How to do stakeholder analysis in 3 easy simple steps to guide to an effective project planning

What is Stakeholder

Taking any company decision. Ask stakeholders.  

Developing a product. Consult with stakeholders. 

Expanding your presence. Discuss with stakeholders.  

You hear the word ‘stakeholders’ a lot in the corporate world. If we break the word, it means ‘someone holding a stake’. Stake means an interest in an enterprise or project or activity.  

So, stakeholder means someone having an interest in your company. For a project, a stakeholder means a person who can affect the project or get affected by it. A stakeholder can be an individual, a group, or an organization.  

Stakeholders can be internal or external and from any position in an organization. They may have direct or indirect involvement in the project. Either they impact the project, its execution, and outcomes or get impacted by it. 

Different types of stakeholders of a business are: 

  • Owners 
  • Customers 
  • Suppliers 
  • Employees 
  • Investors 
  • Communities 
  • Government associations and agencies 
  • Media 
  • Creditors 
  • Industry associations 

Categories of Stakeholders

Category 1: Internal vs External

External stakeholders are external to the business, but either directly impact or get impacted by the project. Example: vendors, customers, communities, etc.

Internal stakeholders exist in the company and are directly influenced or impact the project. Example: employees or owners.

Category 2: Direct vs Indirect

Indirect stakeholders do not affect the project directly, but their interests may be affected positively or negatively by the project. They are concerned only about the outcomes of the project. Example: customers.

Direct stakeholders are directly involved in conducting the activities and tasks related to the project. Example: Employees.

Category 3: Primary vs Secondary

Primary stakeholders are the key stakeholders with the highest level of impact on the project or getting highly affected by the project. Example: Owners, customers, and shareholders (in a large company).

Secondary stakeholders provide the required support to complete the project but have no big say in project decisions. Example: Suppliers, creditors.

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What is Stakeholder Analysis

The process of identifying all stakeholders of a project is called stakeholder analysis. It also includes evaluating the impact they will have on the project or business. The impact is based on the assessment of their involvement or interest in the project.

Company-wide stakeholder analysis helps you to understand all the members involved in the business and at what level and participation. Project-specific stakeholder analysis helps you to identify stakeholders, understand their interest in the project, and determine the ways to enhance interaction with them and between them.

Purpose of Stakeholder Analysis

The reasons for which you must engage in stakeholder analysis include:

Key inputs about the project

You need to know your stakeholders’ points of view regarding the project. This will help you look at the project from different perspectives than yours. Thus, you can get an all-around view of the project to enable you to assess each angle.

Management of resources

With inputs from several stakeholders, you understand the key requirements of the project. It also gives you an idea of the budget that will be required for the project. Not only costs, but with a 360-degree view of stakeholders’ perspective, you comprehend the time, efforts, and other resources required for the project.

Trust group formation

With continuous involvement with stakeholders, they feel that they are important to the project. In turn, they start supporting you in all activities related to the project. This helps you develop a group of trustworthy people that will support you throughout the project execution.

Knowledge about project feasibility

A stakeholder analysis allows you to look at the project from all angles. You can identify the possibility of executing the project in a technical, financial, operational, and scheduling sense. Thus, you can know the viability of the project due to active discussion with stakeholders.

Reduce the possibility of conflict

Due to discussions with stakeholders and an assessment of their needs, you get to know their viewpoints. You are also able to manage the differences between them to bring them in alignment. This allows you to identify the points where they could conflict. Thus, you can better manage the avoidance of such a situation or resolution for conflicting opinions

Successful project planning

You know what people are important to the project and what they expect from the project. You get an idea about the product/service features and thus you can define the performance metrics. Thus, you can make a robust project plan including the project objectives, resources, and execution strategy.

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Process of Performing Stakeholder Analysis

The steps of stakeholder analysis include:

Step 1: Identify your stakeholders

The first main step is to identify the stakeholders of your project. For this, you must list all those individuals or groups who can affect your project. Also, list all those people on whom the project will have an impact.

These may be external or internal, direct or indirect, and primary or secondary stakeholders. Ensure that you do not miss any stakeholder/s because the outcomes may be affected if all are not included. In that case, it is better to include more if you have confusion rather than narrowing the scope.

Step 2: Prioritize the stakeholders

Once you identify the stakeholders, now you need to prioritize them based on their impact. This will require you to assess their level of interest in the project. Or, the level of impact the project will have on them.

For this assessment, you must use stakeholder mapping techniques. Generally, companies use the Power/Interest grid tool. It helps you group the stakeholders into the following four categories:

Low influence and low interest

Stakeholders with low interest in the project with little to no influence of the project on them are secondary stakeholders. In this project, project managers have the choice to not include them at all until the end of the project. But, it would be better to allow some role of theirs in the project.

You can just share the project status reports as and when you produce them and monitor their activities. Or, if the secondary stakeholders request more involvement, you must loop them in. This depends on the criticality and size of the project, industry, and the relationship you have with them.

High influence and low interest

These people are not interested in your project execution. But, they can have a high influence on your project. Generally, this group includes partner or executive leaders whose decisions can impact your project to a great extent.

Since your project affects them in some way, you must make them aware of the basics of your project. Also, provide to them project status reports at frequent intervals to ensure their continued support. Their involvement must be such that they remain satisfied with the project.

Low influence and high interest

This group of stakeholders is highly interested in the project, so they can be highly supportive. But, they do not have much power to take decisions. So, you must keep them aware of the project on a day-to-day basis to ensure their help during any phase of the project.

High influence and high interest

Externally, these include customers and internally, they may be the project sponsors. You need to listen to their expectations carefully and try to achieve those. Satisfy them with the outcomes of the project.

Also, you must update them about the project status at frequent intervals. Collaborate with them on a continuous basis to ensure the project’s successful execution. They have the power to bring a change and hence, manage them closely.

Step 3: Understand your stakeholders’ project needs 

You have the stakeholder list and you know their importance to the project. Now, you must know how to communicate with them and keep them involved with the project. For this, you must know how they feel about the project.  

They might be agreeing to some aspects while not for some aspects. You must find those aspects and try to explain their importance to the stakeholders. For this, you must try to understand their perspective also because all these different perspectives affect the project outcomes.  

You might get a good perspective about the project that you might have ignored until now. So, consider their needs, expectations, and outlook to consider all the factors that may affect the project. Listen to them carefully; you might accidentally come across a solution you were looking for.  

Also, before discussing with them, understand what communication channels they prefer. For some stakeholders, you may need to conduct one-to-one sessions. Some may be more eloquent in brainstorming sessions.  

Understand the type of interest they have in the project. Ask them about their project priorities, motivations, and positive or negative view of the project. With all this information, you will know what information they need and should have for optimized involvement in the project. 

This will help you to gather the required support for your project. Based on their classification and information needs, you engage with them in relevant ways. Thus, you gather their acceptance to provide required support in project execution.  

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Techniques of Stakeholder Analysis

The first technique of stakeholder analysis that we learned above is the Power-interest grid. We will learn two more techniques:

Salience model 

It is a Venn diagram of three circles, each of which represents Power, Legitimacy, and Urgency. Based on the presence and absence of these parameters, seven sections are created within the diagram. The eighth section is outside the circle, which represents non-stakeholders.  

Power means a stakeholder’s influence on the project. Legitimacy means appropriate involvement of the stakeholder in the project. Urgency means stakeholders’ need to receive information about the project.  

Based on the three factors’ Venn diagram, the seven sections are created. Stakeholders falling in each of these sections have a name with specific characteristics as follows: 

  • Core: They have power, urgency, and legitimacy, and hence, you must pay full attention to them. 
  • Dormant: They have power, but no legitimacy and urgency. They do not remain involved in the project. 
  • Discretionary: They have legitimacy, but no power and urgency. You must send them regular updates.  
  • Demanding: They have urgency, but no power and legitimacy. You must provide them with information, but do not spend much time on it, as they are not important to the project.  
  • Dominant: They have power and legitimacy, but no urgency. You must address their needs and expectations.  
  • Dependent: They have legitimacy and urgency, but no power. You must manage them closely. 
  • Dangerous: They have power and urgency, but no legitimacy. You must be wary of them and engage with them cautiously.  

Keep an eye on this diagram during the entire duration of the project. There are chances that a stakeholder’s category may change during the project.  

Stakeholder attitude and knowledge map 

It is also known as a stakeholder knowledge base chart. In this tool, a 4-quadrant mapping of knowledge and attitude of stakeholders is created. Based on this, the four types of stakeholders are: 

Champions 

Champion stakeholders are the ones who are aware of your project and back it completely. You need not pay much attention to them, as they are already supporting. But, you must always value them and not take them lightly. 

Opponents 

Opponent stakeholders are aware of the project but do not support it. They may pose some risks for your project, which you are not aware of. So, employ solid measures to remain alert to the risks such stakeholders pose for the project.  

Ignorants 

These stakeholders are neither aware of the project, nor support it. You must pay full attention to them. With the right, relevant information, it is easier to change their attitude. 

Supporters 

These stakeholders support your project without having much knowledge about it. Nurture them carefully so that you do not lose them.  

Final Thoughts

To execute your project successfully that leads to expected outcomes, stakeholder analysis is crucial. It helps to get new views about the project and thus improve the outcomes. Moreover, analysis of stakeholders helps you to impact more people with the project.

Stakeholder analysis allows you to identify the supporters and opponents of the project. With supporters, you know you need to keep them engaged in the project with constant communication. With opponents, understand their problems and try to resolve them to turn them into supporters.

If you think you want any external help for stakeholder analysis, call Technovisors. We are a leading IT consultant in Ahmedabad, India along with a provider of digital marketing and data analytics services. We help you in every aspect of project management to ensure its success.

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FAQs

Yes, you must do a stakeholder analysis before starting the project. Only then, you will be having a better idea about the project needs and expectations. You will be better aware of the direction to move ahead.

Yes. Stakeholder management is the process of identifying the stakeholders and gaining their support for the project. Stakeholder analysis is the first step of stakeholder management. In stakeholder analysis, you identify the stakeholders and try to understand their needs.  

About the Author

Pathik Shah

(CISA, FCA, CS, DISA (ICAI), FAFP (ICAI))

Pathik is a multi-disciplinary professional with more than 22 years of experience in compliance, risk management, accounting, system audits, IT consultancy, and digital marketing. He has extensive knowledge of Anti-Money Laundering rules and regulations, and he helps companies comply with legal requirements. Pathik also helps companies generate value from their IT investments.