Theory and Practice of Stakeholder Analysis

The origins of SA, belong to the history of business and managerial science. This is reflected in the term "stakeholder" itself, apparently first recorded in 1708, to mean a bet or a deposit. The word now refers to anyone significantly affecting or affected by someone else's decision-making activity. Economic theory centered on notions of stakeholder relations goes back to the beginnings of industrialism and is embedded in ideals of 19th century cooperative movement and mutuality. Stakeholder theory reappears in business and management discussions of the 1930s. The approach was designed then and continues to be used nowadays by firms and organizations to factor in stakeholder interests in order to enhance the enterprise's relationship with society and secure better prospects of financial success. With the help of SA, firm decisions can profit from views that go beyond the narrow interests of stockholders and shareholders investing in a business.

The concept of stakeholder participation and consequently of stakeholder analysis as a first step was adopted by the public sector in the 1980's and 1990's.. It has been widely accepted that the implementation of new laws, governmental initiatives and projects depend on the active support of the affected people, a process which is also described by the term "ownership". Ownership of processes means that stakeholders see these as part of or supplement to their own livelihood strategy. Change management theory has established that many well-conceived public initiatives fail because of lack of ownership and consequent widespread resistance of stakeholders.

Stakeholders can only speak for themselves. The entire notion of clearly defined stakeholder groups is a model which helps to reduce complexity for planning. People belong to many different groups (economic, social, ethnic, religious, age, etc.), and the individual mix of interests and economic objectives can never be exactly the same between two persons. However, stakeholder analysis assumes that there are common denominators of people belonging to the same stakeholder group.

A stakeholder analysis made without the participation of the actual stakeholders is usually the first step. However, elected or self-declared representatives can never entirely refrain from their own perception of reality. Therefore, each statement that is made on behalf of other stakeholders is no more than an assumption which yet has to be proven. Only the stakeholders themselves, however, can prove the assumption to be true.

Since stakeholder identification is a consequential matter, analyses done without participation are likely to reflect the interests and agenda of the agency directing the exercise in social assessment. SA should be an iterative, action-oriented exercise in social analysis. If not revised during the project management cycle, an SA matrix may become obsolete; i.e., stakeholders and their interests and views may evolve, new actors may appear on the scene, or central issues and stakes may shift over time. The notion that SA is a one-shot, quick-and-dirty exercise constitutes a disservice to the programme as a whole.

Tools for Stakeholder Analysis

Prepare a matrix in which you rank stakeholders according to their stake in the process versus their influence :

Table 1: Influence / Importance Matrix

Salience: Power, Legitimacy and Urgency (adapted from Jacques M. Chevalier)

While legitimacy (=normative appropriateness) is an important variable, two other factors must be considered when mapping out stakeholder class relationships. One factor consists in power defined as the ability to influence the actions of other stakeholders and to bring out the desired outcomes. This is done through the use of coercive-physical, material-financial and normative-symbolic resources at one's disposal. The other factor is that of urgency or attention-getting capacity. This is the ability to impress the critical and pressing character of one's claims or interests, goals that are time-sensitive and will be costly if delayed. These three "other-directed" attributes (legitimacy, power, urgency) are highly variable; they are socially constructed; and they can be possessed with or without consciousness.

Consequently, there are 8 different stakeholder groups:

1. Dormant stakeholders (Power, no legitimacy and no urgency)
   
2. Discretionary stakeholders (Legitimacy, but no power and no urgency)
   
3. Demanding stakeholders (Urgency, but no legitimacy and no power)
   
4. Dominant stakeholders (Power and legitimacy, but no urgency)
   
5. Dangerous stakeholders (Power and urgency, but no legitimacy)
   
6. Dependent stakeholders (Legitimacy and urgency, but no power)
   
7. Definite stakeholders (Power, legitimacy and urgency)
   
8. Nonstakeholders (No power, no legitimacy and no urgency)

Figure 1: Power, Legitimacy and Urgency

Marketing has to address demanding and dangerous stakeholders, and try to win dominant, dependent and definite stakeholders.

For public participation, the groups a project needs to cooperate are the dominant and definitive stakeholders; their ownership of the activities has to be won. The capacity of discretionary and of dependent stakeholders to participate needs to be built up, and any programme for participation needs to monitor activities of demanding and "dangerous" stakeholders; their impact on project results needs to be mitigated. Dormant stakeholders need to be brought on board.