Stakeholders choose you!

Many organisations and teams engaged in stakeholder management activities think they can choose the stakeholders for their activity. Whilst it is completely true that the team can decide who to record in their stakeholder register, this does not define or limit the actual stakeholders.

Your stakeholder’s choose you!

People who perceive your project as a threat to them will act to oppose the work. The threat does not need to be ‘real’ or ‘reasonable’; only perceived to be real or reasonable by the stakeholder. Their perceptions are their reality, and you have to deal with them.

In many respects, stakeholders are similar to risks (and often the stakeholder’s are risks). Neither the Risk Register nor the Stakeholder Register prevents unlisted risk/stakeholders impacting the work of the project.

Effective stakeholder management requires a regular scanning of the project environment to assess the current attitude and importance of the known stakeholder community and identify any new or emerging stakeholders. The relationship between stakeholders and the team is built on human emotions and is never static:

• trust and support need to be maintained;
• opposition needs to be mitigated;
• fear of the unknown needs to be reduced by targeted information flows.

The only tool you have to use is effective communication and you cannot communicate effectively with unidentified stakeholders. They are there, they are real and unmanaged can cause major surprises.

Business rules that define stakeholders as being ‘only’ internal to the organisation, or only external (or ‘only anything’) are less than helpful. Stakeholders are:

Individuals or groups who will be impacted by, or can influence the success or failure of an organisation’s activities.

This definition includes everything from small internal projects to major CSR initiatives and spans the work of the activity and the success or failure of its output/outcome.

Keeping track of every potential stakeholder and then managing them all is nearly impossible. Teams need to have processes and methodologies such as the Stakeholder Circle® that allow them to identify the important stakeholders at ‘this point in time’ and then focus their limited resources for maximum effect.

So next time someone tells you (insert name here) is not a stakeholder, you may want to think again.

The Scope of Change

This blog is going to try and link project and program management with change management and benefits realization.

As a start, the only point of undertaking a project or program is to realize some form of value. Benefit realization! To realize value, three elements need to be brought together:

1. There needs to be a new product or process created (an artifact);
2. People within the organization need to make effective use of the artifact to deliver a service;
3. The service as delivered needs to be accepted and used in the ‘market’.

The role of Strategic management and Portfolio management is to determine what services are likely to be accepted or needed by the market; a new shopping centre, an improved insurance package or simply a more efficient process to deliver information. These decisions will depend on the objectives of the organization, and is not the province of this blog.

The generally accepted role of project management is to create a unique product, service or result (an output) and the role of program management is to manage a group of related projects to achieve an outcome more efficiently than if the projects had been managed in isolation. Neither of these processes achieves real value in themselves. The realization of sustained value is achieved by the organization using the program’s outcome effectively over many months or years.

The Scope of Change Management

Projects and, to a greater extent, programs can realize some benefits, partially in the design and delivery of their respective outputs. Early benefits realization is frequently linked to ‘soft’ elements in the range of deliverables such as developing effective training, managing the transition to operations and ensuring a proper support framework is developed. Achieving these elements require the project/program team to really understand the requirements of their stakeholders. However, as demonstrated by the cost/benefit graph, benefits realization should continue for years after the program is finished and closed.

The extended timeline for value realization has important ramifications for organizational change management. Each project is an intense burst of change and the program absorbs these changes and has additional change effects of its own. These ‘activity related changes’ will include beneficial and negative impacts on a range of associated stakeholders. Some changes are disruptive caused by the execution of the work, learning curves, etc. Some changes positive caused by the improvements the projects and programs were initiated to deliver. Achieving a successful project/program outcome requires the effective management of these stakeholder communities, but the stakeolder management activity is essentially tactical.

The critical requirement to deliver sustained value is the organizational culture change needed to actively embrace the program’s outcomes and make valuable use of them. Embedding a culture change into an organization is a 2 to 3 year process as the change migrates from ‘new and threatening’, to ‘accepted (but the old way are still fondly remembered)’ to the ‘established old way’ things are done around here. This type of long term organizational change can only be accomplished by the organization’s line management supported by senior management. This is the realm of the program sponsor and executive management!

These ideas also have important ramifications for effective stakeholder management:

• Project level stakeholder management is relatively short term and focused on minimizing opposition to the work whilst ensuring necessary organizational support is in place to deliver the project’s outputs effectively. This is essentially tactical in nature.
• Program level stakeholder management has a wider view that needs to engage with the organizations strategic vision to ensure the program’s outcome is optimized to the changing circumstances within and around the organization. The key issue here is identifying and responding to changing stakeholder requirements, needs and expectations/perceptions over time; so as to optimize the value of the ‘outcome’ the project was established to deliver.
• Organizational level stakeholder management needs an even broader and longer term view focused on the strategic needs of the organization and its long term relationship with both internal and external stakeholders. Sustained value creation requires both the organizations internal staff and its external customers to jointly perceive the programs ‘output’ as valuable to them and also to perceive the organization favorably so they together maximize its use:
  • For a new shopping center with a 20 year lifespan this translates to retail tenants being willing to rent space and the ‘public’ seeing the shopping center as a ‘good place to shop’.
  • For a new call centre management system this translates into the call centre staff seeing the system as efficient and easy to use and clients of the business perceiving the system and staff as friendly, efficient and effective so they are happy to make repeated use of the system.

Conclusions

Change management and stakeholder management are closely aligned. Effective stakeholder management is essential for successful change management.

Change management and stakeholder management must start as soon as the project or program are initiated but should continue well after the project/program are completed.

The on-going organizational component of change management supported by strategic stakeholder management is critical if the real value of the outputs/outcomes created by the projects and program are to be realized.

Benefits realization is a line management responsibility starting with the project sponsor. All project and program managers can do is ensure their deliverables are crafted to facilitate and encourage benefits realization.

Value is in the eye of the stakeholder

The only purpose of undertaking any business activity is to create value! If undertaking the work destroys value the activity should not be started.

The Value Chain

Any value proposition though is ‘in the eye of the stakeholder’ – this is rarely solely constrained by either time or cost. Effective value management requires an understanding of what is valuable to the organisation and the activity to create value should be focused on successfully delivering the anticipated value.

The chain of work starts with a project or similar activity initiated to create a new product, service or result. However, the new output by itself cannot deliver a benefit to the organisation and the project manager cannot be held responsible for the creation of value. The organisation’s management has to make effective use of the output to realise a benefit. It is the organisations management that manages the organisation and these people need to change the way the organisation works to realize the intended benefit. The role of the project team in value creation is to ensure their output has all of the necessary characteristics and components to allow the organisation to easily adopt the ‘new output’ into it’s overall way of working (eg, effective training materials).

The outcome from making effective use of the output is expected to create a benefit – however to realise a benefit, the outcome needs to support a strategic objective of the organisation. If the outcome is in conflict with the organisations strategy, value can still be destroyed. Strategic alignment is not an afterthought! The processes to initiate the project should have as a basic consideration its alignment with the organisations strategic objectives.

Assuming strategic alignment is achieved, the realised benefits should translate into real value. The challenge is often quantifying value – the concept of ‘value drivers’ helps. Value drivers allow the benefit to be quantified either financially or by other less tangible means.

In the current economic climate, organisations are finding operating capital in short supply. Therefore a new process to accelerate the billing cycle can be measured at several levels:

• The output from the activity to develop the new billing process is simply the new process – this has no value.
• Once the organisations management starts using the new process the measurable outcome is a reduction in the billing cycle from (say) 45 days to 32 days.
• The benefit of this reduction in the billing cycle could be a reduction in operating capital needs of $500,000.
• The value of this reduction is $500,000 at 12% interest = $60,000 per annum.
  The above example may also trigger additional value by allowing the capital to be redeployed into another profit generating activity, improving customer relationships, etc.

Once the whole organisation is aware of the value proposition, decisions to de-scope the initial work to meet time constraints and/or cost constraints can be made sensibly.

• A decision to de-scope the project to achieve a 2 week saving in time that results in a 6 week longer implementation period (eg, by reducing training development) is clearly counterproductive.
• Similarly a decision to de-scope the project to avoid a $5,000 cost overrun that changes the reduction in the billing cycle time from 13 days to 6 days will result in a halving of the capital saving and a cost increase to the organisation of $30,000.

The challenge is identifying and communicating the value drivers to all levels of management involved in the activity so that valuable decisions are made in preference to knee jerk gut reactions focused on short term, easy to measure metrics. Value is created by meeting the strategic needs of the organisation’s stakeholders – this requires careful analysis and understanding of who they are and what are their real requirements; ie, effective stakeholder management.

For more ideas on the realisation of value, see the work by Jed Simms at: http://www.valuedeliverymanagement.com/

For more on effective stakeholder management see: http://www.stakeholder-management.com

Key Stakeholders

I was recently asked by a colleague for the definition of key stakeholder. Everyone writing about stakeholders uses the term probably synonymously with ‘important stakeholder’ but what is the actual definition?

One definition is from Cornell University, Information Technologies. Their definition is: ‘Key Stakeholders are a subset of Stakeholders who, if their support were to be withdrawn, would cause the project to fail’.

This definition is probably true of IT and internal projects but ignores important stakeholder groups such as the ‘environmentalists’ opposed to a major engineering project. Some important stakeholders will never support the project and are focused on preventing it proceeding (or in the example above, at least minimising its impact on the environment). They may never see the project’s output as good or desirable – for these, effective stakeholder management is about finding an effective, ethical way of neutralising the threat they pose.

We use the term key stakeholder to identify members of the sub-group of stakeholders who have the power to substantially damage the project and may potentially cause it to fail. This group are both important and influential/powerful; they may be individuals such as an important manager or entities such as a regulatory authority. This concept of key stakeholder is used extensively in my book Stakeholder Relationship Management: A Maturity Model for Organisational Implementation (due for publication, September 2009).

Key stakeholders must be both important and influential

Our definition is:
Key stakeholders are a subset of stakeholders who have power to prevent the project from achieving its full set of objectives and potentially may cause the project to fail.

This is the flip side of success. Before you can win a game, you have to not lose it. (Chuck Noll, ex-Pittsburgh Steelers Coach). If you fail to manage your project’s key stakeholder community, your project is almost certain to fail: not failing however, does not mean succeeding.

A large proportion of the project’s key stakeholders will also have the power to influence the determination/perception of the project’s eventual success. But in most circumstances, if the project is to be deemed successful, a large numbers of additional stakeholders will have to want to make use the project’s output to realise the value/benefits the project was initiated to create.

For the project to be deemed successful, most stakeholders must perceive it as a success

Achieving success involves significantly more than just completing the project on-time and on-budget. For more on this see my earlier post Success and Stakeholders.

Definitions:

• Organisation’s Stakeholder: Stakeholders are individuals or groups who will be impacted by, or can influence the success or failure of an organisation’s activities.
• Project’s Stakeholder: Stakeholders are individuals or groups who will be impacted by, or can influence the success or failure of the project’s work and/or its deliverables.
• Important Stakeholder: A stakeholder who has been identified as important, using an appropriate prioritisation methodology (such as the Stakeholder Circle®), for the purpose of allocating scarce resources to ensure effective communication and to focus other stakeholder management initiatives.
• Key Stakeholder: A stakeholder who has to power to prevent the project from achieving its full set of objectives and potentially may cause the project to fail.

Note: By these definitions, key stakeholders are always a potential risk to the project (opportunity and/or threat) but may not be particularly important ‘at this point in time’ if the relationship is working well (ie, they may not need high priority communication at this point in time). This will be the subject of a future blog.

Are you aware of any better definitions of key stakeholder? Your comments are welcome.

Success and Stakeholders

I have been putting the hard yards into finishing my new book on Stakeholder Relationship Management Maturity (SRMM®) and have been considering the relationship between success and stakeholders.

One potential conclusion is that success is gifted to you by your stakeholders, you have to earn the gift but there is no way of knowing for sure if it will be granted. This means as a project manager, sports person or business executive, you have to put the effort in to ‘win’ by delivering ‘on-time and on-budget’, finishing first or achieving the planned objective; but achievement on its own does not translate to success. Success is when your achievement is acknowledged by your key stakeholders and they declare it a ‘success’.

Some of the world’s most famous buildings were project management disasters, but they are now considered outstanding successes. The Sydney Opera House overran time, overran budget and the original scope not achieved. The London Eye needed an additional £48 million loan from British Airways to finance is construction in addition to the original capital raising and was months late in opening to the public (in 2005 BA sold its share of the project for £95m and waived £60m of unpaid interest).

Success seems to come from a combination of two factors. One is delivering something of real value to the stakeholder. The other is when a critical mass of key stakeholders recognises the value and appreciates it. Value is not a synonym for ‘on-time and on-budget’ these two factors only matter to the extent that they impact on the usefulness of the outcome when it’s actually used by the stakeholders. Certainly time and money may be important, more often they are not; particularly if a longer term view of benefits realisation is considered. Benefits are realised when the product is actually used and this requires the relevant stakeholder’s participation in actually using the product or output to achive the intended outcomes.

Another important factor in achieving success is meeting the stakeholder’s expectations. This involves identifying and managing their expectations (unrealistic expectations are unlikely to be fulfilled) which in turn requires effective two-way communication. But the stakeholder community for any business activity can be huge.

Three groups of stakeholders

There are a vast number of potential stakeholders who you don’t know and can’t see. This group is often considered as ‘classes’ of stakeholder such as ‘the public’. The only way to reach individual people this group is through broadcasting messages in a similar way to a corporation advertising it brand image to a general audience. Businesses see this activity as Public Relations (PR) or Marketing. In project space, this is the casual audience for general project newsletters, headlines on a project web page and the corporations ‘rumour mill’.

A sub-set of the overall group are the people you know you need to positively influence. In business these groups are the focus of targeted advertising campaigns with specific ‘calls to action’. In project space they may be groups such as the end users of a new system. You need to ‘sell the benefits’ of the product or project to this group so they buy-in to the concept and appreciate the value of the outcome you are creating. There are still too many for one-on-one communication but a carefully planned ‘sales campaign’ associated with effective change management and similar initiatives are critical if you expect a successful outcome. Many of this group may be recipients of routine monthly reports and the like but more is needed; you need to create positive expectations and then deliver on them.

The smallest and most important group are the key stakeholders who wield significant influence or power. This group require targeted one-on-one communication to build and foster positive relationships. It’s a two way process, you need support from them, they need to appreciate the benefits your project or activity will deliver. The Stakeholder Circle® methodology and tools are focused on identifying the ‘right’ stakeholders at the ‘right’ time in a project for this critical communication activity. Failure with this group will generally cause your project to fail and before you can ‘win’ you first have to ‘not lose’!

However, the thought in this blog is these key people are probably not enough on their own to declare the final result of your efforts and outstanding success. Real success requires buy-in from a much larger group of stakeholders, such as the 30 million visitors who have ‘flown’ on the London Eye. But is your organisation mature enough to support the type of structured communication needed to achieve this level of success?

My SRMM® construct addresses the maturity of an organisation to engage in effective stakeholder relationship management and this is a critical start. The bigger question is who’s responsible for the wider communication: the project team, the change manager, the sponsor or the organisation? Achieving real success is definitely a lot more complex than just being on-time and on-budget…. Perhaps this could be the subject for another book?