SATISFACTION MAXIMIZING MODEL FOR MANAGING PROJECT STAKEHOLDERS

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1 Research Journal of Busness and Management (RJBM ISSN: SATISFACTION MAXIMIZING MODEL FOR MANAGING PROJECT STAKEHOLDERS DOI: /Pressacadema Chu-Ch We 1, Chung-Cheng Fu 2, Chou-Shue We 1 Chung-Hua Unversty, Tawan, a @gmal.com 2 Chung-Hua Unversty, Tawan, mark.c.fu@gmal.com Year: 2016 Volume: Issue: 4 Lung-Hwa Unversty of Scence and Technology, Tawan, @gmal.com ABSTRACT From when a proect begns, an uncertan number of stakeholders partcpate n ts plannng, executon, montorng, and controllng, and these stakeholders may change over the course of the proect. Proect success reles on approprate stakeholder management and maxmzaton of stakeholder satsfacton. Conventonally, stakeholder management reles solely on the experence and trats of proect managers; thus, t can only refer to theores and prncples, and cannot be mplemented effectvely and systematcally. To solve ths predcament, ths study developed a mathematcal model that maxmzes stakeholder satsfacton consderng the level of nfluence of stakeholders, the avalable engagement tme, proect rsks, cost of changes, and engagement costs of stakeholders at every stage of a proect. The model uses LINGO to calculate the most favorable engagement tme for each stakeholder at every stage and maxmze stakeholder satsfacton accordng to the proect rsk and nfluence level of stakeholders under condtons of lmted engagement tme and cost. Keywords: Proect, proect management, stakeholder, stakeholder management, stakeholder satsfacton JEL Classfcaton: C61, L84, M12 1. INTRODUCTION Proects are wdely mplemented n all levels of enterprses, such as the executon of strateges, problem solvng, product development, and enterng new markets, and functon as the man approach of management n nonroutne actvtes. A proect begns wth concept development, followed by feasblty analyss, and then enters the stages of plannng, executon, controllng, and closng. Stakeholders can have drect or ndrect and postve or negatve nterests n any stage of the proect. Dependng on the characterstcs of proects, stakeholders can be foundng members, senor admnstrators, department managers, supplers, or customers, all of whom have dfferent levels of mportance and nfluence at varous stages of the proect. In other words, the varyng nvolvement of stakeholders at dfferent stages of proects drectly affects proect progresson and decson qualty. Generally speakng, proect managers have two targets: (1 hard target: the proect s completed on tme and ts qualty meets stakeholder expectatons. (2 soft target: stakeholders expectatons are satsfed durng the progresson of the proect. Even f stakeholders lack suffcent tme to partcpate n a proect, the proect manager and team members must maxmze stakeholder satsfacton, whch s a maor challenge for proect team. The conventonal soluton has been to arrange and treat stakeholders accordng to ther level of mportance. Fgure 1 shows a two-dmensonal power nterest matrx that provdes management strateges for the followng partes: stakeholders wth hgh power and nterest should be managed closely; partes wth low power and hgh nterest should be kept nformed; partes wth hgh power and low nterest should be kept satsfed; partes wth low power and nterest should be montored (PMI, PMBOK,

2 The relatonshp of stakeholders can be vewed from another perspectve. At frst, because stakeholders at most only partally understand a proect, some may decde they are aganst t. In some extreme cases, the success of the proect could drectly affect stakeholders nterests; f stakeholders are not persuaded of the merts of the proect, they mght reect t altogether. If the proect manager and team members successfully execute stakeholder management, stakeholders who were unnformed and resstant at the begnnng of the proect could become neutral or even supportve and lead other stakeholders to support the proect, as Table 1 demonstrates (PMI, PMBOK, Ths paper s dvded nto fve sectons ncludng ntroducton, lterature revew, model development, case mplementaton and concluson. Fgure 1: Power-Interest Grd Table 1: Stakeholder Partcpated Status Assessment 2. LITERATURE REVIEW In stakeholder theory, varous stakeholders exst as ndvduals or groups n a proect, and can affect or nfluence the goals of an organzaton. Freeman (1984 suggested that stakeholders should agree wth the goals of a proect; stakeholders must act and communcate dfferently n accordance wth ther nterests and level of nfluence. Because the requrement and complexty of a proect ncreases daly, the creaton of the establshment of stakeholder management s mperatve to creatng proect value so that proect progresson corresponds to stakeholder nfluence (Aapaoa and Haapasalo, Every stage of the proect lfe cycle nvolves changes n stakeholders. Proect managers should revse the number of key stakeholders, evaluate the level and duraton of stakeholders nfluence, and manage these stakeholders (L, To medate the proect goals and stakeholders nterests, proect managers should endeavor to satsfy varous stakeholders whle executng a proect (Jensen,

3 Stakeholders are subectve n ther nterests (Fredman and Mles, Stakeholder satsfacton can be managed herarchcally and can be separated nto that of nternal stakeholders such as employees wthn the corporaton, and that of external stakeholders such as socal groups and government organzatons (Cleland, The management herarchy contans four categores: (1 actve stakeholders: decson makers who affect passve stakeholders decsons; (2 basc stakeholders: stakeholders who work hard to acheve proect goals nstead of fulfllng personal nterests; ( nterest stakeholders: those whose nterests are ther frst prorty; (4 power stakeholders: stakeholders who have the power to affect the success of a proect (Grmble et al., In the egg model descrbed by Urde (1997, the yolk represents the core values and market brand that combnes resources and strateges. Half of the egg whte s the outsde-n demand and nfluences of external stakeholders, and the other half s the nsde-out condtonal satsfacton of varous stakeholders demands. Stakeholders have varous nfluences at dfferent stages of a proect s lfe cycle. Proect managers should refer to mutual core values when communcatng wth stakeholders n order to gan postve nfluence (Gbson Identfyng and analyzng the degree of partcpaton could help proect managers understand conflcts of nterest and the perodc nfluence of nternal and external stakeholders, whch could be montored and corrected by mplementng the plan-do-check-acton model n proect meetngs (Nash and Chnyo, Ths allows nfluences n all stages of the proect to reman postve and satsfy the stakeholders.. MODEL DEVELOPMENT Ths secton nvolved the development of a mathematcal model for maxmzng stakeholder satsfacton. The model consdered stakeholders nfluence, engagement costs, and engagement tme. Generally speakng, stakeholders who are more nfluental n proects requre more tme to understand proect progresson. Second, f certan stakeholders requre hgher engagement costs, the length of engagement tme spent on those stakeholders greatly affects the cost of the proect. Lastly, nteractons wth stakeholders are lmted to stakeholders tme. Crucal stakeholders are often busy and of hgh status, factors that render them less lkely to spend extensve tme wth the proect team. In addton, the nfluence of stakeholders and ther engagement tme vares accordng to the progresson of the proect. Some stakeholders that are nfluental n the early stages of the proect became less nfluental at the mddle stages and even less so n the later stages. Smlarly, some stakeholders could be less nfluental at the begnnng, gradually ncrease ther nfluence at the mddle, and exert substantal nfluence at the end of a proect. Detaled data are provded n Table 2. In Table 2, refers to the nfluence of stakeholder at stage ; t refers to the engagement tme of stakeholder at stage ; s refers to the satsfacton of stakeholder at stage ; pr refers to the level of rsk at stage ; pc represents costs generated by the changes n stage ; refers to the comprehensve nfluences of all stakeholders at stage ; and ndex refers to the comprehensve mportance weght at stage, whch was determned on the bass of the rsk level of the proect, changes n costs, and the nfluence of stakeholders, and s expressed as ndex pr pc, where max( pr pc max( pr pc s the sum of the three hghest values. Table 2: Maxmzng Stakeholder Satsfacton Parameter Proect stage Stage 1 Stage 2 Stage P t 1 t 11 t 12 t 1 s 1 s 11 s 12 s 1 P t 2 t 21 t 22 t 2 16

4 s 2 s 21 s 22 s P t t 1 t 2 t s s 1 s 2 s Proect rsks (pr pr 1 pr 2 pr Cost of proect changes (pc pc 1 pc 2 pc Stakeholders nfluences at stage ( 1 ( ( ( 1 2 Importance of proect stage (ndex ( pr1 pc1 1 max( pr pc ( pr2 pc2 2 max( pr pc ( pr pc max( pr pc Ths research proposed a mathematcal model for maxmzng stakeholder satsfacton that consdered the aforementoned factors. The model s expressed as Equaton (1: Max m n S 1 1 S (1 S.T. c k n t 1, =1,, m m 1 S c C f ( t 0 t b ndex t t ndex2 ndex t t 1 1 ndex where S refers to the total satsfacton of stakeholders, k c refers to the engagement cost coeffcent of stakeholder, refers to the engagement costs of stakeholder, C refers to the upper lmt of all stakeholders engagement costs, b refers to the upper lmt of engagement tme of stakeholder at stage, ndex refers to the mportance of stage of the proect. 17

5 4. CASE IMPLEMENTATION A case was used to demonstrate the applcablty of the model. A proect nvolvng three stakeholders, P 1, P 2 and P, was dvded nto three stages. Stakeholders nfluences, the rsks of the proect, and cost of changes at each stage are lsted n Table. The nfluences of stakeholders are llustrated n Table 2, wth the mportance weght ndces at each stage shown n the lowest column. Table : Influence of Stakeholders at Each Proect Stage Parameter P 1 Proect stage Stage 1 Stage 2 Stage 1 H(9 M(5 L(1 t 1 t 11 t 12 t 1 P 2 s 1 s 11 s 12 s 1 2 L(1 M(5 H(9 t 2 t 21 t 22 t 2 s 2 s 21 s 22 s 2 L(1 M(5 M(5 P t t 1 t 2 t s s 1 s 2 s Proect rsks (pr H(9 M(5 H(9 Cost of proect changes L(1 M(5 H(9 (pc Stakeholders nfluences at (9 1 1 (5 5 5 (1 9 5 stage (. 7 5 Importance of proect (9 1.7 (5 5 5 (9 9 5 stage (ndex Assume k 1 =5, k 2 =4, k =, C=80, s =t 2 +t +constant; b 11 =, b 12 =2, b 1 =2, b 21 =, b 22 =2, b 1 =5, b 2 =4, b =; and ntroduce these values nto Equaton (1. The followng Equaton (2 was obtaned. Max.7(s 11 +s 12 +s 1 +5 (s 21 +s 22 +s 2 +5 (s 1 +s 2 +s (2 S.T. c 1 =5(t 11 +t 12 +t 1 c 2 =4(t 21 +t 22 +t 2 c =5(t 1 +t 2 +t c 1 +c 2 +c 80 s 11 =t t s 12 =t t s 1 =t 1 2 +t

6 s 21 =t t s 22 =t t s 2 =t 2 2 -t s 1 =t 1 2 +t s 2 =t 2 2 +t s =t 2 +t <t 11 0<t <t 1 2 0<t 21 0<t <t 2 2 0<t 1 5 0<t 2 4 0<t t 11 =(0.5/0.6t 12 t 11 =(0.5/0.8t 1 t 21 =(0.5/0.6t 22 t 21 =(0.5/0.8t 2 t 1 =(0.5/0.6t 2 t 1 =(0.5/0.8t LINGO was used to solve Equaton (2, and the maxmum value of stakeholder satsfacton was determned to be 256. The engagement tme between proect managers and stakeholders and costs and satsfactons at each stage are shown n Table 4. Table 4: Stakeholder Satsfacton at Dfferent Stages Parameter P 1 P 2 Proect stage Stage 1 Stage 2 Stage 1 H(9 M(5 L(1 t s c L(1 M(5 H(9 t

7 s c L(1 M(5 M(5 t P s c 21.8 Proect rsks (pr H(9 M(5 H(9 Cost of proect changes (pc Stakeholders nfluences at stage ( Importance of proect stage (ndex L(1 M(5 H( Table shows that the engagement tme of Stakeholder 1 at Stage 1 was 1.25 wth a satsfacton of 4.1; the engagement tme at Stage 2 was 1.5 wth a satsfacton of 6.05; the engagement tme at Stage was 2.0 wth a satsfacton of 7.90; and the total engagement cost was The engagement tme of Stakeholder 2 at Stage 1 was 1.25 wth a satsfacton of 1.51; the engagement tme at Stage 2 was 1.5 wth a satsfacton of.25; the engagement tme at Stage was 2.0 wth a satsfacton of.6; and the total engagement cost was The engagement tme of Stakeholder at Stage 1 was 1.88 wth a satsfacton of 6.79; the engagement tme at Stage 2 was 2.25 wth a satsfacton of 9.51; the engagement tme at Stage was.0 wth a satsfacton of 1.1; and the total engagement cost was The ndex values were 0.5, 0.6, and 0.8, whch ndcated that the proect was ncreasng n mportance; thus, the engagement tme of stakeholders has ncreased wth the progresson of the proect. Table proves that ths occurred. In other words, the model proposed n ths study could manage the varous characterstcs of proects and adust the engagement tme of stakeholders. In addton, when comparng the satsfacton of stakeholders at dfferent stages, the length of the engagement tme was not drectly related to stakeholder satsfacton. Stakeholders wth same length of engagement tme were not satsfed equally, a result whch matched those observed n actual cases. For example, Stakeholders 1 and 2 demonstrated equal engagement tmes n all three stages. Satsfacton at Stage 1 was 4.1 for Stakeholder 1 but only 1.51 for Stakeholder 2. Satsfacton at Stage 2 was 6.05 for Stakeholder 1 but only.25 for Stakeholder 2, and satsfacton at Stage was 7.90 for Stakeholder 1 but only.6 for Stakeholder 2. The engagement costs of the three stakeholders were 2.75, 19.0, and 21.8, respectvely, wth that of Stakeholder 1 beng the hghest, followed by those of Stakeholders and 2. The total satsfacton ratngs of the three stakeholders were 18.26, 8.6, and 29.4 respectvely, wth that of Stakeholder beng the hghest, followed by those of Stakeholders 1 and 2. When comparng the results of engagement costs and satsfacton measurements, the stakeholder wth the hghest engagement cost was not necessarly the most satsfed stakeholder. Fgure 2 demonstrates the nfluence, engagement tme, and satsfacton of stakeholders at each stage of the proect. The whte bar refers to level of stakeholder nfluence, the sold bar refers to stakeholder engagement tme, and the slash bar refers to stakeholder satsfacton. 20

8 Fgure 2: Comparson of Stakeholders at Dfferent Stages 9 Influence Engagement tme Satsfacton Stakeholder 1 Stakeholder 2 Stakeholder 1.1 Stakeholder 1 Stakeholder 2 Stakeholder (a Stage (b Stage Stakeholder 1 Stakeholder 2 Stakeholder (c Stage Fgure 2(a clearly shows that Stakeholder 1 was the most crucal stakeholder and had a relatvely short engagement tme; thus, Stakeholder 1 was rated second n satsfacton. In contrast, Stakeholder was the least crucal stakeholder; however, ths stakeholder was rated as havng the hghest satsfacton, lkely because they had the longest engagement tme. In Fgure 2(b, all three stakeholders had equal nfluence on the proect, but Stakeholder had the longest engagement tme and hghest satsfacton. Stakeholders 1 and 2 had the same duraton of engagement tme, but Stakeholder 1 been nearly twce as satsfed as Stakeholder 2. Ths could be because the stakeholders satsfacton corresponded dfferently to ther engagement tmes; n other words, even f both stakeholders receved equal engagement tmes, ther satsfacton would be dfferent. Ths condton mrrors to real-lfe crcumstances, because dfferent people express dfferent demands and levels of strctness n the same stuatons. In Fgure 2(c, Stakeholder 2 was both the most crucal but least satsfed stakeholder. Stakeholder 1 was the least crucal and receved an engagement tme equal to that of Stakeholder 2, but Stakeholder 1 was nearly twce as satsfed as Stakeholder 2. Stakeholder was the most crucal stakeholder at Stage and receved the longest engagement tme, whch could be the reason why they were rated as havng the hghest satsfacton. 5. CONCLUSION Proect management s the most effectve approach for enterprses to deal wth non-routne actvtes. Proect members are temporarly transferred from dfferent functonal departments and a proect manager s desgnated to lead the team n the plannng, executng, montorng, controllng, and completon of proect obectves. Whether the proect nvolves product development, market expanson, or organzatonal reform, proect management s an ndspensable approach for company management. Enterprses wth hghly sophstcated proect management can shorten the length of tme spent on product development, amplfy the results of market expanson, facltate the progress of organzatonal reform, and create advantages that allow corporatons to defeat ther opponents. One of the keys to successful proect management s to suffcently manage stakeholders. The conventonal approach s to frst determne the stakeholders and ther demands, and then manage and satsfy these demands. The results of proect management depend on the experence and wsdom of the proect manager. To mprove proect managers performance n stakeholder management, 21

9 ths study developed a quantfed mathematcal model that consdered stakeholders nfluence, engagement tme, proect rsks, engagement costs, proect change costs, and ther mportance at dfferent stages. The model determned the maxmzed satsfacton of every stakeholder at dfferent stages of a proect. Ths s one of the few studes to date to have quantfed stakeholder management. The case analyss showed that the model asssted proect managers n systematcally managng stakeholders accordng to varous proect condtons. Ths could allow proect managers to mprove ther performance n stakeholder management, enhance stakeholder satsfacton, and ncrease the possblty of achevng proect obectves. REFERENCES Aaltonen, K. 2011, Proect stakeholder analyss as an envronmental nterpretaton process, Internatonal Journal of Proect Management, vol. 29, no. 2, pp Aapaoa, A. & Haapasalo, H. 2014, A framework for stakeholder dentfcaton and classfcaton n constructon proects, Open Journal of Busness and Management, vol. 2, pp Baley, S. & Van B. 2015, Qualty of work lfe ssues n the ntroducton of ERP systems n a sub-saharan afrcan context, ICIME 2015, Chna. Chang, K. & Huang, H. 200, Crtcal factor of WAP servces adopton; an emprcal study, Electronc Commerce Research and Applcaton, vol. 5, no., pp Cleland, D.I. 1986, Measurng Success: The owner s vewpont, Proceedngs of the 18th Annual Semnar/Symposum, Montreal, Canada. Daves A. R. 201, Rght to Buy: The Development of a Conservatve Housng Polcy, Unversty of Brstol, UK. Delotte. 2016, Delotte and Touche. Fgueredo, J. & Rchter, K. 2014, Advancng the emprcal research on lobbyng, Annual Revew of Poltcal Scence, vol. 17, pp Freeman, R. E. 1984, Strategc Management: A Stakeholder Approach, Boston, MA. Fredman A. & Samantha, M. 2006, Stakeholders: Theory and Practce, Oxford Unversty Press, Oxford, UK. Garvn, D. 1987, Competng on the eght Dmensons of Qualty, Harvard Busness Revew, Norvember. Grmble, R. & Wellard, K. 1997, Stakeholder methodologes n natural resource management. A revew of prncples, contexts, experences and opportuntes, Agrcultural Systems, vol. 55, no.2, pp Jensen, M. 2002, Value maxmzaton, stakeholder theory, and the corporate obectve functon, Busness Ethcs Quarterly, vol. 12, no. 2, pp L, G. 2012, Consumpton nsurance and local electons: evdence from Chnese vllages, Economcs of Transton, vol 20, no., pp Nash S. & Ezekel C. 2010, The Magntude of Stakeholders Interests n the Course of Constructon Proects, Engneerng Proect Organzatons Conference, South Lake, Tahoe, CA. Mats, U, Baumgarth, C. & Merrlees, B. 201, Brand orentaton and market orentaton - From alternatves to synergy, Journal of Busness Research, vol. 66, pp Muller, R. & Turner, R. 2007, The nfluence of proect manager on proect success crtera and proect success by type of proect, European Management Journal, vol. 25, no. 4, pp PMI. 2016, Proect Management Body of Knowledge (PMBOK GUIDE, Proect Management Insttute Inc, PA. Suchman M. C. 1995, Managng Legtmacy: Strategc and Insttutonal Approaches. Academy of Management, MI. 22