Principles of Stakeholder Management

In the article entitled “Principles of Stakeholder Management”, the authors summarize a document intended to provide general business managers with guidelines to help them interact with business stakeholders. In the article, stakeholders are referred to as “constituencies that are affected (favorably or adversely) by the operation of the corporation” (Clarkson, Donaldson, Preston, & Brooks). In business, for a corporation to continue to grow and flourish, it must learn to balance its own interests with the interests of its stakeholders; in doing so they will meet the needs of the society (Clarkson et al.). Although the article was intended for general business management, project managers can adopt the same principles. By applying these principles, project managers will build a solid foundation for managing stakeholder relationships within their projects.

Overview of Principles

The primary purpose of the principles of stakeholder management is to provide managers of organizations guidelines to help balance corporate goals and the needs of organizational stakeholders. In addition, the principles “make managers more aware of the diverse constituencies that they are obligated to serve and increase the openness of management processes” (Clarkson et al.). The seven principles, if applied by project managers, will achieve a similar objective—to help project managers meet the needs of the project stakeholders.

Principle 1: Project managers should consider project stakeholder concerns during decision-making.

“Managers should acknowledge and actively monitor the concerns of all legitimate stakeholders, and should take their interests appropriately into account in decision-making and operations” (Clarkson et al.). It is important in business to be aware of stakeholder diversity. Projects, like businesses, have multiple stakeholder interests. The project manager must take the time to identify the different stakeholder types and understand their unique interests. This can be a challenge for the project manager, especially during large projects with many stakeholders. However, like in business, this does not mean project managers must address every need of every stakeholder. At a minimum, the project manager should evaluate stakeholder interests to determine how they impact the project. Ultimately the project manager should prioritize stakeholder interests by stakeholder type and give primary attention to core stakeholders.

Principle 2: Project managers should communicate effectively and openly with stakeholders.

“Managers should listen to and openly communicate with stakeholders about their respective concerns and contributions, and about the risks that they assume because of their involvement with the corporation” (Clarkson et al.). For a project manager, open communication with project stakeholders is critical to the success of the project. It is important for the project manager to realize communication must be two ways. For a project manager to communicate effectively with project stakeholders the project manager must carefully listen to the needs of the stakeholders; they must collectively engage in dialog that allows both parties, the project manager or team and the stakeholders, to openly ask questions and communicate project concerns or issues. However, the authors warns open communication should not imply a “commitment to collective decision-making” (Clarkson et al.). Instead, the project manager should use the information gathered during dialog sessions to gain a better understanding of stakeholder needs and to use that information to drive better project decisions.

Principle 3: Project managers should tailor communication to meet stakeholder needs.

“Managers should adopt processes and modes of behavior that are sensitive to the concerns and capabilities of each stakeholder constituency” (Clarkson et al.). There are many different types of stakeholders. Some stakeholder groups are large and have diverse needs, while others are small with very specific needs. It is the project managers’ responsibility to identify the needs of each stakeholder type and then tailor communication to the individual stakeholder type. However, regardless of the stakeholder type, even through the communication method and audience may change, the core message behind the communication must remain consistent. For example, the project manager may change the level of detail when communicating the purpose or objectives of a project, but the actual core message should remain consistent across communication channels.

Principle 4: Project managers should treat stakeholders fairly.

“Managers should recognize the interdependence of efforts and rewards among stakeholders, and should attempt to achieve a fair distribution of the benefits and burdens of corporate activity among them, taking into account their respective risks and vulnerabilities” (Clarkson et al.). The authors identify two types of stakeholders in the article: voluntary and involuntary. Voluntary stakeholders are those who participate in the business by choice. Involuntary stakeholders are those who are impacted by the business regardless of choice. Both stakeholder types are impacted by the changes made during the implementation of projects. In order to ensure that stakeholders remain engaged in the project, project managers ensure stakeholders receive adequate benefit from the project and that the risks are managed to a level that the stakeholders are willing to bear. This may require addition effort on the part of the project manager for involuntary stakeholders and they may tend to focus on the risks and minimize the potential for rewards.

Principle 5: Project managers should develop partnerships with stakeholders.

“Managers should work cooperatively with other entities, both public and private, to insure that risks and harms arising from corporate activities are minimized and, where they cannot be avoided, appropriately compensated” (Clarkson et al.). Change is difficult for most of us. Sometimes changes produced by a project are wanted by the stakeholders; at other times, the consequences of a project are undesirable. In order to reduce some of the undesirable results of project changes, project managers may need help from key stakeholders. Therefore, instead of waiting for problems to occur, it is important for the project manager to proactively develop relationships with stakeholders who can help solve project challenges.

Principle 6: Project managers should clearly outline risks for stakeholders.

“Managers should avoid altogether activities that might jeopardize inalienable human rights (e.g., the right to life) or give rise to risks which, if clearly understood, would be patently unacceptable to relevant stakeholders” (Clarkson et al.). When it comes to managing projects, we can not anticipate everything in advance. Stakeholders do not like surprises, especially when they are negatively impacted by them. The project manager should identify all stakeholders that are potentially impacted by project risks and openly dialog with them about the risks. Stakeholders should collaborate with the project manager to identify potential risk reduction strategies and should continue to look for ways to identify and reduce risks. However, ultimately, the project manager is responsible to strike a balance between stakeholder risks and stakeholder rewards. If the project manager is unable to bring this to a balance that is an acceptable and agreeable by the stakeholders, the project manager should consider delaying or canceling the project.

Principle 7: Project managers should balance their interests as a stakeholder.

“Managers should acknowledge the potential conflicts between (a) their own role as corporate stakeholders, and (b) their legal and moral responsibilities for the interests of all stakeholders, and should address such conflicts through open communication, appropriate reporting and incentive systems and, where necessary, third party review” (Clarkson et al.). As indicated, project managers are also a major stakeholder within a project. However, the project manager is in a unique position as a stakeholder. As the author suggests, with direct access to sometimes privileged information and with direct influenced over decision making, the project manager is in a position of power and control (Clarkson et al.).  In addition, the project manager does not want the project to fail; a project failure could impact the project managers’ job security, rewards, or their responsibilities and influence within the organization. Therefore, the project manager must find a way to balance the power and desire for perceived project success with the needs of the project stakeholder. The project manager should encourage the implementation of a process that will generate this balance. In doing so, the project manager will gain credibility with stakeholders and within the organization.

Conclusion

Ultimately, project managers should apply the same principles of stakeholder management as are recommended for general business managers. By showing concern for stakeholders and treating them fairly, project managers are able to open communication channels and forge partnerships. Working together, project managers and stakeholders are able to identify risks and share rewards. Through a collaborative and balanced relationship, all stakeholders collectively help to improve the likelihood of a project success.

References

Clarkson, M. B. E., Donaldson, T., Preston, L. E., & Brooks, L. J.Principles of Stakeholder Management. Retrieved September 22, 2004, from http://www.rotman.utoronto.ca/~stake/Principles.htm