effectively manage stakeholder interests. Not all stakeholders are strategically important to the company. As a result, businesses must determine which ones should be prioritized.
• Potential problems can be avoided by conducting an upfront analysis of who the stakeholders are and how and when to involve them in the project.

Analysis of common stakeholder issues

Analysis of common stakeholder issues 

As no two stakeholders are the same, the issues they may introduce into a project will be vastly different. This factor means there could be many reasons why a project encounters stakeholder resistance or the project team struggles to gain traction. Identifying stakeholder issues during the project can help with planning ahead of time and preparing an appropriate response.

1. Trying to align different stakeholders.

It is generally a good thing to have a variety of interests in the project and its outcome, but having a lot of different stakeholders can also pull the project team in too many different directions. In addition, it can be challenging for project managers to coordinate too many different stakeholders, which could add new difficulties to the project.

2. Competing priorities between stakeholders

Stakeholders bring their objectives and expectations to the project. However, at least a few of these priorities frequently conflict with or compete with one another. In addition, priorities may vary depending on the department, the role, or the professional backgrounds of the individuals.

3. Resource constraints 

It’s possible that the team lacks some of the resources they require or that the project is utilizing resources that other stakeholders consider crucial to their projects. Resource competition is common in organizations and can lead to conflict.

4. Breakdowns in communication

Effective communication between stakeholders and the project team is crucial for everyone to achieve their objectives and for the project to be successful. When there are communication breakdowns, the project may be delayed, or the team may not receive the necessary information. Without deliberate communication, stakeholders might unintentionally hinder the project’s success.

5. Stakeholders are resistant to sharing information. 

At times, important project sponsors are more focused on their success and fail to promptly or completely provide the stakeholders with the required information. As a result, stakeholders may attempt to disrupt a project unintentionally or on purpose.

6. Potential implications of conflict with a sponsor

Conflict with project sponsors may have many consequences on the project management, such as these typical ones:

• The project’s progress is being slowed
• Reducing the effectiveness and timeliness of decision-making
• Putting team cohesion in jeopardy
• Undermining a project manager’s authority
• Fostering hostility and encouraging uncooperative behavior
• Creating a fearful environment for other stakeholders
• Obscuring the project’s vision

Methods for dealing with common stakeholder conflicts

Methods for dealing with common stakeholder conflicts

1. Stakeholder analysis 

Stakeholder analysis can offer insightful information and guidance, just as project managers must carefully examine resources and specifics. It can be helpful to respond appropriately by taking the time to consider how stakeholders affect the project’s progress.

By conducting a stakeholder analysis, one can learn how to control expectations, channel stakeholder influence toward project objectives, and deliver the information and updates that stakeholders expect from their team.

2. Identify stakeholders

One must first identify the stakeholders to analyze them effectively. List every stakeholder that comes to mind, then include more individuals and organizations as necessary. As stakeholders, all parties involved in the project, those with authority over it or an interest in its success, should be listed.

3. Prioritize stakeholders

The list of stakeholders can then be ranked according to impact, interest, and power. For instance:

• Key stakeholders: This first group heavily influences and controls the project. This group is frequently accurate for executive leadership at the company.
• Primary stakeholders: The project immediately affects the key stakeholders. This pack may include team members, departments, and internal or external clients who stand to gain from the project’s outcomes.
• Secondary stakeholders: The secondary stakeholders are those who play a supporting role, are indirectly impacted or have a less significant stake in the project.

Understand the key stakeholders

A few stakeholders are usually critical to the project. Key stakeholders invoke more power and may have a more significant stake in the project’s success than primary or secondary stakeholders. For example, key stakeholders could include their boss, company executives, or team leaders.

Finding the key stakeholders and understanding what they need can help keep the project on track because they may control important resources, have a significant impact on the project, or grant the necessary approval.

Create a communication plan 

With a communication plan, project leaders will be better prepared to manage their stakeholders on the fly and keep the project moving forward.

• Create your communication strategy based on what the project leader knows about their stakeholders.
• Keeping track of what the stakeholders require from themselves allows project leaders to stay organized and focused on managing the project.
• Gaining the stakeholders’ trust is essential once the developed strategy has been implemented. Rather than dictating the project to them, make each stakeholder a priority – as appropriate – and give them space to contribute.

Final Thoughts

Different stakeholders in the project have different expectations. Project managers should look for potentially hazardous situations when those expectations might clash. Then, they must address and resolve the conflict or risk endangering the project and themselves.

Resolving stakeholder expectations conflicts is always linked to project success. Furthermore, using various forms of communication among the project team, such as senior management and stakeholders, increases the likelihood of mutual understanding. These techniques help project managers align stakeholder expectations and reduce the possibility of project distress.

Feel free to check out my discussion on this topic with Thomas Walenta in YouTube

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