Stakeholder Management should not be ‘Us vs. Them’

In Collaboration with Ipsita Suman, Principal Analyst

Procurement for long has been blamed for not fully understanding business needs and, instead, placing savings before stakeholder interest and dictating standardized processes and policies.

Many organizations struggle to decide whether a dedicated Procurement function is ‘good to have’ or a ‘must have’, according to Rahul Devarakonda, Head of Product at Beroe Inc.

“One of the key reason why it makes the decision very hard is because of business stakeholders having to accept the fact that someone else would be guiding, monitoring and controlling their own budget with regards to external spending,” Devarakonda said.

Discrete spending, or being in a position to approve spending, represents power, authority and importance. This holds high value in the corporate world, where executives face immense resistance to letting someone else manage it, he added.

Unaware that Procurement can offer increased cost savings, internal stakeholders are usually reluctant to interact openly with the former. Procurement has mostly tried to consolidate the supply base, but the internal stakeholder is not yet accustomed to ‘global purchasing.’

There is no doubt that the only way for Procurement to be successful in any organization is by gaining the status of a trusted advisor. Hence, proactive reachouts are necessary in order to keep stakeholders in good humour.
 

Procurement's true value will shine through stakeholder management

Much can be accomplished with regards to stakeholder management.
 

Identifying stakeholders

Stakeholders are personnel who are very close to a project. The PMI PMBOK has categorised stakeholders into seven broad categories.
 

Stakeholder category	Stakeholder description	Designation
Output delivery	Individuals, groups or organizations responsible for the delivery of the project’s outputs	Project team contractors
Product usage	Directly or indirectly use the project products; ultimately responsible for the achievement of business objectives using the project deliverables	Business users
Product support	Responsible for ensuring that the project product is available for use	Support/technical groups
Funding authority	Accountable for the outcome of the project and grant approval for release of funding and provision of resources	Executive, project sponsor, business management
Contributor	Individuals or groups who provide inputs and services to the project	Service groups  such as legal, finance; suppliers and contractors
Review/audit	Groups or organizations that need to review or audit the project and its deliverables to ensure that proper processes are followed and the quality of deliverables meets appropriate standards	Project manager, quality review groups, auditors
Related projects	Other project teams may provide inputs to or receive outputs from the project	Other project managers and teams

 

Performance Management

Stakeholder management aims at internal customer satisfaction.

Indicator	Metric
Accessibility to decision-making process	Number of opportunities for stakeholders to engage in early planning to identify issues Number of jointly identified alternatives/solutions discussed and adopted
Clear understanding of stakeholder interests and concerns	Key stakeholders identified and interviewed Analysis completed to identify and categorise interests and concerns Methods and approaches in strategic stakeholder involvement reflect stakeholder needs, as identified in interviews Plan contains methods for continually assessing stakeholder interests and flexibility for changes, as needed
Diversity of views represented	Number and types of participants Types and locations of meetings/discussions
Integration of interests and concerns	Number and types of interests included in issue definition Number and types of alternatives that reflect common interests Number and types of changed actions, adjustments and/or reprioritisations based on participant interests throughout the project and integrated into final decisions
Information exchange	Routine evaluations to gather feedback from participants on availability, clarity and comprehensibility of written materials Routine evaluations to gather feedback from participants on openness of meetings and ability to enter into discussion on various ideas and viewpoints Types of approaches used, types of issues discussed, solutions identified, routine evaluation to gather feedback from participants on effectiveness of approach, and satisfaction with identified solutions
Project efficiency	Ratio of actual costs to projected costs of overall project percentage of deadlines met Number of decisions readdressed due to lack of support
Decision acceptability	Number of project delays due to public protest/controversy Documentation of regulatory approval Documentations that jointly identify that implementation goals are met; funding provided
Mutual learning/respect	Number and types of concessions/compromises made throughout the project Documentation of routine contact among participants Meeting/engagement summaries indicating civil and productive dialogue among participants
Cost avoidance, direct and indirect	Number of times inadequately planned engagement and partnering activities result in project delays; documented feedback from participants on value of participation Amount of cost/time overruns due to unrealistic expectations of informational material production requirements

 

Key aspects to consider in stakeholder management

Identifying the right stakeholder:
Communicating with the stakeholders who matter is important. They might not always be the bosses either. The most important stakeholders will almost certainly change from time to time, so regular assessment is mandatory to find out the key influencer.

Identifying the needs of the stakeholders:
Mutuality is important. It is important to identify the common goals and work accordingly.

Customisation is key:
It is very important to communicate in line with the stakeholder’s requirement which includes the frequency and mode of communication. No one size fits all.

Attitudes change constantly:
People change their minds often. It is necessary to constantly reassess an important stakeholder's attitudes, and adjust the communication plan to deal with the current situation.
 

Communicate and collaborate with stakeholders

It is of paramount importance to address the stakeholder’s commitment level in the communication channel. The frequency and channel of communication will vary from stakeholder to stakeholder. Thus, Procurement must adapt according to such varying requirements.

Also, communication gap can be partially bridged through an effective feedback mechanism, which will help iron out issues between Procurement and business stakeholders. 
 

Feedback

As per the Deloitte CPO survey in 2018, there has been an eight percentage point drop in Procurement using customer satisfaction surveys to understand business needs when compared to the previous year. It is time to ratchet it up.

Stakeholder feedback is one of the most essential elements in measuring success. Procurement teams can use the Likert Scale survey method where respondents specify their agreement/disagreement for a series of statements. A model template is given below:

TEMPLATE: MODEL STAKEHOLDER SURVEY
Date:	Stakeholder area (business/function/region):
Stakeholder name:	Stakeholder role/title:
Do you agree or disagree that Procurement is effective at:	Agree	Partially Agree	Neutral	Partially Disagree	Disagree
Achieving important business results
Understanding key business priorities
Aligning procurement activities to support the key business priorities
Presenting useful supply options/opportunities that will improve business performance
Communicating with the company
Developing internal (company) relationships
Developing external (suppliers etc.) relationships
Open-ended questions
What actions or activities would you like Procurement to increase?
What actions or activities would you like Procurement to decrease?
What else would you like to share?
Is there any one employee, group, or team within Procurement you would like to recognize?
How would you like to receive feedback on this survey? (give suggestions/options)

Source: The Global Procurement Leader’s Handbook, Erik Stavrand and Chris Shanahan

Regular feedback will act as a pressure release, as it would avoid any build-up of tense situations between Procurement and internal stakeholders.
 

Conclusion

With an effective two-way communication, Procurement can not only iron out key issues that bother their stakeholders, but will be in a position to add significant value to the business. After all, internal stakeholder management should not be viewed from an adversarial perspective—it is never ‘Us vs. Them.’

“Procurement, in most cases, reports to the CFO or CEO directly and that makes a lot of sense -- but they should always remember the importance of business stakeholder management irrespective of the functional reporting structure,” Devarakonda concluded.