Stakeholder analysis is introduced by reminding the reader of the importance of participation. In this case participation is meant to cover internal stakeholders, external stakeholders and beneficiaries. Again, a pragmatic rationale is put for-ward (State Planning Organization, 2006, pp.19–20):
Taking the opinions of the parties with which the agency interacts will ensure that the strategic plan is owned and increase the chance for its implemen-tation. On the other hand, in order for the public services to be shaped in line with requirements of the beneficiaries, their demands should be known.
Therefore, conducting the stakeholder analysis within the scope of the situa-tion analysis is important.
Stakeholders are defined as persons, groups or institutions that are related to the products and services and that are affected by, or affect, the agency. The impact of stakeholders may be positive or negative and the impacts may occur directly or indirectly. The list of examples included: the minister, employees and administra-tors of the agency, public and private sector organizations involved with the activ-ities of the agency, providers of input to the agency, trade unions and customers.
It is suggested that a stakeholder analysis can yield information regarding the following:
1 the opinions and expectations of stakeholders;
2 relationships and potential conflicts of interest between stakeholders;
3 stakeholders’ judgements about the strengths and weaknesses of the organization;
4 information about the barriers to the efficient realization of the agency’s services or products.
It is also suggested that stakeholder analysis will help with the following:
1 getting the interest and contribution of stakeholders in the strategic planning process;
2 planning the stages in the process in which stakeholders can be involved;
3 creating ownership of the strategic plan by stakeholders and therefore increasing the chances of a successful strategic plan;
4 formulating strategies that address the barriers to the realization of the agen-cy’s services or products.
The guidance sets out stakeholder analysis as a four stage process: first, determin-ing who stakeholders are; second, prioritizdetermin-ing them; third, evaluatdetermin-ing them; and, fourth, gathering and evaluating stakeholder opinions and recommendations.
This is shown in Figure 5.2.
The advice given on the performance of a stakeholder analysis is quite detailed. It seems clear that following this advice would be time-consuming and would produce an in-depth and insightful understanding of the stakeholders of a public sector organization. At the end of the process of analysing stakeholders, the analysts would be well placed to incorporate the interests and opinions of stakeholders within the strategic plan.
The first step of the process, determining who are the stakeholders, actually involves three pieces of work. The first is to generate a long list of stakeholders
by attempting to answer a series of questions. Who is related to the activities of the agency? Who directs the activities of the agency? Who uses the activi-ties? Who is affected by the activiactivi-ties? Who affects the activiactivi-ties? The strategic planning process analysts are encouraged to be thoughtful during the process of flushing out all the stakeholders. In particular, it is suggested that subdivid-ing stakeholders into subgroups should be considered. For example, initially it might be decided that ‘employees’ are stakeholders. But it might be useful to split employees into subgroups. The guidance does not make the benefits of this clear but it is obvious that there may be two or more distinct groupings within the body of employees who have different interests, different priorities, different concerns and different amounts of power and influence. It may, for example, be important to give one of those distinct groupings special attention and this could prove to be very important in many different ways, including the planning of the strategic planning process. Likewise, it could be important to differentiate dif-ferent groups in society who use or benefit from the activities of a government ministry. By distinguishing their concerns and their aspirations, this could lead to some very important conclusions in clarifying the strategic goals of the orga-nization. Of course, there may also be times when there is a case for simplifying the stakeholder analysis by ‘lumping’ together some groups who appear to be very similar in terms of their expectations, concerns, power and so on.
Determing who are the stakeholders
Prioritizing stakeholders
Stakeholder evaluation Obtaining
the opinions of stakeholders
■ Figure 5.2
The basic steps in the stakeholder analysis process
The second piece of work in determining who are the stakeholders is to give more thought to understanding the relationship of stakeholders with the agency, which is done by identifying the reason for a stakeholder group being stakehold-ers. The third and final piece of work is to classify each of these stakeholders in the list according to whether they are internal stakeholders, external stakehold-ers, or customers. See Table 5.2.
The second step in the process of stakeholder analysis is justified in the guid-ance on the basis that the list of stakeholders is too long, in the sense that the public sector organization cannot establish an effective relationship with all of them. So prioritizing the list of stakeholders, deciding who is the number one stakeholder, number two stakeholder, and so on, is presented as an efficiency issue in gathering the opinions of stakeholders and reflecting them in the stra-tegic plan.
Of course, it might also be argued that anyone involved in developing any strategic plan would be wise to give to each stakeholder an amount of atten-tion that is proporatten-tional to their relative importance. There is probably another justification as well, which might be expressed as a need to avoid the task of stakeholder analysis becoming too intellectually complex by having too many stakeholders. So, as a matter of practical advice, perhaps it is sensible to just con-sider up to eight stakeholders, and logically it would be wise to concentrate on the eight most important stakeholders.
How should prioritization be done? The guide provides two criteria. The first is to prioritize on the basis of the power of the stakeholders. So the top-priority stakeholder is the most powerful stakeholder. This criterion could be seen as concerned with the ability of the stakeholders to affect the activity of the orga-nization. The second of the two criteria is the degree to which stakeholders are affected by the activities of the public sector organization. It might be com-mented here that some public sector organizations are set up to serve client groups that have very little power, may be vulnerable and may be needing the protection of the state. Such groups may be considered by the relevant public
■ Table 5.2 List of stakeholders at the end of step one of the stakeholder analysis Name of stakeholder Reason identifi ed as a
stakeholder
Classifi cation: internal, external, and customer
sector organization as very important, and right at the centre of the purpose of the organization. Hence, the list of powerful stakeholders and the list of import-ant stakeholders may overlap, but are not necessarily the same. If an analyst wanted to use both criteria to prioritize stakeholders, they would need to rec-oncile conflicts between the separate valuations based on power and importance.
At the end of step two in the stakeholder analysis, the long list of stakeholders can be reduced to a manageable list of stakeholders comprising the group that has been prioritized (for example, the top eight). In the third step of the analysis, an attempt is made to create a comprehensive assessment of each stakeholder.
This is done in three separate pieces of work: ‘cued’ investigation, preparation of a matrix of stakeholders and organizational activities and preparation of the stakeholder impact and importance matrix.
In the first piece of work a number of questions that have already been con-sidered are revisited. Which activity of the organization does the stakeholder relate to? What does the stakeholder expect of the organization? How does the stakeholder affect the organization? How much power does the stakeholder have? How is the stakeholder affected by the organization – positively or nega-tively? Obviously, this time round, since the strategic analyst is dealing with the top-rated stakeholders, more care can be taken, more evidence to back up judge-ments sought and a generally more comprehensive answer provided.
The next piece of work is based on a simple technique originally derived from private sector marketing, where opportunities for business growth are identified by looking at which customer groups are being sold which products or ser-vices. By presenting this information systematically in a matrix, it is possible to hypothesize about how existing customer groups may be targeted in terms of sales of products or services that they do not currently buy.
The guide explains that a stakeholder–product/service matrix may be con-structed within the scope of stakeholder analysis. One dimension of the matrix consists of the activities of the organization displayed in terms of activity fields and associated products or services. The other dimension of the matrix is a list of the stakeholders that have been prioritized. Information is added to the matrix about which top-priority stakeholders relate to which products or services, and who benefits from which products and services. There is no doubt that this is a useful technique for making the analysis more thorough. The visual dis-play makes it easier to check and debate the linkages between stakeholders and activities, and to query the pattern in the supply or distribution of benefits to
‘customers’. Table 5.3 shows the type of matrix recommended in the guidance.
The third piece of work of evaluation of stakeholders is based on the two criteria suggested for prioritization. A matrix is produced in which stakeholders may be classified as either weak or strong, which relates to the power of the stakeholders, and as important or unimportant. This gives a 2 × 2 matrix. The guidance defines importance as ‘the priority given by the agency with regards to meeting the expectations and demands of the stakeholder’ (State Planning Organization, 2006, p.24). In the guidance document, the usefulness of this impact–importance matrix is explained in terms of helping the public sector
■ Table 5.3 Stakeholder–product/service matrix
Stakeholders Activity fi eld 1 Activity fi eld 2 Product
organization to plan how it will interact with the stakeholders during the strate-gic planning process. As might be guessed, four types of interaction are proposed as appropriate for each of the four types of stakeholder defined in the matrix:
monitoring, informing, protecting and working together. The matrix and the interaction patterns during the strategic planning process are shown in Table 5.4.
The guidance gives very practical, very concrete advice on how to carry out the fourth and final step of the stakeholder analysis process. This is the gathering of opinions from the high-priority stakeholders. The advice sets out a number of data collection methods (interview, survey, workshop and meeting) and indicates some factors that can be used to decide on the methods. Face-to-face meetings are recommended where the organization wishes to strengthen its communication with a stakeholder. Surveys may be needed where the number of persons is large.
A different set of questions may be used to gather opinions from each stake-holder group. Stakestake-holders may be asked:
1 Which of the activities of the organization are important to you?
2 What are the positive aspects (strengths) of the organization?
3 What aspects of the organization (weaknesses) should be improved?
4 What are your expectations of the organization?
If we reflect on this set of four questions, it is immediately obvious that such opinions as are gathered from stakeholders could feed into a SWOT analysis
■ Table 5.4 Stakeholder impact–importance matrix Importance of
stakeholder
Impact (power of stakeholder)
Weak Strong
Unimportant Monitor Inform
Important Protect interests, include in activities Work together
(strengths, weaknesses, opportunities and threats) and also could feed into mission and vision statements and the formulation of strategic goals. To the extent that this happened, and to the extent that it happened successfully, the result would be a strategic plan for the organization that is highly responsive to stakeholders, including intended beneficiaries of the specific public sector organization.