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How Stakeholder Interaction and Engagement Impacts Project Complexity

By Dr. Leon Herszon
November 2, 2022

First published by CONNECT, International Centre for Complex Project Management

Stakeholder interaction and their engagement level is an important element of project success. In this article, we will address how relevant the different viewpoints and interests of project stakeholders can impact project complexity.

During the process of deciding the aim and main objective of my PhD research[1], an important element was to create a model that could support project managers, estimators and practitioners when dealing with project complexity. The process of researching the complexity factors (a.k.a. complexity dimensions) that impact projects, included literature review, survey, case studies analysis, and detailed interviews. The initial number of 23 dimensions was streamlined to the 15 most relevant dimensions – and Stakeholder Interaction was one of them.

Let’s start by the definition of stakeholder. PMI defines stakeholder as “an individual, group, or organization that may affect, be affected by, or perceive itself to be affected by a decision, activity, or outcome of a project, program, or portfolio” (PMI, 2016). In a recent conversation with Dr. Harold Kerzner about stakeholders, he noted that the first PMP exam only covered six knowledge areas, whereas risk, quality and stakeholders were not listed as separate areas. Later on, the Guide to the Project Management Body of Knowledge (PMBOK®) included risk and quality, but stakeholders were not included yet. Finally, stakeholder management was included as a separated knowledge area in PMBOK® Guide 5th edition.

Another important definition is related to complexity. I propose that complexity is a dynamic state that has an unknown outcome and an increased level of difficulty since one does not know if or how each part affects or is affected by the other(s). This last part is especially significant because complexity arises when we don’t understand how each element of the project can impact the others, or in our case here how each stakeholder interaction and engagement level can impact a specific element (or elements) of the project.

During the interview with professionals managing complex projects and experts in the field, stakeholder engagement was listed at the top 10 dimensions that can impact project complexity. Not a single interviewee was contrary to the relevance of stakeholders’ engagement and all of them emphasized how important the stakeholders’ interactions are for project success, and how a lack of understanding could lead to increased complexity and project failure.

According to T. Cooke-Davies, different stakeholders might have different and sometimes conflicting interests, motivations, and power levels. Their views of project success can also be different. In many cases powerful stakeholders have no direct participation or awareness of what is happening in the project.

Similarly, stakeholders might bring their own interests and insights to the project, which could increase cost and duration estimates significantly if they are not understood until the end of the project. We can also say that it is all about how certain one is of what must be done. A well-managed stakeholder interaction and open communication to understand stakeholder needs and expectations could address this challenge.

With the evolution of project management and increased complexity of projects, it became more common to have a committee involved on the necessary decisions about projects, since one person would probably not be able to make all decisions. This situation by itself adds complexity because it is harder to manage the relationship with several key stakeholders, each one with their own interests.  For that reason, more and more stakeholders must have at least a basic understanding of project management.

Supporting this view, H. Kerzner understands that today’s stakeholders must have not only a good understanding of the project and its requirement, but also about project management and how their decisions might impact the way that a project will be managed. At the beginning of a project, the project manager must ask all stakeholders two questions; (1) What decisions do you think you might or will have to make as a sponsor? and (2) What metrics or information would you like to see in the reports or dashboards to help you with these decisions? These two questions should be proposed to all stakeholders, both strong and weak or just observing stakeholders. By understanding the complexity of the project at the start, the stakeholders can determine the metrics they need to see.

Furthermore, when the number of participants, including stakeholders and governance personnel increases (whether internal or external), the greater the opportunity for complexity and delayed decision-making. It can go from a more stable situation where almost all the stakeholders are in agreement with the strategic business objectives, to most of them, and moving from significant disagreements between players on the direction of the project, to stakeholders having hidden agendas that might not be aligned with the project’s strategic business objectives. The key word is hidden agendas, which is associated with the very definition of complexity – you don’t know how one element can impact the others.

Another aspect to consider is the power of the stakeholder, as seen in Exhibit 1. Not all stakeholders have the same level of power and their influence on a project varies. For instance, some stakeholders might have the ability to utterly cancel a project, others might have the power to impact project funding, and some may even have the ability to change the project direction, and so on. We might also have a situation where a supporting stakeholder is replaced by a negative stakeholder, or a low-power stakeholder is being replaced by a powerful one.

Exhibit 1: Stakeholder Matrix (source: Adapted from Mendelow, A.L. (1981). ‘Environmental
Scanning – The Impact of the Stakeholder Concept’ ICIS 1981 Proceedings, 20)

When considering the estimation process, it can be argued that it is usually based on each deliverable or activity needed for a project, so if the project manager does not consider how a critical stakeholder can impact these deliverables, a higher level of complexity would occur. Not only how the stakeholder can influence an element of the project but also if the project manager misses to consider a stakeholder altogether, which obviously is not desirable. Some might think that the larger the project is, the more important stakeholder relationship management is, which is not necessarily accurate. It is not about the size of the project but how the stakeholder interactions and engagement levels (or lack thereof) impact the decision-making process of the project. In some cases, you might even have to consider external factors like cultural background, religious affiliation, or politics.

Additionally, there seems to be a correlation between stakeholder interaction and political influence, especially when there are conflicts and different interests.  According to Remington, Zolin, and Turner, the following situations with stakeholders’ interaction might increase the project complexity level. Examples include existence of multiple decision makers, customers, and suppliers; unrealistic expectations by senior stakeholders and clients; inappropriate senior level support; and changing requirements by stakeholders.

For instance, financial managers may focus their attention and priority on the budget, while technical managers may be concerned with deadlines and providing the best solution for the customer, which might require increasing the budget to overcome unexpected problems or take advantage of new opportunities.

As seen on Exhibit 2, my proposed project complexity model2, has stakeholder interaction divided into four levels of complexity:

Exhibit 2: Project Complexity Model (www.complexitymodel.com)

Level 1 – The key stakeholders are aligned with the project objectives and requirements. Their interaction is effective, and the high-level executives provide the necessary support for project success.

Level 2 – Most key stakeholders are aligned with the project objectives and requirements. Their interaction and engagement level are good, but sometimes there is some “noise”. Mostly the high-level executives provide the necessary support for project success.

Level 3 – Most of the key stakeholders are not aligned with the project objectives and requirements. Their interaction and engagement level are not effective, and many issues arise due to poor stakeholder interaction. There is very limited support from high-level executives.

Level 4 – The key stakeholders are not aligned with the project objectives and requirements, with common conflicts and re-work. Their interaction and engagement level are ineffective and there is no support from high-level executives to ensure project success.

When a project manager faces complexity levels 3 or 4 related to stakeholders’ interaction and engagement, it would be useful to have a list of recommended guidelines to be implemented with the objective to reduce the level of complexity related to this dimension. During a series of interviews with practitioners and experts, we received some initial guidelines that might be useful. Some practical recommendations are listed below:

– Communicate with the stakeholders to determine their expectations for the project. Also, try to determine if they have any hidden agendas that could impact the decisions you must make.  – Be aware that during the project life cycle, it is expected that stakeholders may change their expectations or new stakeholders may emerge with different agendas.

– Prepare a stakeholder influence map that shows the power and authority that certain stakeholders will have in regards to decision-making. Not all stakeholders are bystanders. Some stakeholders have significant influence in the direction of the project and may have the authority to cancel or redirect the activities.

– Map all the stakeholders to better understand them, maximize the positive ones (favorable to the project), influence the neutral ones to become positive, and neutralize the negative ones. Both the influential and non-influential stakeholders will require information for whatever decisions they must or prefer to make. They will need dashboard data periodically and you may need to develop a different dashboard for each stakeholder.

– Manage the interactions among stakeholders. The estimator should base the estimates on the information available, so it is recommended that close contact with the project manager be maintained to incorporate any necessary input.

– Everyone, including stakeholders, process and evaluate information differently. When providing information to stakeholders, whether in reports or on dashboards, meet with the stakeholders to ensure that they are properly interpreting the data the way is it being presented.

In summary, the more stakeholders you have with different viewpoints and conflicting interests, the higher the complexity of the project. When we add hidden agendas that are contrary to the project’s business objectives, it becomes potentially more complex. After asking project managers with experience managing complex projects, we could conclude that properly identifying the stakeholders, creating a proactive communication plan, managing stakeholders’ relations, and creating an engagement strategy are important actions to address this challenge (Exhibit 3).

Exhibit 3: Suggested actions to reduce complexity due to Stakeholders Interaction and Engagement

1. “The Complexity of Projects: An Adaptive Model to Incorporate Complexity Dimensions into the Cost Estimation Process” (Herszon, 2017)
2. https://www.complexitymodel.com

Disclaimer: The ideas, views, and opinions expressed in this article are those of the author and do not necessarily reflect the views of International Institute for Learning or any entities they represent.

Leon Herszon, Civil Engineer, Msc, PMP, is finishing his PhD studies and started his career at Shell managing HSE (Health, Safety, and Environment), Information Technology and strategic projects. He was invited by IIL to start operations in Brazil, and moved thereafter to the USA. Now he is based in NY acting as Senior Vice-President, managing global and strategic business. He also delivers presentations and training worldwide, including lectures at Rutgers Business School, and communicates in English, French, Portuguese, German, and Spanish.

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