Projects have an impact on people and organizations in a variety of ways – through the project process (project team members and stakeholders will have new tasks and responsibilities to fulfil), project deliverables (stakeholders may need to adjust their work or their home lives to accommodate change) or project outcomes (stakeholders may enjoy benefits but also suffer temporary or de facto disbenefits too). You will need contributions from individuals and entities to accomplish the project and harvest the benefits. The project manager and the other members of the project organization will need to make many choices in terms of what to do and how to deal with the interests and concerns of all these project stakeholders. In that context it is wise to consider the ethical issues you face in your behaviour towards project stakeholders. By ethical behaviour we mean behaviour that is acceptable according to professional, social or moral standards. Dilemmas will arise because sometimes you may be torn between the need to behave in ways that seem best for the project or for you but that are at odds with various standards. In this chapter, we will present a number of ethical issues that you may come across in your project stakeholder management and we will explore these in the context of essential characteristics of projects described in Chapter 2.

Projects are established to serve another organization, the base organization. The members of the project organization will inevitably develop detailed knowledge about the project to which members of the base organization do not have access. This asymmetric information (Akerlof 1970) means that you and the other members of the project organization will be in a position in which you may keep information hidden from the base organization and at times this might be to that organization’s detriment. This is called the principal-agent problem (Rees 1985a, 1985b, Eisenhardt 1989). The ethical touchstone in this situation is that you should keep in mind at all times that the project is established to serve your base organization. You should give this particular focus at any stage when the interests of the base organization appear to conflict with the interests of the members of the project organization. For example, you and your project team members may learn that a competitor is almost ready to introduce a product to market making the product currently under development by your project team obsolete. Arguably, it would be better for your base organization to terminate the project immediately and allocate financial and non-financial resources to other activities or projects. However, you and your project team members may enjoy the technical challenge of this particular product development and be tempted to delay passing on the information about the competitor for as long as possible. Your ethical dilemma may be further complicated if the information you receive is open to interpretation. This could be the case if you can rationalize to yourselves that the information was unsubstantiated rumour or that the launch of the product might not entirely undermine the commercial basis for the product on which you are working. The same holds true when the project is threatened by sudden, perhaps unanticipated, risks. It can be tempting for project managers and their project teams to withhold these risks from the project owner and the steering committee to prevent them from withdrawing resources from the project. You are faced with this ethical dilemma because clearly you cannot burden your resource providers by communicating ALL risks related to the project. On the other hand, if knowledge about the risks would have altered their decisions, not offering this information is problematic. In a case like this project teams may be so focused on providing solutions and not problems that they may be tempted to delay disclosure in the hope that a solution can be found.

Projects are temporary and unique endeavours. This raises an ethical issue because you may find yourself tempted to deal with your stakeholders in ways that optimize your short-term benefits which may run counter to their needs. In addition, a short-sighted attitude to stakeholders may be harmful to your base organization in the long run or to other project stakeholders for example in terms of corporate social responsibility (CSR) or sustainability issues. Lack of motivation to ensure proper knowledge transfer to other projects may also be an unwelcome result of the project’s temporary nature and uniqueness. You and your team members will be put under considerable ethical pressure if it is clear that project management success is based solely on the fulfillment of the classical constraints – time, budget, specification – and realize that no one seems to care about the possible negative side effects of the project: the impact on the long-term relationships with the stakeholders, the long-term interests of the base organization and knowledge transfer to other projects. The dilemma arises because the long-term and broader concerns may hinder your project progress and you may be tempted to ignore them. To prevent short-termism and an overly narrow focus on project management success, we suggest that you encourage that the long-term issues are included in the project success criteria.

As mentioned repeatedly throughout this book, an essential characteristic of projects is that they depend on a number of negotiations between the members of the project organization and the various project stakeholders. In projects, typically there are shared as well as conflicting interests among the stakeholders and even between the various stakeholders and the project itself. In Chapter 5 we explained the difference between a collaborative approach and a power-based approach. A purely power-based approach, taking advantage of a powerful position at the expense of a stakeholder, involves ethical considerations. A power-based approach in which you force or manipulate the stakeholders to comply with your preferences, when you know or suspect that this is harmful to them, runs counter to contemporary standards for doing business, especially if you consider CSR or sustainability. The power-based approach, however, can be ethically appropriate if you know (or think you know) that your behaviour is in the interest of the stakeholder because the reason why you push your solution through is that you have more insights than the stakeholder on the issues in question. It may also be that immediate urgency of action is required and precludes the time for a collaborative approach.

Clearly, the ethically correct way to manage stakeholders is to facilitate your project to ensure that ideally all project stakeholders will benefit from the project. You are looking for win-win situations. You may be skeptical and argue that this is not always possible – that some projects unavoidably will involve stakeholders who benefit and stakeholders who are disadvantaged. This is sometimes the case for large construction projects where neighbors and landowners object to a project which may damage their view of the surrounding landscape or because they are forced to sell off their land to make space for a new building. Even though we acknowledge the truth in this, we want to put forward that, according to contemporary stakeholder theory, you should always put significant efforts into searching for mutual benefits as well as for ways to support the project so that all stakeholders feel that they are better off with the project than without it. In other words, your focus should be on determining the joint interests and the win-win situations for all stakeholders. All stakeholders have legitimate interests that should be met and no project should favour the benefits of certain stakeholders at the expense of disbenefits of others, where this clearly is disproportionate. This means that you need to consider the impacts of all activities and decisions related to each of the project stakeholders. At the same time, you must be aware that tradeoffs, typically between stakeholders, are inevitable, and that they should be dealt with and preferably agreed on in a conscious and considered way.

Creating benefits for as many stakeholders as possible without damaging the interests of other stakeholders involves ethical dilemmas. On occasion you will find yourself in a situation in which two or more equally important stakeholders have competing claims or wishes. One of these stakeholders may need management attention because he or she is powerful. Another stakeholder may have been classified as needing attention on the basis of an urgent need for the project deliverables. You may then find yourself in a situation where it is up to you to decide which stakeholder is the more in need of attention – the one who may be able to harm the project or the one who will benefit from getting the project deliverables on time. There is no easy solution to this. You may be best-advised to get the stakeholders together and invite them to make trade-offs so that they can figure out the least damaging solution themselves. You may also investigate alternative solutions that might offer a win-win or at least not a fully win-lose situation. It is sensible to spend resources trying on this as a clear win-lose outcome may harm the perception of fairness in the project process and thus discourage some stakeholders from delivering their contribution. The situation can be especially problematic if the stakeholders are part of a network which gives them the opportunity to share experiences – good as well as bad.

The more you are able to establish common ground and keep an open mind, the more you will be able to grasp the requirements, wishes, concerns and attitudes of the stakeholders during the project course so that you can act to make the stakeholders contribute as needed and at the same time seek to take care of their interests.

You should interact with the stakeholders through all phases of the project in order to sustain commitment and create the expected benefits. In a fast-changing world, new decisions and alignment of expectations along the way are typically a major part of the management of stakeholders; decisions made at one point may quickly become non-suitable due to changing conditions. These changes can be disadvantageous but they can also create the basis for new opportunities.

Projects have multiple success criteria. In Chapter 2 we differentiated between project management success and project product success. The project manager is hired to deliver projects as quickly, cost-effectively and smoothly as possible, thus pursuing project management success. Project product success as well as any long-term side effects from the project can only be assessed when the project organization has been terminated. Further, the project product success is in the project management literature mainly seen from the perspective of the base organization (for example, Andersen 2008) – with little, if any, consideration of the suppliers or future generations. Because of this we have taken a classical perspective on stakeholder management, using a ‘dominant coalition’ view (Mikkelsen and Riis 2003) where the dominant coalition in project management is the base organization, the project owner, the project steering committee (if such one exists), the project manager, and his or her project team. The primary success criterion for the project is to deliver benefits to the base organization. A sub-criterion may be that this should happen while creating as many benefits as possible for the other stakeholders as long as this does not hamper the base organization. Creating benefits for the base organization does not necessarily implicate harming other people or organizations, and ethical conduct would aim to avoid this.

Additional dilemmas relate to the calculated behaviour towards others that is inherent in project stakeholder management. According to the guidelines presented in Chapter 5, you should plan your behaviour towards other people based on a rational calculation of the best outcome from the time and effort invested in building the relationship. This means that you engage in communication with the stakeholders with a specific purpose in mind. The communication is planned in terms of the time spent on each stakeholder as well as the information revealed to each stakeholder. This is also true of conversations you may have to reveal stakeholder expectations and aspirations of the project. If you do all this under pretence of creating personal relationships, and the stakeholders discover that in reality the aim was to influence or even manipulate them, then it may be devastating for your credibility, making it hard to communicate freely with the same stakeholders at another time. Therefore it is probably best to be open about it if a meeting or conversation is designed to generate information or to promote the project. On the other hand, such openness can lead to a stakeholder opting for the highest possible gain, particularly if he or she doubts your ability to be fair.

Another characteristic of projects is that project stakeholders have their own stakeholders. This introduces two ethical issues. The first relates to whether you put pressure on your stakeholders in such a way that they cannot take proper care of their own stakeholders, for example their employees or suppliers. This is a grey area because you may argue that each stakeholder is responsible for his or her own stakeholders. On the other hand, abusing a power relationship is not ethical. The second issue concerns the situation in which your stakeholder is behaving unethically, for example by ignoring human rights, perhaps by using child labour. In such a case, you need to consider whether you will sustain your relationship with that stakeholder, try to make the stakeholder change his or her behaviour or terminate the relationship.

Figure 6.1 summarizes the various ethical issues.

Figure 6.1 Ethical issues in project stakeholder management