Project Portfolio Management's Missing Functional Link: Stakeholder Management
Written By: Neil Stolovitsky
Published On: December 5 2006
In project management, success or failure is determined by stakeholders, not project managers. Thus, a project portfolio management (PPM) vendor's raison d'tre is to facilitate stakeholder communications so that project expectations are met. However, project management office (PMO) leaders and project-centric organizations cite the lack of stakeholder management methodologies and tools in their PPM initiatives as one of their biggest challenges.
Although they may possess the necessary framework, many PPM solutions fall short in addressing stakeholder management needs. Nobody denies that many PPM solutions already have the ability to aggregate all the project data that concerns project stakeholders—whether it be managing resources and tracking inventory, or capturing high-level project cost and prioritizing projects. But what these tools are lacking are the formalized templates, processes, and methodologies to identify and manage project stakeholders, as well as the means to deliver these to PMO leaders and project managers.
A logical first step prior to providing the most relevant information to stakeholders is to identify who they are and which results (or stakes) constitute success in their eyes. Project success is based on a number of variables outside the standard project manager's mantra of "on time, within budget, and within specifications." Project success is driven by the unique stakes of all stakeholders. For instance, clients may see the project's return on investment (ROI) as their primary stake, whereas chief executive officers (CEOs) may focus on project profitability. As a result, stakeholder communication tools provided by PPM vendors are only as good as their adaptability to stakeholder dynamics.
The term project stakeholder refers to all the people who have a vested interest in the project at hand. This includes project sponsors; those who execute project activities; project managers; suppliers; contractors; consumers; and business decision makers. Stakeholder management encompasses the activities organizations perform to manage these relationships. There are three steps to managing project stakeholders effectively:
- Stakeholder Identification
The first step is to identify who the project stakeholders are, and how they will be affected by the project. These individuals include those working directly on the project, business decision makers affected by the project, and external resources (clients, suppliers, contractors, etc.) attached to the project.
- Stakeholder Prioritization
Once the stakeholders are identified, the next step is to rank their importance based on the stakeholder's impact on project success. Prioritizing stakeholders will enable the project leader to develop a clear view of who needs to be addressed for a successful project outcome, based on the party's interest and influence.
- Stakeholder Analysis
The final step involves detailed understanding and mapping of what motivates project stakeholders. Project managers need to have direct contact with project stakeholders in order to have a deeper understanding of their project motives. This step also focuses on the analysis of the effectiveness of communication of all parties involved.
Consequently, stakeholder management involves identifying who is involved in projects, and gaining the critical support needed for a successful project outcome. Once that is accurately identified, managing the flow of information among parties is critical in implementing a successful stakeholder management strategy.
Managing Expectations: Staging the Project
Understanding who the stakeholders are, and their demands, is only the first step in successful project delivery. Setting the right project expectations so that all stakeholders are winners is essential in driving a project towards success. Organizations can achieve this by having a clear view of the project requirements that are at stake—the challenge being to identify which requirements are at stake for each stakeholder. Project stakeholders such as the clients, business units, project managers, and project staff will most likely have different goals in determining what is critical to their success. Identifying these critical requirements will provide project leaders with the flexibility to change non-critical requirements, when necessary. A typical example would be a project leader who is confronted with potentially missing a project deadline critical to stakeholders. Recognizing the critical requirements demanded by stakeholders, the project leader can meet the deadline of the project by sectioning out sub-projects (with non-critical requirements) to be delivered at a later date.
Furthermore, with multiple stakeholders, managing the flow of stakes is just as important as identifying what they are. Organizations can achieve this by implementing a systematic approach to consistently and clearly communicate project details relevant to the diverse stakeholders. Although most PPM solutions are excellent in capturing and analyzing those critical project requirements, mapping those factors to the relevant stakeholders is not typically incorporated in the majority of PPM methodologies and applications in today's marketplace.
A Proactive Approach to PPM
Most organizations implement a PPM application or methodology to react quickly to project bottlenecks, and to improve collaboration among stakeholders. However, a PPM methodology can move beyond reactive collaboration among stakeholders to a proactive approach to identifying stakeholders, their needs, and their importance in relation to the projects in the portfolio. Incorporating a stakeholder management strategy in an organization's PPM initiative embraces this proactive approach in designing a framework that anticipates the type of information required and its delivery format to the parties concerned. In fact, stakeholder management should drive the type of information needed to maximize collaboration among stakeholders. Depending on an organization's stakeholder structure, different PPM frameworks can be designed. Some of the key questions to consider are as follows:
- What are the stakes? What data is required to support those stakes?
- Who are the stakeholders? Are they business people? IT? Clients? Project managers?
- What determines a successful project? Is it cost? Respecting timelines? Value?
- Which stakes and stakeholders are priorities?
Although stakeholder management should be a critical element of a PPM framework, today's marketplace pushes PPM as a methodology that aligns business with project objectives without necessarily providing a solution that helps organizations identify who in the business corresponds to those objectives. Consequently, vertical market expertise and a deep understanding of an organization's projects are key to a vendor's successful implementation of a PPM solution.
Understanding What's at Stake: Stakeholder Circle
The stakeholder circle methodology developed by Lynda Bourne, director of Australia-based Stakeholder Management Pty Ltd, showcases the importance of stakeholder impact on projects and PPM. Her methodology seeks to effectively categorize the influence and expectations of project stakeholders. Project leaders use the Stakeholder Circle visualization tool to define the procedures that engage all stakeholders affect the project at hand. The methodology incorporates the notion of direction of influence. With this notion in mind, project leaders manage their stakeholders based on the following directional components:
- Forward managing involves anticipating and planning.
- Backward managing involves maintaining historical data and an explicit knowledge of stakeholders.
- Upward managing involves maintaining and supporting senior managers and executives who have direct influence over organizational commitments to projects.
- Downward managing involves managing the project team.
- Outward managing involves engaging the support of external project stakeholders (such as clients).
- Inward managing involves seeking stakeholder feedback on project activities and processes.
- Sideward managing involves fostering peer-to-peer collaboration.
Source: "Project Relationships and the Stakeholder Circle," Lynda Bourne, 2006
A PPM methodology that can incorporate a formalized process (such as the one referred to here) will ensure that the most relevant information is delivered to the appropriate parties involved in projects, in a timely manner. Furthermore, PPM vendors that embrace this approach can achieve their ultimate goal—delivery of a solution that displays the right information to the right people in the right format.
Stakeholder buy-in will make or break an organization's PPM initiative, as it plays a vital role in determining the success (or perceived success) of projects. Identifying stakeholders and understanding their mission-critical expectations relevant to projects can only add value to the development and implementation of a PPM solution or methodology in an organization. Successful PPM implementations seriously consider stakeholder needs by breaking down typical communication barriers experienced by varying players, such as IT, operations, customers, and management. Although PPM methodologies and solutions facilitate stakeholder communication, in reality most PPM methodologies and applications do not incorporate a stakeholder management component.
Today's PPM vendors deliver solid solutions that capture all relevant project data in a single repository for quick access and strategic decision making. A large part of the challenge in implementing a PPM solution is determining what data is relevant to which project stakeholder. Organizations implementing a PPM methodology or solution must be diligent in determining their stakeholder management strategy. This ensures that their stakeholders will have access to the most relevant information, thus facilitating the best results from their projects. Moreover, the PPM vendors that will lead the pack in delivering formalized processes, methodologies, and templates for stakeholder management will gain a competitive advantage by offering more focused and effective solutions customized to the unique needs of clients.