Stakeholder perspective in project management - Massimo Pirozzi

Stakeholder Perspective in Project
Management: the effective innovativeness
of people centrality
How effective stakeholder relations management can support value
generation to increase the success rate of complex projects
Roma, October 26th, 2018
Speaker:
Massimo Pirozzi
M. Sc., Eur-Ing

The Agenda
• Foreword: expectations and requirements
• Stakeholder, who is he?
• Project Stakeholders, who are they?
• The recent centrality of stakeholders in Project Management
• The stakeholder perspective: project objectives & goals
• Projects and complexity
• Managing value to target success in complex projects
• Key Performance Indicators for measured and perceived value
• The effective innovation of people centrality
Stakeholder Perspective in Project Management: the effective
innovativeness of people centrality - Massimo Pirozzi
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Foreword: Requirements & Expectations
✓ Organizations define strategies which are based on their own mission and vision;
✓ Projects are means to accomplish strategic goals, then achieving, through their results, the
expected benefits in terms of business/social value;
➢ Projects come to life to achieve the goals of satisfying different stakeholder expectations:
expectations are “subjective” (Providers, Customers, Investors, …), i.e. they depend on people
➢ Projects are developed to achieve the objectives of fulfilling the requirements: requirements, which
are the result of a harmonization among different subjective expectations, are supposed to be
“objective” (i.e. deterministic) …
An innovative rediscovery of people (i.e. stakeholder) centrality may be useful …
Stakeholder Perspective in Project Management: the effective innovativeness
of people centrality - Massimo Pirozzi
3
INVESTMENT VALUE PROJECT VALUE BUSINESS/SOCIAL VALUE
PROJECT LIFE CYCLE PRODUCT LIFE CYCLEINVESTMENT LIFE CYCLE
(*) IN ~ 30% OF
PROJECTS:
ORIGINAL PROJECT
GOALS & BUSINESS
INTENTS ARE NOT
ACHIEVED
(EXPECTATIONS ARE
NOT SATISFIED)
(*) IN ~ 50% OF
PROJECTS:
SCOPE CREEPS +
COST OVERRUNS +
TIME DELAYS
(INITIAL
REQUIREMENTS
NOT FULFILLED)
(*) Source: Project Management Institute (2018), PMI’s PULSE of the PROFESSION 2018 – 10th Global Project Management Survey

Stakeholder, who is he?
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➢ The word “stakeholder” dates back to the beginning of the
eighteenth century, meaning the person who was entrusted with
the stakes of bettors, and, then, who was holding all the bets
placed on a game or a race: the first stakeholder was a “holder
of interests”;
➢ the first modern meaning of stakeholders, which has been
attributed to an internal memorandum of Stanford University
Research Center dated 1963, was "those groups without whose
support the organization would cease to exist“;
➢ In the first text on the theory of stakeholders (Freeman, 1984), the
definition of stakeholder was "a stakeholder in an organization is
any group or individual who can affect or is affected by the
achievement of the organization's objectives“;
➢ Ten years later (Freeman, 1994), the concept of generated value
was added too, and stakeholders were defined as “participants in
the human process of joint value creation“;
➢ Starting from the second half of the eighties, the theory of
stakeholder management, which was focused on Corporate Social
Responsibility, incorporated an important ethical component into
the concept of stakeholder, too;
➢ one of main meaning is of word “stake” is risk, and “at stake” is a
synonym of “at-risk”: stakeholders do risk in order to achieve
their goals, and risk based thinking is part of their life, while, on
other side, they introduce risk in all the domains.

Project Stakeholders, who are they? 1 of 2
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A project stakeholder is a person, or a group of
persons, or an organization, who:
✓ participates, or would like to participate, in
the project;
✓ has some kind of interest in the project;
✓ can be (if properly engaged) a primary
supporter of the project;
✓ may affect/influence the project, or may be
affected/influenced by the project itself;
✓ can bring a value, which could be either
positive or negative, to the project;
✓ may have responsibilities towards the
project, which, in turn, is supposed to satisfy
his requirements and expectations;
✓ is characterized by a risk based thinking
approach;
✓ is part of a set that characterizes uniquely
each project;
✓ has a central role in all projects: stakeholders
are both the doers, who implement the
project, and the beneficiaries, who determine
project success via their satisfaction.
Keywords: Interest, Influence, Support, Participation, Ethics, Value, Risk, Unicity, Centrality

Project Stakeholders, who are they? 2 of 2
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Due to the key centrality of their role, all project
stakeholders are important:
✓ the project manager,
✓ the project team, the project management team, the project
management office,
✓ the sponsor, the project steering committee or board, the top
management,
✓ the customers , the users, the contracting officers,
✓ the shareholders, the investors, the funders, the partners
✓ the functional and/or resource managers, the employees, , the
professionals, the collaborators,
✓ the business partners, the network partners, the distributors,
the representatives, the members of the consortium,
✓ the suppliers, the consultants, the service companies, the
outsourcers,
✓ the authorities, the central and local public administration, the
regulatory bodies,
✓ the potential customers and users, the participants and the
candidates to participate in the project,
✓ the local communities, the web communities, the associations,
the trade unions, the media,
✓ the competitors, and the other reluctant and/or negative
and/or hostile stakeholders,
✓ the personal stakeholders, including stakeholders’ families,
lovers, close friends, and generally, all the persons the
stakeholders have strong personal relations with.
Project Manager is the only stakeholder who must have relations with all other project
stakeholders: in fact, project manager spends almost 90% of his time in communicating

Stakeholders and Complexity
Project stakeholder domain is characterized by a
multilevel complexity:
✓ stakeholders are persons, or groups of persons, i.e.
complex systems;
✓ stakeholders are different, they may speak or
understand different languages, and they have
different interests;
✓ stakeholders are numerous, and stakeholder
relations are even more numerous;
✓ stakeholder relations are context dependent, and
they influence each other;
✓ all stakeholder relations are important, and, at least,
have to be monitored;
✓ stakeholder relations may be evolutive.
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Relations with, and among, stakeholders, introduce multilevel complexity in all projects
Only an effective Stakeholder Management can solve it!

Stakeholder Role in PM: a Slow Growth
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➢ In PMBOK Guide 1st Ed. (1996), stakeholders were present in PM
definition “Project management is the application of knowledge, skills, tools,
and techniques to project activities in order to meet or exceed stakeholder
needs and expectations from a project”, but they were limited to a passive
role of information receivers;
➢ In PMBOK Guide 2nd Ed. (2000), stakeholders start to disappear in PM
definition “Project management is the application of knowledge, skills, tools,
and techniques to project activities to meet project requirements”: subjective
stakeholder need and expectations are replaced by objective project
requirements;
➢ In PMBOK Guide 3rd Ed. (2004), for the first time a process including the
word stakeholder came out: Manage stakeholders process, which was
supposed to “manage communications to satisfy the needs of, and resolve
issues with, project stakeholders” became part of Project Communication
Management;
➢ In PMBOK Guide 4th Ed. (2008), process Identify Stakeholders has been
added, and Manage Stakeholder Expectations replaced previous
Manage Stakeholders, both still located in Knowledge area Communications:
this last one was defined as “the process of communicating and working with
stakeholders to meet their needs and addressing issues as they occur” … but
“Manage Stakeholder Expectations involves communication activities
directed toward project stakeholders to influence their expectations
[…], such as actively managing the expectations of stakeholders to increase
the likelihood of project acceptance […]” …
Is it possible and/or convenient to influence stakeholder expectations?

ISO 21500: the Turning Point
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Finally, in 2012, the new International Standard “ISO 21500 - Guidance on project management”
enshrines stakeholders’ primary role:
Stakeholder relations are definitively recognized as central in Project Management
▪ PMBOK Guide 5th Ed. (2013) ensured alignment and harmonization with ISO 21500, and “aligns better
with the focus on stakeholder management being put forward with the new ISO 21500 standard”:
Stakeholder became a new knowledge area, with the processes Identify Stakeholders, Plan Stakeholder
Engagement, Manage Stakeholder Engagement, and Control Stakeholder Engagement.
▪ Stakeholders are also a major “practical” competence of IPMA ICB 4.0 (2015), which is coherent with
ISO 21500, and has several correspondences with it.
▪ PMBOK Guide 6th Ed. (2017) does not contain anymore direct references to ISO 21500, but, about
stakeholders, it confirms what has been stated in previous edition, replacing the Control Stakeholder
Engagement process with the Monitor Stakeholder Engagement one.
➢ “Stakeholder” is defined as a “Subject Group”: “The stakeholder
subject group includes the processes required to identify and manage the
project sponsor, customers and other stakeholders”;
➢ two primary processes are directly related to stakeholders: Identify
Stakeholders, which has the purpose “to determine the individuals, groups,
or organizations affected by, or affecting, the project and to document
relevant information regarding their interest and involvement”, and Manage
Stakeholders, with the purpose “to give appropriate understanding
and attention to stakeholders’ needs and expectations”;
➢ the majority of Project Management processes, or even all, are,
either directly or indirectly, related to stakeholder relations, too;
➢ the utility of soft skills spreads to all the domain of stakeholder
relations: “new” concepts, as diplomacy and tact, are defined “essential
when negotiating with stakeholders”.

The Value of the Stakeholder Relations
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In each project, the stakeholder
relations:
✓ in investment life-cycle, are part of
investment value, and are fundamental
to the existence of the project and to its
definition;
✓ in project life-cycle, generate a project
value, which is incorporated in the project;
✓ in product/service life-cycle, allow the
development of business and/or social
value, through the delivery of project
results.
Stakeholder (Relations) Management is Value Management!

The Stakeholder Perspective
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All the stakeholders are central towards each project:
✓ the stakeholders are both the actors, and the beneficiaries, of the project,
✓ the stakeholders are the critical success factor of the project, since they are both the realizers of
the results, and the validators, at various levels, of their satisfaction in terms of needs and
expectations.
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Effective Stakeholder Management is needed and fundamental to Manage Value!

Projects and Complexity
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➢ Cause and effect relationships
exist, are predictable,
repeatable, self-evident, and can
be determined in advance.
➢ The decision model is based on the
unique best practice.
➢ The most appropriate action path is
sense – categorize – respond
➢ Information is sufficient
exist, but are not evident:
analytical methods, and the
support of experts, are needed.
➢ The decision model is based either
on one/a combination of Good
Practices.
sense – analyze – respond.
➢ Communication is mainly
informative
Cynefin Model can be useful…
are only obvious in hindsight, i.e.
retrospectively.
➢ The decision model is based on an
Emergent Practice.
probe – sense – respond.
➢ Communication is mainly
interactive
➢ No cause and effect
relationships can be
determined, and quick actions
that are finalized to target
more stability are necessary.
➢ The decision model is based on a
Novel Practice.
➢ The most appropriate action path
is act – sense – respond.
➢ Communication is interactive
Projects, Operations, & Emergencies may be seen
as the Cause, Generated Value as the Effect
OPERATIONS
PROJECTS
CRISIS
➢ Procedures are essential
➢ Operations objectives are the
target.
➢ Following Procedures is the CSF.
➢ Lesson learned is the best
practice
➢ Project Management is essential
➢ Project Objectives are the target.
➢ Fulfilling Requirements is the CSF.
➢ Lessons learned are useful.
➢ Complex Project Management is essential
➢ Project Goals are the target.
➢ Satisfying Expectations is the CSF.
➢ Lessons learned are essential.
➢ Project Management is essential
➢ Gaining more Stability is the target.
➢ Restoring the previous Balance is the CSF.
➢ Lessons learned are essential.

Success in Complicated Projects
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«Complicated» projects are plan-driven, and there is a small
gap between the satisfaction of requirements and the
satisfaction of expectations of stakeholders:
✓ project is part of customer core business (supplier’s
perspective, in internal or in outsourcing projects), and/or project
deliverables are product oriented, and/or are tangible (e.g.
in small infrastructure projects), and/or, in any case stakeholder
requirements are either well defined (traditional contexts) or
are evolutive, but all stakeholders cooperate effectively
(agile contexts);
✓ triple constraints are dominant
✓ relations with stakeholders are important, and periodical
Since, in complicated projects, the domains of the stakeholder expectations and
of the stakeholder requirements substantially overlap, we can assume that
success is based on the fulfillment of stakeholder/project requirements:
managing properly the delivered value, whose measures consist, as in classic
project management, in cost and in consistency/progression of the deliverables
(i.e. Earned Value), is necessary and sufficient to target project success.

Success in Complex Projects
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«Complex» projects are value-driven, and there is a
significant gap between the satisfaction of requirements and
the satisfaction of expectations of stakeholders:
✓ project is a support of customer core business (customer’s
perspective, in the majority of external projects), and/or project
deliverables are oriented to services, and/or are intangible
(e.g. in software projects), and/or project is large, and/or, in
any case, stakeholder requirements are either not well
defined or are evolutive, but not all stakeholders cooperate
effectively;
✓ competing constraints are dominant: the importance of
value and reputation is superior to that of the triple
constraints;
✓ relations with stakeholders are primary, and can be
continuous, fast, interactive (2.0), evolutionary
Since, in complex projects, expected project goals can be different and/or distant
from required project objectives, the project success is based on the satisfaction of
stakeholder expectations:
managing properly not only the delivered value, but also the perceived
business/social value, becomes mandatory to target project success.

Key Performance Indicators in PM
✓ Both Economic and Project Management (e.g. EV, CPI, SPI) Key Performance
Indicators are useful during project life-cycle to measure/estimate/assess the
Delivered Value, then supporting the Satisfaction of Stakeholder Requirements
✓ Business Key Performance Indicators, which are commonly used to measure
performances after project completion, can be innovatively used during project
life-cycle to estimate the Perceived Value too, then supporting the Satisfaction
of Stakeholder Expectations
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EXPECTED BENEFITS
MEASURES
EXPECTED BENEFITS
ESTIMATE
INVESTMENT MEASURES,
ESTIMATES, ASSESSMENTS
INVESTMENT ESTIMATE
ECONOMIC KPIS PROJECT MANAGEMENT KPIS
BUSINESS KPIS
INVESTMENT VALUE PROJECT VALUE BUSINESS/SOCIAL VALUE
DELIVERED VALUE
PERCEIVED VALUE
Proper KPIs are a powerful support to target the right path towards the project success
EXPECTED INCOME

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Project Management KPIs
Project Management KPIs are especially useful to enhance project control,
and to maintain and/or modify the proper route towards deliveries that
fulfill stakeholder requirements: they are very helpful in both complicated
and complex projects. These KPIs include, for example:
✓ Earned Value, Cost Performance Index, Schedule Performance Index
(they are used in almost all projects)
✓ Percentages of completed work packages compared to those which have
been planned
✓ Percentages of work packages which are aligned to the budget and/or
to the schedule
✓ Percentages of critical work packages which are aligned to the budget and/or to
the schedule
✓ Percentages of critical work packages which still have to be completed, and/or
percentages of completed milestones
✓ Quantity and quality of resources which have been allocated versus relevant
planning, turnover indicators
✓ Numbers and percentages relating to risks, revisions, to requests for
change and changes

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Economic KPIsEconomic KPIs are especially useful to improve relations with
sponsor, top management and funders, and to maintain and/or
modify the proper route towards the satisfaction of their economic
and financial expectations: their use can be very helpful in
complicated projects, and it is basic in complex projects. Examples
include:
✓ Economic and Financial Indicators, as Net Profit, Net Profit Margin, Gross Profit
Margin, Operating Profit Margin, EBITDA, Revenue Growth Rate, Total Shareholder
Return, Economic Value Added, Return on Investment, Return on Capital Employed,
Return on Assets, Return on Equity, Debt-to-Equity Ratio, Cash Conversion Cycle,
Working Capital Ratio, Operating Expense Ratio, CAPEX to Sales Ratio;
✓ Marketing Indicators, as Market Growth Rate, Market Share, Brand Equity, Cost per
Lead, Conversion Rate, Search Engine Rankings and click-through rate, Page Views
and Bounce Rate;
✓ Customer Relationship Management Indicators, as Net Promoter Score,
Customer Retention Rate, Customer Satisfaction Index, Customer Profitability Score,
Customer Lifetime Value, Customer Turnover Rate, Customer Engagement, Customer
Complaints;
✓ Human Resource Indicators, as Human Capital Value Added, Revenue Per
Employee, Employee Satisfaction Index, Employee Engagement Level, Staff Advocacy
Score, Average Employee Tenure, Absenteeism Bradford Factor, 360-Degree Feedback
Score, Salary Competitiveness Ratio, Time to Hire, Training Return on Investment;
✓ Sustainability Indicators, as Carbon Footprint, Water Footprint, Energy
Consumption, Saving Levels Due to Conservation and Improvement Efforts, Supply
Chain Miles, Waste Reduction Rate, Product Recycling Rate.

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Business Value KPIs
Business Value KPIs are either common, or specific, for each sector of
activity: they are especially useful to improve relations with customers
and users, and to maintain and/or modify the proper route towards the
satisfaction of their business expectations; their use is foundational in
complex projects. The business value KPIs that are common to the
different sectors of activity are of primary importance, since they
include:
✓ Measures and percentages of Stakeholder Satisfaction (in terms of
both Requirements & Expectations)
✓ Measures and percentages of Stakeholder Engagement
✓ Measures of Perceived Value : perceived Business Value, Social
Value, Quality, Reputation, Business Climate, Innovation,
Sustainability
In addition, there are other business value KPIs, as functional and/or
quantitative measures, and the relevant percentages of completion/
deviation from budget/schedule, which are specific of each sector of
activity

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Examples of Business Value KPIs

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KPIs for Roadway Bridges
Component Level:
Substructure, Superstructure, Road + Equipment
System Level: Technical, Sustainability, Socio Economic
Network Level
PIs vs. Maintenance Tasks
Source: EC, Cost Action TU1406 - WG1 “Performance Indicators for Roadway Bridges”, Technical Report

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The Power of Dashboards
KPIs can be shared continuously, quickly, and effectively with stakeholders through
dashboards, which can replace efficiently reports
KPIs that are shared via dashboards:
❖ are business-oriented, client-centered, and very stakeholder-friendly
❖ require a quick and minimal effort to interact
❖ in most cases, they are available so frequently for sharing, that also no-answers can be
interpreted positively, as a silent approval (i.e. they can be effective also with non-positive
stakeholders, as reluctant/indifferent stakeholders, who do not want to be engaged, and
negative/hostile stakeholders, who do not want to agree anything)

Effective Stakeholder ManagementEffective management of the relations with stakeholders requires
additional focus on initiating and implementing processes, i.e.:
✓ a thorough identification of all stakeholders, including the
assessments about who key stakeholders are, and behavioral
stakeholder classification;
✓ an in-depth analysis of stakeholder expectations, including their
prioritization, possible decision-making about their harmonization
and/or compromises, the review and validation of the requirements,
and the appropriate provision of the results, which are fundamental
inputs to “Define Scope” process;
✓ strengthening of implementing and controlling processes: proper
value indicators (KPIs) can be measured, shared with stakeholders,
and used, in order to effectively confirm/redirect the action of the
project team during life cycle of the complex projects;
✓ opening, developing, and maintaining an effective, interactive,
continuous communication with stakeholders (and not only periodical
one-way informative actions!): feedbacks are essential!
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Effective Stakeholder Management can clear critical areas and can successfully support project
goals achievement!

The Effective Innovativeness of People Centrality
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✓ All the stakeholders are central towards both project and project management,
✓ Stakeholder Perspective focuses on both fulfillment of requirements and satisfaction of
expectations, so targeting the achievement of both project objectives and project goals,
✓ Effective Stakeholder Management uses the power of relations to increase the overall
project value
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Only a people/stakeholder-centered approach can significantly increase the
project success rate!
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THE PERSON IS AT THE HEART OF BOTH
PROJECTS AND PROJECT MANAGEMENT
THANK YOU SO MUCH
pirozzi@isipm.org

Stakeholder perspective in project management - Massimo Pirozzi

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