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No doubt, stakeholders can impose risks on your contracting processes, but preventing them from becoming problematic is easier than you might think, especially if you use Dr. David Hillson’s robust and proven framework for dealing with risky stakeholders and follow his recommended strategies for managing them. It’s all about exploiting uncertainty to create value. Why stakeholders are risky?

A project stakeholder is any individual or group who is affected by the project, and who has an interest in the project’s success. Stakeholders are also usually able to influence whether or not the project succeeds, either positively or negatively. That’s why it’s really important to understand our stakeholders and engage with them proactively wherever possible. 

Perhaps the simplest way to define risk is “uncertainty that matters”. Risks are uncertain since they may or may not occur, and they matter because they affect achieving objectives if they do occur. If a risk is negative, then it is a threat, whereas a positive risk is an opportunity.

Without a doubt stakeholders matter, given their ability to affect the outcome of a business decision or project. And the behavior of stakeholders can be uncertain, since they are people or organizations subject to a wide range of motivations, cognitive biases, attitudes, and other influences. Consequently, stakeholders are “uncertainties that matter”. In other words, they could pose a risk to the successful achievement of objectives.1 And just like any other risk, stakeholders can present a threat to our project, making it harder to reach our goals, or they might offer an opportunity, helping us to deliver benefits and value. 

What do risky stakeholders look like?

Research from Securitas2 illustrates some of the ways in which stakeholders are risky including: 

  • making unreasonable obligations and identifying terms in the contract that do not properly fit a specific assignment of responsibility -- like unreasonable liability or pricing that favors only the seller, or hidden profitabilities; 
  • failing to identify all information needed for making proper decisions; 
  • ignoring requirements of regulatory agencies which could result in lower quality, higher costs, lost income, delays, penalties, fines or reputational damage; 
  • failing to handle IT failures, causing disruptions to operations which can affect accuracy and timeliness of reporting – which potentially damages business reputation; 
  • ignoring codes of ethics that can damage business reputation; 
  • mismanaging pricing or wage increases; and 
  • not carefully scrutinizing financial account balances and off balance-sheet items like good will, contract portfolios, deferred taxes.

Risk-based stakeholder analysis

If stakeholders are risky, we need to find a way of identifying and managing the risk they pose to our project. This starts with stakeholder analysis. Traditionally, CM practitioners have used a two-dimensional stakeholder analysis model that involves power and interest. A better model adds a third dimension -- attitude.  We can consider each of these three dimensions in the following ways: 

  1. Attitude is evaluated as positive/negative, or backer/blocker
  2. Interest is measured as high/low, or active/passive
  3. Power is assessed as high/low, or strong/weak


This analysis gives us eight types of risky stakeholders, as shown in Table 1.  

Table 1: Categorizing stakeholders (adapted from Hillson & Simon, 2012)3 

 

CHARACTERISTICS – what stakeholders look like and how to handle them

TYPE

ATTITUDE

INTEREST

POWER

DESCRIPTION

ADVOCATE

Positive

Active

Strong

Advocates are powerful, with a high interest level and a positive attitude. It is important to pay attention to these stakeholders, harnessing their support and doing whatever is necessary to keep it.

FRIEND

Positive

Active

Weak

Friends have low power, but high interest and positive attitude.  They can be used as a confidant or sounding board. We should maintain their support in case they gain additional power within the organization.

SLEEPING GIANT

Positive

Passive

Strong

Sleeping giants are powerful and supportive but display low levels of interest.  They need to be awakened to raise their commitment and maximize their positive input.

ACQUAINTANCE

Positive

Passive

Weak

Acquaintances are low-power, low-interest backers. They should be kept informed but need not be a top priority unless their levels of power or interest increase.

SABOTEUR

Negative

Active

Strong

Saboteurs are powerful with a high interest level, but they display a negative attitude. They must be actively engaged to prevent them from causing significant disruption. You should convert their attitude to be more supportive, so they can use their influence to benefit the business or project.

CHALLENGER

Negative

Active

Weak

Challengers are very interested but not supportive, although they have little power to influence things. Their negative attitude needs to be contained and countered where possible.

OPPONENT

Negative

Passive

Strong

Opponents are powerful but have low interest levels and a negative attitude should be understood so that potential damage can be minimized. Efforts should be made to transform their attitude to be more positive.

HINDRANCE

Negative

Passive

Weak

Hindrances are low-power, low-interest, negative-attitude stakeholders who are likely to hinder or hurt the project.  Their interaction with the business or project should be minimized as far as possible.

Table 1: Categorizing stakeholders (adapted from Hillson & Simon, 2012)3

We can use the three dimensions of this stakeholder analysis to assess how risky each stakeholder might be. First, we need to know whether a particular stakeholder poses a threat or offers an opportunity. Then we can discover how big a risk they are, by considering the probability that they might affect the project, and the potential size of any impact they might have on the project. 

Assessing and managing stakeholder risk

The attitude of each stakeholder determines whether they are a threat or an opportunity:

  • Negative attitude: those who might pose a threat by hindering successful delivery; and
  • Positive attitude: those who might provide opportunities to the business or project by assisting to achieve its objectives.

Stakeholder interest levels suggest how likely they are to try to influence the project:

  • Active interest: high probability of wanting to get involved; and
  • Passive interest: low probability that they will seek to affect the project.

The degree of stakeholder power indicates the size of any potential impact they might have on the project:

  • Strong power: high potential impact; and
  • Weak power: low potential impact.

Now that we’ve assessed the attitude, influence and power levels of each stakeholder, we can plot them on a typical Probability-Impact Matrix4, as shown in Figure 1. This shows stakeholders who are a threat (negative attitude) on the left-hand side, and stakeholders who are an opportunity (positive attitude) on the right. On each side, the position within the grid is then determined by their probability (interest level) and impact (power level).

Figure 1: Prioritizing risky stakeholders via Probability-Impact Matrix

The position of each stakeholder type within the matrix also suggests an appropriate risk response strategy:

Opportunity stakeholders

  • The positive strong support of Advocates should be exploited, by pursuing such stakeholders proactively and intentionally, seeking their support wherever possible. 
  • Friends should be engaged as far as possible to maximize their potential support. 
  • We should aim to raise the interest of Sleeping Giants to enhance their potential contribution to our success. 
  • Acquaintances should be monitored for possible changes, but they are not a priority for involvement. 

Threat stakeholders 

  • The involvement of Saboteurs in our project should be avoided where possible, to prevent significant disruption. 
  • For Challengers, it is wise to engage with them to counter and contain their potential negative impact. 
  • The potential threat posed by Opponents can be reduced by aiming to improve their attitude, through careful targeted communication. 
  • Hindrances should be monitored in case either their power or interest level changes. 

Influencing risky stakeholders

We now have a sense of which stakeholders pose a threat to the project, and which ones offer opportunities, by considering their attitude. We’ve also assessed the level of risk of each stakeholder, based on their levels of interest and power. And we’ve identified a response strategy that suits each type of stakeholder. 

But how can we implement our chosen response strategy and influence risky stakeholders, many of whom are not within our sphere of authority? 

Figure 2 offers a positive six A’s model for influencing risky stakeholders, based on an extension of standard emotional intelligence frameworks.  The six A’s are awareness, appreciation, assessment, assertion, action and assessment and all six are related as shown in Figure 2.

Figure 2: The Six A’s Model (adapted from Murray-Webster & Hillson, 2008)5

The Six A’s Model can be summarized as follows: 

  • Develop awareness of the position of stakeholders, considering their attitude, influence and power
  • Seek an appreciation of the drivers for these positions, including influences on their attitude, reasons for their interest, and sources of their power
  • Assess the level of risk associated with all stakeholders, including whether they are a threat or opportunity. Evaluate as well the probability of them affecting outcomes and the potential size of any impact. 
  • Where intervention is required, use assertion and action to exert the necessary influence. Select and implement an appropriate response strategy and make use of the sources of power available. 
  • If no active response is required, you can accept the current position. 
  • Whether or not a stakeholder’s position is accepted or addressed, the ongoing situation must be monitored and reassessed periodically to determine whether intervention may be required at a later time.

Practical tips and traps

Keep in mind the following when implementing this simple, risk-based framework: 

  1. Know your stakeholders. It is important for us to invest time and effort in identifying and understanding our stakeholders, given their ability to affect outcomes either positively or negatively. 
  1. Use your power. We should understand our own sources of power and learn how to leverage them effectively when engaging with stakeholders. 
  1. Develop emotional literacy. The ability to harness emotional literacy skills will enhance our effectiveness, especially when dealing with risky stakeholders. 
  1. Get help. We need to develop our own support network, including coaches and mentors, as well as use formal and on-the-job training, to ensure that we are well equipped for the challenge of risky stakeholders.

Avoid the following traps when considering risky stakeholders: 

  • Being complacent. It is easy to think that your business or project is immune from the influence of stakeholders, but it is not! 
  • Focusing on the negative. Some stakeholders pose a threat, and they should be addressed proactively. But we should not forget or overlook positive stakeholders who may offer opportunities that could assist us in achieving our objectives. 
  • Doing it only once. Stakeholders change over time, either through personnel changes, or with modifications to levels of attitude, influence and power. It is important to review the stakeholder analysis regularly. 
  • Analyzing without action. Understanding the risks posed by stakeholders must lead to appropriate response action, otherwise it is a waste of time. 

Separate positive stakeholders from negative, and know how to influence them

A risk is any uncertainty that could prevent you from achieving objectives. Some of the biggest risks in business or projects arise from stakeholders, and leaders and their teams need to be aware of these risky stakeholders and manage them proactively. As with all risks, there are both positive and negative stakeholders, and it is important to identify which ones offer opportunities, and identify where potential threats might lie, assess how significant those opportunities and threats might be – and then act appropriately. 


END NOTES

  1. Bourne, L. & Weaver, P. (2016). Managing stakeholder risk, in The Risk Management Handbook: A practical guide to managing the multiple dimensions of risk, D. A Hillson (ed.). London, UK: Kogan Page.
  2. Examples of risks and how they are managed – an online tool from Securitas for assessing key risks and how they can be mitigated.
  3. Table 1. Hillson, D. A., & Simon, P. W. (2012). Practical project risk management: The ATOM Methodology (second edition). Vienna, USA: Management Concepts.
  4. Project Management Institute. (2017) A Guide to the Project Management Body of Knowledge (PMBOK® Guide), Sixth Edition. Newtown Square, PA, USA: Project Management Institute.
  5. Murray-Webster, R., & Hillson, D. A. (2008). Managing group risk attitude. Aldershot, UK: Gower.

 

ABOUT THE AUTHOR

Dr. David Hillson is truly a global risk expert. In the past three decades he has worked with clients on every continent except Antarctica (too cold!), in 50 countries.  The concept of risk is universal, but David is highly aware of the importance of cultural differences in how risk is perceived and treated, and he is careful to respect each national culture wherever he works. David provides global risk expertise with a local flavor. 

Other articles published in Contracting Excellence Journal by David Hillson: 

The Risk Doctor Partnership provides specialist risk management consultancy from their global team of senior risk experts. The organization’s mission is to offer high-quality professional advice to clients across the world, combining leading-edge thinking with expert practical application, providing access to the latest developments in risk management best practice. Full details of the business are on our website www.risk-doctor.com.

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