Procurement Stakeholders

What are stakeholders
Procurement stakeholders are any individual, department or organisation that has an interest in any aspect of the procurement function, regulation or process.

In any activity that a procuring entity undertakes, whether it is strategic, operational or tactical, the activity can only be successful with the input, support and commitment of its key stakeholders. Identifying stakeholders and working with them in a collaborative and effective manner requires a continual interaction. 

Stakeholders can be classified into three principal groups – internal, connected and external – and depends on their position in relation to the procurement function or process. It is crucial to identify these stakeholders as omitting or overlooking them could have a serious impact upon the success of any procurement task. Once identified, the individuals or organisations need to be classified into specific groups and a management plan developed to ensure successful engagement.

Proactive engagement with stakeholders by procurement leaders and procurement professionals will contribute to improving the outcome of the procurement activity. Engagement with stakeholders will ensure the procurement function is able to draw upon their knowledge and experience to facilitate the procurement process.

Failure to operate effectively with stakeholders can present risks for the procurement operation. For example, if the correct stakeholders have not been identified, deadlines could be missed, incorrect technical data (e.g. specifications) used and required quality standards not achieved. All of which will have a negative impact on the expected outcomes of the procurement transaction.

Stakeholder identification
This process should be initiated at or before the commencement of a project, a major acquisition programme, sourcing new items or tendering for repeat items or services. By identifying those stakeholders who will have an impact on the outcome of the procurement activity, the process can be managed more effectively.

One possible approach is to establish cross-functions teams (representing, say, the procurement, technical, quality, financial and end-user departments) to participate in brainstorming sessions to identify stakeholders for specific procurement transactions. The sharing of knowledge and experience between the team members will provide useful information to the procurement team on relevant stakeholders. This information should be captured by the procurement team within its stakeholder engagement and management plan and will contribute to its institutional knowledge.

By encouraging the frank exchange of views in such brainstorming sessions, procurement leaders will initiate open communication with some of their key stakeholders which will facilitate better stakeholder engagement in the actual procurement process.

When the use of cross-functional teams is not appropriate, other techniques to identify stakeholders include:

• conducting research;
• procurement professional’s individual knowledge;
• brainstorming within the procurement team
• documents from previous transactions;
• communicating the procurement widely;
• using the STEEPLE technique to highlight macro/external factors and potential stakeholders.

Types of stakeholder

Internal stakeholders are individuals that are connected very closely to an organisation. They are people that have a strong influence on how the organisation is run and its success. Internal stakeholders could be staff, parent ministries, departmental heads and budget holders. For example, the procurement function may have to promote itself to senior management or management teams, or communicate changes in procurement policy and regulations to all staff.

The interests and influence of some internal stakeholder groups are summarised in the table below:

Connected stakeholders are individuals or organisations that have a relationship in a contractual capacity to a project or procuring entity. Connected stakeholders may have a financial or legal connection to the organisation. These stakeholders frequently have a significant stake in organisational activity, by virtue of their contractual or commercial relationships.

Some of the interests and influence of these groups are summarised in the table below:

External stakeholders are quite diverse and are individuals or organisations that are not directly linked or contractually obligated to a procuring entity or project. Examples of external stakeholders include the government which is enforcing rules and regulations, auditors monitoring performance against established standards and procedures and civil society or communities affected by projects and procurement transactions. Procuring entities are increasingly aware of the need to maintain a positive reputation in the supply and customer markets. This may require a more inclusive approach to stakeholder management, which recognises the legitimate needs and concerns of wider, secondary or ‘indirect’ stakeholders. External stakeholders are likely to have quite diverse objectives and degrees of influence. 

Some of the interests and influence of these groups are summarised in the table below:

Engagement with stakeholders
Once the stakeholders have been identified they can be categorised. By categorising them into four different quadrants, procurement professionals can understand the amount of engagement that is needed as well as the level of information that needs to be shared with each stakeholder.

This model has two axes:

• the horizontal axis shows the level of interest that the stakeholder is perceived to have and the left side of the axis represents low interest and the right side shows high interest;
• the vertical axis shows the level of power an identified stakeholder has; the bottom of the axis represents a low level of power and the top a high level. Understanding whether a stakeholder has high or low levels of power and interest, it is possible to categorise them in one of the four quadrants.

Stakeholder categorisation

• A stakeholder with high power and high interest is a Key Player (somebody that needs to be managed closely) such as the head or leader of an organisation.
• A stakeholder with high power and low interest is somebody or an organisation that needs to be kept satisfied. This could be a government or regulatory body which ensures a project or commodity is meeting legal requirements. A stakeholder with high interest and low power should always be kept informed of progress on procurement developments. For example, a local community group with keen interest in the impact of a project (e.g. new rural health clinic).
• A stakeholder who has low interest and low power should not be ignored but does not require much resource to manage. An example of such a stakeholder could be civil society which is not aware of a project and has limited interest nor little power. Periodic monitoring of these stakeholders is usually sufficient for their management.

Benefits for Procurement 
While it is important for the procurement function to create a strategy for managing its key stakeholders through a programme of engagement, equal consideration should be allocated to meeting the interests and needs of the stakeholders. As noted above, the stakeholders have a vast range of influencing factors they can bring to bear on the procurement professionals either to support of procurement activities or, on rare occasions, to frustrate them. Accordingly, these relationships need to be managed on a mutually beneficial basis and the stakeholder’s perception of the procurement function is integral to its responsiveness.

The diagram includes two axes with the point of conjunction showing the beginning of the relationship where neither the stakeholder nor the procurement leader has knowledge of the other and distrust or lack of trust may exist:

(a)    the vertical axis shows the stakeholder’s increasing belief in the procurement leader (by showing empathy and inclusion) and engendering an increasing sense of affection and trust;

(b)    the horizontal axis shows the stakeholder’s increasing belief in the capabilities and competence of the procurement leader (by being transparent and giving regular feedback) and developing an increasing sense of respect and trust.

When managing stakeholders these management methods should be used so that individuals feel they have been treated fairly and will respond more effectively.

Brainstorming meetings with stakeholders are a good opportunity to initiate empathetic relationships and this should continue with stakeholders being listened to and any tension or conflict managed effectively and professionally. Regular and appropriate feedback will reassure stakeholders their needs are being met.