Project ManagementWhat is a Stakeholder in Project Management?

What is a Stakeholder in Project Management?

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What is a stakeholder in project management, and what role do they play in your software development organization’s success? We will answer that question, plus explain the different types of stakeholders so you can see how they can help you as a project manager.

Before we begin, are you considering becoming a certified project manager? We have a list of the Top 5 Project Management Certifications to help you get started.

What is a Stakeholder?

It is not uncommon for project managers to sometimes feel like they are on an island, but that should not be the case. Completing a project takes the effort and collaboration of several individuals that exist both in and out of an organization. This includes your team members, management, developers, IT support, other departments within your company, as well as clients. What can you call all of these individuals? Stakeholders, but let us look at the more formal definition of this term.

The Project Management Institute (PMI) defines stakeholders as individuals and organizations that:

  • Are actively involved in a project or
  • Are concerned with a project’s successful completion or execution since it can positively or negatively impact their interests

In simple terms, a stakeholder is someone who has something to gain or lose from a project’s outcome, versus an outsider who will not be affected whether that project is a success or a complete failure.

Project stakeholders can sometimes be a homogenous group with a single interest. Other times, they can be a varied group with differing interests. In fact, you may one day have to manage a project where some of your stakeholders have conflicting interests, which can present quite the challenge.

Stakeholders with conflicting interests are just one challenge managers can have when completing projects. Another is that stakeholders can change during a project or see their power or influence shift.

What must you do as a project manager? When it comes to stakeholders, you must keep them involved and informed as the project progresses from start to finish, plus balance their interests to ensure everything runs smoothly. Why is this so essential? Because statistics show that stakeholder satisfaction is one of the keys to project success. Just one dissatisfied stakeholder can make your life rough as a manager, and they can mean the difference between project success and failure if you do not handle them properly.

Read: Top Collaboration Tools for Software Developers

What is a Key Project Stakeholder?

The general definition of a project stakeholder is anyone affected by your project’s outcome or execution, whether negative or positive. This could be an individual or an entire organization with something riding on your project.

What is the definition of a key project stakeholder? As its name suggests, a key project stakeholder is someone with greater input and influence over a project’s success. They have the power to dictate the success of a project via objectives that need to be satisfied, as opposed to those with little or no input or influence. And, while a project may be executed to the point that it is within budget and all deliverables are complete, a key project stakeholder’s dissatisfaction will mean it is not a success.

Here are some examples of key project stakeholders that you may encounter in some of your projects:

  • Executives: A company’s top management in charge of directing the strategy to complete the project
  • Project manager: The person in charge of leading the project to completion
  • Team members: The group that works towards the project’s completion under the guidance of the project manager
  • Resource managers: People in charge of controlling the resources needed to complete the project
  • Sponsor: One who finances the project
  • Steering committee: A group of executives, sponsors, and other key project stakeholders in the organization that makes critical decisions regarding the project
  • Customers: A product’s or service’s direct users who can be external or internal to the company tasked with completing the project

Types of Stakeholders

A project’s stakeholders are usually divided into two main categories: internal and external. Here is a closer look at the roles they play and how they differ from one another.

What are Internal Stakeholders?

True to their name, internal stakeholders are those that exist within your organization, company, team, etc. Examples of internal stakeholders include executives, managers, team members, developers, database administrators, web developers, and some customers.

What are External Stakeholders?

While internal stakeholders come from within your organization or company, external stakeholders are outsiders who still have an interest in whether your project succeeds or fails. Examples of external stakeholders include suppliers, users, investors, contractors, subcontractors, freelance developers, and some customers.

How To Perform A Stakeholder Analysis

Project managers will have an easier time executing your project planning if you take the time to identify or map out your internal and external stakeholders. This will also help you ensure that your stakeholders – both internal and external – stay in the loop and are satisfied once your project is complete. When should you start identifying your stakeholders? After your project charter is finished and your project’s scope is defined. That is when you should perform your stakeholder analysis, and here are the steps to make it happen.

We have a great tutorial highlighting Tips for Defining Project Scope that can help you better define your project’s scope.

Identify Stakeholders

Your analysis should start with identifying your internal and external stakeholders. Use your project charter, project plans, and any other documentation you have to complete this step.

While the goal is to identify as many stakeholders as possible from the start so you can build proper relationships as your project progresses, some will not appear until later on. Do your best to identify everyone you can, and you should be good to go.

Prioritize Stakeholders

As mentioned, stakeholders differ in terms of their internal/external status, plus some are considered key project stakeholders who hold more influence over the project. As such, the second step of your stakeholder analysis involves prioritizing them so you can invest your resources accordingly.

One method to prioritize stakeholders is by using a power/interest grid. It can help you pinpoint key project stakeholders by asking a couple of questions:

  • What level of power does the stakeholder have?: How essential are they to the success of the project? How influential are they to other stakeholders, whether positive or negative? How critical is their satisfaction with the project’s execution?
  • What level of interest does the stakeholder have?: Are they directly accountable for the project? Do they need the project to succeed? Is the project extremely important to them or of minimal interest?

Stakeholders with high power and high interest should be closely managed. Ones with high power and low interest should be satisfied. Stakeholders with high interest and low power should be informed. And those with low power and low interest should be monitored.

Understand Stakeholders

Once your stakeholders are identified and prioritized, the third and final part of your analysis is to understand them so you can thoroughly learn what they expect from the project.
This will likely include in-person meetings with key stakeholders where you ask things like:

  • How they define project success
  • What their project expectations are
  • What concerns they have about the project
  • What conflicts of interest (if any) exist with other stakeholders
  • How a positive or negative project result would impact them

Such meetings and questions will help you better understand each stakeholder’s role in the project, plus it will help you see how each stakeholder relates to one another. Perhaps most importantly, this final part of stakeholder analysis will give you insight into how each stakeholder likes to communicate and their other preferences so you can build strong relationships from the start.

How to Manage Stakeholders

There are many methods project managers can use to help manage stakeholders and other invested parties in a software development project. The subject itself is to large to cover her, so, instead, we encourage you to read our follow-up tutorial: Tips for Managing Stakeholders, where we cover the topic in great detail.

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