Stakeholder Management: How Much Should I Invest?
If you’ve been tasked with looking at stakeholder management options and how much you should invest, you might be thinking, Can you really put a price on the smooth running of a project? Or on the value of highly engaged stakeholders?
And the answer is yes, actually. You can.
But to find the figure you’re looking for, you need to consider factors such as the needs of different stakeholder groups, the size of your team, and the complexity of your project.
In this article, we’ll discuss what you need to consider when working out a budget for stakeholder management, as well as look at potential returns on investment, and the tools and software you might need to budget for.
But first, let’s define what we mean by budget. Because in the world of stakeholder management, it’s way more than allocating a financial cost.
The True Meaning of Stakeholder Management Investment
Stakeholder management involves setting up collaborative processes that bring long-term benefits, for example:
- Strong networks and relationships. To further the goals of the organization and be there to draw on in times of crisis.
- Expectation management. By making strategies and goals available and easily accessible to all stakeholders expectations are managed, minimizing potential conflicts.
- Greater collaboration. With smoother processes, information sharing, and clear communication lines, teams and individuals can find more opportunities to collaborate and innovate.
At a project focused level, this means:
- The organization’s aims and objectives within the project are met.
- Every voice involved in the project, or impacted by the project’s outcomes, is heard.
Creating the right environment for collaboration might mean spending money. But it often involves setting up opportunities that drive collaboration. So it’s more than money. It’s about spending time and effort to involve stakeholders in your process, and evaluating what business resources you have or need, in order to make that happen.
Great stakeholder management is an investment in your organization’s success. From strong and strategic relationships to empowering innovation, it has the power to make or break your work.
Really, it’s more than a monetary thing.
– Simply Stakeholders
Stakeholder Management is Strongest With a Strategy in Place
Particularly if you want to see a return on your investments.
Whether the success of a project relies on financial or non-financial resources, one thing is true: Everyone involved will want to know what benefits will come their way as a result of their investment.
The good news? There’s a clear correlation between effective stakeholder management and the level of return that a business, organization, or government can expect to see. (An epic example of this is on the way.) But achieving great results means having a robust stakeholder strategy in place.
What Is A Stakeholder Strategy?
A stakeholder strategy is a clear framework for project managers and consultants to work within. It outlines the needs and interests of all stakeholder groups, as well as the organization’s broader goals and objectives.
Strategy directly impacts stakeholder management investment. Understanding each stakeholder group involved in the project (or affected by it) makes it easier to evaluate which groups are vital to achieving the desired outcomes, and which are a little less…critical. The weight each group carries is reflected in the budget.
An Epic Example of a Powerful Stakeholder StrategyIn their article How to Create a Stakeholder Strategy the authors (all part of a US-based, global management company) create a composite medical supplies company. The company is based on several firms that they have advised over the years. The article emphasises that the company’s fortune begins to turn when it moves away from ‘a vague strategy’ and embraces an ‘explicit strategy that aimed to grow net value for its stakeholders’. Implementing the change meant evaluating the different stakeholders and assigning them an importance weighting based on the organization’s overarching mission. (Which in this case was ‘to help health care providers improve the lives of patients by creating a business system that grows long-term value for all our stakeholders’.) One of the case study’s most interesting discoveries was the view of their employees. The assumption was that staff wanted to provide a great customer experience. But the reality was that staff were more concerned with salary and efficiency. This led the company to revise its recruitment messaging in the hope of attracting stakeholders whose values aligned with the company’s. After two years, the results in greater stakeholder investment included:
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Deciding How Much to Invest
A traditional guide project managers might use to guide how much to invest in each stakeholder group is the Power/Interest Grid influence/interest matrix.
It looks like this.
Each stakeholder group is placed into one quarter of the matrix, which are:
- High interest, low influence
- High interest, high influence
- Low interest, low influence
- Low interest, high influence.
Depending on where they fall in the matrix, you then decide whether to:
- Merely keep them satisfied
- Ensure the group is managed closely
- Monitor the group throughout the project
- Simply keep them informed.
Given the pace and complexity of some organizations, the 2×2 grid way of mapping stakeholders isn’t really fit for purpose. Or it should be used in conjunction with other stakeholder mapping diagrams in order to build a clearer picture of the stakeholder groups. From there, it’s easier to assess how much weight each stakeholder group carries, and the influence they’ll have on a specific project or within the organization.
Using these tools, you can start to divide your budget accordingly. It’s a helpful starting point and can be a useful method to justify the amount of budget for each stakeholder group.
What Are You Budgeting?
An idea we touched on earlier was that budgeting for stakeholder management is more than assigning a dollar value. When it comes to working out how much to invest, you also need to consider these non-financial assets.
- Time and effort: How much total time is needed for the project, and how might the complexity of the project affect the time and effort needed?
- Personnel: Which existing individual staff members and teams are needed, and how will this impact their day-to-day duties? Or do you need to hire contractors or temporary staff?
- Systems: Will the project require the use of existing workflows and processes, or are new ones required?
- Resources: Whether it’s paper and printing, or access to company vehicles and buildings, what resources are essential? And how might their use during the project impact general day-to-day operations that also rely on them?
- Technology: Will the current technology, such as phone lines, internet access, and software platforms, support the project? And how much extra pressure might the project put on these systems?
Budgeting is fiddly. And this is true when looking at the non-financial assets of a budget. It often means reallocating existing resources to make the project happen. For example, employees may need to spend days or weeks working on the project, at the expense of their day-to-day responsibilities.
When working out what the business can afford to invest in changes like this, a good question to ask is: How long can you sustain this new work process without impacting existing operations?
Using existing resources that don’t incur extra costs to the business is always going to be music to a financial officer’s ears. But successful stakeholder management generally requires some cash to be splashed. (Responsibly and within reason, of course.) So what can you expect to have to pay for?
The Financial Cost Of Different Tools and Resources
Digital tools and software have simplified stakeholder collaboration. (There’s really no need to keep using spreadsheets.) And there are a plethora of tools and resources you can choose from, depending on the size and complexity of your project, whether you need new processes or solutions that will integrate with existing legacy methods. (Like the first one in our list.)
Interviews and Surveys
These feedback mechanisms can be done in person, over the phone, or online. Some have a higher price tag than others.
For in-person interviews, costs might include:
- Venue hire: Convenient and comfortable enough for conducting interviews
- Refreshments: For staff and interviewees who may be there for a long time
- Recording equipment: Video and sound recording, or audio only, or pens and paper
- Printing: If the survey or questionnaire isn’t digital.
- Incentives: Encouraging people to take part.
If you’re not holding in-person interviews or surveys, then your costs might involve paying for postage to reach stakeholders. Or if you’re digitally inclined, you need to budget for the cost of hosting your survey on an appropriate platform and emailing it to stakeholders.
Going digital is often a good option for projects:
- With smaller budgets,
- That are restricted by time
- That are environmentally conscious.
For example, online meeting apps such as Teams or Zoom, might be more a cost-effective and convenient way to run interviews with stakeholders. And for surveys, online survey platforms are reasonably priced (anywhere between free and $300 depending on your needs) and deliver responses immediately and securely.
Find out more about stakeholder feedback and why it’s an essential element in effective project management.
Customer Relationship Management Software
Customer relationship management platforms (CRM) help an organization or business manage interactions and processes related to the customer. They assist the business or organization in completing the obligations they need to provide to that customer, which largely focuses on the sales process.
Some popular CRMs include HubSpot, Salesforce, and Monday. And while these are useful for organizations that need to chart their sales process, it doesn’t really translate into effective stakeholder mapping, such as being able to segment stakeholders. (Useful for when organizations need to make targeted investments in building stakeholder relationships.)
Pricing can start from as little as $8 per month, with the cost increasing based on the size of your team and the functions you want to access.
Project Management Software
ClickUp, Asana, and Jira are just three examples of project management software, but there are literally thousands of options. They’re designed with tools that help individuals and teams manage projects and workflows, and may include:
- Task management
- Project calendars
- Budget tracking
- Chat functions
- Time tracking
- File sharing.
Customizing your project management software to show the most relevant data and reports can save time and ensure all stakeholders have the relevant information without delay.
Similar to CRMs, these platforms offer various plan levels based on the complexity of the project, your needs, the number of people using the platform, and whether you want to be billed monthly or annually.
There are lots of variables, but costs could be as low as $7 per user per month or as much as $30,000 per person per year.
Stakeholder Relationship Management
Blending the best bits from CRMs and project management software, stakeholder relationship management software (SRMs) include tools and functions that help businesses and organizations manage stakeholders and the interests of each stakeholder group.
Some of the functions you’ll find on an SRM include:
- Data tracking
- Budget tracking
- Task management
- Report generation
- Stakeholder mapping
- Workflow automation
- Grievance management
- File holding and sharing
- Communication functions.
SRM pricing is as variable as CRMs. Perhaps more so, as the software capabilities can offer a huge amount of dashboard and module customization that meet the specific needs of the stakeholder groups involved.
This is why you’ll often see SRM businesses, such as Simply Stakeholders, offering free trials, or extending an invite to get in touch.
Return On Stakeholder Management Investment
Calculating return on investment (ROI) normally means looking at the ratio of benefit to financial cost. But stakeholder management ROI is a little different. (As we saw from the Harvard Business REview example.) There are tangible and intangible benefits.
Tangible benefits may well include an improved dollar figure or saved resources after the completion of a project. But it’s more likely that the ROI you’ll see is an intangible benefit. We’ve shared examples of intangible benefits in our article 6 Ways Stakeholder Management Software Delivers ROI, but in summary, ROI might arrive in the form of:
- Time saved
- Knowledge collection and sharing
- Strong and profitable relationships
- Process and workflow consolidation
- Risk and error reduction
- Improved compliance.
So what might this ROI look like in the real world?
2 Examples of SRM Investment Paying Off
Businesses and organizations of all sizes, from the private and public sector, invest in SRM and SRM software. The effects might be subtle and internal only, or far-reaching, affecting employees and clients alike.
Here are two such examples from Simply Stakeholders clients — one in the non-profit sector and the other from the corporate and external affairs sector.
The first is The Nature Conservancy, based in Long Island, and its community engagement program. By investing in SRM, they improved their planning and organization, which enabled them to begin tapping into new stakeholder groups.
In a short period of time, they were able to improve their outreach and attract more stakeholders to engage with the group, compared to their pre-SRM days.
Read The Nature Conservancy case study.
The second example comes from one of the world’s largest furniture brand. With 200,000 employees, they wanted an SRM to facilitate collaboration and map internal relationships.
By investing in SRM, collaboration between team members and departments increased. Some of these interactions happened between employees who had never met before.
Read A Better Way to Manage Internal Stakeholder Relationships case study.
So now you know why it’s important to invest in stakeholder management, the correlation between stakeholder management, strategy and ROI, and what that ROI might look like, let’s get down to the brass tax of the topic.
What percentage of your budget should you invest in SRM?
How Much Of Your Project Budget Can You Expect To Invest In SRM?
The answer to this is ‘it depends’. And while this might sound like a cop out, it really is difficult to put a dollar cost or percentage range for how much of your budget you should spend.
The following factors all affect the final cost.
- Number of users
- Complexity of the project
- Modules and functions needed
- Existing processes and workflows and how they’ll integrate
- Need for training and support for any new systems put in place.
Ballpark figures and loose industry insights
Market tracking of CRM software, which is a larger market than SRM and has been available for longer, offers some spending insights.
Use the following figures to decide whether part of your budget, the majority of it, or all of it should be invested in SRM.
CRM Statistics To Guide Your SRM Investment Decisions
- The US is the largest adopter of CRM software. (DigitalSilk)
- The CRM market is expected to reach $131.90 billion in revenue by 2028. (DemandSage)
- Nearly three-quarters of total CRM spending comes from companies with more than 1,000 employees. (HG Insights)
- Companies with revenue of $5 billion or more account for more than half (52%) of spending in the CRM market. (HG Insights)
- Companies with a revenue of $1 – $10 million make up just 0.5% of CRM spending.
- This tier is where the majority of CRM buyers sit, indicating how important relationship management software is for small businesses. (HG Insights)
What’s undeniable is that the CRM market is growing. (At an annual rate of almost 11% according to some reports.) Companies and organizations that are serious about streamlining their processes working more efficiently, and better managing customers are turning to this increasingly sophisticated software. Most of which, now boast AI capabilities.
The insights also show us that every size of company is investing — large and small businesses; global and local. This technology isn’t reserved for a single industry or organizations with astronomical revenues. Its usefulness is far-reaching.
The most pertinent question, therefore, isn’t whether you should invest in stakeholder relationship management. It’s what do you need the technology to do for you, to achieve the ROI you and your stakeholder groups expect to see?
