Building and Managing Relationships with Stakeholders

5

Maintaining effective and positive relationships with stakeholders at all levels is essential for success in portfolio, program, and project management. These relationships can either positively or negatively affect the program or project. In a study of management of large capital projects in the United Kingdom, Baker (1962) points out, “You cannot get large projects carried out without persuading large numbers of extremely different sorts of people to understand the importance of what is being done and to work together” (p. 328). This assertion supports later research (de Abreu and Conrath 1993) showing that defining stakeholders’ expectations based on their perception of the project‧s objectives and then determining the extent to which they are (or are not) fulfilled can predict the success of a project. McElroy and Mills (2003) also underscore the importance of “the continuing development of relationships with stakeholders for the purpose of achieving a successful project outcome” (p. 103).

First, it is incumbent on the manager and the team to identify all of the key stakeholders who will be involved and then determine how best to work with each one. This is not an easy task. While some stakeholders are obvious, such as the program sponsor or the customer, others are not. These people still may have a direct interest in or impact on the portfolio, the program, or the project. Once the stakeholders have been identified, it is necessary to build a relationship with each one to ensure his or her concerns are heard and addressed in an effective and timely way.

Connecting with stakeholders is even more difficult in complex, global programs and projects performed by virtual teams. In such situations, there are many more stakeholders, and they are more likely to represent different cultural and political views. A stakeholder management plan and a stakeholder strategy, along with strong interpersonal skills that include influencing and relationship building, can help.

You can use a number of methods to identify stakeholders, as described in PMI (2008a), Milosevic (2003), Smith (2000), Jepsen and Eskerod (2009), and elsewhere. It is not the purpose of this chapter to detail these identification approaches. Rather, this chapter discusses how a portfolio, program, or project manager can best work with various stakeholders, as well as the key interpersonal skills required for success.

Identifying Stakeholders

PMI (2008a) defines stakeholders as the people or organizations who are actively involved in a project or whose interests may be affected, either negatively or positively, by the project. It notes that stakeholders may influence the project, the deliverables, and the team, and emphasizes the importance of stakeholder identification throughout the project because different stakeholders may have interests at different times in the project. Freeman (1984) is credited with setting the stage for this definition. He states that “a stakeholder in an organization is any group or individual who can affect or is affected by the achievement of the organization‧s objectives” (p. 4).

PMI (2008a) notes the following categories of stakeholders:

• Customers or users

• Sponsors

• Portfolio managers and the portfolio review board

• Program managers

• Project management office

• Project managers

• Project team

• Functional managers

• Operational managers

• Sellers/business partners.

The project manager is responsible for stakeholder identification, and he or she must work with each stakeholder through a defined strategy. However, Mitchell, Bradley, and Wood (1997) point out that anyone who is affected or could be affected by the organization is a stakeholder—making the job of the portfolio, program, or project manager even more difficult. The authors emphasize how important it is to understand the stakeholder‧s ability to influence and recognize the legitimacy of each stakeholder‧s concerns. The authors also note that some stakeholders will have urgent demands for information; when this is the case, the portfolio, program or project manager must actively engage this stakeholder to ensure he or she maintains a positive attitude about the program or project. Baccarini (1999) suggests focusing attention on the important stakeholders to ensure project success. The task then is determining which stakeholders are the most important, at what times during the project their role will be most prominent, and how best to interact with each one.

It is important to recognize that on programs and projects, we are acutely aware of some key stakeholders; others may know of our plans but may not be involved, but they still could influence or impact our products, services, or results in either a positive or negative way. We may need to convince most every stakeholder that our work has benefits and value. As Armstrong and Beecham (2008) state, conflicts occur if one stakeholder perceives that his or her interests are not taken seriously, are being opposed, or are affected by another stakeholder. These stakeholders may have different goals for the program or project, different values or beliefs, ambiguous roles, and communication problems with others who are involved. If there is not agreement on goals and objectives, for example, this disagreement will lead to later risks and issues for program and project managers. Jepsen and Eskerod (2009) note that the proactive project manager views stakeholder identification and analysis as a route to ongoing learning and an opportunity to talk with stakeholders to consider their ideas early in the project, which contributes to overall project success.

Communicating with Stakeholders

In a matrix environment, the project manager must communicate with team members and their functional managers to ensure that there is a clear understanding of the role each team member will play, when the team member will be needed, and how the team member‧s work will be evaluated. If the functional manager is reluctant to let the team member join the project, the project manager should point out any common areas of interest and how the project can help the team member develop new skills that then will be useful to his or her functional team when he or she completes the specific assignment. Focus on building a partnership with the functional manager based on mutual trust, and involve the functional manager and his or her staff in key decisions involving the project beyond the need for resources.

As the project manager, you should recognize that the functional manager may think that you are encroaching on his or her assigned resources. If you have not built a positive relationship with the functional manager, he or she may act as an obstacle—for example, by mandating complete compliance with all technical requirements. This factor alone makes the functional manager a critical stakeholder. Establishing a long-term relationship with him or her is vital.

Karlsen (2002) notes that certain stakeholders control needed resources for the program or project and explains that each stakeholder has different ideas about what constitutes the success of a program or project because each stakeholder‧s interests are different. Frooman (1999) says that stakeholders may withhold resources or attach constraints to what the resources are allowed to do to exert their influence or even change the overall intent of the program, the project, or the organization.

If the project has only one customer, serve as the liaison to the customer and provide regular information. Actively listen to understand the customer‧s point of view, and point out any opportunities that the project team has noticed for the customer to improve its processes, even if they do not apply directly to the project. Obviously, these suggestions must be subtle. You do not want the customer to think that you are telling it how to do its work. You simply want to explain that you see an area in which the customer might be able to make a small improvement that will enable it to excel in its field. If the customer is receptive, you have set the stage for a closer relationship, one in which you as the project manager are viewed as a valued partner, rather than just the person who is responsible for the current project.

If there are multiple customers, consider making a team member responsible for interacting regularly with each one. Make sure to communicate directly with each one; do not expect them to communicate among themselves, even if they are in the same organization.

Show each stakeholder that you are interested in compromising as much as possible when decisions are required on key project issues, and regularly solicit ideas from stakeholders about ways you can foster continuous improvement on your project.

Communicate actively and often with sponsors, especially concerning resource use, requirements, and progress, so that the sponsor learns about any issues firsthand from the project manager rather than from others in the organization. Recognize, though, that the sponsor has time constraints. Make sure you are providing the information needed, not information overload. If there is a problem you think you can solve on your own, you can suggest a solution to the sponsor to gain his or her support, but do not surprise the sponsor with a request for help. Some problems cannot be anticipated and may suddenly affect the project. When such problems do occur, immediately inform the sponsor and maintain a policy of no surprises in your relationship with him or her. Keep in mind the organization‧s goals as well as those of your project. Ask the sponsor questions about how your project can better meet the organization‧s goals and what you can do to foster improvement in both financial and enterprise measures of success.

Remember that the sponsor is the champion of the project and will be involved throughout the life cycle, so you need to establish a winning relationship with him or her. The sponsor can influence decision-making, facilitate problem-solving, and assist in stakeholder identification, especially because the sponsor probably prepared the initial business case for the project. Open and consistent communications with the sponsor must be the norm.

The sponsor may provide feedback to you as the project manager, so you must be an active listener, appreciate the sponsor‧s advice even if he or she is critical of a decision you have made or an action you have taken, and strive to improve your skills.

When working with team members, the project manager acts as a facilitator; it is up to the team to actually complete the product, service, or result. In the facilitator role, the project manager:

• Works with team members to promote shared values so that everyone has a sense of the overall vision and direction and does so in a manner that stresses the importance of teamwork to overall success.

• Focuses on setting up an atmosphere of trust for a strong, positive, and success-focused team culture.

• Shows the team that he or she is willing to commit the time to make the team a highly productive one, with a culture that considers team members’ views and promotes their inclusion in as many decisions, problem-solving sessions, and meetings with customers and sponsors as possible.

• Routinely helps team members as needed to enable them to best perform their specific responsibilities.

• Helps interested team members work toward development of a career path in project management, or promotes this career path if it already is in existence in the organization.

• Shows a genuine interest in the well-being of each team member and demonstrates consideration if anyone is undergoing a personal crisis.

• Promotes an environment in which team members are comfortable with working with one another.

In short, your team should be one on which membership is coveted by others in the organization.

Communicating with External Stakeholders

Because outsourcing as a cost- and risk-cutting method has become more common, suppliers, subcontractors, and vendors are often key stakeholders on programs and projects. To encourage positive interactions with these people, the project manager should show that he or she understands and appreciates their unique competencies and contributions to the project and should be familiar with the supply chain management process. The project manager should bring these stakeholders into the decision-making process on key issues, especially if their contributions are essential in certain phases of the life cycle, such as in new product development.

As the project manager, you should focus on creating a partnership based on trust. It may be helpful to set up a partnering agreement that details how you and your team will work with the supplier‧s team. Through such a partnering relationship, you can openly discuss problems and issues and work to jointly resolve them, which will help you avoid extensive change requests and contract disputes later. The supplier is seen as a valued partner to the project team—a win-win situation.

The public is a stakeholder in many external projects. When working with the community, the project manager must provide up-to-date information on the project‧s status and must explain to the public why the project is important and desirable, especially in terms of environmental sustainability or economic or social development, if applicable. Sharing information, especially when public support is necessary and regulatory hurdles are involved, is one way to foster positive public opinion of the project and to improve the end result.

Communicating with Key Program Stakeholders

As in project management, in program management stakeholders are critical in the implementation of successful organizational change. At the program level, program managers can best communicate with critical stakeholders by:

• Sincerely understanding and respecting their key concerns about the program.

• Talking with them, either face-to-face if co-located or on the phone or by instant message, about the importance of the program to the organization and its customers, emphasizing the need for change and the benefits the program will provide.

• Continually interacting with stakeholders to discuss progress and to find out if their concerns have been addressed successfully; if not, determining what the program manager and the team can do to make sure their needs are met.

• Providing up-to-date information to stakeholders about the program, especially about their specific areas of interest.

• Working with team members to create an atmosphere of open communication and to encourage the delivery of consistent messages in both directions.

• Serving as the lead with customers, showing a genuine interest in immediately resolving any problems or issues that may surface, and creating solutions that both the customer and the program team see as a win-win. To maintain a successful relationship that endures over the years, program managers must actively communicate with customers, sometimes as often as daily but at least several times each month, not only to inform them of program status but also to enhance these relationships.

• Recognizing the long-term nature of most programs and working with stakeholders to help prepare for the future once the program is complete and the benefits have been transitioned by building new skills and competencies at a variety of levels.

• Talking with the customer after the program is complete to see if there are ways in which both the end products and the interpersonal processes could have been more successful, which will help foster future relationships and broaden business opportunities.

Considering the complexity and length of programs, it is likely that issues will remain, and not all of them will be solved easily. The program manager must recognize that people still may not totally accept the changes from the program and should openly and actively listen to their concerns. If there are points of disagreement, the program manager must look for some areas in which there is agreement and then move to solve remaining issues in a way that benefits both parties. The program manager then focuses on continuing to build relationships with stakeholders.

Communicating with Key Portfolio Stakeholders

At the portfolio level, PMI (2008b) again stresses the importance of stakeholder identification and reiterates that stakeholders’ level of involvement may vary. PMI notes the following key stakeholders:

• Executive review board

• Portfolio review board

• Portfolio managers

• Sponsors

• Program managers

• Project managers

• Program/project management office

• Project team

• Marketing management

• Operations management

• Engineering management

• Legal management

• Human resources management

• Functional managers

• Finance managers

• Customers

• Vendors/business partners.

This list shows there are even more stakeholders for portfolio managers to consider than there are for program or project managers, and the stakeholders’ involvement is at a different level. The organization‧s portfolio manager must use different approaches to communicate with each kind of stakeholder.

The portfolio manager is charged with linking corporate goals and objectives to specific programs and projects, sharing the success criteria proposed for each program and project, and discussing programs’ and projects’ progress with the executives and members of the portfolio review board or comparable group. Further, the portfolio manager must work with each stakeholder or stakeholder group regularly to build a relationship based on trust. Trust cannot be assumed and must be developed.

Executive Review Board

The portfolio manager should keep members of the executive review board apprised of any internal or external changes that will have a major effect on the organization‧s portfolio by providing timely information in an easy-to- read format. He or she should, if possible, make suggestions for capitalizing on external forces that may impact the organization. Embracing change and adapting quickly to the effects of the change are key.

The portfolio manager must recognize the executives’ desire to improve the organization‧s competencies in program and project management. When working with these executives, the portfolio manager should stress how program and project management can best support organizational transformation and innovation.

Portfolio Review Board

The portfolio manager should provide members of the portfolio review board with timely information about changes involving resources that may affect the current portfolio mix, as well as updates on the progress of the current portfolio components.

Portfolio Managers

The overall portfolio manager must work with portfolio managers in different areas of the organization because these managers need information on strategic changes that may affect the priority of their programs, projects, or other work. They also must be notified when the business rules involving the portfolio process change or the priorities in the portfolio are rebalanced. The key role of the portfolio managers when working with the executives and the members of the portfolio review board is striving to achieve balance as the organization‧s priorities change. Portfolio managers must show a willingness to adapt to constant change and to use the changes to benefit the organization. They also must be skilled in communicating with people at all levels about why a change has occurred and the effects it will have on the programs and projects within the portfolio.

Sponsors

Each program or project will have a sponsor. For a new program or project, the portfolio manager must first meet with the sponsor to find out if the business case for the program or project is complete and then must provide timely information to the sponsor about the portfolio review board‧s decision to accept or reject the program or project. If the program is accepted, the portfolio manager must work with the sponsor to provide information to the portfolio review board concerning the program‧s status.

The best approach when working with the sponsor is to recognize that the sponsor is interested in overall success. Because many programs and projects involve organizational change, the sponsor becomes a critical stakeholder because he or she has ultimate responsibility for the program‧s or project‧s success. The sponsor must ensure that the organization is ready to accept the program‧s benefits and deliverables. Often this is a difficult process because people tend to resist change. Patton and Shechet (2007) say that the relationship between the portfolio manager and the sponsor should be a partnership, and they suggest that the parties prepare a sponsor agreement that shows each person‧s roles and responsibilities during the various phases of the life cycle.

Customers

Customers are the critical stakeholders. The portfolio manager should strive to improve communications with all customers to boost customer satisfaction. Working with the marketing staff, the portfolio manager can help cultivate customer support and future relationships.

Program and Project Managers and Team Members

The portfolio manager may elect to communicate directly with program and project managers or may leave communication up to the sponsor. Program and project managers need to be informed about the business rules to be followed as priorities are established by the portfolio review board. The portfolio manager focuses on coordinating any interfaces between programs and projects underway to overcome any barriers to following the portfolio process or to offer proactive solutions to risks and issues. He or she also must help assess how well the programs and projects are preparing the organization for future success. By working to build long-term relationships with program and project managers, the portfolio manager can maintain better communication with them, which in turn will encourage the program and project managers to offer updates when requested, even if the program or project is struggling.

Marketing Management

Because the portfolio manager is charged with assessing changes in the marketplace that may affect the organization‧s strategic goals and objectives and the programs, projects, and operational management work in the portfolio, he or she must forge a relationship with the marketing staff and work closely with them to identify changes and new markets to pursue. Thinking of marketing as separate from program and project management is inappropriate in this era of rapid, continual change and frequent adjustments to portfolios because of environmental changes. Marketing must be integrated with program and project activities.

Active involvement with the marketing staff is necessary in the early stages as the program or project is initiated and at the end when the deliverables are complete and the benefits have been realized and are being transitioned. Resources from the marketing staff must be involved throughout each program and project to offer strategic and innovative ideas for deliverables. Marketing people can present different insights that the teams might not otherwise consider.

Portfolio managers should talk with marketing staff about ways to broaden the business by focusing on opportunities that can lead to increased benefits. Program and project managers should leverage the expertise of marketing staff to promote more creativity and innovation in deliverables and to learn how the deliverables can further benefit current or future customers.

Finance Management

The finance department is a major stakeholder for each program or project and especially at the portfolio level, because it is a critical partner in investment decisions and overall investment strategies. When communicating and working with people in finance, the portfolio manager must demonstrate an understanding of business skills and competencies. He or she cannot make choices based only on technical considerations and must involve the finance staff as appropriate, especially when new programs and projects are proposed for consideration as components in the organization‧s portfolio.

The portfolio manager must work with the finance staff to help prepare the business case for a proposed portfolio component and to ensure that resources are available to support it if it is selected to be part of the portfolio. He or she must convey a desire to use programs and projects as a way to increase overall revenue.

The program or project manager must recognize that the finance department may constantly be looking for ways to reallocate funds, even those that have been officially designated for the program or project. Continual communication and involvement with the finance staff is essential to ensure that funds are not reallocated to a program or project that is, for example, new or struggling.

Legal Management

The legal staff is a critical stakeholder in decisions made by the portfolio team about program and project selection. It also is involved if the organization works with labor unions. In dealing with the legal staff, portfolio managers should bring up any issues regarding confidentiality agreements and intellectual property issues. Further, it is necessary for all managers to comply with regulations and standards, including codes, inspections, and approvals.

Building Stakeholder Relationships

Parker (1994) suggests that a worksheet is helpful in building relationships, or “bridges,” as he calls them, with stakeholders. Teams can complete a bridge- building worksheet for each stakeholder. The sheet lists:

• Who the stakeholder is

• What kind of help the team needs from this stakeholder

• What guidance the stakeholder needs from the team to determine what the team can do for the stakeholder

• Common objectives and outcomes the team and the stakeholder share

• Potential barriers (such as past problems, competition, lack of respect, or lack of support) that might prevent the team and the stakeholder from working together in a positive way

• Ways to overcome these barriers

• Which team member will work with the stakeholder

• The steps the program or project manager can take to develop a positive relationship with the stakeholder.

Uniting the Team

To succeed as a portfolio, program, or project manager, the manager must have an orientation toward people, not just toward tools and techniques. (Applying tools and techniques is the responsibility of team members.) The manager is the one who pulls everyone together to work effectively and who takes the high road even, for example, when a stakeholder makes negative comments about the project or program.

To unite team members with diverse views, the portfolio, program, or project manager must:

• Be able to sense stakeholders’ attitudes toward the portfolio process, especially negative attitudes, and to identify their needs. Negative attitudes are sometimes characterized by stakeholders who do not buy into the portfolio process or have negative opinions about the program or project.

• Keep stakeholders’ needs in mind while making realistic determinations about what actually can be achieved

• Look at issues from the other person‧s point of view

• Have a positive attitude and respect for and genuine sensitivity toward the views of others, even if they are different from his or her own point of view

• Actively listen when meeting with stakeholders at all levels

• Speak clearly and concisely in terms each stakeholder can understand, rather than relying on project management jargon, which may be too confusing or limiting to stakeholders who are not team members

• Be willing to provide extra help and assistance when required

• Not expect any special recognition or rewards for offering help

• Respect people at all levels, not just those who are in upper management positions

• Recognize that everyone‧s contributions are important

• Be able to balance the demands of stakeholders, recognizing that over time, their interests may change, which means their expectations regarding the portfolio, program, or project may change

• Continually communicate the vision and mission of the program or project or, if he or she is a portfolio manager, communicate the strategic objectives of the organization and the organization‧s culture

• View change positively, but recognize people‧s resistance to change and work with them to overcome this resistance and support the program or project by explaining the benefits of the change and why it is important

• Understand that relationship building takes time, and the more stakeholders involved, the longer it takes.

Explaining Decisions

Even if the manager is sensitive to the needs of everyone involved, he or she will make decisions that some will not totally support. No one really likes change, and often it is difficult to accept, but it is constant in today‧s environment, especially on programs and projects. The manager must meet individually, if in a co-located environment, with anyone who does not support a decision to explain why the manager has chosen that course of action. (In a virtual environment, the manager should have a one-on-one conversation with the person on the phone or electronically.) Such an approach may not always work, but it does show that the manager has a genuine concern for the other person‧s point of view, that he or she has taken this point of view into consideration, and that the manager has thought about the decision and made it in an objective, systematic way.

Once the decision has been made, the manager then must introduce it to the stakeholders. If the decision leads to change, the program or project manager must show that he or she embraces the change and must explain how the change will benefit the program or project. The manager should then convey information concerning the decision to the stakeholders through consistent messages. Everyone must hear about the decision in the same way. On a virtual team, the decision can be posted on the home page of a portal, and an email can be sent to everyone on the team to tell them to check the portal. On a co-located team, the manager can call a meeting to explain the decision and also issue written information about it to everyone involved in case a key stakeholder cannot attend.

Summary

Building relationships with stakeholders at all levels is an ongoing key process for portfolio, program, and project managers. Consider using a variety of approaches in working with stakeholders at all levels and preparing a stakeholder management plan and stakeholder management strategy to help ensure successful relationships. It also is important to recognize that various stakeholders will have different requirements at different points of the program or project life cycle. Sometimes people who were not identified as stakeholders initially may turn out to have an interest in the program or project, and new stakeholders may join the organization and require information about the portfolio management process or a specific program or project of interest to them.

Discussion Questions

Imagine that you managed an internal improvement project. Your company is on the customer‧s qualified supplier list, but it had never worked directly for this customer‧s representative before. The customer asked you to hire a subcontractor who has special expertise in the kind of work being performed in the internal improvement project. It soon became apparent that the customer really wanted to work directly with this subcontractor, but it was not on the qualified vendor list. At the kickoff meeting, you could tell that the customer‧s representative and the subcontractor‧s representative not only respected one another but also were personal friends. Soon after, you learned that the customer was talking directly to the subcontractor without telling you or your team about it. You and your team became less and less involved with the project; in fact, it seemed as if you were just a pass-through to the subcontractor. However, your company was still responsible for the project.

The customer‧s representative immediately accepted the first deliverable and made few changes. The second deliverable also was well received.

You realized that there was another area in which your firm had specialized expertise that it could contribute, and you asked to meet with the customer. The customer informed you that your firm would not get any additional work from the organization. You were surprised; the first two deliverables were accepted with almost no changes. You then learned that the subcontractor was now on the qualified supplier list. Next, you found out that your contract was being terminated for convenience.

1. What should you have done to prevent this situation from occurring in the first place?

2. What specific interpersonal skills should you have used so that the customer worked through you, not directly with the subcontractor?

3. How could you have better worked with the subcontractor so that its representatives included you and your team in its work with the customer?

4. How should you have created an atmosphere that was conducive to project success from all three perspectives—the customer‧s, your organization‧s, and the subcontractor‧s?