What Is Stakeholder Analysis and How Can It Benefit Your Project?

Managing a project can be a daunting task. You need to keep track of deadlines, deliverables, resources, success metrics, communications strategies and a host of other factors. Stakeholders are a common thread between these factors, since all of these elements affect (or are affected by) people or organizations in one way or another. Because of these connections, it’s important to understand who your stakeholders are, the influence they have on your project, how your work affects them and what their goals are. Stakeholder analysis can help you identify, learn about and prioritize your stakeholders to minimize hurdles and maximize your chances of a successful outcome.

Let’s start with the basics.

What is a stakeholder?

In project management, a stakeholder is any person or organization that can affect or will be affected by a business decision. Pretty broad, right? There are different types of stakeholders, and these key players all have interests that should be considered during projects and decision-making processes.

Stakeholders are typically divided into two main categories: internal and external.

Internal stakeholders are people or groups that are involved or have a direct relationship to your organization’s daily operations and strategic planning. For example:

• Executives
• Project managers
• Department managers
• Project sponsors
• Employees working on the project
• Other employees
• Company owner
• Investors

External stakeholders exist outside of your organization but can still influence or be affected by your project or decision. This group includes:

• Customers, users or clients
• Prospects
• Suppliers
• Contractors and subcontractors
• Creditors
• Regulators
• Communities

The main stakeholders in a typical company are investors, executives, employees, customers and suppliers. With the increasing focus on environmental and social governance (ESG) across industries, the concept of stakeholders has expanded to include governments, trade associations, environmental agencies and the communities around a company’s operations or to which its product is being sold. For example, a chemical manufacturer looking to produce a new line of industrial solvents would need to consider its employees and surrounding communities as stakeholders in decision-making and the planning process.

Understanding who your stakeholders are is key to managing their expectations effectively. This is where stakeholder analysis comes in.

What is stakeholder analysis and why is it important?

Stakeholder analysis is the process of identifying and evaluating relevant stakeholders and their relationships to a project or business decision. It provides a structured way to understand the various parties that can affect or be affected by the task at hand, and helps shape your organization’s action plans and communications strategies.

Specifically, to conduct a stakeholder analysis, you weigh the competing demands of everyone with a stake in a particular project or decision. This process enables you to balance their needs and desired outcomes and ultimately focus all priorities based on strategic importance.

The benefits of stakeholder analysis include:

• Information gathering Learn about the interests, concerns and expectations of different stakeholders.
• Prioritization Assess who the most interested and influential stakeholders are to help determine the goals to focus on, the most efficient ways to use resources and where to target your communication efforts.
• Risk management Understand stakeholders’ interests and potential reactions to decisions so that you can anticipate challenges and proactively address them.
• Communication Focus on transparency to demonstrate understanding of stakeholders’ perspectives and a commitment to keeping them informed.
• Buy-in and visibility Gain support and resources by aligning your project with key stakeholders’ interests, which could prevent roadblocks further down the road.

When to do a stakeholder analysis

Project managers typically complete stakeholder analysis before beginning a project like developing a new product, launching a marketing campaign or updating a business process. They may also regularly repeat the analysis to keep track of any changes in key stakeholders and their attitudes or needs over time. Key decision-makers may also conduct stakeholder analysis before making major business changes, like acquiring another company or restructuring.

How to execute a stakeholder analysis (and what tools you’ll need)

Conducting a stakeholder analysis will provide the full picture of the people and organizations involved in a project: who the stakeholders are, what they want, how the project affects them and how they can push the project forward – or hold it back. This information is then used to determine how to prioritize their needs in the context of the project’s objectives. There are plenty of stakeholder analysis tools available that make the process both structured and repeatable. So, how do you conduct a stakeholder analysis?

1. Identify stakeholders

Make a list of all the individuals, groups or organizations that your project or decision could affect and that could influence the outcome. This includes both internal and external parties from the list above.

To help identify all relevant stakeholders, ask yourself:

• Who will be working on this project or involved in making this decision?
• Whom will this affect inside the business?
• Whom will this affect outside the business?
• Which communities will this project or decision affect?
• Who can approve or reject this project or decision?
• Who will be interested in the outcome and success of this project or decision?
• Who will be involved throughout the supply chain (if applicable)?
• Which regulations or government departments will influence this project or decision?

2. Prioritize stakeholders

Not all stakeholders are equal in terms of their impact on a project or decision. Some might have substantial power or resources that can significantly affect the outcome, while others might have a high level of interest in the project but less ability to influence it. Stakeholder mapping can help you work out who falls into what category and the best way to move forward with your stakeholder management.

You can choose from several different matrices and mapping tools for assessing stakeholders and their importance to the project or decision. The most common format is the power-interest grid, a two-dimensional grid with power (the ability to influence the outcome) measured on one axis and interest (how concerned stakeholders are about the outcome) measured on the other. The grid is divided into four quadrants, with stakeholders placed on the grid based on their level of power and interest. This methodology allows organizations to easily identify key players depending on the quadrant they fall into and determine how to manage relationships with them.

High power, high interest: These stakeholders are key players and must be managed closely. They are likely decision-makers or project sponsors and have significant influence over the decision or project’s success. Communicate regularly, collaborate actively and ensure that your expectations for the outcome are aligned with theirs.

High power, low interest: These people or groups must be kept satisfied. They typically include internal executives that have the power to approve or deny your project, but have less interest in the everyday running of it. Your project can still affect their work, however, so you’ll need to keep them informed of your project’s status and high-level progress to ensure they are happy with its direction.

Low power, high interest: Keep these stakeholders informed. You won’t typically need approval on a project from stakeholders in this quadrant, but their input can be very helpful. Be sure to communicate with them over the course of the project to stay ahead of any issues.

Low power, low interest: These stakeholders have less of a direct relationship to your project, so you should monitor relationships with them but not communicate excessively. Depending on the complexity of the project, you might only need to update stakeholders in this group occasionally or toward the end of the process.

These guidelines enable you to focus your communication and engagement strategies where they’re needed most.

Keep in mind that some stakeholders may move from one quadrant to another throughout the project or decision-making process, so it’s worth revisiting this tool as time progresses. For example, if a low-power, high-interest internal stakeholder is promoted, that person might suddenly become a key player in your project and you’ll need to adjust communication and engagement with them accordingly. In some cases, you may even want to encourage stakeholders to move from low- to high-interest quadrants to increase their buy-in on the project and the likelihood they’ll champion it to others.

3. Learn about your stakeholders

The next step is to learn about each stakeholder and fill out a stakeholder register. This is a document that records stakeholders’ details, including their names, organizations, roles and contact information in addition to their interests and influence regarding the project.

Some of this information will be readily available but you can also use surveys and interviews to fill in any gaps and gain valuable insights into your stakeholders’ interests, expectations and potential concerns. This intel can also be used later in the process to refine strategies and improve stakeholder relations.

Tools like SWOT analysis are also useful for learning about stakeholders. In particular, use SWOT to evaluate your stakeholders’ strengths and weaknesses, and the opportunities and threats they pose to your endeavor. This information allows you to plan for any potential hurdles and improve your chances of success.

4. Develop engagement strategies

Design strategies for how and when to engage with the parties in each group based on their interest, influence and priority level. These stakeholder engagement strategies should place emphasis on key players – such as those identified through use of the power-interest grid – and align with any additional objectives, like increasing a stakeholder’s interest in the project. The strategies should also address stakeholder concerns, make use of pledged support and manage any potential resistance or conflicts.

Stakeholder engagement is an important component of corporate social responsibility, as these strategies seek to involve the people and groups who will be affected by a project or decision, such as local communities. Stakeholder engagement provides the opportunity for dialogue, negotiation and relationship building, with stakeholders conveying their needs, concerns and feedback and project personnel or decision makers aiming to improve buy-in and build trust. Communication strategies, on the other hand, include marketing plans, customer education and internal updates on the project or decision’s progress, and are more about providing information than building relationships.

Stakeholder analysis in healthcare – an example

Stakeholder analysis is useful in the healthcare sector, where project managers are balancing many competing priorities from administrators, patients, doctors, regulators and executives. Let’s use a project manager at a company that produces medical devices as an example. Their team is about to develop a new piece of surgical equipment, so they’re conducting a stakeholder analysis before the project kick-off.

1. Identify stakeholders: The project manager brainstorms their list of stakeholders, which might include biomedical engineers, researchers, lab technicians, surgeons, patients, hospital procurement teams, regulatory agencies, upstream suppliers and the company’s executives.

2. Prioritize stakeholders: The project manager might place surgeons in the high-power, high-interest quadrant. Since surgeons are the end-users of the device and will have specific requirements for its function, quality and ease of use, they will ideally have a high level of interest in the outcome of the project. Meeting their needs will go a long way to ensuring the device is successful, giving them significant power in the project. On the other hand, the regulatory body overseeing medical devices sets approval standards, meaning they have a great deal of power over the project, but likely aren’t particularly interested in it. This would place them in the high-power, low interest quadrant.

3. Learn about stakeholders: The project manager needs to record key information for each stakeholder they identified in step one. For example, the names, contact details, hospital and roles of the surgeons consulting on the project, as well as their power-interest levels and prioritization from step two. When it comes to the regulatory agency, they might also record information about the relevant standards, the documentation requirements and the approval process. These details are crucial to the project, as the length of the approval process will affect its timeline, and the project manager will need to allocate the appropriate resources to ensure the device meets the standards.

4. Develop engagement strategies: The project manager might develop a stakeholder engagement plan for the new surgical equipment by mapping out tailored strategies for each group of stakeholders.

Surgeons, being primary users and high-power, high-interest stakeholders, are brought in during the early stages of the process to consult on the design and functionality of the equipment. Later in the process, product experts present detailed workshops to educate them about the tool's benefits and solicit feedback. The goal is to ensure the tool meets their needs and to encourage their advocacy as early adopters.

Regulatory bodies, such as the FDA, require a different approach. The project manager coordinates a series of compliance meetings and the accompanying documentation to demonstrate the device's safety, efficacy, and adherence to guidelines. Timely and clear communication here is key to navigating the approval process effectively.

In terms of communication strategies, the project manager will also map out plans for communicating with stakeholders throughout the project. This may include a timeline for check-ins with key personnel working on the project, regular progress updates for key stakeholders, and marketing plans targeting hospital procurement teams.

By conducting a stakeholder analysis, the project manager has identified key stakeholders, prioritized resources, stakeholders need, assessed risks and opportunities and developed strategies for engagement and communication – plus, they have all this documented, making it easy for them to share relevant information with anyone in their team that needs it.

Common challenges in stakeholder analysis and how to overcome them

Though stakeholder analysis is valuable, it’s not without its challenges. Thankfully, each of these challenges has practical solutions or workarounds.

Identifying all relevant stakeholders

One of the earliest challenges in the process of stakeholder analysis is ensuring no important stakeholder is overlooked. Missing a key stakeholder results in incomplete analysis and can lead to potential conflicts down the line.

To overcome this challenge, use a systematic approach to identify stakeholders: Consider all internal and external individuals and groups that could influence or be affected by your project or decision. Use team brainstorming sessions and seek input from different departments to ensure a comprehensive list.

Assessing stakeholder power and interest

Determining the level of influence and interest of each stakeholder can be subjective and complex, which opens the door to potential inaccuracies.

To mitigate this, employ a consistent method for assessing stakeholders, like the power-interest grid or other stakeholder mapping tools. These tools provide specific guidelines for evaluating your criteria like decision-making power, resources or degree of involvement in the project.

Balancing stakeholder interests

Stakeholders have varying and sometimes conflicting interests, and balancing these can be challenging.

Open communication and negotiation with your stakeholders is key. Understand the core interests and motivation of each stakeholder and find common ground where possible. If conflicts arise, focus on dialogue and compromise to reach a mutually satisfactory solution.

Time and resource constraints

Stakeholder analysis can be time-consuming and resource-intensive, particularly for large projects with numerous stakeholders.

The solution to this challenge is to prioritize your stakeholders. Focus on those with high influence and interest. Take advantage of tools and techniques that streamline the process, such as stakeholder registers and automated survey tools. While stakeholder analysis requires effort, the benefits typically outweigh the costs since the process can help projects run more smoothly and with better organization.