Importance Of Stakeholder Management And Stakeholder Involvement Management Essay

Accordingly Takim, stakeholders can be sorted into internal and external stakeholders. The former have legal contact with the client and those clustered around the client on the demand side and supply side while the latter help to shape the inception and operation of the project such as government regulations, technology and standards (Pokharel, 2011). Since the nature of construction projects are involved many stakeholders, participation of stakeholders is extremely important to achieve project success. This is because participation is touted to be one of the best ways of attracting and sustaining the interest of stakeholders (Boon et al., 2012). Heravitorbati et al. (2011) and other scholars studying the construction sector (Yang et al., 2010; Brian and Martin, 2008; Bosher et al., 2007; El-Gohary et al., 2006; Wang and Huang, 2006; Cole, 2005; Olander and Landin, 2005; Chan and Chan, 2004; Dainty et al., 2003) have realized that stakeholder involvement is an indispensable component for project success. It is not only thus, they also find that stakeholder involvement has undeniable impacts on the project outcomes. In order to achieve project success, a project manager shall seek the stakeholders’ input to the project. It is widely acknowledged that most projects involve a wide range of associated stakeholders (Ward and Chapman, 2008). Different stakeholders have different levels and types of investments in the project (Yang, 2010) which can influence the project’s shape and progress to a greater or lesser extent (Ward and Chapman, 2008). In short, without stakeholders, a project can not exist.

According to World Bank (1996), the concept of “stakeholder participation has been variously conceived to include a process by which interested parties affect and take part in the control of development initiatives and the decisions and resources that influence them”. Participation is a basic human right and participation in project management could involve the identification of problems. For instance, knowing who is to be involved and what the involvement may be, can form a basis on the problem solving. A project manager should proactively working towards improving the levels of participation in the various stages of a project so that the outcomes are more likely to success.

To assess the degree of stakeholders’ participation in construction project in Malaysia, Critical Success Factors (hereafter referred to as the CSFs) approach is applied to identify these essentials. CSFs are a business term for an element which is necessary for an organization or project to achieve its mission (Knoll, 2006), for instance; the project manager may use the critical success factor method as a mean to increase the participation of stakeholders. Furthermore, identifying CSFs early enough before project formulation is a vital start for ensuring successful project completions (Torp et al., 2005). This paper has a major role of contributing to the project success. Participation of the stakeholders should be enhanced and maintained in the Malaysia’s construction project. This is due to the issue of stakeholders’ participation in construction project poses a significant challenge in Malaysia.

1.2 Problem Statement

An increasing number of studies (Ei-Gohary et al., 2006; Yang et al., 2009; Yang et al., 2010; Smude and Courtright, 2011; Boon et al., 2012) have identified the importance of stakeholder management and stakeholder involvement in the construction project. As the number of stakeholders involved or interested in the project can increase the complexity of the situation (Karlsen et al., 2008), each stakeholder usually has their own interest in the project and this might cause different priorities and conflicts. It is wrong to ignore the stakeholders or attempt to impose a rigid detailed control. These mean that the project manager can not overlook, but has to consider and deal with the stakeholder in the proper way.

Accordingly PMI (2004), a construction project is ” a temporary endeavour undertaken to create a unique product, service or result”. Ibrahim and Nissen (2003) also state ” there is no such thing as a typical facility development project. No two projects are ever the same”. The team members have to learn quickly how to work together as a coherent unit (Ibrahim and Nissen, 2003). However, there are still some issues pertaining stakeholders that can not be avoided in these temporary and unique environment, for instance, stakeholders having vaguely event goals and objectives, having indistinctly statement and project missions, project manager resolving conflicts between stakeholders ineffectively, lacking of trust and communication among stakeholders (Finch, 2008; Rowlinson and Cheung, 2008; Karlsen et al., 2008; Yang et al., 2009; Yang et al., 2019; Reid, 2011). So as to find the proper way to manage and figure out the issues caused by stakeholders, project teams need to realize what the critical success factors are to overcome these dilemma. Particularly, this paper is concerned with four research questions:

Who are the stakeholders?

What is stakeholders’ participation?

How the stakeholders participation impact on a construction project?

What are the CSFs for stakeholders’ participation in the construction project in Malaysia?

Aim and Objectives

It is crucial to explore the relative importance and groupings of factors that affect the stakeholders’ participation. This is why this research has been carried out. Scilicet, it is to promote more inclusive stakeholders participation in Malaysia’s construction project. This aim presents some references for construction project managers in managing the stakeholders. Given the complexity of each project, it is significance to render certain the satisfaction of each stakeholder. Provided always that the level of satisfaction of stakeholders influence the participation rate of the stakeholders. The higher the level of satisfaction, the higher the participation rate.

The following three objectives are designed to achieve the above aim:

to identify all CSFs associated with stakeholders’ participation in construction project.

to quantitatively prioritize CSFs and group them into lesser dimensions by using factor analysis.

to identify approaches for improvement in stakeholder participation.

1.4 Significance of Study

This paper concerns on what are the factors that influence the participation of the stakeholders. Make certain the participation of stakeholders in the project is an important task for every project manager. The involvement of stakeholders in the project bring many advantages. By way of illustration, it produces effective and efficient problem solving. On the average, several people will produce more and better solutions to a nonroutine problem than will a single person. This is the conclusion of a review of research studies which compare individual problem solving with conventional group problem solving (Shaw, 1976). Participation by group members facilitates understanding. Good solutions and challenging goals are valuable only to the extent that they are understood. Participation in goal setting and in problem solving increases the understanding of what is to be done and or how it is to be done (Latham and Saari, 1979).

Therefore, Critical success factors are determined to ensure the project managers know how to strengthen and maintain the degree of participation of stakeholders. By and large, the author agrees importance of the stakeholders in the construction project. Atkin and Skitmore (2008) explained the importance of stakeholders by mentioning that the stakeholders have the resources and capability to stop the projects. If a project can not get any participation from the stakeholders, the project will undoubtedly come to nothing. Last but not least, the intention of this paper also is to add to knowledge and the provision of an improved understanding of the stakeholders’ participation.

1.5 Research Flow

To accomplish the aim and objectives, this paper was structured as follows:

First, definitions of stakeholders were provided.

Secondly, literature reviews pertaining to stakeholders’ participation were conducted.

Thirdly, the research methodology was described.

Fourthly, findings and analysis based on literature reviews and questionnaire survey.

Fifthly, proposed recommendations were made.

Lastly, conclusions were drawn and devoted future research studies.

CHAPTER 2

LITERATURE REVIEW

2.1 Defining Stakeholder

There is a difference of opinion over who or what exactly stakeholders are (Reed et al., 2009). A selection of general definitions of stakeholder is set out in Table 1. Different authors have different points of view of stakeholder; some definitions are singularly broad and some relatively narrow.

Table 1 Defining Stakeholder

Driven by their own interests and goals are participants in a firm and thus depending on it and whom for its sake the firm is depending (Ahlstedt and Jahnukainen, 1971)

Can affect the achievement of an organization’s objectives or who is affected by the achievement of an organization’s objectives (Freeman and Reed, 1983)

Any group or individual who can affect or is affected by a business (Freeman and Gilbert, 1987)

Benefit from or are harmed by and whose rights are violated or respected by corporate actions (Evan and Freeman, 1988)

Without whose support the organization would cease to exist (Bowie, 1988)

Groups to whom the corporation is responsible (Alkhafaji, 1989)

Asserts to have one or more of these kinds of stakes- ranging from an interest in a right (legal or moral) to ownership or legal title to the company’s assets or property (Carroll, 1989)

In “relationship with an organization” (Thompson et al., 1991)

Have an interest in the actions of an organization and the ability to influence it (Savage et al., 1991)

Having some legitimate, non-trivial relationship with an organization such as exchange transactions, action impacts and moral responsibilities (Brenner, 1993)

“Asserts to have one or more of the kinds of stakes in business”- may be affected or affect… (Carroll, 1993)

Interact with and give meaning and definition to the corporation (Wicks et al., 1994)

The firm is significantly responsible for their well-being, or they hold a moral or legal claim on the firm (Langtry, 1994)

Can and are making their actual stakes known- are or might be influenced by, or are or potentially are influencers of any organization (Starik, 1994)

Bear some form of risk as a result of having invested some form of capital, human or financial, something of value in a firm or are placed at risk as a result of a firm’s activities (Clarkson, 1994)

Have or claim ownership, rights or interests in a corporation and its activities (Clarkson 1995)

Interact with the firm and thus makes its operation possible (Nasi, 1995)

Are or which would impact or be impacted by the firm/organization (Brenner, 1995)

An individual, individuals, team or teams affected by the project (Juliana, 1995)

Persons or groups with legitimate interests in procedural and/or substantive aspects of corporate activity (Donaldson and Preston, 1995)

Those that contribute voluntarily or involuntarily to the organization’s wealth-creating and activities (i.e. potential beneficiaries or risk bearers) (Post et al., 2002)

Groups or individuals who have a stake in or expectation of the project’s performance and include clients, project managers, designers, subcontractors, suppliers, funding bodies, users and the community at large (Newcombe, 2003)

Those who have any input in decision making (Phillips, 2003)

Those to benefit from the outcomes of a decision (Phillips, 2003)

A person or group of people who has a vested interest in the success of a project and the environment within which the project operates (Olander, 2007)

Any individuals or groups which can affect an organization or project performance or which are affected by the achievement of the organization’s or project’s objectives (Li, 2007)

A person or group of people who has a stake in the proposed project/ programme and trying to influence its implementation so as to guard their individual interests (Olander and Landin, 2008)

Individuals and organization who are actively involved in the project or whose interests may be positively or negatively affected as a result of project execution or successful project completion (Project Management Institute, 2008)

Classify stakeholders in the construction industry into two categories: a) internal stakeholders, who have legal contact with the client and those clustered around the client on the demand side and supply side; b)external stakeholders, which comprising private sector and public sector (Takim, 2009)

Any individuals or organizations who have a stake in the firms (Shao, 2010)

Individuals and groups who affect or are affected by organizations (Freeman et al., 2010)

Those who can influence the project success and/or final results, whose living environments are positively or negatively affected by the project and who receive associated direct and indirect benefits and/or losses (Terry et al., 2011)

Classify stakeholders into active and passive: a) active stakeholders directly provide continuous inputs on the projects and are impacted by its design and operation on a regular basis; b) passive stakeholders like government regulations, technology and standards help to shape the inception and operation of the project (Pokharel, 2011)

There are too many definitions of stakeholders exist and this raise the question of what purpose a definition of stakeholders serves. In this context, the author prefers a definition of stakeholders that classifying stakeholders into stakeholders and external stakeholders. The former refers to anyone who has a vested interest meanwhile has overall managerial responsibility and power, usually bound by contractual relationship such as project manager, general managers, functional managers, prime contractor, management contractor, designers, professionals, financiers and suppliers. The latter refers to any people or groups that influence the project through regulations or direct action. External stakeholders might include local communities, local government, regulatory agencies, local residents, landowners, environmentalists and media.

2.2 Defining Stakeholders’ Participation

The International Association for Public Participation distinguishes five key participation forms (IAP2, 2007):

Informing – providing the stakeholders with balanced and objective information to assist them in understanding the problems, alternatives, opportunities or solutions (also Rauschmayer and Risse, 2005);

Consulting – inviting the stakeholders to comment on the documentation and provide feedback on analysis, alternatives or decisions (also Bisset 2000, Fischer, 2007);

Involving – working directly with the stakeholders throughout the process to ensure that their concerns are consistently understood and considered (Maia, 2012);

Collaborating or co-operating – negotiating and partnering with the stakeholders in planning and decision making (also Arnstein, 1969); and

Empowering – placing final decision making in the hands of the stakeholders (Maia, 2012)

According to Kirby et al. (2003), participation is not simply about being present or taking part but should be based upon having some influence over decisions and action. World Bank (1999) defined stakeholders’ participation as a process by which interested parties affect and take part in the control of development initiatives and the decisions and resources that influence them. In principle, stakeholders’ participation involves ever stakeholder, however it is not always possible to reach all individuals and some are not interested in being involved (Li et al., 2012). Participation in construction project could involve all the activities from the inception stages to completion stages. Indeed, participation of stakeholders in a construction project can be beneficial and avoid project failure.

2.3 Importance of Stakeholders’ Participation

Different stakeholders have different levels and types of investments and interests in the project (Yang, 2009). It is difficult to avoid the conflicts among the stakeholders. It might comprise of conflict of interest or dissension. Scilicet, success or failure of the project relies on the stakeholders, mainly owing to construction stakeholders have the resources and capability to stop the construction project (Atkin and Skitmore, 2008). It is not only thus, many scholars have given the opinion that project success concerns not only cost, time and quality, but also the satisfaction and effective management of the stakeholders involved (Mallak et al., 1991; Bourne and Walker, 2004; Jepsen and Eskerod, 2008). Lerbinger (2006) stated that organizations that engage with their stakeholders’ activity are more likely to succeed. Furthermore, there is a high degree of consensus among development actors and project managers on the need for active participation of stakeholders in project design and implementation in order to insure high project implementation success (Boon et al., 2012). But also participation is effective if it allows the views, perceptions, interests, values and needs of stakeholders to be integrated into project decision making (Davis-Case et al., 1992; World Bank, 1999). In every construction project, stakeholders should engage to participate in decision making.

The evidence of importance of stakeholders’ participation reinforced by the case studies done by the Boon et al. (2012) and El-Gohary et al. (2006). According to Boon, there are a number of community projects in Ghana such as toilet facilities; market structures and boreholes have been abandoned due to little or no stakeholder participation. Ei-Gohary et al. (2006) stated that major public private partnership (PPP) transportation initiatives in the United States has reportedly failed due to stakeholder opposition. As a result, it reveals that stakeholder s’ participation in construction project is the key to project success.

2.4 An overview of CSFs for Stakeholders’ Participation

Identifying CSFs for stakeholders’ participation early enough before formulation of any construction projects are vital to make sure the projects go on wheels. CSFs are viewed as those activities or practices that should be addressed so as to ensure effective participation of stakeholders in a construction project. It was once said that prevention is better than cure; consequently the project managers should ascertain all the CSFs for stakeholders’ participation before the commencement of a project. During review of the fifty papers, it appears that the only comparative study directly related to stakeholders’ participation. Many scholars (Wheeler and Sillanpaa, 1997; Smith and Love, 2004; Carroll and Buchholtz, 2006; Roome and Wijen, 2006; Ward, 1999; Yang et al., 2010) have stated the key stakeholder involvement, stakeholder engagement and stakeholder management, but not stakeholders’ participation. Even so, these proposed factors may be the CSFs for stakeholders’ participation. In addition, the relative significance of these factors do not appear to have been tested in any published work.

From the review of the fifty papers, the author hypothesizes and proposes fifteen factors associated with the stakeholders’ participation. These fifteen CSFs are as follows:

Clearly defined goals and objectives

Managing stakeholder with social responsibilities (economic, legal, environment and ethical)

Identifying stakeholders

Vested interest of stakeholders

Exploring stakeholders’ needs and constraints to projects

Assessing stakeholders’ attitude and behaviour

Assessing stakeholders’ knowledge

Specification of responsibilities of each stakeholder

Trust among stakeholders

Web of commitment

Formulating appropriate strategies to manage stakeholders

Effectively resolving conflicts among stakeholders

Effectively compromising conflicts among stakeholders

Increasing organizational efficiency

Keeping a good communication among stakeholders

2.4.1 Clearly defined goals and objectives

The project manager should have a good understanding of the project missions at each particular stage of the project lifecycle (Yang et al., 2010). For instance, issues related to cost, budget and schedule. According to the interviews done by the Jergeas et al. (2000), he proved that “setting out common goals, objectives and project priorities” is vital for improving the stakeholder management.

2.4.2 Managing stakeholder with social responsibilities (Economic, Legal, Ethical and Environment)

Social responsibility encompasses “the economic (the obligation to produce goods and services, sell them at affordable price and make a profit), legal (obligation to obey the law) and ethical (issues not covered in law but expected by society) expectations that society has of organizations at a given point in time” (Carroll, 1979). Lately, many scholars (AlWaer et al., 2008; Prager and Freese, 2009) have been devoted to environmental expectation for sustainability reasons. The environmental consideration embodied air, flora/fauna, water, noise and dust. As mentioned above, scholars have studied social responsibilities of stakeholder management from there four perspectives: economic (El-Sawah, 2006), legal (Radin, 2002; Crow, 2008), ethical (Phillips, 2003; Moodley et al., 2008; Smyth, 2008) and environmental (AlWaer et al., 2008; Reed, 2008; Prager and Freese, 2009). As a result, project management should able to manage the stakeholders with corporate social (economic, legal, ethical and environment) responsibilities (Yang et al., 2010).

2.4.3 Identifying stakeholders

Most scholars studying stakeholder management (Olander and Landin, 2005; Walker et al., 2008; Jepsen and Eskerod, 2008; Yang et al., 2009; Reid, 2011; Smudde and Courtright, 2011) have pointed out the significant importance of stakeholder identity in the construction industry. Accordingly Freeman and Evan (1990), the project stakeholders can be divided into different types and can be classified and therefore managed, once such stakeholder identities are clear. Project stakeholders can be project manager, general managers, prime contractor, competitors, suppliers, creditors, government agencies, consumer groups, intervenors, local communities, general public, stock holders, designers, constructors, management contractor, functional managers, professionals and work package manager (Cleland, 1986).

2.4.4 Vested interest of stakeholders

The vested interest of stakeholders is a vital component in stakeholders’ participation. There is plenty of researchers that considered stakeholder interest in a project to be a factor affecting the success outcome of a project (Nguyen et al., 2009). Some of the scholars even show the “interest” term in their stakeholder definitions, for instance the definitions of McElroy and Mills (2000), PMI (2004) and Bourne (2005). The vested interest of stakeholders in a project can be served as few reasons such as mission of project, economic interest, legal right, political support, health and safety, lifestyle, opportunism and survival (Cleland and Ireland, 2007).

2.4.5 Exploring stakeholders’ needs and constraints to projects

Exploring stakeholders’ needs and constraints regarding the projects are to identify areas of stakeholder interests and list the detailed issues of stakeholder concerns (Freeman et al., 2007). During the construction process, stakeholders’ needs should be assessed so that a satisfactory and realistic solution to problems being addressed can be achieved (Love et al., 2004). Yang et al. (2010) also proved the importance of exploring stakeholder needs and project constraints by survey questionnaire in China.

2.4.6 Assessing stakeholders’ attitude and behaviour

Stakeholder attitude refers to whether the stakeholder supports or opposes the project (McElroy and Mills, 2000). Stakeholders have positive and negative influences on project outcomes, thus project manager should identify the objectors and supporters (Nguyen et al., 2009). There are five levels of stakeholder attitude, active opposition, passive opposition, no commitment, passive support and active support (McElroy and Mills, 2000). The behaviour of stakeholders has been found to be not necessarily co-operative (Yang et al., 2010). They have the ability to either contribute or jeopardize the project success. Stakeholder behaviour can be sorted into three categories: observed behaviour, cooperative potential and competitive threat (Freeman, 1984). During the stakeholder management process, the project managers need to clear the range of both stakeholders’ attitude and behaviour.

2.4.7 Assessing stakeholders’ knowledge

Stakeholders’ knowledge can be a driver in respect of stakeholder impact on projects (Nguyen et al., 2009). This provides a strong sense of stakeholder impact on projects when the stakeholders have more knowledge about the projects. According to McElroy and Mills (2000), stakeholder knowledge range from full awareness to total ignorance. The former refers to the intention of the stakeholders to gain knowledge of the project by finding the facts to help them achieve their own objectives while the latter refers to the fact that stakeholders have knowledge of the project by hearsay and assumptions rather that facts (McElroy and Mills, 2000).

2.4.8 Specification of responsibilities of each stakeholder

It is crucial to define clearly the responsibilities of each stakeholder for bearing and managing project-related uncertainty (Ward and Chapman, 2008). By way of illustration, the contractor firms are more likely conscious of the ambiguity about responsibilities than their clients. The clients exerts influence over the contractor mainly through conditions laid down in a contract between the two parties. Basically, the contract sets out what is to be produced, what the client will pay, how the client can assess and monitor what the contractor has done and how the things should proceed in case of any contingent events (Ward and Chapman, 2008). Therefore, specify clearly the responsibility of each stakeholder in contract is vital to reduce uncertainty about each party’s responsibility and also avoid dispution in the future.

2.4.9 Trust among stakeholders

Trust is something that must be earned over time by listening, talking and making sure that you “walk the talk” (Karlsen et al., 2008). Trust is the single most critical variable in stakeholder relationships (Finch, 2008) and it creates the opportunity for project success. This is because trust primarily led to more effective and efficient project managentment as far as technical issues are concerned (Rowlinson and Cheung, 2008).

2.4.10 Web of commitment

Commitment can be defined as “the simplest kind of agreement between two people about something they both agree to do” (Berkun, 2005). Berkun (2005) argues that trust is built through meaningful commitments. High commitment is important for building trust in a relation. This coincides with Berkun’s (2005) opinion that if a project manager continually breaks his commitment to a person, that person’s perception of the project leader will alter. Then the person will no longer see the project manager as a good leader and he will question his trust in him. In the Malaysia construction project, it is a norm for both site supervisor and site engineer from the operation level to attend all monthly management meetings, once again reinforcing the level of commitment from both parties to management and empowerment and participation (Rowlinson and Cheung, 2008).

2.4.11 Formulating appropriate strategies to manage stakeholders

According to the survey done by Karlen (2002), he stated that there are different types of the strategies to deal with the stakeholders, yet stakeholder management strategy is the attitude with which the project manager treats different stakeholders. Other scholar such as Schwager (2004) also points out the central question of stakeholder management which was “what are the strategies that the organization used to solve the issues raised by stakeholders”. All the proof above show that there is a need to formulate some appropriate strategies to manage the stakeholders so that can maximize the satisfaction among the stakeholders.

2.4.12 Effectively resolving conflicts among stakeholders

Every construction project involves a number of stakeholders (Ward and Chapman, 2008) such as owners, project managers, designers, subcontractors, suppliers, financiers ,local communities, local government, regulatory agencies, environmentalists and media (Takim, 2009). When there are many stakeholders in an endeavour the potential for their stakes to conflict with each other is relatively higher (Lynch, 2006). For example, if an organization focuses on the interests of one stakeholder alone, the interests of its other stakeholder are devalued (Doyle and Stern, 2006) and this will definitely arouse controversy about his interests. Other than that, in real construction, stakeholders often have divergent interests and objectives (Heugens, 2003) and it is recognized that there will have conflicts from pre-construction to post completion stage. Hence, it is important for project manager to resolve the conflicts effectively.

2.4.13 Effectively compromising conflicts among stakeholders

Since there are plenty of conflicts among stakeholders, finding solutions resolves regarding these conflicts is important for project managers (Freeman, 1984). Somehow there is no guarantee that all the conflicts can be resolved while compromise conflicts emerged as the alternative ways to achieve win-win situation.

2.4.14 Increasing organizational efficiency

Organizational capabilities that foster cooperation and environmental learning are a critical part of stakeholder engagement (Clarke and Roome, 1999). Working together has an added value that exceeds the negative effects arising from conflits of interest and these negative effects can undermine the organizational effectiveness (Clegg 1989; Roome and Wijen, 2006).

2.4.15 Keeping a good communication among stakeholders

According to Weick (1979), communication is certainly essential in the firm’s organizing. In other word, communication is the key to maintain relationship with stakeholders relationship (Smudde and Courtright, 2011). This statement reveals more significant in the construction field. As mentioned before, conflicts will always being along the construction process, neither pre-construction stage nor post completion stage. It is a good practice that keeping a good communication among the stakeholders. Therefore, with the communication as the heart of organizations and organizing, it will contributes to the project success. In addition to this, project managers should be highly skilled negotiators and communicators, capable of managing individual stakeholder expectations and creating a positive culture change within the overall organization (Weaver, 2007).

CHAPTER 3

RESEARCH METHODOLOGY

Introduction

The study was based on li