PMexpo17 - The Stakeholder Perspective - Massimo Pirozzi

The Stakeholder Perspective for
the Value Generation
Effective Knowledge Based Stakeholder Management
to increase the Success Rate in Complex Projects
Roma, October 27th, 2017
Speaker:
Massimo Pirozzi,
M. Sc., Eur-Ing

The Project Stakeholders
The Stakeholder Perspective for the Value Generation - Massimo Pirozzi
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A stakeholder, or an interested
party, is a person, or a group of
persons, or an organization, who:
• has some kind of interest in the
project;
• may affect the project, or may be
affected by the project;
• participates, or would like to
participate, in the project;
• can bring a value (which could be
either positive or negative) to the
project.

The Value of the Stakeholder Relations
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In each project, the stakeholder
relations:
 are a value, which is fundamental to
the existence of the project and to its
definition;
 generate a value, which is
incorporated in the project;
 allow the exchange of value,
through the delivery of project results.
Stakeholder Relations are the Core of Project Value

Generated Value: from Strategies to Benefits
 Organizations define strategies which are based on their own mission
and vision;
 projects are means to accomplish strategic goals, then achieving,
through their results, the expected benefits:
the overall value that is generated by each project determines the
stakeholder satisfaction in the whole investment life-cycle
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GENERATED
VALUE
INVESTMENT VALUE PROJECT VALUE BUSINESS/SOCIAL VALUE

The Stakeholder Perspective
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All the stakeholders are central towards each project:
 the stakeholders are both the actors, and the beneficiaries, of the project,
 the stakeholders are the critical success factor of the project, since they are
both the realizers of the results, and the validators, at various levels, of their
satisfaction in terms of needs and expectations.
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Reference: «The Stakeholder Perspective», Massimo Pirozzi, PM World Journal, Ed. June 2017, Featured Paper
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Effective Stakeholder Management is needed…
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Stakeholder Management is the crucial process which can target the project
success, by supporting the generation of that project value which satisfies
stakeholder requirements and expectations.
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Today, more than 30% of the projects don’t meet their original goals and business
intent… i.e. they don’t satisfy stakeholder expectations. (PMI’s Pulse of the Profession 2017)
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«The emphasis … on Relationship Management is of special importance
in today's world» (Russ D. Archibald, 2017)

Success in Classical Projects
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In «classical» projects, there is a small gap between the
satisfaction of requirements and the satisfaction of
expectations of stakeholders:
 project is part of customer core business (supplier’s
perspective, in internal or in outsourcing projects), and/or project
deliverables are product oriented, and/or are tangible (e.g.
in infrastructure projects), and/or, in any case stakeholder
requirements are either well defined (traditional contexts) or
are evolutive, but all stakeholders cooperate effectively
(agile contexts);
 triple constraints are dominant
 relations with stakeholders are important, and periodical
Success is based on the satisfaction of stakeholder requirements, whose domain,
in classical projects, almost overlaps domain of stakeholder expectations
satisfaction, and, then, the measures of the value could be limited to the
measures of costs and consistency (state of progress) of the deliverables

Success in Complex Projects
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In «complex» projects, there is a significant gap between the
satisfaction of requirements and the satisfaction of
expectations of stakeholders:
 project is a support of customer core business (customer’s
perspective, in the majority of external projects), and/or project
deliverables are oriented to services, and/or are intangible
(e.g. in software projects), and/or, in any case, stakeholder
requirements are either not well defined or are evolutive,
but not all stakeholders cooperate effectively;
 competing constraints are dominant: value and reputation
overcome triple constraints (*);
 relations with stakeholders are primary, and can be
continuous, fast, interactive (2.0), evolutionary (*).
Success is based on the satisfaction of stakeholder expectations, which, in
complex projects, can be significantly far away from the satisfaction of
stakeholder requirements as it is, and, then, the measures of the value must
include the measure of business value
(*) Reference: «Project Management 2.0», Harold Kerzner, 2015

Success is achieving Business Value …
«Success is not necessarly achieved by completing the project within time, cost,
and scope. Success is when the planned business value is achieved within
the imposed constraints and assumptions» (Harold Kerzner, 2009)
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TIME
COST
SCOPE
VALUE

… Value Management Requires Measures
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Since, during project life cycle, business value measures are not possible, we need
the support of indicators that could represent effectively both the project value
and the business value:
proper Key Performance Indicators (KPIs) are needed.
 During project life-cycle, in each time, the measure of deliverables requires the
measure of actual cost and the assessment of the state of progress, which will
be used as indicators to estimate «future» time and cost of the project
completion
 Generated business value is, in any case, «future» with respect to project life-
cycle, and could be measured only after project completion

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Key Performance Indicators
In each complex project, effective
Stakeholder Management is based on
measuring, monitoring, and sharing
value-driven specific Key Performance
Indicators
KPIs must be S.M.A.R.T (Specific,
Measurable, Attainable, Realistic, Time
Related), but also Few, Relevant,
Actionable, Predictive (*)
(*) Reference: «Project Management 2.0», Harold Kerzner, 2015

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The Power of Dashboards
KPIs can be shared continuously, quickly, and effectively with
stakeholders through dashboards, which can replace efficiently reports
The use of dashboards can be effective also in several cases of reluctant,
indifferent, up to negative/hostile, stakeholders … only Y/N answers are
needed, and also no-answers at all could be interpreted positively …

Stakeholders Target Different Values
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Project Stakeholders are different, and have different behavior…
 Providers (PM, Team..) target Technical (Delivered) Value: Triple Constraints, Project Objectives,
Revenues
 Investors (Top Management, Funders…) target Economic Value: Costs, Revenues, Business
Prospects
 Purchasers (Customers, Users) target Business Value: Customer Costs (=Providers/Investors
Revenues), Project Goals, Benefits Achievement
KPIs must address different types of Value, then covering both Project
Management, Economic, and Business Domains
Reference (1): «The Stakeholder Perspective», Massimo Pirozzi, PM World Journal, Ed. June 2017, Featured Paper
The Stakeholder Hypercube (1)

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Project Management KPIs (examples)
 Earned Value (although it is almost never defined as a KPI, it is used in
almost all projects, and it is the only KPI which is present in traditional/
classical Project Management)
 Percentages of completed work packages compared to those which
have been planned
 Percentages of work packages which are aligned to the budget and/or to
the schedule
 Percentages of critical work packages which are aligned to the budget
and/or to the schedule
 Percentages of critical work packages which still have to be completed,
and/or percentages of completed milestones
 Quantity and quality of resources which have been allocated versus relevant
planning, turnover indicators
 Numbers and percentages relating to risks, revisions, to requests
for change and changes
 ROI, etc.

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Economic KPIs (examples)
 Economic and Financial Indicators: Net Profit, Net Profit Margin, Gross Profit Margin,
Operating Profit Margin, EBITDA, Revenue Growth Rate, Total Shareholder Return (TSR),
Economic Value Added (EVA), Return on Investment (ROI), Return on Capital Employed
(ROCE), Return on Assets (ROA), Return on Equity (ROE), Debt-to-Equity (D/E) Ratio, Cash
Conversion Cycle (CCC), Working Capital Ratio, Operating Expense Ratio (OER), CAPEX to
Sales Ratio, Price Earnings Ratio (P/E Ratio)
 Marketing Indicators: Market Growth Rate, Market Share, Brand Equity, Cost per Lead,
Conversion Rate, Search Engine Rankings (by keyword) and click-through rate, Page Views
and Bounce Rate, Customer Online Engagement Level, Social Networking Footprint
 Customer Relationship Management Indicators: Net Promoter Score (NPS), Customer
Retention Rate, Customer Satisfaction Index, Customer Profitability Score, Customer Lifetime
Value, Customer Turnover Rate, Customer Engagement, Customer Complaints
 Operational Indicators: Six Sigma Level, Capacity Utilisation Rate (CUR), Process Waste
Level, Order Fulfilment Cycle Time, Delivery In Full, On Time (DIFOT) Rate, Inventory
Shrinkage Rate (ISR), Project Schedule Variance (PSV), Project Cost Variance (PCV), Earned
Value (EV) Metric, Innovation Pipeline Strength (IPS), Return on Innovation Investment
(ROI2), Time to Market, First Pass Yield (FPY), Rework Level, Quality Index, Overall
Equipment Effectiveness (OEE), Process or Machine Downtime Level
 Human Resource Indicators: Human Capital Value Added (HCVA), Revenue Per Employee,
Employee Satisfaction Index, Employee Engagement Level, Staff Advocacy Score, Employee
Churn Rate, Average Employee Tenure, Absenteeism Bradford Factor, 360-Degree Feedback
Score, Salary Competitiveness Ratio (SCR), Time to Hire, Training Return on Investment
 Sustainability Indicators: Carbon Footprint, Water Footprint, Energy Consumption, Saving
Levels Due to Conservation and Improvement Efforts, Supply Chain Miles, Waste Reduction
Rate, Waste Recycling Rate, Product Recycling Rate

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Business Value KPIs (examples)
 Measures and percentages of Stakeholder Satisfaction (in terms of
both Requirements & Expectations)
 Measures and percentages of Stakeholder Engagement
 Measures of Perceived Value : perceived Business Value, Social Value,
Quality, Reputation, Business Climate, Innovation, Sustainability
 Functional and/or Quantitative Measures, and relevant Percentages of
Completion and/or of Deviation from Budget and/or Schedule

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KPIs to support Value Generation
The use of an appropriate
selection of KPIs in Stakeholder
(Relations) Management, is a
powerful tool to target the
Success of the Project, by
supporting both the Value
Generation, and the Project
Goals Achievement
In Project Management, any measurable value can be
effectively used as a KPI.

Knowledge Based Stakeholder Management
 Definitively, in each project, which is made by people for other people, the relations
among people (the stakeholders) transform requirements and expectations in
deliverables and outcomes;
 effective cooperation is mandatory for value creation and delivery;
 knowledge is the only engine which may enable, through awareness, sharing,
and communication, an effective cooperation.
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STAKEHOLDER (RELATIONSHIP) MANAGEMENT
Reference: Development from «Guida ai Temi ed ai Processi di Project Management», edited by E. Mastrofini,
Authors E.Mastrofini, V.Introna, M.Monassi, M.Pirozzi, G.Trasarti, B.Tramontana, February 2017, FrancoAngeli
In complex projects, effective stakeholder management requires knowledge: in PM
issues, in economics, in (customer) business

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 Stakeholders are central towards both Projects and Project Management
 Stakeholders define success in terms of generation of their own
Business Value: effective Stakeholder Management requires proper
Knowledge not only in Project Management, but in both Economics and
Customer Specific Business, too
Conclusions
 Proper Value Indicators (KPIs) can be measured, shared with
stakeholders, and used to confirm/readdress, in terms of both
deliverables and satisfaction, the action of the Project Team during the
entire Project Life Cycle, then increasing the Project Success Rate by
supporting both the Value generation, and the Project Goals
achievement

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THANK YOU SO MUCH
pirozzi@isipm.org

PMexpo17 - The Stakeholder Perspective - Massimo Pirozzi

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