Tag Archives: Stakeholders

PMIAUS13

PMI-13

The inaugural PMI Australia 2013 conference is over. To create the event, the PMI Australian Chapters collaborated to develop a platform for professionals, academics and community representatives to share knowledge and experience. For a first time and a new committee it was a great start and we look forward to the 2014 event.

Our contribution was a presentation: Communication ≠ Engagement that included the world’s first ‘mass verbal tweet’! Certainly social media and web technologies have made broadcast communication in the 21st century easier then ever, but communication does not equal engagement and the ‘verbal tweet’ proved this!

Project success requires the key stakeholders, including senior executives and the sponsor to be actively engaged in support of the project objectives. And achieving engagement requires mutuality, a robust relationship built on empathy and trust, plus credibility and leadership to bring different stakeholder viewpoints into alignment to assist the work of the project.

Effective communication is the tool that facilitates the building of relationships and engagement but this type of communication is focused, personal and two-way. As a consequence, the project team need to invest significant time and effort in these key communication channels. The challenge is identifying the right stakeholders and the right messages to communicate ‘at this point in time’.

You can download the presentation from: http://www.mosaicprojects.com.au/Resources_Papers_170.html

And read our blog on credibility at: http://mosaicprojects.wordpress.com/2013/04/27/credibility/

When our paper was originally submitted last year, I was expecting to be doing the presentation. However, in the interim I was accepted as a member of the International Faculty of the EAN University in Bogota, Colombia, presenting a Masters’ level course – Managing Project Teams. So I’m enjoying a few weeks in South America and the second author, Patrick Weaver enjoyed the hospitality of Sydney and presented the paper for us.

The BANANAs slip up

A UK Government Minster recently commented that the world was shifting from a bunch of NIMBYs to BANANAs!

HS2-banana

NIMBY = Not In My Back Yard (potentially selfish but understandable)

BANANA = Build Absolute Nothing Anywhere Now and Always

In the UK the journey from London to the Midlands is fraught – traffic is overcrowded for most of the 24 hours – one accident can cause hours of traffic chaos, conventional rail is overloaded and the distance is too short for effective air travel. The solution to this problem has been rolled out throughout the rest of Europe for several decades – high speed rail. Using the existing high speed rail you can get to Paris or Brussels easier than Birmingham or Leeds from the centre of London.

To fix the problem, the UK is planning its second high speed rail link from London to Birmingham and then on to Leeds and Manchester, called HS2. Since its announcement the BANANAs have been out in force – apparently it is better from the BANANA viewpoint to have highly inefficient, high pollution traffic jambs and build nothing rather than a clean and efficient alternative. The fact that the North of England is significantly disadvantaged compared to the better connected South is irrelevant. The emotional arguments about ‘damage’ caused by the development are immediate and compelling, the benefits arising from the operation of HS2 are in the future and so BANANAs can ignore them.

HS2-Map

Fortunately the UK High Court operates in a more pragmatic space. In its judgement earlier this month, the government won nine out of 10 points being challenged, which effectively gave the “green light” to the high-speed rail project. The judge agreed it was lawful for the Government to choose to rule out upgrading the existing network as a credible alternative to HS2. He noted that a patch and mend approach failed to meet the Government’s objectives of providing a long term boost to capacity and economic growth. He also found that the Government’s approach to consultation on the HS2 Phase One route, environmental assessment and consideration of the impact on habitats and protected species, had all been carried out fairly and lawfully.

The one point the judge upheld was a challenge concerning the way the property compensation consultation had been carried out. The Government has decided that instead of appealing this decision it will re-run this consultation in line with the judge’s finding to fairly compensate the public who are impacted by the scheme.

Contrast the problems in the UK and the Republican Party blocking a similar initiative in the overcrowded NE of the USA with China where current plans are for 16,000km of high speed rail to be operating by 2020, including the 9676km already built, in a determined effort to overcome congestion and pollution.

To quote the Boston Consulting Group: ‘China’s big infrastructure networks are platforms upon which new industries are layered greatly multiplying the economic value of the projects themselves’.

Australia has its fare share of BANANAs – there are 100s of tones of radioactive medical waste stored in expensive hospital buildings as well as radioactive industrial waste scattered throughout metropolitan areas because no government has had the courage to develop a safe storage facility. Every time one is proposed the BANANAs start screaming, but they also do not want to let cancer patients die or fly in unchecked aircraft (radio isotopes are used in the non-destructive testing of welds).

What the BANANAs forget is living is a compromise – every decision not to do something has a consequence and every decision to do something has a consequence. Careful consideration of the options and a balanced decision is needed based on the overall good for the environment and society (with proper compensation to those disadvantaged).

Doing nothing simply condemns everyone to progressively lower standards of living that will eventually lead to mass degradation of the environment because there is no money to look after it!

The advent of BANANAs supported by social media opens up a whole new set of stakeholder management challenges. NIMBYs were identifiable and had reasonable ground to expect consultation. BANANAs are far more widespread and work on emotions rather than common sense – for more on the tools for stakeholder management see: http://www.stakeholdermapping.com/

Lessons from a vineyard

We are at the end of a long lazy ‘members weekend’ enjoying the hospitality of our favourite local winery Pfeiffer’s of Rutherglen. Reflecting on the discussions around their range of fortified wines and the way modern business and projects are focused raises an interesting paradox.

When you are taught to drive fast, the key lesson is the faster you go, the further in front of the car you need to be ‘driving’. Quick reactions are not enough, you need to be planning and positioning the car now to be in the right place to two or three curves down the track.

Modern business is going faster and faster and pressures are on projects to complete quicker and better but unlike racing drivers, no one seems to be planning ahead – if there is a panic on the current project, everyone forgets about transiting staff onto the next project sensibly. Rather than optimising the overall outcome to benefit the business ‘down the track’, the short term focus outweighs the long term benefits and produces suboptimal results.

This destructive short term focus is encouraged because most business management and directors seem to concentrate on satisfying the demands of short term speculators rather than the needs of the organisations stakeholders. Commercial companies are driven by the needs of the high speed traders operating second by second, day traders and other short term speculators who are only focused on movements in the share price, not the long term health of the organisation and its ability to meet the needs of the majority of its stakeholders. Consequently, the daily and quarterly share price movements seem to mean more than long term plans future growth.

A classic example is the regular announcement by major corporations that they are sacking 100 or 200 staff. This creates an immediate boost in the share price and makes management look good to the short term speculators whilst destroying the organisations relationship with all of its staff. In reality, the monthly staff turnover is more than enough to make this type of adjustment in a smooth way that looks after the interests of this group of key stakeholders, the employees that actually do the work needed to allow the organisation to operate. But few managers seem to even ask what’s more important – share movements over the next couple of days or maintaining and enhancing the relationship with the organisation’s “most important asset”, its people??? Apparently the speculators win every time in the mind of management.

The situation is not much different in government organisations where the focus seems to be a combination of the 24 hour news cycle and short term personal advantage, a focus on ‘petty politics’ rather than long term policy and the good of the organisation. Different drivers but the same outcome, a prioritisation of immediate gratification over long term best outcomes.

But what has all of this got to do with fortified wines??

The simple fact is you cannot develop world class fortified wines in a generation. Pfeiffer’s are now into their 40th vintage and in the last three years have succeeded in rounding out their range of both Muscat and Topaque to include a good example of all four classifications of these wine types. The classifications below are defined by the characteristics of the wine, not by age, but in general terms:
The ‘Rutherglen’ classification is blended from wines that are on average 5 years old;
The ‘Classic’ classification is on average 12 to 13 years old;
The ‘Grand’ classification is on average 18 years old; and
The ‘Rare’ classification is on average 23 to 24 years old.

But the average age is misleading, all four classifications include some of the original blend created 30 or 40 years ago, that has been topped up and enhanced every year since. Obviously there is a far higher percentage of old wines in the ‘Rare’ compared to ‘Rutherglen’ classification but all of the wines have the same origins. In short, the characteristics of the current wine are based on decades of decisions ranging from how to manage the vines and the vineyard, how to develop each barrel of wine and what to add to the residual ‘base’ carried forward from last year to create each year’s release across all four classifications.

The decisions of 5, 10 and 30 years ago have an influence on the wines of today which puts a relatively new winery like Pfeiffer’s at a disadvantage when competing with some of their Rutherglen neighbours such as the Morris family who have stocks that have been developed over more than 100 years.

The current generation of winemakers do not see themselves so much as the ‘owners’ of the current stock of fortified wines, rather the custodians of a heritage that they hope will go on developing and improving for generations into the future. This is true of all types of blended fortified wines and is one of the reasons old world wine regions such as the Ports of Portugal and Sherries of Spain have characteristics that are hard to replicate in newer countries such as Australia that only have 100 to 150 years of development.

In many ways organisations are similar to a wineries stock of fortified wine. The current group of managers are the custodians of a complex set of capabilities, facilities and cultural beliefs, behaviours and relationships that have been created by the thousands of decisions and actions made by their predecessors and their decisions will create the organisation that will be passed onto their successors.

For example, a new ‘culture change’ initiative by current management does not start from a blank canvass, the outcome will inevitably be coloured by everything that has gone before that has created the current culture, and will inevitably influence everything that happens later. It is impossible to erase the past without erasing the organisation!

The paradox is that far too many managers seems to act as owners with a focus that extends days or months into the future and their directors look at reports focused on the past, whilst the organisation needs a focus that is long term and future focused to meet the needs of its stakeholders.

Perhaps a weekend at a winery that produces a world class range of fortified wines could pay real dividends…..

ISO 26000, CSR and Stakeholders

Numerous studies have consistently shown that organisations that support overt corporate social responsibility (CSR) activities, either by allowing staff to participate in voluntary work or by donating to charities, or 100s of similar options for giving back to the wider community do better than organisations that do not. It is an established fact that organisations that embrace CSR have a better bottom line and more sustained growth, however, what has not been clear from the various studies is why!

Two options regularly canvassed are:

  • Because the organisation is doing well for other reasons it has the capacity to donate some of the surplus it is generating to the wider community whereas organisations that are not doing so well need to conserve all of their resources. Factor in the effect of taxation and great PR is generated at a relatively low net cost.
  • Because the organisation does ‘CSR’ it enhances its reputation and as a consequence becomes a more desirable place to work and therefore attracts better staff at lower costs and is also seen as a better organisation to ‘do business with’ and therefore attracts better long term partners and customers again at a lower cost than other forms of ‘public relations’ and advertising.

Both of these factors have a degree of truth about them and frankly, if an organisation does not seek to maximise any competitive advantage its management are failing in their duties. However, this post is going to suggest these are welcome collateral benefits and the reason CSR is associated with high performance organisations lays much deeper.

We suggest that observable CSR is a measurable symptom of ‘good governance’. The Chartered Institute of Internal Auditors define governance in the following terms:
Governance is about direction, structure, process and control, it also is about the behaviour of the people who own and represent the organisation and the relationship that the organisation has with society. Key elements of good corporate governance therefore include honesty and integrity, transparency and openness, responsibility and accountability.

Consequently, a well governed organisation will generally have a good reputation in the wider community; this is the result of the organisation’s stakeholders giving that organisation credibility and loyalty, trusting that the organisation makes decisions with the good of all stakeholders in mind. It can be summarised as the existence of a: a general attitude towards the organisation reflecting people’s opinions as to whether it is substantially ‘good’ or ‘bad’. And this attitude is connected to and impacts on the behaviour of stakeholders towards the organisation which affects the cost of doing business and ultimately the organisation’s financial performance.

Therefore, if one accepts the concept that the primary purpose of an organisation of any type is to create sustainable value for its stakeholders and that a favourable reputation is a key contributor to the organisation’s ability to create sustainable value. The importance of having a ‘favourable reputation’ becomes apparent, the reputation affects stakeholder perceptions which influence the way they interact with the business – and a favourable reputation reduces the cost of ‘doing business’.

However, whilst a well governed organisation needs, and should seek to nurture this favourable reputation, it is not possible to generate a reputation directly. The organisation’s reputation is created and exists solely within the minds of its stakeholders.

As the diagram below suggests, what is needed and how it is created work in opposite directions!

Governance-Stakeholder-Reputation1

What the organisation needs is a ‘favourable reputation’ because this influences stakeholder perceptions which in turn improve the stakeholder’s interaction with the organisation, particularly as customers or suppliers which has a demonstrated benefit on the cost of doing business. But an organisation cannot arbitrarily decide what its reputation will be.

An organisation’s ‘real reputation’ is not a function of advertising, it is a function of the opinions held by thousands, if not millions of individual stakeholders fed by all of the diverse interactions, communications, social media comments and other exchanges stakeholders have with other stakeholders. Through this process of communication and reflection the perception of a reputation is developed and stored in each individual’s mind. No two perceptions are likely to be exactly the same, but a valuable ‘weight of opinion’ will emerge for any organisation over time. The relevant group of stakeholders important to the business will determine for themselves if the organisation is substantially ‘good’ or ‘bad’. And because the sheer number of stakeholder-to-stakeholder interactions once an opinion is generally ‘held’, it is very difficult to change.

The art of governance is firstly to determine the reputation the organisation is seeking to establish, and then to create the framework within which management decisions and actions will facilitate the organisation’s interaction with its wider stakeholder community, consistent with the organisations communicated objectives.

Authenticity is critical and ‘actions speak louder than words’ – it does not matter how elegant the company policy is regarding its intention to be the organisation of choice, for people to work at, sacking 500 people to protect profits tells everyone:

  1. The organisation places short term profits ahead of people.
  2. The organisations communications are not to be trusted.

The way a valuable reputation is created is through the various actions of the organisation and the way the organisation engages with its wider stakeholder community. Experiencing these interactions create perceptions in the minds of the affected stakeholders about the organisation. These perceptions are reinforced by stakeholder-to-stakeholder communication (consistency helps), and the aggregate ‘weight’ of these perceptions generates the reputation.

The role of CSR within this overall framework is probably less important that the surveys suggest. Most telecommunication companies spend significant amounts on CSR but also have highly complex contracts that frequently end up costing their users substantial sums. Most people if they feel ‘ripped off’ are going to weight their personal pain well ahead of any positives from an observed CSR contribution and tell their friends about their ‘bad’ perception.

However, as already demonstrated, actions really do speak louder than words – most of an organisation’s reputation will be based on the actual experiences of a wide range of stakeholders and what they tell other stakeholders about their experiences and interactions. Starting at Board level with governance policies that focus on all of the key stakeholder constituencies including suppliers, customers, employees and the wider community is a start. Then backing up the policy with effective employment, surveillance and assurance systems to ensure the organisation generally ‘does good’ and treats all of its stakeholders well and you are well on the way. Then from within this base, CSR will tend to emerge naturally and if managed properly becomes the ‘icing on the cake’.

In short, genuine and sustained CSR is a symptom of good governance and a caring organisation that is simply ‘good to do business with’.

Unfortunately, the current focus on CSR will undoubtedly tempt organisations to treat CSR as just another form of advertising expenditure and if enough money is invested it may have a short term effect on the organisation’s reputation – but if it’s not genuine it won’t last.

One resource to help organisations start on the road to a sustainable culture of CSR is ISO 26000: 2010 – Social responsibility.  The Standard helps clarify what social responsibility is, helps businesses and organisations translate principles into effective actions and shares best practices relating to social responsibility. This is achieved by providing guidance on how businesses and organisations can operate in a socially responsible way which is defined as acting in an ethical and transparent way that contributes to the health and welfare of society. Figure 1 provides an overview of ISO 26000.

Interestingly, my view that understanding who the organisation’s stakeholders really are and engaging with them effectively is the key to success, is also seen as crucial by the standard developers! For more on stakeholder mapping see: http://www.stakeholdermapping.com

Conclusion

This has grown into a rather long post! But the message is simple: Effective CSR is a welcome symptom of an organisation that understands, and cares about its stakeholders and this type of organisation tends to be more successful than those that don’t!

PMBOK #5 Boosts Stakeholder Management

PMI_PMBOK5The publication of the PMBOK® Guide 5th Edition is a major boost for stakeholder management. The introduction of Chapter 13, Project Stakeholder Management as a distinct knowledge area raises the importance of engaging stakeholders to the same level as all other PM ‘knowledge areas’. Ideally the new section would have been placed next to the closely aligned process of communication management but this is not to be – the PMBOK is expanded by adding new chapters to the end.

The four processes follow the familiar PMBOK pattern with a few differences. They are:

  • 13.1 Identify Stakeholders – identifying everyone affected by the work or its outcomes.
  • 13.2 Plan Stakeholder Management – deciding how you will engage with the stakeholders.
  • 13.3 Manage Stakeholder Engagement – communicating with stakeholders and fostering appropriate stakeholder engagement
  • 13.4 Control Stakeholder Engagement – monitoring the overall relationships and adjusting your strategies and plans as needed.

The 5 stages of our Stakeholder Circle’ methodology are embedded within these processes; the key steps in theStakeholder Circle’ are:

  1. Identify – the primary purpose of 13.1 with very similar objectives.
  2. Prioritize – This is mentioned in 13.1 (Identification) without any real assistance on an effective approach to this important task. The PMBOK recognises most projects are going to be resource constrained and should focus its engagement activities on the important stakeholders but that’s all – options to calculate a meaningful prioritisation is missing. See more on prioritisation.
  3. Visualize – This is also included in 13.1 (Identification) based on a simple 2 x 2 matrix. A number of options are listed including power/interest, power/influence, and the influence/impact grids. The Salience model developed by Mitchell, Agle, and Wood 1997 is also mentioned without attribution. In reality to properly understand your stakeholders you need to understand significantly more than two simple aspects of a relationship. The Stakeholder Circle’ diagram was adapted from the Salience model to help teams really appreciate who matters and why. This will be the subject of another post in a couple of day’s time.
  4. Engage – the primary purpose of 13.2 (Plan engagement) and 13.3 (Implementing the communication plan). Separating planning and implementation is a good idea. The planning process uses an engagement matrix similar to the tool built into the Stakeholder Circle’ – However, whilst the PMBOK looks at the attitude of each stakeholder (both current and desired) it omits the key consideration of how receptive the stakeholder is likely to be to project communication. If the stakeholder does not want to communicate with you the challenge of changing his/her attitude is a whole lot harder and the missing priority level lets you know how important this is.
  5. Monitor and Review – whilst this is the focus of 13.4, the assumption of review and adjustment is a statusing process. Our experience suggests the dynamic nature of a stakeholder community requires the whole cycle starting with the identification of new and changed stakeholders to be repeated at regular intervals of 3 or 6 months (or at major phase changes).

Conclusion.

As mentioned at the beginning, the introduction of a separate knowledge area for stakeholder management is a huge advance and should contribute to improving the successful delivery of projects – PMI are to be congratulated on taking this step!

However, unlike most other areas of the PMBOK, the processes outlined in this 5th Edition are likely to be less than adequate for major projects. As soon as there are more than 20 or 30 stakeholders to assess and manage, the tools described in this version will be shown to be inadequate and more sophisticated methodologies will be needed.

Note:
Stocks of the PMBOK® Guide 5th Edition are now in the shops:
Internationally: http://marketplace.pmi.org/Pages/Default.aspx
Australia: http://www.mosaicprojects.com.au/PMP-Pack-LP.html

For other posts on the new PMBOK 5th Edition see: http://mosaicprojects.wordpress.com/category/training/pmbok5/

The Stakeholder Mutuality Matrix

Whilst the stakeholder community for any project or program can be a very diverse group of people and organisations, there is a key sub-set that either require goods, services or other outputs from the project, or have to supply resources, services or support to the project. These ‘logistical’ relationships need careful management as they directly affect the project’s ability to achieve its defined goals.

Altruism and charitable actions are wonderful, but it is dangerous to base the success of your project on the assumption that all of your ‘logistical’ stakeholders are automatically going to be altruistic and generous. The Stakeholder Mutuality Matrix™ described in this post provides a pragmatic framework to help craft communications and build relationships with the stakeholders that matter from a logistics management perspective, within the project’s overall stakeholder management framework.

Understanding your Stakeholder Community

Project communication takes time and effort, both of which are in limited supply. Therefore, most of your communication effort needs to be focused on stakeholders that are important to the success of your project. This requires answering two key questions about each stakeholder:
1. Who are the most important stakeholders at this point in time?
2. Why are they important?

Understanding who is important is fairly straightforward, based on an assessment of the stakeholder’s power and involvement in the project. The Stakeholder Circle® uses a combination of power, proximity and urgency to define the most impotent stakeholders. The amount of power held by a stakeholder and their degree of involvement with the work of the project (proximity) are fairly static. Urgency, defined as a combination of the value of the stakeholders ‘stake’ in the project and the degree of effort they are likely to use to protect that ‘stake’ changes significantly and can be influenced by the effectiveness of the project’s communications and the strength of the relationships between the project team and the stakeholder. (See more on prioritising stakeholders).

Whist this process is highly effective at defining who the most important stakeholders are ‘at this point in time’, from a logistics perspective there is a second important group that also needs attention. Care needs to be taken to ensure that lower priority stakeholders who have to provide the support and resources needed for the project’s work are not overlooked in the communication framework. Effective ‘preventative’ communication can keep this group of logistically important stakeholders happy and low on the priority listing, whereas failing to communicate effectively can lead to problems and the person rapidly moving up the prioritisation listing.

Using the Stakeholder Mutuality Matrix

Once you know who is important either from a logistical or prioritisation perspective, you also need to understand why each of these stakeholders is important to define the type of relationship you need to develop and plan your communication accordingly.

The Stakeholder Mutuality Matrix™ provides a useful framework to help in this part of your communication planning. The matrix has two primary dimensions:

  • Each stakeholder will either need something from the project to further their interests or alternatively need nothing from the project.
  • Similarly the project either needs the active support of the important stakeholders, usually in the form of assistance or resources; or alternatively requires nothing from the stakeholder.

Stakeholder Mutuality Matrix

The result is four quadrants that provide a framework for communication and within the framework each stakeholder will also be either supportive or negative towards the project (for more on supportiveness see the SHC Engagement Matrix).

All high priority stakeholders need to be considered plus any low priority stakeholders that have to supply goods, services or support to the project.

  • Project needs nothing / stakeholder needs nothing: Important stakeholders in this quadrant are almost invariably ‘protestors’ or ‘objectors’ attempting to block or change the project. Occasionally very powerful and interested stakeholders have no requirements of the project.
    • Approach for positive stakeholders: Keep informed and engaged.
    • Approach for negative stakeholders: There are two communication options:
      - You may be able to defuse the ‘protests’ by providing better information, but this only works if the protest is based on false assumptions.
      - The alternative is to choose not to communicate with the stakeholder beyond some necessary minimum.
      - The only other alternative is to change the project to remove the cause of objection but this is rarely within the authority of the project team.
  • Project needs nothing / stakeholder needs something: These stakeholders are the easiest to manage from a logistical perspective; providing their requirements are part of the projects deliverables. If their requirements are outside of the project’s scope the stakeholder needs to initiate a change request.
    • Approach for positive stakeholders: All that is needed is regular reassurance that their needs will be fulfilled.
    • Approach for negative stakeholders: Provide information to clearly demonstrate your deliverables to them will be beneficial and are aligned with their core interests. These stakeholders are typically an organisational change management challenge.
  • Project needs something / stakeholder needs something: This group needs active management. Project communication needs to clearly link the provision of the required support or resources by the stakeholder to the project being able to fulfil the stakeholder’s requirements. Time needs to be spent developing robust relationships to facilitate an effective partnership that supports both parties interest.
    • Approach for positive stakeholders: A strong relationship is important to ensure a good understanding of both parties’ requirements. Including clearly defined information on what you need from them and when it’s required, linked to reassurance that their needs will be fulfilled.
    • Approach for negative stakeholders: Significant effort is required to change the dynamic of the relationship. You need their support and they need to understand that this is in their best interest if their needs are going to be fulfilled.
    • Approach for low priority stakeholders: All that is usually needed is clearly defined information on what you need from them and when it’s required, linked to reassurance that their needs will be fulfilled.
  • Project needs something / stakeholder needs nothing: This group are your major risk; it typically consists of regulatory authorities and others who have to inspect or approve the project’s work as part of their normal business. Care is needed to build a proper ‘professional’ relationship that respects the integrity of the stakeholder’s position whilst at the same time ensuring your communications are received and acted upon.
    • Approach for positive stakeholders: A good relationship is helpful; however, the key requirement is clearly defined information on what you need from them, when it’s required and why their input is important to the project.
    • Approach for negative stakeholders: Significant effort is required to change the dynamic of the relationship. They are important to you, but you are not important to them and have very little to ‘trade’. To change their attitude, you need to understand the source of the negativity and use any available option to build rapport either directly or through other supportive managers, or by appealing to some greater good.
    • Approach for low priority stakeholders: Ensure clearly defined information on what you need from them, when it’s required and why their input is important to the project is provided in adequate time to allow the stakeholder to do its work.

Once you understand the mutuality matrix, the way you communicate with each of the important stakeholders can be adjusted to ensure both parties in the communication achieve a satisfactory outcome.

Communication!

The recently released Sixth edition of the APM-BoK consists of four major sections: context, people, delivery and interfaces. Typical ‘hard’ project management processes such as scope, schedule, cost, resource, risk, integration and quality comes in the section focused on delivery. This is after the section concerned with people and interpersonal skills and the first area featured in the APM-BOK under the people area is communication. The APM-BoK recognises that communication is fundamental to the project management environment, and makes a very powerful statement: “None of the tools and techniques described in this body of knowledge will work without effective communication”.

To an extent the PMBOK is playing ‘catch-up’ with other key standards including the Association of Project Management (UK) Body of Knowledge (APM-BoK) 6th Edition and ISO 21500. The good news is all three standards now see identifying the important stakeholders in and around a project or program and then communicating effectively with each stakeholder as the fundamental driver of success.

The recently released Sixth edition of the APM-BoK consists of four major sections: context, people, delivery and interfaces. Typical ‘hard’ project management processes such as scope, schedule, cost, resource, risk, integration and quality comes in the section focused on delivery. This is after the section concerned with people and interpersonal skills and the first area featured in the APM-BOK under the people area is communication. The APM-BoK recognises that communication is fundamental to the project management environment, and makes a very powerful statement: “None of the tools and techniques described in this body of knowledge will work without effective communication”.

The PMBOK® Guide 5th Edition has followed PMI’s standard practice of retaining existing chapters and adding new sections at the back so the positional prominence in the APM-BoK is not possible. However understanding the changes between the 4th and 5th Editions and comparing these to ISO 21500 does show the extent of the increased focus in the PMBOK on communication and the stakeholders you communicate with.

MANAGE STAKEHOLDERS

This is a new section in the PMBOK® Guide 5th Edition (Chapter 13). It is based on two processes moved from the communication section of the 4th edition and has been expanded.

Identify stakeholders is a beefed up version of the same process in the 4th Edition, focused on understanding who the project’s stakeholders are.

Plan Stakeholder Management is a new process that describes how the stakeholder community will be are analysed, the current and desired levels of engagement defined and the interrelationships between stakeholders identified. It highlights the fact that levels of engagement may change over time.

Manage stakeholders remains basically the same as in the 4th Edition and is similarly defined in ISO 21500.

Control Stakeholder Management is a new process that ensures new stakeholders are identified, current stakeholders are reassessed and stakeholders no longer involved in the project are removed from the communication plan. The process requires the on-going monitoring of changes in stakeholder relationships the effectiveness of the engagement strategy, and when required, the adaption of the stakeholder management strategy to deal with the changed circumstances.

As with ISO 21500, the early parts of the PMBOK discussing the management or projects in organisations also has a strong emphasis on stakeholders (Chapters 1, 2 and 3).

COMMUNICATIONS MANAGEMENT

This section of the PMBOK® Guide 5th Edition has been consolidated and expanded and is very similar to ISO 21500 in its effect.

Plan Communications remains basically unchanged, the key input is the stakeholder analysis.

Manage Communications is a new process that amalgamate the 4th Edition processes of Distribute Information and Report Performance, and in doing so removes a lot of unnecessary confusion. This new process goes beyond the distribution of relevant information and seeks to ensure that the information being communicated to project stakeholders has been received and understood, and also provides opportunities for stakeholders to make further information requests. ISO 21500 has an interesting additional function (not in the PMBOK) which is the management of the distribution of information from stakeholders to the project in order to provide inputs to other processes such as risk management.

Control Communications is a new process that identifies and resolves communications issues, and ensures communication needs are satisfied. The outputs are accurate and timely information (resolved communications issues) and change requests, primarily to the communication plan.

Summary

Communication is the means by which information or instructions are exchanged! Communication is the underpinning skill needed to gather the information needed to make project decisions and to disseminate the results from all of the traditional ‘hard skills’ including cost, time, scope, quality and risk management. Good communication makes these processes effective, whereas poor communication leads to misunderstood requirements, unclear goals, the alienation of stakeholders, ineffective plans and many other factors leading to failure.

The common theme across all three standards is that communicating the right information to the right stakeholders in the right way (and remembering communication is a two-way process) is fundamental to success. The basic requirement is to deal effectively and fairly with people, their needs, expectations, wants, preferences and ultimately their values – projects are done by people for people and the only way to influence people is through effective communication.

Project communication skills include expectation management, building trust, gaining user acceptance, stakeholder and relationship management, influencing, negotiation, conflict resolution, delegation, and escalation.

What’s really pleasing to me is how similar these ‘standard’ requirements are to the ideas embedded in my Stakeholder Circle®methodology, books, blogs, White Papers and tools. I have no idea how much influence my writings have had on the various standards development teams but it is pleasing to see a very common set of ‘best practices’ emerging around the world. Now all we need is the management will to implement the processes to improve project and program outcomes.

Thoughts on communication

There have been a couple of ‘stories’ in the Australian media of late that suggest a fundamental change in the communication landscape is emerging. One is the ongoing furore around a comment in very bad taste made by radio presenter Alan Jones at a private function organised by a political party, the other concerns perceptions about one of our political leaders. For the purpose of this post, the facts of the two situations are less important than the trends they suggest are emerging.

The Australian government does not try to moderate good taste and within sensible limits around defamation, incitement and vilification we enjoy the privilege of freedom of speech which I believe is critically important; therefore:

Alan Jones has a right to exhibit bad taste and make his comment and the 1000s of other people who are using social media to express their objection to the comment have an equal right to ‘free speech’ and the whinging from the 2GB management (Jones’ radio station) about the effect of the social media campaign on their advertises is also ‘free speech’.

Having said that, what I believe is really interesting is the shift in power that is evident. As a high profile radio presenter, Jones used to have almost complete power, he controlled the microphone, could rubbish detractors on air and cut off their response. That power still remains but has been circumvented by social media; a sustained campaign by the ‘twittering classes’ has cost 2GB hundreds of thousands of dollars in cancelled advertising – a new paradigm for directors and managers to deal with.

In a similar vein, the ongoing ‘noise’ around opposition leader Tony Abbot’s attitude to women will be interesting to watch through to a conclusion, if one is ever reached……

But even at this early stage there are a number of observations that are likely to become increasingly important in an effective stakeholder engagement and communication model for any entity; both individuals and organisations.

  1. Negativity is becoming a very dangerous weapon to deploy. American politicians of all persuasions have been running negative advertising about politicians of the other persuasion for many years. The negative advertising has worked, the America public consistently place politicians at the very bottom of any list based on ethics, trust, etc. Used car salesmen and journalists are preferred to politicians and the situation is not much different in Australia. If you start using negativity, the power of social media to spread the negativity almost guarantees it will come back to damage the initiator. In the connected age, negativity is rapidly becoming a WSD (of similar power to a WMD but read ‘weapon of self destruction’).
  2. Perceptions are easily created and hard to dispel or change. I have no idea how Tony Abbot actually works with women, but a negative perception has emerged. Perceptions are frequently wrong, but they are based on what people believe they saw or heard. Consequently this type of social perception cannot be changed by people with a vested interest telling others they are wrong, to quote Margaret Thatcher “Power is like being a lady… if you have to tell people you are, you aren’t” – the same applies to perceptions. Perceptions can be managed but they are built over time and have to be changed over time and this can only be achieved with a sustained change in observed behaviour – words are not going to do anything.
  3. There seems to be an emerging disconnect between perceptions and emotions and reality. This was the focus of my blog post Credit, Trust and Emotions. What’s not mentioned in the blog, but is in the RBA report, is that non-mining business investment has been increasing rapidly despite the flat business sentiment. The real economic situation and actual investment levels are aligned, but the business sentiment is failing to recognise business reality.

Managing a corporate image, your project’s image within the organisation or your personal image is certainly getting to be a whole lot harder. What I’m wondering based on the above is, are we starting to see a real shift from positional power, supported by negativity and traditional advertising to something more subtle, distributed and potentially positive, and if so how can this be effectively managed?

Productivity decline should generate more projects

Projects and programs are the key organisational change agents for creating the capability to improve productivity through new systems, processes and facilities. But only if sensible projects are started for the right reason.

Declines in productivity seem to be widespread. In Australia, labour productivity in the market sectors of the economy increased at 2.8% per annum between 1945 and 2001, reducing by 50% to an annual rate of 1.4% between 2001 and 2001.

  • The measure of Labour Productivity is the gross value added per hour of work.
  • The ‘market sectors’ measured exclude public administration, education and healthcare where measurement is almost impossible.

Some of this change can be attributed to macro economic factors, there were massive efficiency gains derived from the shift from paper based ‘mail’ and copy typist to the electronic distribution of information, improved global transport systems (particularly containerisation) and the restructuring of manufacturing post WW2. These massive changes in the last half of the 20th century are not being replicated in current.

Whilst this decline in the rate of improvement in labour productivity is significant, the capital inclusive index is a more telling statistic. The multi-factor productivity index which includes the capital invested in production, giving a purer measure of the efficiency with which labour and capital are combined to produce goods and services. In the six years leading up to 2001, this measure of productivity grew by an average of 1.5% per annum, in the decade between 2001 and 2011 this reversed and productivity fell by 0.4% per annum.

Around 40% of the decline in the last decade can be explained by massive investments in mining and utilities that have yet to generate a return on the capital invested. The other 60% represents the massive cost of ‘new capabilities’ in general business for relatively small, or no improvement in productivity.

One has only to look at the ever increasing number of ‘bells and whistles’ built into software systems ranging from high definition colour screens to features that are never used (and the cost of upgrading to the ‘new system’) to understand the problem. 90% of the efficiency gain came with the introduction of the new system many years ago, the on-going maintenance and upgrade costs often equal the original investment but without the corresponding improvement in productivity. Another area of ‘investment’ for 0% increase in productivity is compliance regimes. Whilst there may be good social arguments for many of these requirements, the infrastructure and systems needed to comply with the regulations consume capital and labour without increasing productivity.

In Australia general management have been rather slow to appreciate the challenge of declining productivity, the impact being cushioned by a range of other factors that helped drive profitability. But this has changed significantly in the last year or so. There is now an emerging recognition that productivity enhancing organisational change is an imperative; and smart management recognise this cannot be achieved through capability limiting cost reductions.

Organisations that thrive in the next decade will:

  • Enhance customer satisfaction and service,
  • Enhance their engagement with their workforce, the community and other stakeholders,
  • Enhance their products and capabilities, and
  • Improve their labour productivity.

Achieving a viable balance across all four areas will require an effective, balanced strategy supported by the efficient implementation of the strategic intent through effective portfolio, program and project management capabilities that encompass benefits realisation and value creation.

The three key capabilities needed to achieve this are:

  • The ability to develop a meaningful and practical strategic plan.
  • An effective Project Delivery Capability (PDC); see: WP1079_PDC.
  • An effective Organisational Change Management Capability; see: WP1078_Change_Management.

Improving productivity is a major challenge for both general management and the project management community; and the contribution of stakeholder management and project management to the overall effort will continue to be a focus for this blog.

The value of stakeholder management

One of the questions I’m regularly asked is to outline the business case for using stakeholder management in a business or project. This is a difficult question to answer accurately because no-one measures the cost of problems that don’t occur and very few organisations measure the cost of failure.

The problem is not unique; it is very difficult to value the benefits of an effective PMO, of improving project delivery methods (eg, improving the skills of your schedulers), of investing in effective communication (the focus of my September column in PMI’s PM Network magazine) or of better managing risk. The costs of investing in the improvement are easily defined, but the pay-back is far more difficult to measure.

There are two reasons why investing in effective stakeholder analytics is likely to deliver a valuable return on investment (ROI).

  • The first is by knowing who the important stakeholders are at any point in time, the expenditure on other processes such as communication can be focused where it is needed most, generating efficiencies and a ‘bigger bang for your buck’.
  • The second is stakeholders are a major factor in the risk profile of the work, their attitudes and actions can have significant positive or negative consequences and understanding the overall community provides valuable input to a range of processes including risk identification, requirements definition and schedule management.

At the most fundamental level, improving the management of stakeholders is directly linked to improving the quality of the organisation’s interaction with the stakeholders and as a consequence, the quality of the goods or services delivered to the end users or client (ie, stakeholders) as a result of being better informed whilst undertaking the work.

Quality was defined by Joseph Juran as fit for purpose, this elegant definition applies equally to the quality of your management processes as it does to your production processes and to the deliverables produced. And the three elements are interlinked; you need good management systems and information to allow an effective production system to create quality outputs for delivery to the client. A failure at any point in the chain will result in a quality failure and the production on deliverables that do not meet client requirements.

Placing stakeholder management within the context of quality allows access to some reasonably well researched data that can be interpolated to provide a reasonable basis for assessing the ‘return’ likely to be generated from an investment in stakeholder management.

Philip B. Crosby invented the concept of the ‘cost of quality’ and his book, Quality Is Free set out four major principles:

  1. the definition of quality is conformance to requirements (requirements meaning both the product and the customer’s requirements)
  2. the system of quality is prevention
  3. the performance standard is zero defects (relative to requirements)
  4. the measurement of quality is the price of nonconformance

His belief was that an organization that established a quality program will see savings returns that more than pay off the cost of the quality program: “quality is free”. The challenge is knowing you fully understand who the ‘customers’ actually are, and precisely what their various requirements and expectations are, and having ways to manage mutually exclusive or conflicting expectations. Knowing ‘who’s who and who’s important’ is a critical first step.

Feigenbaum’s categorization of the cost of quality has two main components; the cost of conformance (to achieve ‘good’ quality) and the cost of poor quality (or the cost of non-conformance).

Derived from: Feigenbaum, Armand V. (1991), Total Quality Control (3 ed.), New York, New York: McGraw-Hill, p. 109, ISBN 978-0-07-112612-0.

The cost of achieving the required level of quality is the investment made in the prevention of non-conformance to requirements plus the cost of testing and inspections to be comfortable the required quality levels have been achieved.

The cost of poor quality resulting from failing to meet requirements has both internal and external components. The internal costs are associated with defects, rework and lost opportunities caused by tying people up on rectification work. External failure costs can be much higher with major damage to an organisation’s brand and image as well as the direct costs associated with fixing the quality failure.

The management challenge is balancing the investment in quality against the cost of quality failure to hit the ‘sweet spot’ where your investment is sufficient to achieve the required quality level to be fit for purpose; overkill is wasted $$$$. But first you and ‘right stakeholders’ need to agree on precisely what fit for purpose actually means.

Also, the level of investment needed to achieve the optimum cost of quality is not fixed. The better the organisation’s quality systems, the lower the net cost. Six sigma proponents have assessed the total cost of quality as a percentage of sales based on the organisations sigma rating.

This table demonstrates that as the quality capability of the organisation improves, the overall cost of quality reduces offering a major competitive advantage to higher rating organisations. Most organisations are rated at 3 Sigma so the opportunity for improvement is significant.

Within this overall framework, the costs and risks associated with poor stakeholder engagement are significant and follow the typical pattern where most of the costs of poor quality are hidden. Using the quality ‘iceberg metaphor’ some of the consequences of poor stakeholder engagement and communication are set out below:

Effective stakeholder analysis and management directly contributes to achieving the required quality levels for the organisation’s outputs to be fit for purpose whilst at the same time reducing the overall expenditure on the cost of quality needed to achieve this objective. The key components are:

  • Effective analysis of the stakeholder community will help you identify and understand all of the key stakeholders that need to be consulted to determine the relevant aspects of fit for purpose.
  • Understanding the structure of your stakeholder community facilitates the implementation of an effective two-way communication strategy to fully understand and manage the expectations of key stakeholders.
  • Effective communication builds trust and understanding within a robust relationship.
    o Trust reduces the cost of doing business.
    o Understanding the full set of requirements needed for the work to be successful reduces the risk of failure.
    o Robust relationships with key stakeholders also contribute to more effective problem solving and issue management.
  • Maintaining the stakeholder engagement effort generates enhanced information that will mitigate risks and issues across all aspects of the work.

Calculating the Return on Investment:

Effective stakeholder management is a facilitating process that reduces the cost, and increases the efficiency of an organisations quality and risk management processes. Based on observations of similar process improvement initiatives such as CMMI, the reduction in the cost of quality facilitated by improved stakeholder engagement and management is likely to be in the order of 10% to 20%.

Based on the typical ‘Level 3’ organisation outlined above, a conservative estimate of the efficiency dividend per $1million in sales is likely to be:

Total cost of quality = $1,000,000 x 25% = $250,000
Efficiency dividend = $250,000 x 10% = $25,000 per $1 million in sales.

Given the basic costs of establishing an effective stakeholder management system for a $5million business, using the Stakeholder Circle®, (See: http://www.stakeholder-management.com) including software and training will be between $30,000 and $50,000 the efficiency dividend will be:

($25,000 x 5) – 50,000 = $75,000
(or more depending on the actual costs and savings).

The element not included above is the staff costs associated firstly with maintaining the ‘culture change’ associated with introducing an effective stakeholder engagement process and secondly with actually performing the stakeholder analysis and engagement. These costs are embedded in the cost of quality already being outlaid by the organisation and are inversely proportional to the effectiveness of the current situation:

  • If current expenditures on stakeholder engagement are relatively low, the additional costs of engagement will be relatively high, but the payback in reduced failures and unexpected risk events will be greater. The overall ROI is likely to be significant.
  • If the current expenditures on stakeholder engagement are relatively high, the additional costs will be minimal (implementing a systemic approach may even save costs), however, the payback in reduced failure costs will be lower because many of the more obvious issues and opportunities are likely to have been identified under the current processes. The directly measurable ROI will be lower, offset by the other benefits of moving towards a higher ‘Sigma level’.

Conclusion:

The introduction of an effective stakeholder management system is likely to generate a significant ROI for most organisations. The larger part of the ‘return’ being a reduction in the hidden costs associated with poor stakeholder engagement. These costs affect reputation and future business opportunities to a far greater extent than their direct costs on current work. For this reason, we feel implementing a system such as the Stakeholder Circle is best undertaken as a strategic organisational initiative rather than on an ad hoc project or individual workplace basis.

The path to organisational Stakeholder Relationship Management Maturity (SRMM®) is discussed at: http://www.stakeholdermapping.com/srmm-maturity-model