Part 10: Project Stakeholders and Governance

Stakeholders are very important in the Project Management Process


  • Stakeholder = An individual, group, or organization, which Affects, is Affected by, or Perceives to be Affected by a decision/activity/outcome of a project
  • A stakeholder may or may not be actively involved in the project
  • Can be positive or negative
  • Can be internal or external (inside the organization or outside)
  • The influence of a stakeholder can change over time.  A stakeholder can become more powerful or less powerful.  Why?  A stakeholder could gain/lose authority over time, or the project might become too successful for the stakeholder to be able to interfere.
  • Stakeholders have competing expectations
  • A Project Manager must align the project with the needs of the Stakeholders and the Strategic Objectives of the Organization
  • A Project Manager must
    • Identify stakeholders
    • Understand their influence on the project
    • Balance their needs

Stakeholders Include

  • All the members of the project team
  • Project Sponsor
    • A Sponsor is the Person/Group providing resources/support for the project
    • Sponsor can be External or Internal
    • Sponsor convinces upper management to approve the project
    • Sponsor resolves issues that are beyond the control of the Project Manager
    • Sponsor transfers deliverables to the customer/organization when the project is completed
    • In a for-profit corporation, the sponsor might be a senior executive. In a government project, the sponsor might be a government minister.
    • If Vortex is designing an oven, the Vice President of Product Design might be the Project Sponsor.

  • Customers/Users
    • Customers Approve & Manage the Project’s Product, Service, or Result
    • Can be External or Internal
    • For example, when Vortex designs a new oven, its own manufacturing department would be an internal customer.
    • There can be multiple layers of customers (e.g. Vortex’s manufacturing department is the internal customer, Vortex’s distributors are external customers, retailers such as Home Depot/Sears are the second layer of external customers, and the consumers who ultimately use the ovens are the third layer of external customers.)
    • The customers are very important.  They use the product and their input is necessary for the success of the project.
    • In a construction project, for example, you have one end customer (the person or company buying the building).  They may exert a lot of influence on the project.  You may talk to the customer every day about things like the color of the paint or the size of the tiles.
    • In a project to design a product for a marketplace (like the design of a toaster), there are many end customers.  These customers have opinions identified by market research but don’t affect the design process much.  The opinion of one specific end customer won’t have much effect on the project.

  • Sellers
    • Sellers are people/companies that provide your project with components or services
    • Sellers are external
    • Also known as Vendors/Suppliers/Contractors
    • People who supply paint, steel, electrical wire, or other oven components are sellers.
    • It’s important to consult with sellers early on.  The seller must be (1) capable of supplying the products/services you require (2) in the quantity you require, and (3) at an acceptable cost and timeframe.
    • If Vortex is designing an oven (including a custom circuit board to control the oven), and orders the circuit board at the last minute, the supplier might not be able to produce them fast enough or cheap enough.  Or the circuit board may be impossible to manufacture given the seller’s existing equipment.  Then the entire oven project will have been a waste.

  • Business Partner
    • Business Partners provide special services (installation/training/support)
    • Business Partners are External
    • For example, if Vortex subcontracts the installation and maintenance of its appliances to subcontractors, those subcontractors are Business Partners.
    • Business Partners are important.  If Vortex designs an oven that is heavy or requires special tools to install, the business partners will struggle to perform the installation, or charge Vortex more money.  It’s important to consult with them during the design process.

  • Organizational Group
    • Organizational Groups are Internal
    • Include departments like HR, Sales, Legal, or Finance
    • These departments have regulations that could interfere with the project
    • For example, the legal department will make sure that you don’t design a product that is unsafe, or that infringes on another company’s patents.

  • Functional Manager
    • The Functional Manager is Internal
    • The Functional Manager manages a key functional area in the organization
    • May provide expert knowledge or services to the Project
    • For example, if Vortex designs a toaster, the Functional Manager (assembly line manager) will eventually be responsible for its production.  The Functional Manager provides the design team with valuable advice for designing a toaster that can be easily manufactured, given the resources of the factory.

  • Operational Management
    • The Operational Management is Internal
    • Operational Management is responsible for overall operations of the business
    • Operational Managers expect to see that the goals of the project are aligned with the goals of the organization.
    • The Operational Manager might expect you to design an appliance that can generate a specific profit.

  • Other Stakeholders
    • There may be other stakeholders including Financial institutions, the Government, and Subject Matter Experts

IMPORTANT to identify stakeholders early in the project, or it will result in

  • Unexpected Changes
  • More Expensive Changes
  • Rejected Deliverables

The PMP Exam (and real life) will ask you why your project is experiencing so many unexpected changes and rejected deliverables.  If you see those on the PMP Exam, you

  • Did not identify (all) the stakeholders
  • Did not identify/consult with stakeholders early enough in the process
  • Did not identify the right stakeholders

Why?  When you add stakeholders later in the project phase, those stakeholders add requirements that you didn’t consider earlier.  For example, you forgot to consider the government when you designed a vehicle.  Then you realize that the government requires you to design an energy-efficient car, and you now have to make changes to the engine design. 

Project Governance

  • Project Governance is oversight aligned with the organization’s governance model
  • Project Governance, in simple terms, are rules that the Project Manager must follow when making decisions
  • Project Governance is separate from Organizational Governance (mentioned earlier)
  • Project Governance
    • Provides the Project Manager with structure/decision-making models
    • Supports/Controls the Project
    • Comprehensive and consistent
    • Defines, Documents, and Communicates Reliable, Repeatable Project Management Practices
  • The PMO may be involved in governance
  • The Project Governance is a Constraint.  The project team must follow the Project Governance, but the team is still responsible for planning, executing, controlling, and closing the project.
  • Governance helps the PM make decisions and manage the project, using methods developed through the organization’s experience.
  • Governance means the PM must “follow the rules” of the organization, but at the same time has a lot of useful information he can use to make decisions.

Examples of Project Governance Examples

  • Project Success/Deliverable Acceptance Criteria
  • Process to identify/escalate/resolve issues
  • Relationship among project team/stakeholders
  • Project Roles/Organization Chart
  • Communication procedures
  • Decision-making procedures
  • Project Life Cycle
  • Process to review project phases
  • Process to Review/Approve Changes to Budget/Scope/Quality/Schedule

Project Success

  • Project Success is measured by completing the project within the most up-to-date Scope, Time, Cost, Quality, Resources, and Risk constraints
  • Constraints are approved by project managers and senior management