Stakeholder analysis is a crucial step in project management that aids in the identification, understanding, and management of stakeholders – individuals, groups, or organizations that can impact or be impacted by the project. Understanding stakeholders, their interests, and the influence they can exert on the project is vital in ensuring project success. The Project Management Professional (PMP) exam tests project management aspirants on these essential skills.
Understanding Stakeholders: Power Interest Grid
A useful tool in stakeholder analysis is the Power Interest Grid. It helps identify how stakeholders may influence the project, their level of interest in the project, and what attention they need from the project manager and team.
The Power Interest Grid has four quadrants:
- High Power-High Interest: These stakeholders have significant influence over the project and a high interest in its outcomes. They require close management and engagement. Example: Executive Sponsor.
- High Power-Low Interest: These stakeholders have the power to impact the project but may not have a significant interest in its outcomes. They need to be kept satisfied. Example: Regulatory Bodies.
- Low Power-High Interest: These stakeholders may not have much power over the project, but they have a high interest in its outcomes. Their inputs can be useful, and they should be adequately informed. Example: End-Users.
- Low Power-Low Interest: These stakeholders have minimal influence and interest in the project. They need to be monitored but not intensively managed. Example: Competitors.
| High Interest | Low Interest | |
| High Power | Close Management (e.g., Executive Sponsor) | Keep Satisfied (e.g., Regulatory Bodies) |
| Low Power | Keep Informed (e.g., End-Users) | Monitor (e.g., Competitors) |
Analyzing Influence and Impact
Stakeholder Influence and Impact analysis is also a critical aspect of stakeholder management. Influence represents the power a stakeholder has over the project, while Impact represents the degree to which the project’s outcomes may be affected by the stakeholder’s actions, decisions, or status.
A stakeholder may have high influence but low impact; for instance, a stakeholder who can make significant decisions about the project (high influence) but whose decisions would not significantly affect project outcomes (low impact). A stakeholder may also have low influence but a high impact: they can’t determine major project decisions (low influence), but their actions or status can significantly affect project outcomes (high impact).
To effectively manage stakeholders, project managers should analyze and understand how much influence stocks have, the potential impact they may have on the project, and strategize accordingly.
| High Impact | Low Impact | |
| High Influence | Manage Closely (e.g., Project Sponsor) | Consider their Views Carefully (e.g., Specialist Consultant) |
| Low Influence | Keep Informed (e.g., Local Community) | Monitor and Provide Information as Needed (e.g., Competitors) |
In conclusion, Stakeholder analysis – including tools like the Power Interest Grid and Influence-Impact Grid – forms a vital part of project management. It assists project managers in predicting stakeholder behaviors, understanding their interests, and strategizing appropriately to ensure project success. Candidates sitting for the PMP exam should have a good understanding and practical knowledge of these aspects to ensure project success in their professional roles.
Practice Test
True or False: In stakeholder analysis, stakeholders with high power and high interest should have minimal management attention.
- False
Answer: False
Explanation: In stakeholder analysis, stakeholders with high power and high interest should typically receive majority of management’s attention because they can significantly influence the project outcomes.
Which matrix visually displays the relationship between stakeholder’s level of authority and their level of concern regarding project outcomes?
- A) Power/Interest Grid
- B) SWOT Analysis
- C) TOWS Matrix
- D) PESTEL Analysis
Answer: A) Power/Interest Grid
Explanation: The Power/Interest Grid is a visual tool used in project management to identify and classify stakeholders based on their level of authority (power) and their level of concern (interest) about the project outcomes.
True or False: All stakeholders have equal influence over a project.
- False
Answer: False
Explanation: Not all stakeholders have equal influence over a project. Their power, interest, and involvement vary, which can significantly impact the project’s outcome.
Who are considered as external stakeholders in a project?
- A) Customers
- B) Competitors
- C) Suppliers
- D) All of the above
Answer: D) All of the above
Explanation: External stakeholders include individuals or groups outside the organization, such as customers, competitors, and suppliers, who are affected by or can affect the outcome of a project.
Which of these is NOT a good way to manage high power, low interest stakeholders?
- A) Keep them informed
- B) Keep them satisfied
- C) Manage closely
- D) Keep in consultation
Answer: C) Manage closely
Explanation: High power, low interest stakeholders should be kept satisfied, not managed closely.
True or False: Stakeholder analysis is generally conducted in the planning phase of the project lifecycle.
- True
Answer: True
Explanation: Stakeholder analysis is generally conducted in the planning phase of the project lifecycle to understand the needs, interests, and influences of various stakeholders.
Which of the following describes the ‘Manage Closely’ category in a Power/Interest grid?
- A) Low power, low interest stakeholders
- B) High power, high interest stakeholders
- C) Low power, high interest stakeholders
- D) High power, low interest stakeholders
Answer: B) High power, high interest stakeholders
Explanation: ‘Manage Closely’ category in a Power/Interest grid typically includes stakeholders with high power and high interest.
A Stakeholder Register is a project management tool that includes:
- A) Identification Information
- B) Assessment Information
- C) Stakeholder Classification
- D) All of the Above
Answer: D) All the Above
Explanation: A Stakeholder Register includes Identification Information, Assessment Information, and Stakeholder Classification which represents their power, influence, and interest in the project.
True or False: Power/Interest grid takes into account stakeholder’s legitimacy, urgency, and proximity.
- False
Answer: False
Explanation: Power/Interest grid mainly classifies the stakeholders based on their authority and interest level. Legitimacy, urgency, and proximity are considered in the stakeholder salience model.
In the context of stakeholder analysis in project management, power refers to:
- A) The stakeholder’s ability to influence the project outcome
- B) The level of interest a stakeholder has in the project
- C) The physical distance between the project site and the stakeholder
- D) Stakeholder’s levels of urgency regarding the project outcome
Answer: A) The stakeholder’s ability to influence the project outcome
Explanation: Power in this context refers to the authority or capability of the stakeholder to influence the project outcome or decisions.
True or False: Stakeholders’ interests and influences remain constant throughout the project.
- False
Answer: False
Explanation: Stakeholders’ interests and influences might not remain constant throughout the project, they can change based on the project phase, decisions, and external factors. Regular stakeholder analysis and monitoring helps in managing this dynamic aspect of stakeholders.
In stakeholder analysis, what does it mean to ‘monitor’ a group of stakeholders?
- A) Keeping them satisfied
- B) Limiting their involvement
- C) Regularly reviewing their interest and influence
- D) None of the above
Answer: C) Regularly reviewing their interest and influence
Explanation: In stakeholder analysis, to ‘monitor’ means to regularly review the interest and influence of stakeholders and adjust the management approach accordingly.
True or False: “Keep informed” strategy of stakeholder management should be used for high power, high interest stakeholders.
- False
Answer: False
Explanation: High power, high interest stakeholders should ideally be managed closely rather than just keeping them informed. Their influence can greatly impact the project outcome.
The stakeholder management strategy should be:
- A) Fixed at the beginning of the project
- B) The same for all stakeholders
- C) Dynamic and adjusted throughout the project
- D) None of the above
Answer: C) Dynamic and adjusted throughout the project
Explanation: The stakeholder management strategy needs to be dynamic as stakeholders’ interests, influence, and the project circumstances change over time.
True or False: The aim of stakeholder analysis is to identify stakeholders and their relationship with the project.
- True
Answer: True
Explanation: The aim of stakeholder analysis is indeed to identify stakeholders, understand their interests, influence, and their relationship with the project to manage them effectively.
Interview Questions
What is the power interest grid in stakeholder analysis?
The power interest grid is a visual tool utilized in stakeholder analysis. It helps in ranking and organizing stakeholders based on their power to affect the project and their interest in the project. This can assist in understanding who should be given priority in the communication plan.
How are stakeholders classified in the power interest grid?
Stakeholders are classified into four categories in the power interest grid: high power, high interest; high power, low interest; low power, high interest; low power, low interest. These classifications help the project management team to decide how to engage each stakeholder or stakeholder group effectively.
What does the influence of a stakeholder convey?
The influence of a stakeholder represents the extent to which the stakeholder can enforce his/her preferences over the decisions related to the project. High-influence stakeholders can significantly affect the project’s outcome and thus should be carefully managed.
What does a stakeholder’s impact signify in project management?
A stakeholder’s impact measures the degree of positive or negative effect a stakeholder can have on a project. The higher the potential impact, the more management attention the stakeholder or stakeholder group requires.
What is the main objective of stakeholder analysis?
Stakeholder analysis aims to identify all stakeholders involved in a project, understand their interests, expectations, and influence, and determine effective strategies to manage them. It helps prevent conflicts, improve communication, and ensure stakeholders’ concerns are addressed, contributing to the project’s success.
What does high power, high interest stakeholder mean?
High power, high interest stakeholders have a substantial influence on the project and a keen interest in the project’s outcome. They are usually key decision-makers and should be fully engaged in the project, as their support is critical for the project’s success.
How should project managers manage low interest, low power stakeholders?
Low interest, low power stakeholders have minimal influence and interest in the project. They require minimal management efforts. However, they should not be ignored because their interest and/or influence may increase during the project.
What is a Stakeholder Management Strategy?
A Stakeholder Management Strategy is a planned approach to effectively engage stakeholders in project decisions and execution based on their power, influence, interest, and impact. It aims at minimizing potential conflicts and maximizing stakeholders’ support for the project.
Why are stakeholders’ interests important to understand in project management?
Understanding stakeholders’ interests is crucial because it helps predict their reactions to project decisions or changes, identify potential risks, and plan effective communication strategies. It contributes to better stakeholder management and project success.
What role does effective stakeholder communication play in the stakeholder management strategy?
Effective stakeholder communication ensures that all stakeholders are informed about the project’s progress, changes, and issues. It helps manage their expectations, encourages their support and involvement, reduces resistance, and leads to more successful project outcomes.
How often should stakeholder analysis be performed during a project?
Stakeholder analysis should be performed throughout the project lifecycle. It’s not a one-time task because stakeholder’s power, interest, influence, and impact may change as the project progresses. Regular updates to the stakeholder analysis help maintain effective stakeholder engagement.
What tool is often used to visually represent stakeholder influence and impact?
Stakeholder influence and impact are often visually represented by a stakeholder mapping matrix. Stakeholders are placed on the matrix based on their level of influence and impact, helping project teams to prioritize their stakeholder management efforts.
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