Project stakeholder analysis as an environmental interpretation process

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1 Available online at International Journal of Project Management xxx (2010) xxx xxx Project stakeholder analysis as an environmental interpretation process Kirsi Aaltonen * Helsinki University of Technology, BIT Research Centre, P.O. BOX 5500, FI HUT, Finland Received 26 August 2009; received in revised form 4 December 2009; accepted 2 February 2010 Abstract International projects face a variety of pressures from their uncertain and complex external stakeholder environments. In order to reduce uncertainty, a project management team builds up interpretations about their environment by conducting stakeholder analysis. This study aims to examine the interpretation processes, through which project management teams come to know their external stakeholder environment. The point of departure for the study is Daft and Weick s (1984) typology about organizational interpretation modes. The paper identifies and describes distinctive interpretation modes of external stakeholder environments in four international projects. The interpretation modes differ in their stakeholder analysis characteristics. The project managers beliefs about the stakeholder environment and the project s intrusiveness towards its stakeholder environment are hypothesized to be associated with the identified differences in the interpretation modes. Ó 2010 Elsevier Ltd and IPMA. All rights reserved. Keywords: Project stakeholder analysis; Environmental interpretation; Project stakeholder environment; International projects 1. Introduction Projects involve a wide array of stakeholders whose interests and demands need to be considered in the managerial decision-making, to ensure the success of the project (Cleland, 1986; Diallo and Thuillier, 2005; Olander and Landin, 2005). An essential part of stakeholder management is stakeholder analysis. By conducting stakeholder analysis, project managers attempt to build a correct picture of their stakeholder environment upon which the organizational action concerning stakeholders can be determined. Building the correct picture of the stakeholder environment, however, is not as straightforward as diverse normative managerial methods and tools of stakeholder analysis would suggest. This paper is based on the assumption that the process of stakeholder analysis is always an interpretation process, which may produce different understandings of the stakeholder environment. Despite the fact that the management s perception and * Tel.: address: kirsi.aaltonen@hut.fi interpretation processes have been asserted to be at the heart of many stakeholder classification frameworks (e.g. Mitchell et al. s (1997) stakeholder salience framework) only limited attention has been devoted to the interpretation processes concerning stakeholder environments in the field of project management. However, it is these very interpretation processes how information from the stakeholder environment is obtained, filtered and processed that ultimately determine the managerial actions. In this paper we apply the theoretical model of organizations as interpretation systems (Daft and Weick, 1984) in the context of project stakeholder analysis. The theoretical model particularly focuses on describing the process by which managers perceive, interpret and attempt to respond to changes in an organization s external environment (Milliken, 1990). The main argument is that organizations differ systematically in the modes and processes through which they interpret their external environment. Additionally, Daft and Weick s (1984) model suggests that two dimensions: (1) management s beliefs about the environment and (2) organizational intrusiveness into the environment, determine organizational action related to interpretation processes /$36.00 Ó 2010 Elsevier Ltd and IPMA. All rights reserved. doi: /

2 2 K. Aaltonen / International Journal of Project Management xxx (2010) xxx xxx By adopting an environmental interpretation perspective, we describe the external stakeholder analysis processes in four international case projects that are implemented in challenging institutional environments. The unique context of international projects provides an excellent setting for the study of interpretation processes with regard to external stakeholders, such as authorities, regulatory bodies and local community groups groups whose importance is growing (IFC, 2007) but that are often excluded from stakeholder investigations. We are particularly interested in how, through what kinds of practices, do project management teams analyze and interpret their external stakeholder environment in the context of international projects? Furthermore, the role of Daft and Weick s (1984) model s two dimensions in determining the interpretation processes is investigated in the project context. This approach is believed to increase our understanding of the variance of project stakeholder analysis practices: previous literature has devoted only limited attention to the association of project stakeholder analysis practices with the project management team s assumptions concerning the stakeholder environment and the project s intrusiveness towards its environment. The concept of interpretation is not well understood in the existing literature. In this paper the interpretation processes concerning the project s external stakeholder environment are viewed widely as any type of activity within the project through which the project management teams come to know the external stakeholder environment of the project. These activities include data scanning, actual interpretation process, and strategy formulation and decision-making (Daft and Weick, 1984). In the following, we first discuss the concept of project stakeholder environment and review the literature regarding project stakeholder theory and analysis. After presenting the theoretical model of Daft and Weick (1984) in more detail, literature on project stakeholder management is reviewed by paying particular attention to the perspectives of project managers beliefs about the stakeholder environment and a project s intrusiveness towards its stakeholder environment. The methodology of the study is presented next and followed by case descriptions, cross-case analysis results, discussion and conclusions. 2. Literature review 2.1. Project stakeholder environment Stakeholder theory provides a solid basis for identifying, classifying and categorizing stakeholders, and understanding their behavior. The basic idea of stakeholder theory is that the organization has relationships with many constituent groups and that it can engender and maintain the support of these groups by considering and balancing their relevant interests (Freeman, 1984; Jones and Wicks, 1999). Overall, a central purpose of stakeholder theory is to enable managers to understand and, subsequently, manage stakeholders more strategically. While having its origins in strategic management, stakeholder theory has been applied to a number of fields. Furthermore, it has been presented and used in a number of ways that are quite distinct and involve very different methodologies, concepts, types of evidence and criteria of appraisal (Donaldson and Preston, 1995). The managerial importance of stakeholder management has been accentuated in various studies (Clarkson, 1995; Freeman, 1984; Donaldson and Preston, 1995; Mitchell et al., 1997; Rowley and Moldoveanu, 2003; Savage et al., 1991) which demonstrate that fair treatment of stakeholders is related to long-run survival of the organization. Since Freeman (1984) published his landmark book on stakeholder management, stakeholder theory has been thoroughly debated. The majority of research on stakeholders has focused on theoretical discussions and debates about the concept of stakeholders and the nature of stakeholder theory (Donaldson and Preston, 1995; Jones and Wicks, 1999; Mitchell et al., 1997; Rowley, 1997; Frooman, 1999). Indeed, the theory has developed diffusely, which has resulted in a diverse set of definitions and perspectives. Among others, Freeman and McVea (2001) have called for the application of the ideas of stakeholder theory to real world problems instead of focusing solely on the development of the theory. The management of project stakeholders by taking into account their needs and requirements is an essential element of project success (Cleland, 1986; Diallo and Thuillier, 2005; Olander and Landin, 2005). In the project management standard (PMI, 2008), stakeholders are defined broadly as individuals and organizations that are actively involved in the project or whose interest may be affected as a result of project execution or project completion. A typical division is to group stakeholders into internal and external stakeholders. Internal stakeholders are the stakeholders that are formally members of the project coalition and, hence, usually support the project (Winch, 2004). They are often referred to as primary stakeholders (Cleland, 1998) or business actors (Cova and Salle, 2005). Such stakeholders have a formal, official, or contractual relationship with the organization. External project stakeholders are not formal members of the project coalition, but may affect or be affected by the project. Such groups are often referred to as non-business stakeholders (Cova and Salle, 2005) or secondary stakeholders (Clarkson, 1995). A lack of understanding of the various interest groups, the drivers of their actions and their potential to influence during the project life-cycle, especially on the part of management, has been identified as a major challenge in international projects (IFC, 2007; Miller and Olleros, 2001; Winch and Bonke, 2002). Recently, both external and internal pressures for projects to be more environmentally and socially responsible have been on the rise. Therefore, today the concerns of external stakeholders need to be considered in the project decision-making more carefully in order to ensure project success (IFC, 2007). However, until

3 K. Aaltonen / International Journal of Project Management xxx (2010) xxx xxx 3 recently scholars in the field of project management have devoted much of their research effort to examining the management of internal stakeholders that are important with regard to the project s economic interests, such as suppliers, sponsors, and customers. As open systems, projects interact with their stakeholder environment on various levels and in various ways (Cleland and King, 1968; Morris, 1983). The concept of project stakeholder environment is not established or defined in the current project management literature, even though informal reference to a projects complex stakeholder environments have been made in previous research (e.g. Artto et al., 2008; Martinsuo and Lehtonen, 2009). In this paper, a project s stakeholder environment is understood to consist of all organizations, and relationships between them, that can affect, or be affected by, the project. The external stakeholder environment involves all external stakeholders of the project and relationships between them Project stakeholder analysis as an environmental interpretation process Project stakeholder analysis is a central component of stakeholder management. It is the process through which project managers attempt to understand and read the project s stakeholder environment in order to be able to determine the right type of action concerning different stakeholders. While the majority of project stakeholder research has focused on producing normative guidelines, models and instructions on how to classify stakeholders and identify the most salient stakeholders, assuming an objectively analyzable stakeholder environment, less explicit attention has been paid to how project managers actually and project management teams perceive and make interpretations about their stakeholder environment in practice. Indeed, project managers, following the seemingly similar stakeholder analysis processes, may perceive and enact their stakeholder environment differently and build up different interpretations about it. Daft and Weick (1984) view organizations as interpretation systems and divide the interpretation process into three stages. First managers scan the environment in order to collect data about actual or potential changes in it. Second, they analyze and interpret the collected information in order to make sense of it and identify important issues. Third, they make decisions and take action based on their interpretations. These three tasks described by Daft and Weick (1984) can also be considered as fundamental elements of a systematic project stakeholder analysis process: the established guidelines for stakeholder analysis include stakeholder identification, characterization, and classification of stakeholders based on their attributes and interests, as well as decision-making about the stakeholder management strategy (Jepsen and Eskerod, 2009; PMI, 2008). The scanning process, which involves data collection serves as the input for the actual project stakeholder identification and characterization. The interpretation process, in which data is actually given meaning, involves the actual project stakeholder identification and their characterization and classification, while the strategy formulation and decisionmaking process pertains to the formulation of project stakeholder management strategy. Research on project stakeholder management has identified different methods and tools for collecting stakeholder related information, identifying key stakeholders and characterizing them, in addition to formulating the stakeholder management strategy. From an interpretation perspective, the different stakeholder identification and classification frameworks can be viewed as tools that support the development of a shared understanding or collective mind of the project team with regard to the stakeholder environment. Table 1 combines the identified interpretation tasks (Daft and Weick, 1984) with the corresponding stakeholder analysis process phases, and summarizes and classifies existing project stakeholder research with regard to different phases of the analysis process Organizations as interpretation systems Daft and Weick s (1984) argument is that organizations differ systematically in the mode and process by which they interpret their environment. Arguably, a number of factors influence the potential differences in interpretation processes concerning the environment. Based on the idea that organizations may differ in their beliefs about the environment and in their intrusiveness into the environment, Daft and Weick (1984) categorize organizations according to different interpretation modes. Fig. 1 presents the interpretation system model summarizing the four modes of interpretation. Based on the model predictions about organizational characteristics related to the interpretation behavior scanning characteristics, interpretation processes, and strategy and decision behavior, can be made. The enacting mode reflects active strategy towards the environment and the managers assumption that the environment is unanalyzable. Such organizations gather information by trying new behaviors and seeing what happens. Data sources are external and personal and decision processes based on trial and error. Organizations in the discovering mode represent an intrusive organization, but the focus is on searching for the correct answer from the analyzable environment. Formal data and processes are valued. The conditioned viewing mode covers organizations that are passive towards their environment and assume an analyzable environment. They rely on routine documents and reports and do not cross the traditional boundaries in their interpretations. Organizations in the undirected viewing mode employ a passive approach towards their environment; however, they do not rely on hard and objective data because the environment is assumed to be unanalyzable. Instead, external, and personal data sources are highlighted. (Daft and Weick, 1984).

4 4 K. Aaltonen / International Journal of Project Management xxx (2010) xxx xxx Table 1 Environmental interpretation process and corresponding project stakeholder analysis phases. Interpretation process phase Data scanning Project stakeholder analysis phase Data collection concerning project stakeholders and their characteristics Examples of methods related to different stakeholder analysis process phases Face-to-face interviews (Varvasovszky and Brugha, 2000) Snowball interview technique (Cova et al., 1996) Generic stakeholder lists (Pouloudi and Whitley, 1997) Brainstorming (Calvert, 1995; Vos and Achterkamp, 2006) Surveys and semi-structured questionnaires (Cova et al., 1996; Karlsen, 2002) Start up dialogue (IFC, 2007) Special reports (IFC, 2007) Lessons learned reports (El-Gohary et al., 2006) Workshops, personal surveys, focus group discussions, public meetings, public hearings (El-Gohary et al., 2006) Data interpretation Stakeholder identification and classification Cleland s (1986): identify stakeholders and their interest, measure the interest, try to predict stakeholders future behavior Stakeholder salience model (Mitchell et al., 1997): classification based on power, legitimacy, urgency Stakeholder group categorization (Savage et al., 1991): supportive, mixed, blessing, not-supportive, marginal Power/interest matrix (Johnson and Scholes, 1999; Olander and Landin, 2005) Stakeholder mapping (Winch and Bonke, 2002) Role-based stakeholder models (Achterkamp and Vos, 2008; Vos and Achterkamp, 2006) Outline tool (Andersen et al., 2004): area of interest, contributions, expectations, power, management strategy Stakeholder commitment matrix (McElroy and Mills, 2003) Stakeholder Circle a tool for measuring and visualizing stakeholder influence (Bourne and Walker, 2006) Stakeholder impact index (Olander, 2007) Application of uncertainty management framework, SHAMPU (Ward and Chapman, 2008) Strategy formulation and decisionmaking Formulation of stakeholder management strategy based on the results of stakeholder identification and classification Communication and information dissemination strategies (PMI, 2008) Stakeholder engagement process (Bourne and Walker, 2006; IFC, 2007) Stakeholder empowerment (Rowlinson and Cheung, 2008) Stakeholder involvement process (El-Gohary et al., 2006) Keep satisfied, manage closely, monitor, keep informed (Johnson and Scholes, 1999; Olander and Landin, 2005) Influence strategy, dismissal strategy, compromising strategy, adaptation strategy, avoidance strategy (Aaltonen and Sivonen, 2009) 2.4. Dimensions determining interpretation modes in project management context By applying the ideas of Daft and Weick (1984) in the context of project stakeholder analysis, this study is built on the assumption that project management team s stakeholder analysis activities and interpretation processes are determined by: (1) the project management team s beliefs about the analyzability of the external stakeholder environment and (2) the extent to which the project intrudes into the external stakeholder environment to understand it. In other words, the level of stakeholder related information collection, rules and resources devoted to interpreting this information, and decision-making based on the interpretation are associated with the two variables. In the following two sections, we review how the two variables identified are present in the literature on project stakeholder management Project management team s beliefs about the analyzability of the stakeholder environment The analysis of project management research reveals fundamental differences in the underlying assumptions about the analyzability and controllability of the project s stakeholder environment. On the one hand, stakeholder analysis standards, models, and guidelines (PMI, 2008) provide detailed descriptions on how to analyze and enact the environment as objectively as possible: in other words, the majority of existing project stakeholder analysis guidelines assumes a highly analyzable environment by implying

5 K. Aaltonen / International Journal of Project Management xxx (2010) xxx xxx 5 Unanalyzable ASSUMPTIONS ABOUT ENVIRONMENT Analyzable UNDIRECTED VIEWING Constrained interpretations. Nonroutine, informal data. Hunch, rumor, chance opportunities. CONDITIONED VIEWING Interprets with traditional boundaries. Passive detection. Routine, formal data. ENACTING Experimentation, testing, coercion, invent environment. Learn by doing. DISCOVERING Formal search. Questioning, surveys, data gathering. Active detection. Passive Ati Active ORGANIZATIONAL INTRUSIVENESS Fig. 1. Model of organizational interpretation models (Daft and Weick, 1984). that an appropriate stakeholder management strategy can be selected ex ante. On the other hand, some scholars claim that it is impossible to formally model, anticipate, and foresee emergent, uncontrollable interactions in a project s uncertain and dynamic stakeholder environment (Floricel and Miller, 2001; Söderholm, 2008). This view on the environment argues that projects do not exist in a predictable, Newtonian world of cause and effect where things go according to plan (Flyvbjerg et al., 2003). Empirical research has also acknowledged the difficulties for an organization to draw boundaries during the process of stakeholder identification (Achterkamp and Vos, 2008), the human limitations concerning the existing methods and tools for identifying stakeholders (Jepsen and Eskerod, 2009), and difficulties associated with the dynamic and uncertain nature of the stakeholder environment that makes environmental analysis more challenging (Olander, 2007; Olander and Landin, 2005; Yang et al., 2009). Kasperson et al. (1988) introduce the concept of social amplification of risks and point out that consequences of risk events extend far beyond direct harms to include significant indirect impacts, which makes their identification challenging. Their argument is that social amplifications of risk will yield behavioral responses which will result in secondary impacts. These impacts may spread or ripple to other parties and distant locations as well. Whilst research on stakeholder management takes different stands towards the analyzability of the environment, it is likely that project managers will do so as well. Presumably project managers and project management teams differ in their beliefs concerning the project s stakeholder environment. While some project managers may utilize stakeholder analysis models for seeking the correct rationalistic interpretation of the environment and assume the environment to be analyzable and events and actions to be concrete and measurable, others may maintain that it is highly challenging to analyze formally the emergent interactions in complex stakeholder environments. Managers beliefs are identified as central components in many fundamental stakeholder models, such as stakeholder salience theory (Mitchell et al., 1997). The stakeholder salience framework proposes that it is the firm s managers who determine which stakeholders are salient and will therefore receive the management s attention. Mitchell et al. (1997) argue that managerial characteristics are an important factor in stakeholder management, since managers vary greatly, for example, in their environmental scanning practices and values. The salience framework proposed by Mitchell et al. (1997) has also received criticism. Among others, Banerjee (2007) has criticized the salience framework for being particularly problematic for marginalized groups, such as indigenous communities trying to negotiate their survival with corporations and governments. Following Banerjee (2007), this is because stakeholder legitimacy is a function of power relationships between different actors, and the rationality that determines the legitimacy of a stakeholder arises from corporate and economic values, not social ones. The prevailing tendency by decision makers and project promoters seems to be to highlight the desirability of projects and diminish the potential negative consequences of the projects (Grün, 2004). Therefore, managers have a tendency to ignore such stakeholder groups that are negatively affected and have incompatible needs and interests with those of the project (Flyvbjerg et al., 2003). Existing empirical research has, however, also revealed that some CEOs are more sensitive to the claims of external stakeholders than others due to the differences in managers personal values (Agle et al., 1999) Project s intrusiveness projects as passive versus active towards their stakeholder environment Project management research provides contradicting evidence on how active versus passive projects are, and should be, towards their stakeholder environment. While active projects search the environment for an answer on a

6 6 K. Aaltonen / International Journal of Project Management xxx (2010) xxx xxx continuous basis, allocate resources to search activities and are receptive to inputs and influences from the environment or even try to proactively influence the environment, passive projects accept whatever information the environment gives them and react only when a crisis occurs. Aaltonen and Sivonen (2009) show how projects differ with regard to how active or passive they are towards their external stakeholder environment in the context of international projects: while some projects are constantly scanning and intruding towards their environment, others attempt to encapsulate the project from the environmental influences and respond only when conflicts occur. Early stakeholder engagement and opening of a project in its shaping phase has been emphasized by many authors as a major project success factor (Flyvbjerg et al., 2003; Miller and Olleros, 2001). It is a widely acknowledged assumption in both the project management literature and in ethical guidelines of infrastructure projects (IFC, 2007) that the project preparation phase is a stage where different stakeholders with differing opinions and objectives have the best possibility to affect the project s objectives and outcomes (IFC, 2007; PMI, 2008). At this stage, it is suggested that activity directed at the stakeholder environment is needed. In short, research has shown that openness, dialogue and active engagement of stakeholders, particularly in the front-end phases of the project, reduce the potential for conflict in the project execution phase. Morris (1983) emphasizes the important role of senior management in connecting the project to the wider social system and outside world, such as media, local and federal government, regulatory agencies and community groups. According to him, senior project management should be sensitive to different value systems and political realities in the environment. However, Morris (1983) notes that project managers rarely have training or skills related to the coordination of projects with their outside environment and, therefore, often dismiss external stakeholder related issues in the important early stages of the project. Passive interaction with the project s environment has been brought up as a means to protect the development of the project. For example, Lundin and Söderholm (1995) have proposed isolation as a mechanism for diminishing the impacts of environmental turbulence especially during the project execution phase. Furthermore, empirical evidence confirms that in order to highlight the desirability of a project (Grün, 2004), negative stakeholders views and opinions are treated passively by project managers in the investment preparation phase. Relating passively to an opposing stakeholder s input can be understood from the project managers short-term imperative to secure and promote a project go-decision: taking too many negative claims into account, especially from such stakeholder groups that are not powerful and in a contractual relationship with the project, provides a threat for the actual project go-decision. Passive projects may not, for example, have departments assigned to take care of external stakeholder involvement (El-Gohary et al., 2006) Methodology The present study employs a qualitative research strategy in a multiple case setting (Eisenhardt, 1989) by utilizing the initial theoretical framework of organizations as interpretation systems (Daft and Weick, 1984) in the context of project stakeholder analysis. Since previous research with an interpretation perspective on project stakeholder analysis is limited, and while our research addresses how type of question in order to understand how stakeholder analysis is actually conducted and how it is dependent on contextual forces, a case study approach was chosen as a research strategy. Furthermore, we are interested in exploring the practice of stakeholder analysis through the two dimensions that have been hypothesized to explain differences in the interpretation processes. The case study method is particularly suited to research questions which require detailed understanding of social or organizational processes; this is because of the richness of the data that can be collected in a case study context (Hartley, 2004). In case study research the phenomenon is not isolated from its context but is of interest precisely because the aim is to understand how organizational behavior and processes are influenced by the organizational and environmental context (Yin, 2003). The case selection was not random but based on theoretical sampling. We selected the context of international projects for the purposes of this study because such projects typically involve a highly complex, demanding and uncertain external stakeholder environment. We selected two turnkey delivery projects and two system delivery projects, each implemented in a multi-firm project network in an institutionally demanding environment. The project-based organizations of the cases were all different. We looked for polar cases that were seen to differ with regard to their intrusiveness towards the stakeholder environment and with respect to the project management teams assumptions about the stakeholder environment. With this case selection strategy we wanted to ensure that the cases would reveal differences in the environmental interpretation processes and fill the different theoretical categories in the framework of Daft and Weick (1984). Hence, we selected four cases which we called Analyzer, Prospector, Reactor and Defender. The names of the cases reflect our initial expectations about the differences in the profiles of the interpretation modes between the cases. Case Analyzer was a turnkey project conducted in Eastern Europe, Case Prospector, a turnkey project implemented in Caribbean, and Cases Reactor and Defender system delivery projects conducted in China. Table 2 presents detailed background information about each analyzed project case. Case studies may employ either qualitative or quantitative evidence or both. For the purposes of this research, a qualitative research strategy with interviews as a primary method of data gathering was chosen. The goal of any qualitative interview is to see the research topic from the

7 K. Aaltonen / International Journal of Project Management xxx (2010) xxx xxx 7 Table 2 Case information. Dimension Case Analyzer Case Prospector Case Reactor Case Defender Project scope, duration, monetary value Organization s position in the project network and project scope Turnkey project Greenfield network investment 5 years >200 million US dollars Turnkey contractor responsible for the whole project implementation Small turnkey project, 2 years, ca. 100 million US dollars Turnkey contractor, responsible for the whole project implementation System delivery to an industrial facility, 2 years, 20 million US dollars System contractor, responsible for design, equipment delivery and installation Host country Former Soviet Union country Caribbean islands China China System delivery to an industrial facility, 3 years, >10 million US dollars System contractor responsible for design, equipment delivery and installation Customer Nature of projectbased firm s operations Project organization Project-based firm s experience from host country and from customer Project manager s experience Stakeholder network A Southern European company with permanent operations in the host country Tens of projects implemented in parallel, turnkey projects, system deliveries, equipment deliveries, service projects Project team co-located in the host country. Part of the project personnel divided among different regions in the host country Limited experience Local energy supplier A Chinese company A Chinese company Tens of projects implemented in parallel. Majority of the projects turnkey projects Distributed. Part of the project team in the host country, part of the project team in the home base Experience from a previous similar project to the same customer. Local conditions well known Tens of projects implemented in parallel. Majority of the projects system deliveries Distributed. Project manager in the home base country, part of the project team in China. Project manager s frequent visits to China, once in 2 months, 2 3 weeks Limited experience Tens of projects implemented in parallel. Majority of the projects system deliveries Distributed. Project manager and project team in the home base country. Project manager s frequent visits to China, once in 3 months for 2 3 days Various industrial deliveries to China A new customer A new customer Customer known based on earlier co-operation An experienced project manager with experience from diverse countries Inexperienced, 3 years experience as a project manager An experienced project manager but no exposure to China before the project An experienced project manager, but no exposure to China before the project Highly complex Complex Complex Low in complexity Customer, two primary subcontractors, various local subcontractors, various authorities and regulatory agencies, local opponents Local customer, customer s consultant, local main contractor, local authorities Customer, customer s Chinese engineering office, Chinese suppliers delivering critical equipment, Shanghai subsidiary, local authorities in-directly through subcontractor s exposure Customer, domestic subcontractors, Shanghai subsidiary Other contextual factors Highly strategic project. Rather fast-paced sales phase. Challenging country environment due to constant changes in regulations and political climate Mature technology and non-complex product. A highly challenging local environment with regard to bureaucracy and regulations Intense sales phase Chinese subcontractors used for the first time for critical component delivery Project was considered as easy from the beginning. The project was a copy project from a previous delivery Project success Still ongoing. Challenging with regard to stakeholder management and interfaces. Delays Completed on time and on budget. A highly satisfied customer Successful with regard to profitability. Delayed Highly successful in terms of profitability, delayed due to customer s challenges with permissions

8 8 K. Aaltonen / International Journal of Project Management xxx (2010) xxx xxx perspective of the interviewee and to understand how and why they come to have this particular perspective (King, 2004). Interviews were selected as a primary data gathering method due to their insightfulness, possibility to gain rich data and the possibility to focus directly on the case study topic (Yin, 2003). The interview data was complemented with project related documentation. The primary data was collected in 2008 through faceto-face interviews with project directors, project managers and other project management team members (project engineers, risk managers, and project controllers) that were involved in the stakeholder analysis processes of the projects. The number of interviews with different project team interviewees was 22: In Case Analyzer eight interviews, in Case Prospector four interviews, in Case Defender six interviews and in Case Reactor four interviews. In all the four cases, the project managers were interviewed twice in order to validate initial findings and to provide a more in-depth discussion of the selected themes. Project managers were considered as the key informants concerning their projects. In Cases Analyzer, Reactor, and Defender, local team members (Eastern European and Chinese), were also interviewed near the project site in the host country of the project. Primary interview data was complemented with 15 interviews altogether, each with the case projects parent company representatives: five interviews in Case Analyzer, four in Case Prospector, three in Case Reactor and three in Case Defender. These representatives included country managers, project process managers and heads of project management offices that belonged to the steering committees of the analyzed project cases. In addition, project documentation such as project plans, risk analysis reports and lessons learned reports complemented the interview data in each of the cases analyzed. Interviews were carried out by two to three interviewers. A semi-structured interview protocol entailing open-ended questions was utilized in the interviews of the project team members. The interview guide is presented in Appendix A. The interview themes included, among other things, descriptive information concerning the project, its organization and proceeding, internal and external stakeholders, local host country environment, stakeholder management practices, and stakeholder related events and their management. The objective was to gain knowledge especially about the stakeholder environment contexts of the projects and about the projects stakeholder analysis practices. Examples of interview questions related to stakeholder analysis practices are: What types of processes do you have for collecting stakeholder data and interpreting it, can you give an example? How do you decide on stakeholder management actions, can you give an example? We also posed questions that were intended to reveal interviewees assumptions and beliefs concerning the external stakeholder environment that are present in Daft and Weick s (1984) framework. An example of this type of question is How would you describe the external stakeholder environment of your project? In each of the project cases, various external stakeholder related events were brought up by the interviewees. When this happened, the interviewees were urged to describe these events candidly with their own words and to tell their story about their analysis and management. These descriptions provided additional data concerning the interviewees beliefs about the external stakeholder environment, as well as their activeness versus passiveness towards the environment. The interviews lasted between 50 and 90 min each, and they were tape recorded and transcribed. The original data consisted of over 250 pages (MS Word, 8 pt) of transcribed interview material. The interview data was content analyzed manually. Analysis codes were generated based on the various reading rounds of the interview transcripts, literature on stakeholder analysis process and the theoretical model by Daft and Weick (1984). During the first coding round, we focused on coding the activities related to scanning stakeholder information, interpretation processes and the decision-making and strategy formulation processes. After this, the interview data was coded electively by focusing on events that involved external stakeholders, such as ones pertaining to authorities or local community groups. Then scanning processes, interpretation processes, decision-making and strategy formulation processes concerning these events were identified. The third coding round focused on coding indicators that dealt with how the project management team members involved in the stakeholder analysis process perceived their environment (whether it was considered to be analyzable or unanalyzable) and how actively the project was intruding into its environment. Based on the coding, the case descriptions were formulated. Illustrative interviewee quotations were selected to deepen and validate the within case analyses. Finally, cross-case analysis was conducted, during which we carefully examined the cases seeking commonalities and differences between them Case analyses Case Analyzer Case Analyzer was a turnkey project implemented in a former Soviet Union country. In addition to the focal company that had full responsibility for the turnkey delivery, the multicultural and complex project network included a Southern European customer, and local Eastern European subcontractors. Analyzer had no previous project experience from the host country that presented difficulty, especially with regard to legislation and permission procedures. The external stakeholder environment of the project was complex and uncertain, involving a number of actors that were not previously known to Analyzer. Therefore, information concerning diverse authorities, regulatory bodies, government agencies, and local community group representatives, including their requirements and permission procedures, was needed. The data acquisition concerning external stakeholders was characterized by the project team members as continuous, systematic and controlled, and was started already in

9 K. Aaltonen / International Journal of Project Management xxx (2010) xxx xxx 9 the early sales phase of the project. However, in the front end of the project, challenges were also encountered; these are illustrated in the following quotation from the project manager: We did not have the country knowledge, nor understanding of the local circumstances and stakeholders. Also customer and our primary subcontractor lacked this knowledge at first. When we came here all we had was a big black hole. Therefore, the project manager placed special emphasis on learning about and gaining the understanding of the local practices and salient external stakeholders on which the project was dependent. The data acquisition was first conducted by a specialized project preparation team. After that, the responsibility was shifted to the project team. In other words, assigned resources were allocated to information collection activities. Both external sources, such as country studies and country analyses, formal and documented discussions with other project participant organizations representatives, as well as brainstorming sessions within the project team and lessons learned reports from previous projects were utilized in the data acquisition. Furthermore, processes related to external stakeholders, such as requests of permission to authorities, were systematically and formally mapped to a large process map that visualized all interconnections between the Analyzer s project processes and the local authorities processes. The project manager characterized this exercise as extremely laborious. The collected information was also stored to different Excel spreadsheets for later use. As new relevant stakeholder related information appeared it was integrated with accumulated stakeholder knowledge and the Excel spreadsheets were also updated. For example, when local opposition by the residents appeared suddenly against the project, this information about a new stakeholder group was immediately recorded to the Excel spreadsheet. Information about salient external stakeholders was also systematically collected through the local subcontractor network. This information collection took place during the daily interaction with the local subcontractors and was described by a project director as follows: An extremely useful source of information with regard to the external stakeholder environment, were the local subcontractors. The process actually started proceeding through them little by little. Not in a day or two, but in a few months due to our daily interaction. To summarize, data acquisition concerning the external stakeholder environment was tightly embedded in the daily activities of the project, and the project team members were involved and committed to collecting and analyzing the information by following the specified company guidelines. The interpretation process, including characterizing and classifying stakeholders, was also typically a group effort within the project management team. Different possibilities to identify, categorize, and approach external stakeholders were discussed together in meetings, and several individuals participated in these processes. Also formal tools, such as stakeholder maps, were utilized in the categorization and prioritization efforts of stakeholders. These categorization exercises frequently aroused vivid discussions among the project management team members as contradictory opinions concerning the prioritization of stakeholders were voiced. Issues related to external stakeholders were also regularly brought up in the standard weekly project meetings. In the actual management of external stakeholders, local subcontractors were also used as a supporting resource. The strategy was to approach and influence external stakeholders proactively. The understanding of the project s external stakeholder environment was perceived by the project management team as highly important for the success of the project. Even though the host country of the project was turbulent and acquisition of stakeholder related information was challenging due to the limited transparency of the environment, the project management team still held the assumption that the stakeholder environment is analyzable and could be used for collecting information. Their view was that a correct interpretation about the external stakeholder environment could be discovered with intelligent information gathering and rational analysis. This became obvious from various indicators in our data and is illustrated in the following quotes from the project director and project manager. We went through and mapped all our permission processes thoroughly. You can see from these detailed process descriptions how complicated this thing is what it takes when we start from the planning until the last phase is completed. It entails many steps, so many stages where you must realize where the permission comes from. We did not have this figured out at all before this exercise. [Project director] We track weekly all our permission procedures with the authorities. We also receive continuous reports about the timetable. One cannot rely and believe that the permits will come some day, one must be highly active and proactive towards the authorities. [Project manager] The project management team seemed to perceive the external stakeholder environment as a natural part of the project. Therefore, no attempt was made to establish clear boundaries between the project and its external stakeholders. Further, the project management team tried to systematically influence and manipulate the environment through various activities, instead of consciously isolating the project from its environment. Active orientation towards the stakeholder environment was realized, for example, in various discussions with authorities and permission agencies, in addition to consultations with local residents. Overall, diverse stakeholders were considered as legitimate actors and valuable resources for the project whose voices needed to be heard and taken into account for the project to succeed. The project director s comment illustrates this viewpoint:

10 10 K. Aaltonen / International Journal of Project Management xxx (2010) xxx xxx Here the public reaction takes place in so many places and instances. It s completely natural. Even though we have all the official permits and authorizations in order somebody may start agitating. This stops the construction works for a specified period of time. This is one of the major issues that we have to monitor closely all the time and be always proactive. We track this down really carefully and identify all these kinds of risks and maintain official statistics about this Case Prospector Case Prospector was a turnkey delivery project to Caribbean islands. In addition to the focal company Prospector, the project network involved a local customer, local suppliers and subcontractors. The local host country environment of the project was demanding with regard to diverse authorities and regulative procedures that needed to be studied and mastered in order for the project to succeed. However, Prospector had experience from delivering a similar type of plant to the same location for the same customer. In Case Prospector, the data gathering process concerning external stakeholders was characterized by the project team members as regular and proactive. The project manager stated clearly that he favors an ad hoc and informal approach to gathering knowledge about external stakeholders, instead of doing things formally by following systematic guidelines or instructions. Gaining local knowledge and collecting lessons learned about the local external stakeholders took place primarily through various informal discussions with the project team members that had been involved in a similar type of project before. Learning from previous experiments was especially emphasized. The approach is portrayed in the following comment made by the project manager: There is no point in reinventing the wheel and repeat what the others have already done. I consider the informal channels, personal relationships, as the most efficient way of getting the insight information concerning the different project stakeholders. In addition to internal sources within Prospector, the data gathering relied also on external sources such as local customer, local subcontractors, and consultants. The analysis procedures were not systematic or adherent to certain guided procedures or instructions; rather they were depicted as more intuitive and ad hoc in their nature. Therefore, the collected data and results of the analysis were not formally stored in company systems for later use. As a consequence, not much formal documentation concerning the stakeholder environment of the project was accumulated for later use. This is because the project manager valued learning through experience and trial and error more than the filling of the different standard sheets. This view is illustrated in the following comment made by the project manager: To me there s no added value in filling in the standard stakeholder lists and doing it in a formal manner. My approach is informal and practice-oriented. You learn along the way. The key issue is that the project crew can participate informally in the project right from the beginning of the sales. As new external stakeholder related signals appeared they were interpreted and analyzed by the team. Limited attention was given to the agenda and systematic proceeding of the analysis sessions: issues were discussed in an intuitive, extempore manner. The utilization of formal stakeholder analysis tools was limited. Issues relating to stakeholders were also regularly discussed in the weekly project meetings but mostly in an informal manner. The project manager emphasized the importance of looking at stakeholder issues from diverse perspectives and encouraged the project team member to bring up their opinions. Overall, the approach was highly relational in orientation, which is illustrated in a quotation from a project team member: We can not reach maximum satisfaction in the external relations if we are not communicating efficiently, being proactive, and giving full support to each other, but in a relaxed manner. The understanding of the project s external stakeholder environment was considered by the project management team to be very important for the success of the project. However, at the same time the external stakeholder environment was perceived as non-transparent and difficult to analyze. It seems that the project team did not share the assumption that an objective perspective of the environment could be constructed by the means of formal data gathering and analysis, but different interpretations about the stakeholder situations encountered were seen as natural and even encouraged, as is evident in the following quote from the project manager. The local stakeholder environment is highly challenging, difficult and hard to analyze by rational means. You have to be conscious and aware about things so that you do not step on anyone s toes. That is why I prefer relying on intuition and on informal sources. Consequently, not much effort was put on formal stakeholder environment analyses. Instead, it was believed that, by actively engaging in informal discussions with diverse project participants, weak signals about the emergent developments could be detected Case Reactor Case Reactor was a system delivery project to China. Reactor had a Chinese customer and two Chinese suppliers that delivered critical components and exposed the project to local influences. The project was led from the company s headquarters, but part of the project team was comprised of Chinese employees and located in the Chinese subsidiary.