What is stakeholder analysis? All you need to know

Stakeholders add variety to the corporate scene but can also be a manager’s headache. With each stakeholder having their own opinions and ideas, keeping everyone happy in a project is tough.

Yet, as a project manager, it’s a crucial job to make sure everyone is satisfied for the project to succeed.

So, how do you do it?

It all starts with the stakeholder analysis.

This simple yet crucial process plays a pivotal role in determining the success of the project.

In this post, we will understand the concept of stakeholder analysis, its advantages, and how to do it. To begin, let’s first establish a clear definition of who exactly qualifies as a stakeholder.

What is a stakeholder?

A stakeholder is someone who can influence the project or can be influenced by the project.

In simpler terms- a stakeholder is someone who cares about or is involved in a project, business, or plan. It could be individuals, groups, or organizations that have an interest in the outcomes. These people can influence or be affected by the results, and they often have specific needs or views related to the project.

Primarily there are two types of stakeholders in a project: internal and external.

• Internal stakeholders: Internal stakeholders are the people within the organization. They include employees, investors, project managers, a company owner, the board of directors, executive leaders, and more.
• External stakeholders: External stakeholders are the people outside the organization. They include customers, business vendors, community, government, contractors and suppliers, and more.

What is stakeholder analysis & its main purpose?

Stakeholder analysis is the process of identifying all the stakeholders of a project, their needs, influences on the project, and communication requirements.

The main purpose of stakeholder analysis is to assess the influence, impact, and relationships of stakeholders to effectively manage their involvement. By recognizing stakeholders’ perspectives and concerns, organizations can make informed decisions, build positive relationships, and navigate potential challenges more successfully throughout a project.

Stakeholder analysis in project management

Without an in-depth understanding of all the stakeholders and their needs, it is hard to ensure the success of a project.

Stakeholder analysis in project management helps you gain an in-depth understanding of all the stakeholders in a project, ensure an early alignment among all stakeholders on project goals and plans, and address conflicts among them early on. The result is increased chances of achieving the goals of all the stakeholders in a project.

If a project does not meet the expectations of all the stakeholders, it cannot be called a successful project. Let’s understand it with an example.

You can create an exceptional product for your company, but you overrun the budget and time. This may be a successful project for the employees and customers but may not be for the investors as it reduces the profit margins significantly. Thus, despite the success of the project in the market, it is not a successful project for all stakeholders.

Stakeholder analysis in project management helps you ensure the interests of all the stakeholders in a project are met.

Benefits of stakeholder analysis

Stakeholder analysis is the first step for effective stakeholder management in a project. It benefits you by gaining more insights, support, and buy-in from stakeholders in a project to ensure success.

For example, key stakeholders such as investors, C-level executives, and the board of directors can help you set the goals, objectives, vision, budget, and schedule of the project.

Similarly, knowing and identifying the requirements of external stakeholders helps you understand project constraints.

Internal stakeholders like team leaders and project coordinators help you execute the project plan effectively.

Have a look at the five main benefits of stakeholder analysis:

• Increased understanding of a project helps in better project planning and decision-making
• Reduced risk of project failure as you understand the stakeholders’ expectations and requirements
• Increased project buy-in and support from stakeholders as they are engaged throughout the project
• Makes it easy to manage stakeholder relationships with a project with an in-depth understanding of stakeholders’ needs and expectations
• Helps you improve stakeholder communication and collaboration at all levels

How to conduct a stakeholder analysis?

Conducting a stakeholder analysis is a three-step process: identifying all the stakeholders of a project, categorizing the stakeholders, and deciding how, when, and what to communicate.

Here is the explanation of the three stakeholder analysis steps:

1. Identify all the stakeholders of a project

Think of all the interested parties in a project. The simple way to do that is to ask yourself a question: who are the people who can influence the project or be influenced by the project?

Start writing down the names of all the interested parties in a project. The list can somewhat look like this:

• C-level executives such as the CEO, owner, and member of the board of directors
• Investors and sponsors
• Employees
• Customers
• Program and project managers
• Suppliers and vendors
• Government agencies

2. Categorize the stakeholders

We all know that not all stakeholders have equal influence, power, and interest in the project. Thus, you need to categorize all the stakeholders based on their influence and interests.

The most popular framework to do so is to use a power-interest grid. It groups all the stakeholders into four quadrants based on power and interest and this stakeholder analysis map suggests the course of action in communication for stakeholders in each group.

The X-axis represents interest and the Y-axis represents power.

The power interest grid groups stakeholders into four categories.

1. High power, high interest (manage closely): These are the most important stakeholders of your project and you want to keep them most interested in your project. You need to keep them at the top of the priority in the list of stakeholders.

Priority: High

2. High power, low interest (keep satisfied): These are the people you need to keep satisfied because of their influence in the project. But as they have low interest, you do not want to turn them off with over-communication.

Priority: High

3. Low power, high interest (keep informed): These are the people who play a key part in the success of the project. You need to keep them informed regularly to ensure the successful execution of the project.

Priority: Medium

4. Low power, low interest (monitor): These are the least important stakeholders of your project and they are not going to add a ton of value based on their influence. You just need to monitor these stakeholders and inform them periodically about the progress.

Priority: Low

3.  Decide how, when, and what to communicate

Now, you have grouped all the stakeholders in these four quadrants. It is time to decide how, when, and what to communicate. You need to:

• Decide the communication frequency
• Decide the communication method
• Define the information you need to share and the buy-in you want from each stakeholder in the decision-making

To do so, you need some brainwork. The ideal process would be to interview each stakeholder and find out what they expect and what you can expect from them.

Here are a few questions that help you start with the process:

• What is their definition of success in the project?
• What financial and emotional interests do they have in this project?
• How do they want to contribute to the project?
• How do they want to be communicated?
• What are their views on the project?
• What impact does project outcome have on them
• Who influences their opinions generally?
• What is their view of the project and will this stakeholder likely have a positive impact on the project?
• What are the possible points of conflict with other stakeholders they might have

Doing so, at the beginning, helps you reduce the project risks, plan the projects better, and keep everyone in alignment.

Example of stakeholder analysis

Let’s understand the importance of stakeholder analysis with a practical example. Suppose you are developing an e-commerce app for a client.

Here’s an example of stakeholder analysis:

1. Identify all the stakeholders

Key stakeholders of a project are:

• Client (it can include multiple stakeholders such as owner, chief technical officer, marketing team, and legal team)
• Product owner
• Project manager
• Development and design team
• Customers (end-users)
• Business development team

Other stakeholders of a project are:

• Regulatory authorities
• Executive leadership

2. Map the power and interest of stakeholders

Create a table:

Title:  Influence, Interest

• Client: High, High
• Product owner: High, High
• Development and design team: Medium, High
• End-users: Low, High
• Business development team: Low, Medium
• Regulatory authorities: Low, Low
• Executive leadership: High, Low

3. Define the communication strategy

Here the most important stakeholder in this e-commerce project is the client. The role of a project manager is to ensure all the goals of the project are achieved. Thus, the client needs to keep engaged at every step of the project.

For example, if you receive feedback from the end user about a feature, you need the approval of the client before starting work on it. During the stakeholder analysis, you need to clearly define where you need the client’s buy-in and attention, when to communicate, and how to communicate.

Here is the communication template:  

• Stakeholder name: Nick
• Title: Client  
• Communication frequency: Weekly   
• Decision maker: Yes
• Mode of communication: Video conference/phone  
• Influence: High

Similarly, you need to define for every stakeholder how much buy-in you want from each in the decision-making process, to whom you should inform about the changes, and who are the stakeholders who are least interested in the project.

Stakeholder analysis tools

You can perform a stakeholder analysis using a pen and paper. In the past, project managers did that as there were no tools. Then, as soon as Excel spreadsheets were available, they started using it for performing comprehensive stakeholder analysis, documenting it, and making it easy to share. 

Currently, we have project management tools that can help you with multiple features like templates, graphs, and maps to help you with stakeholder analysis. 

Here are the three stakeholder analysis tools you have:

1. Standard methods 

Various methods can help you get started with stakeholder analysis. Stakeholder mapping, power-interest grid matrix, and RACI matrix are some of the most popular stakeholder analysis techniques. 

• Stakeholder map: A stakeholder map is the visual representation of relationships among various stakeholders involved in a project. It visualizes how stakeholders are interconnected and their stakes in the project. 
• Power-interest grid matrix: Power interest grid matrix is another technique to define the influence and interest of each stakeholder in a project.
• RACI matrix: The RACI matrix is another powerful method to define who is responsible, accountable, consulted, and informed for every action in the project. 
• Stakeholder analysis matrix: The stakeholder analysis matrix is a powerful technique that includes the key information of a stakeholder such as name, power, interest levels, point of contact, priorities, project impact, communication frequency, and engagement strategy.
• Interviewing stakeholders: Direct interview with stakeholders is the best way to gather information about what they expect and how they will be involved.            

2. Templates

There are templates for every stakeholder analysis method mentioned above that guide on how to do a stakeholder analysis. You can use the templates to conduct a stakeholder analysis. Or you can simply create your templates using Excel spreadsheets to perform stakeholder analysis. 

3. Stakeholder management software 

Stakeholder management software provides the tools you need for complete stakeholder management not just stakeholder analysis. You get pre-built templates, tools to create maps, graphs, and tables, documentation tools, and collaboration features to perform an in-depth stakeholder analysis.  Apart from that, you get the tools you need for stakeholder management such as Gantt charts, product roadmaps, and reports to review the progress.   

The purpose of using stakeholder management software is to make life easy for the project manager, document every step of the process, and create a centralized place for all the information related to stakeholders.

Various powerful tools in the market can help you with project stakeholder analysis. And most of the project management tools provide you with features for stakeholder analysis and management.

Level up your stakeholder management with ProofHub

Stakeholders are the most important people in a project. A manager has to manage the juggling needs of all the stakeholders for the success of the project. Stakeholder analysis is the first step to do it.

It helps you figure out who the stakeholders of a project are, how important is the role of each stakeholder, when and how much a stakeholder should be communicated, and other similar factors related to stakeholder management.

If you are looking for a powerful system for stakeholder analysis and management to make your projects successful, ProofHub is a great choice of tools to bring your project, stakeholders, and teamwork to one place.

ProofHub is all-in-one project management and team collaboration software that helps you manage all the stakeholders of a project from a single place.

It provides you with a centralized platform where you can create, store, and collaborate on all the project-related information. You can store all the information related to stakeholders in one place.

The best thing is stakeholder engagement. ProofHub provides you with a set of tools for effective stakeholder management:

• Gantt chart: If a key stakeholder wants to visualize the product journey, you have the Gantt chart to visualize the project roadmap, key milestones, and other key details of the project.
• Project discussions: If a stakeholder wants to share some insights, discussions at the project level help them share the information with the team.
  Reports: If a stakeholder wants to check the project’s progress, they can refer to the project reports to get an overview and gain an understanding.
• Task management: You have a centralized task management system for internal stakeholders to stay on top of the project management.

Advanced collaboration features: Features like custom roles, forms, online proofing, notes, and file import and export make it easy to collaborate with external stakeholders.

You can try ProofHub for free for 14 days, sign up by clicking here

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