Construction Project Stakeholders

Introduction to the concept of project stakeholders

A stakeholder is an individual, group, or organization that may affect, be affected by, or perceive
itself to be affected by a decision, activity, or outcome of a project, program, or portfolio (PMI,
2021).
One of the key performance domain of project management is successful engagement of its
stakeholders. The best planned and executed project may fail due to improper engagement of the
stakeholders. Dissatisfied stakeholders may pose problems in delivering the intended benefits of
the projects in time. As a result, disputes may arise, projects may get delayed or cost may exceed
beyond the allocated budget. Due to this critical nature of stakeholders in construction projects,
there is a growing consensus among the project management community that stakeholder
management needs stronger focus and a dedicated approach in construction.

Why Stakeholder Management?

According to the book “Navigating Complexity: A Practice Guide” published by PMI, project
stakeholders, their interrelationships, interdependencies, and their interactions are primary project
complexity enhancers. Hence, tackling project complexity require a stringent stakeholder
management strategy.
The Guide to PMBoK (2021) suggests stakeholder performance domain as one of the key areas
which will determine the project’s effective management. The stakeholder performance domain
addresses activities and functions associated with stakeholders and their management. Effective
execution of the stakeholder performance domain results in the following desired outcomes:

• A productive working relationship with the stakeholders throughout the project.

• Stakeholder’s agreement with the project objectives.
• Supportive stakeholders/beneficiaries are kept satisfied and opposing stakeholders do not
negatively impact the project outcome.

Classification of Stakeholders
There are different ways to classify stakeholders. The most common approach to classify them is
on the basis of their immediate association with the project. This way, stakeholders are classified
as Primary stakeholders and Secondary stakeholders.
▪ Primary stakeholders are those who have formal, official, or contractual relationships and
have a direct and necessary economic impact upon the organization.
▪ Secondary stakeholders are diverse and include those who are not directly engaged in the
organization's economic activities but are able to exert influence or are affected by the
organization. – Savage (1991)
Another approach to classify them is through their relative position in the project’s core objective.
The classification is as follows:

Construction Stakeholders:
An indicative list of construction stakeholders are as follows:
Project owners
1. Client organization
2. Project management team
3. Customer end user
4. Suppliers
5. Contractors
6. Subcontractors
7. Designers
8. Insurers
9. Government aid
10. Equity providers
11. Dept financiers
12. Employees
External stakeholders
1. Social organizations
2. Political organization
3. Local, and national authorities and governments
4. Environmentalists
5. Local communities
6. The general public
7. Interests groups
 8. Local trade and industry
9. Media
10. Advisers
11. Regulating bodies
12. Affected neighbors
13. Property owners
14. Social services (schools, hospitals, etc.)
15. Media
Among the project stakeholders, some stakeholders are mobilized by the client, some are
mobilized by the contractor and some are self-mobilized.

The Stakeholder Engagement Process

Stakeholder engagement includes implementing strategies and actions to promote productive
involvement of stakeholders. Stakeholder engagement activities start before or when the project
starts and continue throughout the project.
 • Stakeholder engagement entails:
– working collaboratively with stakeholders to introduce the project,

– elicit their requirements,

– manage expectations,
– resolve issues,

– negotiate,
– prioritize,
– problem solve, and

– make decisions.
• Engaging stakeholders requires:
– the application of soft skills, such as active listening, interpersonal skills, and
conflict management,

– as well as leadership skills such as establishing the vision and critical thinking.
The steps to engage stakeholders are as follows:
Identify Stakeholders
The first step is to identify the people, groups or entities who are capable to affect or get affected
by the project outcomes. This will require collection of on-ground data, brainstorming, snow-
balling and group decision making.
High-level stakeholder identification may be carried out prior to forming the project team. Detailed
stakeholder identification progressively elaborates the initial work and is a continuous activity
throughout the project. Some stakeholders are easy to identify, such as the customer, sponsor,
project team, end users, and so forth, but others can be difficult to identify when they are not
directly connected to the project.
Next, planning for engaging the stakeholders should be strategized. This step involves
understanding the stakeholders, their concerns and analysing them using various tools and
techniques.
Plan Stakeholder Engagement
Stakeholder Analysis
Analysing stakeholders involve understanding their characteristics and attributes. There are
numerous attributes that govern the behaviour and actions of stakeholders. A project manager
needs to ascertain these characteristics in order to assess the criticality of the stakeholders and then
prioritize them according to their criticality. Some of the prominent stakeholder attributes are listed
and defined below:
Among the attributes, Power, Urgency, Legitimacy, and Interest are the most commonly used
parameters in analysing stakeholders.
The next sub-step in analysing stakeholders is to map them according to their attributes. There are
a number of approaches that may help in this regard. Some of the approaches are outlined below.
The Power-Interest Matrix
This approach categorizes the stakeholders in a 4-quadrant grid. The interest and power of each
stakeholder is assessed on a scale of 1-5. Then the power and interest scores are plotted on Y and
X axis respectively. Stakeholders are classified as high interest-high power, high interest-low
power, low interest-high power and low interest-low power category. The stakeholders are then
mapped onto the matrix to check their relative position in the grids.
The power/interest matrix can be seen in the figure below.

Johnson, G., Scholes, K. and Whittington, R. (2009)

It describes the context within which a strategy might be pursued by classifying stakeholders in
relation to the power they hold and the extent to which they are likely to show interest in supporting
or opposing the project.
The matrix helps in thinking through stakeholder influences on the development of project and
strategize the engagement policies and relationship management approach with them. However, it
must be emphasised that how managers handle relationships will depend on the governance
structures under which they operate and the stance taken by the project organization in terms of
their contractual limitations.
The following strategies are universally accepted in engaging with stakeholders mapped in the
power-interest matrix.

• high interest-high power: Manage Closely, share information regularly, consult and
always maintain good relationship. Collaborate as much as possible.
• high interest-low power: Keep Informed, share information regularly, no need of active
engagement. Consult as and when needed.
• low interest-high power: Keep satisfied by actively listening to their concerns and
maintain cordial relationship. No need of regular information sharing. Involve when
feasible.
• low interest-low power: Monitor closely. No need of regular information sharing and
active engagement. However, regularly collect on-ground feedback. Inform vital decisions.
PMI has proposed a 3-dimensional approach to the classical power-interest matrix. The third
dimension incorporated here is the “Attitude”. The analysis grid is depicted in the figure below.
The Stakeholder Salience Model
The most significant contribution to the stakeholder analysis framework was made by Mitchel,
Agle and Wood (1997) when they proposed the 3-dimensional Stakeholder Salience Model.
Salience is defined as the degree to which managers give priority to competing stakeholder claims.
Their proposition assumed that stakeholders can possess the three attributes of Power, Urgency
and Legitimacy in varying degrees. Stakeholders may possess all the attributes, or two or one of
among Power, Urgency and Legitimacy. The stakeholders can then be classified based on their
degree of possession of such attributes. The framework is described in the figure below.
The typology is described in the following table for clarity.

The Stakeholder Impact Index

Olander and Landin (2008) proposed an analytical framework to quantify stakeholder impact. The
approach is empirical in nature and help in ranking and prioritizing stakeholders more objectively.
They proposed a metric “Stakeholder Impact Index”. The description is given below.
 • 𝑆𝑡𝑎𝑘𝑒ℎ𝑜𝑙𝑑𝑒𝑟 𝐼𝑚𝑝𝑎𝑐𝑡 𝐼𝑛𝑑𝑒𝑥 = 𝑉𝑖𝐼𝐼 ∗ 𝐴 ∗ 𝑃𝑜𝑠

𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡∗𝑖𝑚𝑝𝑎𝑐𝑡
• 𝑉𝑖𝐼𝐼 = 𝑉𝑒𝑠𝑡𝑒𝑑 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐼𝑚𝑝𝑎𝑐𝑡 𝐼𝑛𝑑𝑒𝑥 = √ 25

• 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑎𝑛𝑑 𝐼𝑚𝑝𝑎𝑐𝑡 𝑎𝑟𝑒 𝑡𝑜 𝑏𝑒 𝑟𝑎𝑡𝑒𝑑 𝑜𝑛 𝑎 𝑠𝑐𝑎𝑙𝑒 𝑜𝑓 1 − 5

• 𝐴 = 𝐴𝑡𝑡𝑟𝑖𝑏𝑢𝑡𝑒 𝑆𝑐𝑜𝑟𝑒 = 0.4 ∗ 𝑃 + 0.3 ∗ 𝐿 + 0.4 ∗ 𝑈 [𝑃 = 𝑃𝑜𝑤𝑒𝑟, 𝑈 =

𝐿𝑒𝑔𝑖𝑡𝑖𝑚𝑎𝑐𝑦, 𝐿 = 𝑈𝑟𝑔𝑒𝑛𝑐𝑦; 𝑟𝑎𝑡𝑒𝑑 𝑜𝑛 𝑎 𝑠𝑐𝑎𝑙𝑒 𝑜𝑓 1 − 5]

• 𝑃𝑜𝑠 = 𝑃𝑜𝑠𝑖𝑡𝑖𝑜𝑛 𝑆𝑐𝑜𝑟𝑒 = 𝐴𝑡𝑡𝑖𝑡𝑢𝑑𝑒 𝑡𝑜 𝑏𝑒 𝑟𝑎𝑡𝑒𝑑 𝑜𝑛 𝑎 𝑠𝑐𝑎𝑙𝑒 𝑜𝑓 [−1, − 0.5, 0, 0.5, 1].

– active opposition (Pos=-1), passive opposition (Pos=0.5), not committed (Pos=0),

passive support (Pos=0.5), and active support (Pos=1).
Using these analytical frameworks, stakeholders can be analysed for their criticality and impact.
The scores obtained should help project managers rank and prioritize the stakeholders for
strategizing relationship management and communication policies with the project stakeholders.
Manage Stakeholder Engagement
Stakeholder Prioritization
Stakeholder prioritization work entails organizing activities aimed at prioritizing competing
stakeholder claims with respect to a given project. Prioritization work also involves assessing the
attributes of the stakeholders, however, the analytical outcome of the analysis process helps in
gaining an objective ground in determining the next course of action by the project managers (i.e.,
stakeholder engagement).
On many projects, there are too many stakeholders involved for the project team to engage directly
or effectively with all of them. Based on its analysis, the project team can complete an initial
prioritization of stakeholders. It is common to focus on stakeholders with the most power and
interest (along with other attributes) as one way to prioritize engagement. As events unfold
throughout the project, the project team may need to reprioritize based on new stakeholders or
evolving changes in the stakeholder landscape.
Stakeholder Engagement
Stakeholder engagement work is defined as organizing activities aimed at taking action with
respect to the stakeholders of a given project. Stakeholder engagement entails working
collaboratively with stakeholders to introduce the project, elicit their requirements, manage
expectations, resolve issues, negotiate, prioritize, problem solve, and make decisions. Engaging
stakeholders requires the application of soft skills, such as active listening, interpersonal skills,
and conflict management, as well as leadership skills such as establishing the vision and critical
thinking.
The RACI Matrix
A popular approach to engage project stakeholders is the RACI Matrix. RACI is an acronym for
Responsible, Accountable, Consulted and Informed.

• R stands for Responsible. This denotes the individual (or group of individuals) assigned to
carry out a task or activity. The responsible party undertakes the task, but is not necessary
held accountable in the case of success or failure.

• A stands for Accountable. This highlights the individual who has ownership for the task,
activity, outcome or makes the final decision. It is good practice for this to be one person
with sufficient expertise and authority. In the case of a mistake or error, the person or
organization who is accountable for this element takes ownership of the mistake.

• C stands for Consulted. This refers to individuals (or groups of individuals) who provide
information to the project, or whose input is required before a decision can be made.
Subject matter experts could be an example of this, and they could be internal or external
to the project.

• I stands for Informed. This outlines individuals (or groups of individuals) that need to be
informed of progress or outcomes. These could be internal or external to the project.
The RACI Matrix helps in determining the gaps in the project communication framework while
strategizing to engage stakeholders. Identifying which stakeholder to be consulted or informed
regarding critical project decisions helps the project manager avoiding future disputes. Similarly,
assigning responsibilities and accountabilities to internal stakeholders help in drawing out a clear
project communication and delivery road map for the project. The example RACI Matrix is shown
below.
Stakeholder Communication for Engagement
Communication with stakeholders can take place via written or verbal means, and it can be formal
or informal. Examples of each type of communication are shown in the figure below.

Communication methods include push, pull, and interactive communication:

Push
Communication sent to stakeholders such as memos, emails, status reports, voice mail, and so
forth. Push communication is used for one-way communications with individual stakeholders or
groups of stakeholders. Push communication inhibits the ability to immediately gauge reaction and
assess understanding; therefore, it should be used deliberately.
Pull
Information sought by the stakeholder, such as a project team member going to an intranet to find
communication policies or templates, running internet searches, and using online repositories.
Pulling information is used for indirect sensing of stakeholder concerns.
Engagement goes deeper than pushing or pulling communication. Engagement is interactive. It
includes an exchange of information with one or more stakeholders such as conversations, phone
calls, meetings, brainstorming, product demos, and the like. With all forms of communication,
quick feedback loops provide useful information to:

• Confirm the degree to which the stakeholder(s) heard the message.

• Determine if stakeholders agree with the message.
• Identify nuanced or other unintended messages the recipient detected.
• Gain other helpful insights.
Monitor Stakeholder Engagement
Throughout the project, stakeholders will change as new stakeholders are identified and others
cease to be stakeholders. As the project progresses, the attitude or power of some stakeholders may
change. In addition to identifying and analyzing new stakeholders, there is an opportunity to assess
whether the current engagement strategy is effective or if it needs to be adjusted. Therefore, the
amount and effectiveness of stakeholder engagement is monitored throughout the project.
Higher-complexity environments require the project manager’s full engagement of key
stakeholders to ensure successful business outcomes. Using a stakeholder engagement assessment
matrix can mitigate engagement risks. It is important to develop and maintain communications
networks with all key stakeholders, and closely monitor these ever-changing human or
organizational relationships for signs of change that may indicate additional threats or
opportunities. Possible actions for Monitoring and Controlling Stakeholder Engagement in
construction projects include:
• Develop a common language among stakeholders.
• Develop and maintain a web-based communication management system to share with all
key stakeholders to allow for collaborating and tracking of requirements approval.
• Be aware of small changes in the tone and context of communications among stakeholders
to capture early signs of potential issues that may have an impact on the future of the
project.
• Hold workshops involving stakeholder groups to understand and resolve views and
opinions regarding requirements.
• Continually engage stakeholders on success criteria as those can change over time.
• Identify potential biases among stakeholders, understand their motives, and then develop
mitigation actions.
• Ensure that the stakeholder management plan is the key focus throughout the project life
cycle.
• Ensure the scope of work includes adequate stakeholder engagement activities; for
example, stakeholder assessment, buy-in, management strategies, and continuous
monitoring or follow-up.
• Learn and understand the strategies or objectives of stakeholders to adopt the right
communication techniques.
The degree of stakeholder satisfaction can often be determined by having a conversation with
stakeholders to gauge their satisfaction with the project deliverables and the overall management
of the project. Project and iteration reviews, product reviews, stage gates, and other methods are
ways to obtain periodic feedback. For large groups of stakeholders, a survey can be used to assess
the degree of satisfaction. Where necessary, the stakeholder engagement approach can be updated
to achieve higher stakeholder satisfaction.
Recommended Readings
1. The Project Management Body of Knowledge (PMI, 2021)
2. The Construction Extension to the Project Management Body of Knowledge (PMI, 2019)
3. Construction Stakeholder Management, Chinyio and Olomolaiye (Eds.), Wiley-Blackwell,
2010.