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Stakeholder Management: Definition & Importance

Instructor: Michelle Marshall

Project Manager and Governance, Risk & Compliance Specialist

In this lesson, you will learn about project stakeholders and why stakeholder management is a very important part of project management. You will also learn what should be included in a good stakeholder management plan and how it can assist you in managing your stakeholders.

Who is a Stakeholder?

Project managers are responsible for the end-to-end management of their projects, including managing the performance and/or expectations of individuals who may be outside their direct control, but who have a vested interest in the project. A stakeholder is anyone who has an interest in a project or will be affected by its deliverables or outputs.

For example, let's say you're the project manager for a project that will enable a company to accept online sales orders via their website. Your stakeholders for this project are likely to be the Head of Sales (who is likely to be the project sponsor), a sales manager representing the internal end user group, a store/warehouse manager representing the internal end user group on supply-chain side, an IT manager who will provide the systems solutions for your project, and a group of customers who will represent the external end user group.

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Why is Stakeholder Management Important?

By their very nature, all projects involve some sort of change. Whether it's the implementation of a new system, the rollout of a new business process, or the launch of a new product, there is always some kind of change delivered by a project. Implementing change can be challenging because it requires transforming how people work and interact. Many people are naturally resistant to change, which can jeopardize the success of your project. If the stakeholders reject what your project is delivering or are uncooperative and unsupportive when it comes to doing the work of the project, there can be a detrimental effect. One way of minimizing this resistance is to engage project stakeholders from the outset and get their commitment to support the project.

In our example, can you think of reasons why the stakeholders might be resistant to the new online ordering system? A sales manager might be concerned that he will lose the face-to-face contact with his customers. A store/warehouse manager might be concerned that the new online process will cause errors, resulting in wrong deliveries and unnecessary stock returns. The IT manager might be concerned about whether the company's existing IT infrastructure can support the new online ordering process. And customers might be concerned about whether their orders placed online will actually be received and fulfilled correctly and on time. All of these concerns could cause the stakeholders to be resistant to the change if they are not properly managed.

Besides managing tasks within a project, project managers should also consider the 'softer' side of project management, such as the people issues surrounding projects, and recognize that properly involving and managing their stakeholders can be a critical success factor. An enormous amount of a project manager's time can be wasted on managing stakeholders if it's not done effectively, and poor stakeholder management and poor project communication are two of the main reasons why projects often fail. Managing stakeholders effectively is a key part of helping a project manager lead the change that their project will bring about.

In our example, given the resistance that might be faced from certain stakeholders, it would be critical for the project manager to manage these stakeholders effectively.

How Does One Effectively Manage Stakeholders?

Project managers should have a formal stakeholder management plan that is appropriate for their project. The aim of the stakeholder management plan is to engage your stakeholders and create positive relationships with them by setting objectives and managing their expectations. Stakeholders have a vested interest in the success or failure of a project, but they sometimes have conflicting ideas of how best to make the project successful. Stakeholder plans can be a useful device to bring stakeholders together by outlining a common way to meet the project objectives.

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