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Interest Groups and Organizations as Stakeholders Paper Number 35 June 2001 Robert R. Bianchi Sherrie A. Kossoudji
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Interest Groups and Organizations as Stakeholders

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Page 1: Interest Groups and Organizations as Stakeholders

Interest Groups and Organizationsas Stakeholders

Paper Number 35June 2001

Robert R. BianchiSherrie A. Kossoudji

Page 2: Interest Groups and Organizations as Stakeholders

Interest Groups and Organizationsas Stakeholders

Robert R. BianchiSherrie A. Kossoudji

Paper Number 35June 2001

Social Development Papers

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First printing: June 2001

This publication was developed and produced by the Social Development Family of the World Bank.The Environment, Rural Development, and Social Development Families are part of the Environmentallyand Socially Sustainable Development (ESSD) Network. The Social Development Family is made up ofWorld Bank staff working on social issues.

Papers in the Social Development series are not formal publications of the World Bank. They arepublished informally and circulated to encourage discussion and comment within the developmentcommunity.

Copies of this paper are available from:

Social Development DepartmentThe World Bank1818 H Street, N.W., MSN MC5-507Washington, D.C. 20433 USAFax: 202-522-3247E-mail: [email protected]

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Contents

Contributors iv

Preface v

1. Introduction to the Issues 1

2. Organized Interests as Social Development Partners: Conceptsand Techniques 3

Robert R. Bianchi

3. Strategies of Stakeholder Analysis to Improve Participation and ProjectPerformance: Concepts and Field Techniques 17

Sherrie A. Kossoudji

iii

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iv

Contributors

Robert R. BianchiInternational attorney555 West Madison St., Ste. 3010Chicago, IL 60661Tel: (312) 775-5988Fax: (312) 902-3617E-mail: [email protected]

Sherrie A. KossoudjiAssociate Professor/School of Social WorkAdjunct Associate Professor/Economics DepartmentThe University of Michigan2788 SSW Building1080 S. University Ave.Ann Arbor, MI 48109-1106Tel: (734) 763-6320Fax: (734) 763-3372E-mail: [email protected]

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This publication is a collaboration betweenmembers of the Social Development Family inthe World Bank and academicians outside theBank. It part of a project by Social Develop-ment staff to develop and refine methods ofsocial analysis to help address the new chal-lenges faced by the Bank. The key componentsof this program are the Social AnalysisOperational Policy, the development ofparticipatory methods for social analysis(including stakeholder, organizational, andinstitutional analysis), the Quality AssuranceGroup process, and the collection of casestudies.

The first step in this process has been to takestock of existing useful material both withinand outside the Bank. The two chapters in thisvolume are an outcome of this stocktaking.They combine thought inside the Bank and inacademia on stakeholder analysis.

Preface

The next step has been to convene a team ofBank staff to collate and refine techniques asthey are applied to particular Bank instru-ments, thereby developing a unified yet flexibleprotocol for social analysis. The team willcontinue to seek feedback via its website fromSocial Development staff who apply these andsimilar methods in the field. The Social Devel-opment Family will return to stakeholderanalysis once it has taken full stock of organiza-tional and institutional analysis.

This publication was made possible in partby the Danish Trust Fund, which has supportedthe Social Development Family in the develop-ment of tools and techniques for social assess-ments. We gratefully acknowledge the valuablecomments provided by David Marsden, AnisDani, and Judith Edstrom. Alicia Hetzneredited the volume, and it was desktopped byGaudencio Dizon.

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Any development intervention that seeks tochange the rules of the game will producewinners and losers. Existing stakeholders withentrenched interests in the previous system willhave major interests in determining howattempts at institutional change will affect theirpower and interests. Thus, the task manager’sability to understand and engage or neutralizestakeholder interests during project design andimplementation is essential for the success ofinterventions posited on changing conditionson the ground.

Traditionally, World Bank staff have usedstakeholder analysis at the level of the indi-viduals affected by interventions. However, itis the analysis of groups and organizations—both inside and outside government—asstakeholders to processes and outcomes that iscritical to the success of any policy reform. It isthrough stakeholders within government thatany reform will be mediated. Groups of stake-holders, both within and outside government,mediate access to resources and power andproduce forms of stratification and obstacles toempowerment.

The shift from a state that owned enterprisestoward a regulatory state, and from a state-based toward a private-sector-based model ofdevelopment, has radically altered the socio-political map. Stakeholders who previouslyhad acted as checks and balances to oneanother’s power have been thrown into adifferent set of relationships with one anotherand with the state. Organizations withingovernment, and interest groups developed inclose collaboration with government are likelyto be threatened by change.

In the first chapter of this volume, RobertBianchi explains the process by which interestgroups gain a stranglehold over a weak state.He argues that professional groups are firstcaptured by bureaucracy and then themselvesrecapture bureaucracy. The state aims toprovide stability among contentious groupsby incorporating them in its own structure.The groups are given organizational forms,rights, and resources to perform certaincorporate tasks. Many of these corporatistgroups were formed in the period duringwhich the state was seen as the natural agentof development. Because they were incorpo-rated in the state, they developed a stronginterest in perpetuating the state-led devel-opment model. These groups can becomepoints of pressure on the state that organizedthem, using their official status to exert influ-ence in pursuit of their political, social, andeconomic goals.

The proliferation of interest groups withtentacles in the old state prevents strategicprioritization by the government and stallsreform. The politics of lobbying may help toexplain why projects are not finished withintime and cost estimates, or not finished at all.Thus, it cannot be assumed that all civil societyorganizations are potential partners for theBank. Often they are closely aligned with thegovernments that created them, with en-trenched interests in preserving existing insti-tutions and resisting policy change. Theirinterests may not be aligned with the goal ofpoverty reduction.

Bianchi’s analysis has implications for thedesign and implementation of operations.

1. Introduction to the Issues

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Interest Groups and Organizations as Stakeholders

During design, the task team needs to evaluatecarefully why a particular project is needed toensure that it does not merely flow from anentrenched interest. Task team members mustexamine the rationale for the project in theoryand on the ground to ensure that the goals ofthe project reflect the interests of the poor. Thetask team also should make sure that imple-mentation and design arrangements preventcapture of project benefits by local elites orinternational stakeholders, such as consultantsand international firms. During implementa-tion, the task team should constantly keep inview the medium- and long-term goals toprevent short-term accommodations to interestgroups from hampering the accomplishment ofpro-poor goals.

In the chapter, Sherrie Kossoudji formulatesa range of critical questions that the task teamneeds to ask when planning and implementingan intervention. Which individuals or groupsare essential to success and need to be wonover? Which individuals or groups are likely toresist and need to be isolated? Who is likely to

be adversely affected and must be compen-sated? Which groups, especially poor andunorganized groups, are likely to benefit froman intervention but do not realize it? Whichgroups could benefit but will not be able todefend the benefits in case of resistance bymore powerful groups? What, then, are the beststrategies for persuading or isolating groups?

These two chapters are part of an ongoingeffort by the Social Development Family todevelop further its methodologies in stake-holder, organizational, and institutional analy-ses. Stakeholder analysis has been recognizedas a key vehicle for tailoring World Bankoperations to a country context.1 It is also auseful tool to analyze the dynamics of owner-ship within government organizations, and toidentify groups in order to provide a basis forsystems of monitoring.

Note

1. “Reinventing Adjustment Lending: Retrospec-tive and Strategy,” OPS November 10, 2000.

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World Bank task managers will face many hardchoices as they try to enlist interest groups associal allies. Most interest groups are notori-ously biased spokespersons for the broadconstituencies they claim to represent. Even inthe mature democracies of the United Statesand Western Europe, group leaders often speakonly for themselves and a small fraction oftheir most privileged and assertive followers.Nominal members, interested nonmembers,and the public at large may have little or noinfluence over powerful groups whose actionsdirectly affect the daily lives and futures ofmillions of people.

For generations, Americans were regarded asmasters of the “art of association” because oftheir penchant for joining countless types ofvoluntary groups. However, during the lastthree decades, North American participation ingroup life has atrophied as disillusionedcitizens realize that group life is dominated notby grassroots movements and public interestorganizations, but by entrenched lobbies thathave acquired a stranglehold over critical areasof public policy and economic activity (Putnam2000). In the world of interest group politics,effective power flows not from public opinionand the will of the majority, but from theorganizational skills and financial resources ofsmall yet determined minorities. Hence, publicadvocacy groups such as the Sierra Club andCommon Cause commonly are overshadowedby the special interests of fewer people repre-sented by the National Rifle Association, the

2. Organized Interests as Social DevelopmentPartners: Concepts and Techniques

Robert R. Bianchi

American Medical Association, and the Inter-national Brotherhood of Teamsters.

The problem is worse in partial democraciesand authoritarian regimes in which the stateoften represses and manipulates most types ofassociations. In many developing countries, thelargest organizations, such as chambers ofcommerce, bar associations, guilds, and laborunions, have had long histories of serving thegovernment and the ruling party instead oftheir members (Bianchi 1989, Schmitter 1971).Frequently, the oldest and most importanteconomic and professional groups originatedas monopolies that were created and funded bythe state. By law, membership was compulsory,and no competing organization was permitted.Usually, the government controlled the selec-tion of group leaders and kept them in power.Because of their questionable origins, manypeople still view such groups as the creaturesof a discredited authoritarian past rather thanas natural outgrowths of a free society.

If, in both old and new democracies, somany interest groups tend to distort the repre-sentation of public opinion and to corrupt thepolicymaking process, why should task manag-ers pay them any heed? Should not the WorldBank ignore them instead of trying to workthrough them? If some groups seem too power-ful to ignore, would it not be better to workwith their competitors or to oppose them headon instead of co-opting them or giving in totheir demands? Since even the most powerfulinterest groups frequently enjoy little legitimacy

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or public respect, should not task managers befree to encourage the creation of new associa-tions for prospective beneficiaries and allieswho do not yet possess their own organiza-tions?

Concepts

Pluralist and Corporatist Systemsof Interest Representation

One of the most popular paradigms for study-ing interest groups is the distinction betweenpluralist and corporatist systems of representa-tion. As ideal types, pluralism and corporatismare useful starting points for classifying andcomparing interest group systems, but they areno more than intellectual abstractions. In thereal world, there are no “pure types” of eitherpluralist or corporatist political systems.Instead, all systems are hybrids that mix bothpluralist and corporatist structures in differentproportions. Furthermore, even in the samecountry, the relative balance between these twotypes of group organization often changesdramatically from time to time and from sectorto sector.

The crux of the model is the fundamentaldichotomy between groups that serve theirmembers and groups that serve the state. Socialscientists usually distinguish the two halves ofthe dichotomy by listing several ways in whichpluralist and corporatist groups stand apartfrom each other—sometimes as polar oppositesand sometimes as different ends of a con-tinuum.

In theory, pluralist systems are composed ofgroups that have the following characteristics.Pluralist groups are spontaneous creations oftheir leaders and members—they come intobeing without the need for prior approval fromthe government. They freely define their ownfields of activity according to their subjectivepreferences. There is no limit to the number ofgroups that can operate in any field. Multiplegroups can compete for the same members,and individuals can belong to multiple groupsat the same time. Membership is voluntary, andmembers retain the right to resign. Membersare free to select and remove their leaders at

regular intervals. Examples of pluralist groupsare charitable foundations, sporting clubs,community improvement associations, volun-tary labor unions and professional syndicates,veterans’ committees, women’s groups, andethnic societies.

In theory, corporatist systems are composedof groups that possess opposing characteristicson all of these dimensions. Corporatist groupsare public bodies that are created by statute,supervised by a parent ministry, and financedwith state funds. Their fields of activity arestipulated in law and may not exceed thoseboundaries. They operate as official monopo-lies in their designated sectors—no rivalgroups are permitted. Membership is compul-sory for everyone who belongs to a legallydesignated social or economic category. Thegovernment retains the right to screen, appoint,and dismiss organizational officers. Examplesof corporatist groups are associations that arelicensed and funded by the state, unions with“closed-shop” contracts, and any group thatlegally requires people to become members as acondition to working in a particular job orenterprise.

The hallmark of corporatism is a lop-sidedbargain between interest group leaders and thestate. The state agrees to grant favored groupsa degree of power, money, and status. In return,group leaders agree to help implement govern-ment policy, to soften their demands andcriticisms, and to control their members. Theexchange gives interest group leaders numer-ous privileges that they would not enjoy if theyheaded private, voluntary associations, includ-ing guaranteed access to top decisionmakersand virtual immunity from potential rivals anddissatisfied members. For its part, the stateacquires a small stable of pliable partners whoare strong enough to deliver on their agree-ments but too weak to drive hard bargains orimpose their own preferences.

Corporatism is popular with many govern-ments that wish to mask their discriminatorytreatment of social and economic groups.Because corporatist organizations exercisetenuous privileges instead of inherent rights,governments enjoy enormous discretion inmanipulating the system to promote favored

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Organized Interests as Social Development Partners

interests and to demote potential troublemak-ers. Groups that appear to share common legaland structural characteristics will still haveradically different power relations with thestate and with one another. Even in the mostrepressive dictatorships in which all of societyseems to be at the mercy of the rifle butt,certain groups will fare much better or muchworse than the rest. Some may barely bow,some may have to kneel, and others may beforced to choose between crawling and stand-ing up to fight.

Although corporatist arrangements usuallyplace the state firmly in the driver’s seat, theyalso allow wide freedom of maneuver to groupleaders who understand the rules of the gameand who learn to bend them to their advantage.The fate of group leaders can quickly divergefrom the fate of their supposed constituents. Itis very common for members to experienceshrinking benefits and tightening regulations atthe same time that group leaders are expandingtheir bureaucratic fiefdoms, patronage net-works, and personal fortunes.

Many people assume that pluralist groupstypify democratic systems whereas corporatistgroups typify authoritarian systems. In fact,pluralist groups are slightly more common indemocratic systems, and corporatist groups areslightly more common in authoritarian sys-tems. However, there is no simple, absolutecorrespondence between interest group struc-tures and political systems.

Most authoritarian regimes find it extremelyuseful to preserve prominent enclaves ofpluralism, particularly in sectors in which theywant to promote fragmentation and weaknessinstead of coherence and unity. By encouragingthe proliferation of small and competinggroups, pluralism can serve as an excellentmeans to “divide and rule.” At low doses, theright of association can have perverse anddisorganizing effects. Pluralism can providejust enough freedom for squabbling groups tonullify one another’s efforts at building apopular and effective political force.

Consequently, ruling elites can have the bestof both worlds—they can weaken social andeconomic groups while claiming that thegroups’ problems are self-inflicted. Government

spokespersons can insist that vast sectors ofsociety are weak not because they are bulliedfrom above but because they are dividedfrom within. Developing country rulersfrequently try to pass off what might becalled “debilitating” pluralism as an inevi-table aspect of nascent democracy. They hopethat foreign donors and human rights advo-cates will view the persistent disorganizationof civil society as the lingering effect ofcollective action problems instead of theresult of deliberate government policies. Thisallows them to take credit for adopting thewindow dressing of democracy without havingto share power with autonomous groups andequal partners.

On the other hand, many democraciesencourage the development of corporatistinterest groups to compensate for the perceivedinadequacies of pluralism and multipartycompetition. In most of Western Europe, asmall circle of interest group cartels holdsregular summit meetings with governmentplanners to negotiate economic agreements forthe entire country. Both right-wing and left-wing governments regularly resort to this sortof elite bargaining in the belief that rationaleconomic policies are more likely to emergefrom a roomful of secluded technocrats than aparliament of grandstanding politicians.

The steady shift of power from electedlegislatures to collusive committees of interestgroups and bureaucrats has sparked popularprotests in nearly all industrialized democra-cies. Corporatist bargaining processes haveproduced “social pacts” and “incomes policies”that tried to tone down social tensions whileboosting productivity and exports. However,the cost and pain of these agreements havefallen mostly on millions of citizens who werenot represented at the bargaining table andwho were never invited to participate. Thus, inmany developed countries, taxpayers, environ-mentalists, small producers, and shopkeepersmay well mount revolts. Their hope is not onlyto dramatize the unequal benefits of corporatistbargaining but also to push policymaking backinto the public arena of electoral competition sothat they and ordinary voters can rejoin thedebate.

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How Representative Are Interest Groups?

The systematic distortion of public opinion andmember preferences is a common weakness ofinterest groups, whether they are pluralist,corporatist, or the more common admixture ofthose ideal types. The most important distinc-tions among organized groups are not theircategorizations in law or social science theory,but the kinds of biases that they create inpolitical life and the prospects for overcomingthose biases. The study of interest grouppolitics amounts to an ongoing conversationthat is dominated by two questions: “Why domature groups tend to become fixed and frozeneven if they originally appeared to be free andfluid?” and “What forces can correct or reversethis ossification?” Social scientists give conflict-ing answers to these questions, running thegamut from extreme optimism to extremepessimism.

Optimistic writers argue that correctivemeasures are likely to come from within theinterest group system itself. Extreme optimistscontend that democracy alone is sufficient toensure that most groups remain open, competi-tive, and responsive even if some of the stron-ger actors occasionally manage to corner partsof the market (Truman 1953, Dahl 1961). Aslong as a society preserves the freedom ofassociation, group life will be virtually self-equilibrating. Inequities will be mild andtemporary not systematic and self-sustaining.

However, moderate optimists recognize thatmany people lack the resources and skillsnecessary for translating formal rights intoeffective power (Bendix 1964, Hardin 1982).Drawing a distinction between the “right ofassociation” and the “art of association,” theynote that even the freest democracies aredivided by social and economic gaps thatcreate corresponding disparities in the abilityof different groups to exercise their nominallyequal liberties.

Nonetheless, moderate optimists believe thatmany disadvantaged groups can eventuallyovercome these obstacles through a process ofpolitical learning and self-empowerment.Inequalities in group organization and powerare viewed as common symptoms of market

failure caused by imperfect information,entry barriers, and transaction costs. Givenenough time and tutoring, most groups canacquire the means to mobilize an effectivecountervailing force that will enable them todemand the same sort of access and influencethat more privileged groups take for granted.With repetition, the learning period shoulddecline, allowing even latecomers to catch upin short order by following the examples ofsuccessful predecessors.

By contrast, pessimistic writers argue thatgroup systems become so entrenched andsclerotic that reform is impossible withoutshocks and pressures from outside the groupsthemselves. Moderate pessimists usually thinkthat a major national crisis can provide asufficient jolt to crack open an oligarchy ofcomplacent groups (Schmitter 1974, Lowi1971). New actors could enter the system tohelp manage an emergency that the old ordercan no longer control: a severe recession, aseries of escalating riots, or an electoral upsetthat deposes a long-dominant party. Interestgroup “cartels,” unaccustomed to bargainingwith either rivals or partners, would be forcedto seek out new blood to save themselves fromtheir own unwillingness to share power.

For extreme pessimists, however, entrenchedgroups are so resistant to change that realreform can follow only a full-blown catastro-phe that wipes the slate clean (Olson 1982,Bachrach 1967). Innovative coalitions cannot begrafted onto existing ones; they can be createdonly out of their ashes. This view notes that ademocratic and economic renaissance oftenappears in precisely those countries in which anational disaster has swept away hegemonicinterest groups that seemed invincible todomestic opponents. Thus, many kinds oftragedy—from depression and civil war tomilitary defeat and foreign occupation—mayprove to be blessings in disguise, if they finallybreak the back of an old guard determined tocling to power at all costs.

Although each of these competing argu-ments has made a lasting contribution to thestudy of interest group politics, most analyststend to agree on two key conclusions. Earlierportrayals of interest groups as natural agents

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Organized Interests as Social Development Partners

of democracy and development have givenway to a host of more critical and skepticalviews. Instead of assuming that an “invisiblehand” will somehow balance contendinginterests, most social scientists are asking hardquestions about how groups operate in the realworld: “Who created them and why?” “Whatkinds of people do they include and exclude?”“Does their role in policymaking promote orprevent equity and efficiency?” “Who pays theprice for a particular system of group activity,and who reaps the benefits?”

The empirical evidence has convinced moreand more social scientists that interest groupsobstruct democracy and development at least asmuch as they encourage them. In this sense, it isfair to say that today’s students of interestgroup politics are both more pessimistic andmore realistic than their predecessors. How-ever, they are also becoming increasinglyconfident about the prospects for reforminginterest group systems through various combi-nations of internal and external pressures.

Many field workers and theorists have triedto specify the conditions under which under-represented social sectors are likely to organize,form effective coalitions, and reshape interestgroup systems that have been the historicalpreserves of privileged minorities. Havingdiscovered the hurdles to collective action,social scientists are also beginning to realizethat the hurdles are not as insurmountable asthey once appeared (Olson 1965). Thus, mostsocial scientists have abandoned the myth thatan “invisible hand” will somehow permitinterest groups to correct their own abuses.Instead, they are examining a number of“helping hands” that can actively intervene toalleviate the biases that regularly accumulate inmature systems of group politics.

With increasing frequency, some of the mostimportant helping hands are coming from theinternational community, including the WorldBank. Donor democracies, human rightsadvocates, and foreign investors realize morethan ever that they have a direct stake inbuilding more open and flexible systems ofrepresentation. Associational life is no longerseen as the exclusive concern of domestic elitesand national sovereigns, but as a universal

interest of all who value greater human free-dom and well-being (Sen 1999). Internationalactors seeking local partners for economic andsocial development usually discover that theymust also become part of transnational alli-ances for political change. Implementing eventhe most orthodox economic policies mayrequire adopting some unconventional politicalpractices such as intentionally altering theimbalance of power among organized groups.

Lobbying and Other Interactionswith the Government

The most influential interest groups are thosethat have established continuous and mutuallybeneficial relationships with a small circle ofbureaucrats and lawmakers who controlspecific areas of public policy. The most suc-cessful lobbies rely not on bribery and arm-twisting but on providing unique informationand expertise that help decisionmakers accom-plish their goals and advance their careers.Effective lobbies do not buy or extort influence;they usually receive it as a tacit reward for theirwillingness to share the daily chores andresponsibilities of governing (McConnell 1967).

The drift of public power into private handstakes many forms. In the most extreme cases,governments and interest groups exchange notjust knowledge and advice, but leaders as well.It is common to meet cabinet ministers andparliamentary chairpersons who are formerdirectors of associations in the very profes-sional or economic sectors that they are sup-posed to be regulating in the public interest.Similarly, many interest group leaders areretired civil servants and politicians who arenow lobbying the same government officialswho were once their colleagues.

When an interest group is itself a quasi-public agency, the line between the regulatorsand the regulated becomes virtually nonexist-ent. Many business and professional associa-tions originated as government agencies thatwere designed to discipline modern economicsectors in much the same way that traditionalguilds controlled crafts and trades. Gradually,these new groups also acquired representativefunctions and overtly advanced their members’

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demands, but they never lost the official statusand authority that they possessed as agents ofthe state bureaucracy. In continental Europeand in much of the developing world, this hasbeen the typical pattern for middle-classorganizations such as chambers of commerce,exporters’ clubs, manufacturing societies, barassociations, engineers’ syndicates, and agricul-tural cooperatives.

Many private interest groups that did notenjoy this sort of privileged access at theirinception nonetheless have succeeded inpenetrating government bodies both nationallyand locally. For example, in the United Statesand the United Kingdom, most case studies ofinterest group activity focus on private associa-tions that gradually “colonize” and “capture”executive agencies and legislative committees.American audiences, in particular, have alwaystended to regard this blurring of public andprivate power as scandalous or semi-criminal.Even today, when accounts of group politicsusually come from the pens of historians andsocial scientists instead of muckraking journal-ists, many of them still read like exposeschronicling the pervasive corruption of publicofficials by special interests.

In practice, the exercise of group influencetends to assume common forms regardless ofwhether an association originated in the publicor private realm. In either instance, the keyrelationship typically revolves around a “sym-biotic triangle” that joins an interest group, aspecialized administrative agency, and aparliamentary committee. Each party suppliesa set of vital ingredients to the partnership. Theinterest group contributes inside information,assistance in implementing government poli-cies, and political support for the officialdecisionmakers. The agency provides author-ity, enforcement, funding, and coordinationwith other branches of government. Thecommittee adds formal oversight, appropria-tions, and defense against public criticism.

The prevalence of these symbiotic trianglesacross so many policy arenas means thatoutsiders who seek to influence decision-making may find themselves enmeshed indelicate negotiations with a wide range ofpotentially conflicting personalities, in effect, a

policy “family.” It may be impossible to workwith top government bureaucrats unless one isalso prepared to deal with the associations andpoliticians who make up their support groups.Likewise, outsiders may approach an interestgroup because it enjoys a popular reputationfor dictating policy in its sphere of influenceonly to discover that it is merely a link in along chain of mutually dependent actors thatstretches deep into the state and the politicalsystem.

As with any family, dealing with a policytriangle can be a joy or a nightmare dependingon its internal dynamics. A harmonious andcooperative triangular network can open doorsin many directions, paving the way for far-reaching innovation in fields and institutionsthat initially seemed unrelated. However, asquabbling network can produce prolongeddeadlock in which personal and organizationalresentments defeat even modest initiatives thatappear to serve the objective interests of all ofthe major actors. When the members of a policytriangle are locked in battle, a foreign donor oradvisor may not be able to accomplish morethan brokering a truce that enables existingprograms to continue without major disrup-tions. Divided policy networks are very un-likely to adopt new proposals, particularly ifone member believes that its rivals will controllucrative benefits that can alter the balance ofpower among them.

Patterns of Organization by Sector

Although any social and economic sector cancontain many different types of associations,there are some very common organizationaltendencies among private business groups andlabor unions. At early stages of economicdevelopment, business interests often cluster ina small number of undifferentiated structuresthat are sponsored and supervised by govern-ment ministries. However, as the private sectorgrows and diversifies, many entrepreneursbegin to prefer more specialized groups thatcan represent their diverging and often contra-dictory demands. New voluntary associationssuch as bankers’ clubs usually spring upalongside the older guild-like chambers of

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commerce. Eventually, the private sectorbecomes populated by a host of corporatist andpluralist organizations that compete for thesame members and that lobby the same gov-ernment bodies.

In time, the public face of private businesscan change dramatically. What appears to be amonopolistic and hierarchical block oftendevelops into one of the most fragmented andcompetitive arenas in the political system.Rhetorical references to one collective “busi-ness” interest give way to multiple collisionsamong increasingly hostile factions—exportersversus importers, manufacturers versus trad-ers, lenders versus borrowers, large conglomer-ates versus small firms, developed growthpoles versus the hinterlands.

The proliferation of specialized businessgroups often creates a private sector that is notonly multi-vocal but also highly polarized. Theprofusion of conflicts over specific policiesbecomes eclipsed by a single overriding cleav-age. This is the division between the smallnumber of internationally competitive enter-prises with access to foreign finance andmarkets versus the multitude of weaker firmsthat depend primarily on domestic resourcesand customers.

In a developing economy, bitter inter-business quarreling frequently spills over to thegovernment and the political party system. Theeffects can be particularly onerous for the majoreconomic ministries and the largest right-wingparties. Rival business groups are often instru-mental in breaking a moderately conservativemass party into a collection of weak splinterparties that espouse conflicting economicprograms. Smaller entrepreneurs are particu-larly likely to adopt more independent andaggressive political strategies, hoping that theirlarger numbers can partially compensate fortheir weakness in the marketplace. New coali-tions of business groups and splinter partiesusually criticize liberal models of the market,demanding more government intervention inthe economy to protect less competitive enter-prises against the pressures of monopolizationand globalization.

A deeply divided business community canmake it nearly impossible for a developing

country to formulate a stable macroeconomicpolicy or to shape the broad electoral alliancesnecessary for stable government. When rivalbusiness groups are able to wage their battlesinside of coalition governments and economicministries, the result is usually a series of sharppolicy reversals in trade, investment, moneysupply, and taxation—reversals that virtuallyguarantee fiscal crisis and developmentalblockage.

In many developing countries, private-sectordivisions contribute to a prolonged economicand political stalemate that threatens socialorder and, in some cases, the very survival ofthe nation. Politicians aligned with rival busi-ness groups frequently try to broaden theirelectoral support by linking economic conflictswith more explosive grievances based onregional, ethnic, and religious divisions. Be-cause the most disadvantaged districts areoften also the homelands of alienated minori-ties, clashes of material interest can quicklydegenerate into bloody confrontations of racesand cultures. The ensuing social and politicalturmoil jeopardizes not only the hard-wongains of the private sector but also the legiti-macy and viability of the nation-state it hopesto lead.

Whereas private-sector development encour-ages business groups to become more frag-mented and competitive, it spurs labor unionsto become more unified and coordinated. Theincreasing dynamism of private businessthreatens different segments of the unionmovement in different ways, but the commonthread is the perception that greater politicalactivism is necessary to compensate for labor’seconomic weaknesses. The preferred type ofpolitical action will vary from union to uniondepending on its degree of leverage in thelabor market and its prospects for forgingalliances with the major political parties.

Among union leaders in the developingworld, three patterns of political-economicorientations are particularly popular:

1. A conservative unionism tries to preservethe vestiges of paternalism in the state sector.

2. A militant unionism confronts the risingpower of private employers.

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3. A social democratic unionism tries to bridgethe gap between the two extremes (box 1).

Each orientation tends to become identifiedwith a separate faction of the labor movementthat is composed of clusters of unions facingsimilar problems. As unionization grows, thestruggle to control the labor movement as awhole often narrows down to a stable rivalryamong these three factions. Sometimes theywill set up separate confederations; at othertimes, they will maneuver for dominancewithin in a single confederation until theinternal strains reach the breaking point and anew round of competition and coalescencebegins.

Unions in large state-owned enterprisesadopt a defensive posture, trying to protectpast gains against pressures for cost cuttingand privatization. These are usually the mostpragmatic and opportunistic parts of the labormovement. Some senior union leaders maynurse a lingering nostalgia for a former rulingparty that treated public-sector workers as aprivileged constituency, but the ideologicaldrag of this old guard becomes increasinglyembarrassing to their younger and morepliable colleagues.

Most state-sector unions eagerly court thegovernment of the day regardless of its parti-san and ideological complexion. They focus onquietly lobbying ruling party leaders andcompany managers, pledging to prevent workstoppages in return for job security and mini-mal benefits. Sometimes they espouse a passivestyle of unionism that claims to pursue exclu-sively economic goals while avoiding partisan

activity. Rival labor leaders usually denouncethis approach as a kind of “company union-ism” that does the bidding of the state.

Unions in large privately owned enterprisesconfront cost-conscious employers who are notsubject to the kinds of direct political meddlingthat public-sector managers learn to take forgranted. The bargaining power of private-sector unions depends not on political patron-age but on the conditions of the labor marketand the system of industrial relations. Theseunions can rely on economic strategies onlywhen the supply of labor is scarce in a particu-lar field and when the law promotes collectivebargaining and the right to strike.

Although such favorable conditions arisefrom time to time, they are rare and ephemeral.Hence, private-sector labor leaders commonlytry to form a stable political alliance with left-of-center parties that are willing to strengthenthe rights of unionization and collective bar-gaining and to defend them against constantthreats from authoritarian opponents. Private-sector manufacturing often spawns the mostmilitant labor leaders, especially when theemployers are powerful multinational corpora-tions with deep pockets and poor publicrelations skills.

Unions in small and struggling enterprisesusually form an intermediate group in betweenthe conservative faction that relies on politicalpatronage and the militant faction that tries tostrengthen its economic muscles. The commonproblem connecting this group of unions is thatmost of their employers are barely able tosurvive even with low labor costs. Weak firmsin labor-intensive manufacturing and cash-strapped municipal governments depend onsympathetic union leaders to help them stayafloat. Many times, the two sides even have toagree to shed some workers to avoid sendingthem all into unemployment.

Dismal economic prospects push this factiontoward political activism, but not toward classwarfare. In fact, they often seek alliances with avariety of middle-class associations represent-ing businesses and professionals who feelthreatened by the growing power of the biggestand most modern firms. Forced to live by theirpolitical wits, these labor leaders frequently

Box 1. Common Strategies of Labor Unions

Conservative. Lobby state managers andruling parties to fend off privatization and costcutting.

Militant. Confront large private and foreignemployers and ally with leftist parties that arewilling to strengthen collective bargaining re-gimes.

Social democratic. Mediate factional conflictsin the labor movement and build multi-classelectoral alliances.

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Organized Interests as Social Development Partners

become the “diplomats” of the union move-ment. They are constantly trying to smoothconflicts among the other union factions and tobuild multi-class electoral coalitions with left-of-center parties and moderate-income voters.

Although both business groups and laborunions become more sophisticated and asser-tive political actors, they tend to develop verydifferent styles. Increasingly confident businessgroups break away from multifunctionalorganizations to press their special demandswith greater independence. Increasinglydefensive labor leaders try to overcome organi-zational fragmentation by forming stable unionfactions and broader social alliances. Businessquietly targets the bureaucrats who directspecialized state agencies whereas labor clam-ors to mobilize public opinion and ordinaryvoters. Sensing its growing power, the privatesector prefers autonomy to artificial unity.Sensing its greater vulnerability, labor looks inall directions for potential partners who arealso too weak to act alone.

Interest Groups as Potential Partnersin Development Projects

Task managers’ relationships with interestgroups, including business associations andlabor unions, will depend on the specificcoalitions of state and private actors that theWorld Bank needs to build. Task managersshould learn to view both government agenciesand interest groups as potential allies as well aspotential adversaries. Bank officials will regu-larly become partners in four different patternsof coalition, and each will require a distinctapproach to interest group politics.

When a unified government and a dominantset of organized interests clearly approve of aWorld Bank program, the core of a tacit consen-sus coalition already exists. In this instance,task managers can operate more as facilitatorsand cheerleaders than as power brokers anddeal-makers. However, in virtually every othersituation, Bank officials will have to activelyorganize and participate in a reform alliancethat is willing to stand up to well-entrenchedopposition.

Typically, these alliances take shape in threeway: as coalitions supporting reforms fromabove, below, and within. In reform fromabove, weak government agencies seek exter-nal assistance in overcoming resistance fromdomestic interest groups. In reform from below,the Bank tries to deal directly with groups ofintended beneficiaries to bypass an incompe-tent or recalcitrant government. In reform fromwithin, task managers face a divided state aswell as a divided society in which both stateactors and private groups line up on either sideof the battle.

Several of the most successful Bank projectsdemonstrate that task managers can operateeffectively in all of these situations (box 2). Forexample, they led consensus coalitions in

Box 2. Patterns of Coalitions in WorldBank Projects

Consensus coalition. China’s Ministry of Healthdecided to decentralize its deteriorating system ofrural health care, allowing Bank teams to organizebroad community participation by villagers,medical professionals, and women’s groups.

Reform from above. A handful of Indonesiancabinet ministers turned their common love forunderwater diving into a campaign to protect coralreefs from the ravages of commercial fishing andindustrial pollution. They joined the Bank inorganizing local groups of “reef watchers” whopressured the government to prevent over-fishingand to build new oil refineries in other areas.

Reform from below. In Brazil the Bank was ableto bypass corrupt state governments by directlyfunding thousands of community associations thatdrew up and administered their own developmentprograms. The benefits reached the poorestgroups in rural society, helping them become anew force in state and regional politics.

Reform from within. In India the Bank helpedthe central government to launch an importantland reclamation project despite strong oppositionfrom irrigation officials and local landowners. Bygiving small farmers title to the new lands andorganizing them in Water User Groups, the Bankconstructed a powerful public-private alliance thatovercame entrenched interests.

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China, India, Rwanda, and Swaziland, wheregovernments acknowledged the need to orga-nize underprivileged groups to improve thedelivery of services. In each case, World Bank-sponsored association building was instrumen-tal in mobilizing popular participation in ruralhealth care, female education, refugee resettle-ment, and land reform.

Task managers aided embattled governmentofficials in building coalitions for reform fromabove in Brazil, India, and Indonesia. In thesecountries, external support helped to tip thebalance in favor of state agencies that werewilling to take on formidable vested interests:public-sector unions resisting pension reform,farmers and consumers clinging to subsidizedelectricity, and petroleum companies andfisheries endangering a fragile marine environ-ment. Bank officials joined these governmentcampaigns against these sacred cows by help-ing to educate the public and by strengtheningcitizens’ groups that were willing to championpoorly represented public interests.

Reform from below is a risky strategy for anyinternational organization that wants to pre-serve harmonious relationships with sovereignstates. Nonetheless, task managers havefollowed this path to good effect in severalcountries in which government authority isparticularly weak, as in Bosnia and Palestine;in which it is overwhelmed, as in Bangladeshand Gabon; or in which it is notoriously cor-rupt, as in rural Brazil. In these cases, Bankofficials were able to bypass formal authorityand to establish direct links with beneficiarieseven if the latter had no preexisting organiza-tions of their own. Some task managers had tobuild new groups from scratch; some adaptedinformal groups to new purposes; and somehelped bigger groups to spawn smaller ones—all with little or no state involvement.

Reform from within is the most challengingstrategy because it requires task managers tojoin one mixed alliance of state and privateactors against another. The best examples ofsuccess through this path are the judiciaryreforms in Venezuela and land reclamationprograms in India. In Venezuela, Bank officialsshaped a coalition of reformist judges and civicassociations to shepherd the overhaul of a court

system that had long been crippled by delayand corruption. In India, task managers had toovercome the resistance of irrigation directorsand local elites to make the saline land held byformer laborers more productive. They did soby aiding individuals willing to reclaim theland through their own labor. In addition theyhelped central bureaucrats establish indepen-dent associations for the new titleholders andwater users, and they created a public-privatealliance that outflanked the combined opposi-tion of vested interests in the capital city and inthe states.

Types of Coalitions

Although coalition building is an integral partof nearly every task manager’s efforts, somecoalitions will be tactical and transitory whileothers will have more political implications.

Project-oriented coalitions. When interestgroup leaders believe that the stakes are mod-est, they are likely to view alliances as a seriesof discrete decisions with no long-term conse-quences for the balance of power. Joining aparticular World Bank coalition today will havelittle influence on whether a given groupdecides to oppose the same task manager in adifferent coalition tomorrow.

This sort of project-oriented coalition is mostcommon in efforts to expand infrastructure andto deliver social services. Interest group leadersusually perceive these distributive programs aswelcome opportunities for horse trading andlogrolling.1 Although some groups stand togain more than others, most believe they cangain something, and all can try to improvetheir position in the next round of negotiations.Thus, even if the bargaining is occasionallyintense, it seldom produces either lasting alliesor lasting enemies.

Policy-oriented coalitions. However, interestgroup leaders will be much more demandingpartners when the proposed coalition concernsstructural adjustment or interrelated projectsthat add up to sweeping economic, administra-tive, or political reform. “Economic liberaliza-tion,” “decentralization,” and “democratization”are abstract slogans that will have little attrac-tion to interest group leaders unless they have

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Organized Interests as Social Development Partners

a clear view of whether the new blueprints willenhance their power or threaten it. Many groupleaders are seasoned in-fighters who excel atquickly sizing up potential shifts in the balanceof power. Those with experience in authoritar-ian political systems are particularly accus-tomed to looking beyond vague expressionssuch as “deregulation,” “privatization,” and“empowerment” to ask blunt questions aboutwho will prosper from such changes and whowill suffer from them.

Interest group leaders are likely to viewbroad policy-oriented coalitions as long-termcommitments that carry both higher risks andhigher rewards than the fluid alliances sur-rounding most distributive projects. Becausethese coalitions support major social transfor-mations, they are bound to generate conflictand polarization among the most powerfulinterest groups. In this situation, group leaderswill be flexible in negotiating the details ofindividual programs as long as they are con-vinced that the total package of reforms willhelp them to consolidate influence over theirconstituents and in society at large. However,they are likely to become uncooperative if theysense that other coalition partners are reapinggreater gains that can undermine their ownpower in relative terms even while improvingit absolutely.

Consequently, task managers will find thatpolicy-oriented coalitions are far more difficultto construct and maintain than project-orientedcoalitions even if the two types of alliancefrequently involve the same partners. Taskmanagers might find it useful to view someproject-oriented coalitions as dress rehearsalsfor policy-oriented coalitions, allowing unfa-miliar or competing partners the opportunityto develop mutual trust and to discover con-verging interests. Conversely, if a troubledpolicy-oriented coalition appears to be indanger of breaking down, task managers mightbe able to shore it up by offering aggrievedmembers more privileged positions in otherproject-oriented coalitions.

In many countries, the most importantincentive for preserving broad policy-orientedcoalitions will be the members’ subjective fearsthat they may have to deal with social and

political upheaval unless they can learn to dealwith one another. Although such psychologicalfactors are usually beyond task managers’control, they should not be beyond theirknowledge. A political coalition’s behavior isoften a reflection of how its members view thestakes involved. Even the most intractableconflicts and jealousies tend to lose their edgewhen the stakes are not simply a particularprogram or policy package but the survival ofan entire regime.

Techniques

Identifying and working with interest groups isnot difficult, but it does require a willingness todo some preliminary homework and to build awide net of contacts in diverse social circles. Alarge part of interest group studies is merelyreputation analysis: canvassing well-informedpeople to learn which groups they regard asthe most influential players in a particulararena and in the country as a whole. The mostknowledgeable sources are usually journalists,politicians, senior civil servants, universityprofessors, economists, and experiencedexpatriates. Invariably, however, the very bestauthorities are interest group leaders them-selves. They are their own best critics, and theycan become invaluable teachers to any investi-gator who makes the effort to earn their confi-dence and pick their brains.

Task managers should cultivate two specialskills for dealing with organized interestgroups: (1) “interviewing” the regulations thatgovern interest group activity, and (2) “read-ing” interest group leaders to size them up asallies or adversaries.

How to “Interview” a Statute

Most countries have about a dozen laws thatcontrol the structure and operation of all of themajor interest groups. Usually, one omnibusstatute covers the multitude of small voluntaryassociations and clubs that make up the major-ity of organized groups. This code—commonlyknown as the “Law of Associations”—is thebest starting point for assessing the overallstate of the freedom of association. In addition,

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Robert R. Bianchi

separate specialized laws generally exist foreach of the larger and politically influentialoccupational groups such as chambers ofcommerce and industry, labor unions, profes-sional syndicates, and agricultural coopera-tives.

Much of this legislation is extremely de-tailed, spelling out every aspect of the group’sauthority, membership, internal hierarchy,financial operations, electoral procedures, andpermitted activities. Frequently, the lawsexplicitly list the kinds of political behaviorthat are allowed and forbidden for each group,including contacts with civil servants, legisla-tors, political parties, and foreigners. Taskmanagers who “ask” a group’s statute a struc-tured list of questions on these topics willacquire an enormous amount of “inside”information about an organization even beforemeeting its leaders (box 3).

By comparing the statutes of several groups,task managers can quickly grasp some of thebuilt-in biases that make certain organizationsprivileged players while handicapping others.Understanding the systematic inequities ofgroup structure can serve as a useful “realitycheck” against informants’ subjective andanecdotal reports about reputed politicalinfluence. Often, a particular group’s reputed

strength or weakness clearly reflects its relativestatus in a formal, legal hierarchy that isintentionally skewed to its advantage ordisadvantage.

However, nearly every country containssome striking anomalies. These include power-ful groups that have acquired their cloutindependently instead of through governmentlargesse as well as marginal groups that havesquandered official privileges that their disfa-vored rivals could never hope to enjoy. Taskmanagers might find that these anomalies arehelpful clues to discover examples of bothparticularly skilled and particularly incompe-tent group leaders.

How to “Read” an Interest Group Leader

Interest group leaders come from all walks oflife and exhibit all shades of personality. Mostof them have extremely strong egos and enjoyusing their interpersonal skills to win overpeople whom they regard as influential. Nomatter how busy their schedules, they areusually flattered by requests for face-to-facemeetings with journalists, researchers, andrepresentatives of international organizations.Most often, they are eager to share their knowl-edge and insight, particularly if visitors make itclear that they are well informed and that theyare also communicating with the group’s majorcompetitors and critics.

An initial meeting with an interest groupleader is much more than an opportunity toobtain firsthand information. It also can be thebeginning of a unique personal relationshipthat blossoms into a working partnership andopens countless doors to other potential allies.Such relationships always depend on a myste-rious combination of personal chemistry andhard-nosed calculations of mutual advantage.Nonetheless, task mangers can use the follow-ing five field-tested techniques to keep theprocess on track:

1. During the initial meeting with the groupleader, ask if you can also arrange to haveconversations with his or her top aides andlieutenants. This will accomplish many goalssimultaneously. You will convince the group

Box 3. Questions to “Ask” a Regulationon Interest Groups

1. Can groups form spontaneously or do theyrequire prior approval from the government?

2. Is membership voluntary or compulsory?

3. Can more than one group operate in thesame area of activity?

4. Is there a “parent” ministry that supervisesgroup operations, finances, and leadershipselection?

5. Is the group strictly private or does itperform duties that are usually reserved forgovernment bodies such as revenue collection,adjudication, rulemaking, and professionaldiscipline?

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Organized Interests as Social Development Partners

that your interest is sincere and ongoing. Youwill acquire much more information fromdiverse sources while making minimaldemands on either your schedule or theirs.You will quickly become attuned to the keydebates and factional rivalries within thegroup.

2. As you develop a circle of contacts withinthe group, ask them to invite you to one oftheir private meetings, particularly to adecisionmaking session during whichimportant business will be on the table. Thiswill provide an invaluable view of interper-sonal relations among the top leaders. Theirinterpersonal dynamics may confirm orcontradict your understanding of the formalchain of command and the conclusions youhave drawn from one-on-one encounters.Either way, you will learn a great deal aboutthe group’s ability to act as an effective andreliable partner.

3. Tell the organization’s leaders that you alsowant to meet the directors of other interestgroups. Ask them to suggest a list of newcontacts and to provide personal introduc-tions. If the group leaders are friends, askyour current contact to set up the initialappointment on the spot.

4. Frequently, you will find clusters of interestgroups that share close working relationshipswith one another, regardless of whether theyare formally affiliated through a federation orconfederation. Such clusters are, in effect,readymade coalitions of interest groups thatcan be mobilized in unison. When task manag-ers discover a group cluster that is worthexploring, it is best to let the groups them-selves handle the advance work and earlycoordination. Ask the leader of the mostinfluential group to designate a member of hisor her staff to serve as your liaison. Let theliaison arrange a schedule of interviews withleaders of the other groups. Let the liaison actas your guide and chief informant. Meet withthe liaison regularly to review your progressand to check your interpretations of yourobservations.

5. Always remember to go back to the groupleaders that originally chose your liaison.Acknowledge and confirm those leaders’

authority within their own organizationsand their wide-ranging influence with othergroups. Give them the satisfaction of know-ing that you know that they possess powerand that they have chosen to use it for yourbenefit. Most likely, they will be pleased todiscover that you are a fast learner. Likemost political actors, interest group leadersenjoy displaying their power to outsiders atleast as much as they enjoy acquiring it inthe first place. Astute task managers whoappreciate the use of power in small wayscan improve their future chances of seeingthat power used in even more importantways.

Task Managers Can Promote Improvementsin Group Behavior

The inherent biases and weaknesses of interestgroups give World Bank officials a wide rangeof options in selecting social allies and manag-ing partnerships for development. Task manag-ers can exploit this freedom of maneuver toadopt flexible coalition-building strategies thatsuit each country’s political environment andserve the special needs of particular projects.No strategy will work in all countries or for allprojects. At times, it may even be necessary toapply different strategies to the same group ifits leaders support Bank objectives in one areawhile trying to defeat them in another.

With the aid of knowledgeable informants,task managers can readily identify the interestgroups that are most critical to their projects.Moreover, by interviewing group leaders, taskmanagers can confidently assess each organiza-tion’s political strength and determine whichare most likely to act as a supporters, oppo-nents, or bystanders. Although this back-ground information is indispensable fordeveloping a political strategy, it will notdictate a self-evident course of action. Everytask manager still must make difficult choicesabout selecting and managing coalition part-ners based on a unique combination of harddata and personal intuition.

There are many sound reasons for grantingtask managers a wide degree of discretion inshaping their relations with interest groups.

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Usually, they will be the most competentjudges of the reliability of local data sourcesand informants. Because coalition buildingdepends on cultivating face-to-face relation-ships that are based on mutual trust, taskmanagers will have the clearest insight intowhether prospective partners have the abilityand intention to fulfill their commitments.Finally, the success of any political strategy willdepend on the task managers’ belief in itswisdom and their willingness to take personalinterest in its implementation. Assuming thathalf-hearted approaches are seldom worth theeffort, it is important for managers to feel thatthey are nurturing alliances and relationshipsthat reflect their personal values and sympa-thies.

Task managers should make a serious effortto understand the realities of interest grouppolitics, but they should not assume that theserealities are given or unalterable. No system oforganized interests is natural or inevitable. Onthe contrary, all group systems are made byhuman beings, contrived, and deeply flawed.They are products of historical accident andpolitical convenience. Hence, their structuresand activities are open to constant debate,reform, and renegotiation. Informed andprudent task managers can promote improve-ments in group behavior that are just as impor-tant and effective as the changes they sponsorin any other field of development.

Task managers must be aware of the existingdistribution of group power, but they shouldnot credit it with a degree of legitimacy andrespect that it does not possess or deserve. Thebalance of power among interest groupsusually has nothing to do with democracy,merit, or justice. More often, it simply reflectsand reinforces long-standing patterns of elit-ism, cronyism, and exclusion. Interest groupswill not necessarily be valuable allies merelybecause they are strong and well organized.Nor will they be unworthy partners simplybecause they are still weak and voiceless.

When existing disparities of group powerfavor the effective implementation of a parti-cular project, task managers should takeadvantage of the windfall by collaboratingwith sympathetic and well-entrenched

organizations. However, when task managers’objectives coincide with the interests of theweak instead of the strong, they should realizethat the skillful manipulation and alteration ofthe existing system is an indispensable part oftheir jobs.

Notes

1. “Logrolling” is the “you-scratch-my-back-and-I’ll-scratch-yours” logic of legislative deals aroundthe world.

References

Bachrach, P. 1967. The Theory of Democratic Elitism.Boston: Little Brown.

Bendix, R. 1964. Nation-Building and Citizenship. NewYork: Wiley.

Bevin, D. L., and others. 1999. Nigeria and Indonesia:The Political Economy of Poverty, Equity, andGrowth. Washington, D. C.: World Bank.

Bianchi, R. 1989. Unruly Corporatism. New York:Oxford University Press.

_____. 1984. Interest Groups and Political Developmentin Turkey. Princeton, N. J.: Princeton UniversityPress.

Dahl, R. 1961. Who Governs? New Haven, Conn.:Yale University Press.

Hardin, R. 1982. Collective Action. Baltimore, Md.:Johns Hopkins University Press.

Lowi, T. 1971. The Politics of Disorder. New York:Basic Books.

Maddison, A., and others. 1992. Brazil and Mexico:The Political Economy of Poverty, Equity, andGrowth. Washington, D. C.: World Bank.

McConnell, G. 1967. Private Power and AmericanDemocracy. New York: Knopf.

Olson, M. 1982. The Rise and Decline of Nations. NewHaven, Conn.: Yale University Press.

_____. 1965. The Logic of Collective Action. Cambridge,Mass.: Harvard University Press.

Putnam, R. 2000. Bowling Alone. New York: Simonand Schuster.

Schattschneider, E. E. 1997. The Semi-Sovereign People,rev. New York: Harcourt, Brace, Jovanovich.

Schmitter, P. 1974. “Still the Century of Corporatism?”Review of Politics 36 (January).

_____. 1971. Interest Conflict and Political Change inBrazil. Stanford, Cal.: Stanford University Press.

Sen, A. 1991. Development as Freedom. New York:Knopf.

Truman, D. 1953. The Governmental Process. NewYork: Knopf.

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The success and sustainability of World Bankoperations are closely linked to the activeparticipation of affected individuals, groups,and organizations in their design, implemen-tation, and monitoring. Stakeholder analysisis essential to the design of participatorystrategies.

Conducting stakeholder analysis in the field,however, is difficult, and few concise docu-ments exist to help task managers do the job.This chapter summarizes the methods used bythe World Bank, the Department for Interna-tional Development (DFID) (formerly theOverseas Development Administration, orODA), and the United Nations DevelopmentProgramme (UNDP). It outlines simple andcreative techniques to implementation stake-holder analysis, discusses the benefits and costsof different approaches, and puts forth strategicdecision options geared to improve projectperformance. Here, stakeholder analysis isexplored as a precursor to, and a preparationfor, full stakeholder participation throughoutthe life of the project, which is not detailed inthis chapter.

3. Strategies of Stakeholder Analysisto Improve Participation andProject Performance: Conceptsand Field TechniquesSherrie A. Kossoudji

Improving Project Performance

There is little in this chapter that will be com-pletely new to task managers. Indeed, it servesto formally organize activities that are often aninformal part of project preparation. It isproductive to consider stakeholder analysis asanother tool to improve project performancerather than as a new technique. However, thedirect goal of stakeholder analysis encompassesmore than identifying the individuals, groups,and organizations who will become net eco-nomic beneficiaries or losers as a result of theproject’s activities. More importantly, stake-holder analysis attempts to identify potentialallies or enemies and calculate policy resis-tance. It will help predict which political oreconomic actions stakeholders may take topromote or sabotage a project.

As the Overseas Development Administra-tion (now DFID) defines it (1995:2), stakeholderanalysis is “the identification of a project’s keystakeholders, an assessment of their interests,and the ways in which those interests affectproject riskiness and viability.” Unfortunately,

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no single design or methodology tells develop-ment practitioners how to do this. The tech-niques and tools vary within and between thebusiness community and the advocacy commu-nity (see, for example, Kluyver 2000).

For the Bank, stakeholder analysis will be ablunt tool designed to achieve several subtleoutcomes:

• To work successfully within a new participa-tory development context

• To enhance the Bank’s ability to manage itsrelationships and maintain its credibilitywith those influenced by its projects andloans

• To optimize a project’s performance.

The lack of a fixed methodology for stake-holder analysis gives it the flexibility necessaryfor it to function as a strategic tool under manyfield conditions.

The approaches used in this chapter arestraightforward:

• To identify stakeholders• To learn about and learn from stakeholders• To make strategic participation and project

development decisions on the basis of thatlearning.

Six Good Reasons to Conducta Stakeholder Analysis

Stakeholders’ agendas now dominate discus-sions in both the public and private sectors. Arecent conference on ethical accounting high-lighted the importance of stakeholders forrealizing a company’s potential: “In the future,it is difficult to imagine a company creatingreal trust in its relationships, without a clearlydescribed, audited, and verified stakeholderdialogue process” (Copenhagen 1999: 1). It isnow clear that the same is true for internationaldonor organizations. The social audits devel-oped in the private sector are now beingapplied through the development audit, thesocial audit, and score cards. What, though, aresome concrete, field-level reasons for conduct-ing formal stakeholder analyses as a precursorto participatory decisionmaking?

1. To improve the accuracy of the assessment ofthe project environment and to minimize fundamen-tal misunderstandings of the local context. Onecould view coherent stakeholder analysis asinsurance against political or economic disas-ter. Strategic mistakes can torpedo currentprojects. Furthermore, costly externalities aregenerated by misguided projects. Adversereactions to current activities will almostcertainly magnify the work necessary for futureprojects, and increase their cost.

2. To enhance the Bank’s negotiating position byacquiring early knowledge of potential obstacles andsupport. By identifying people, groups, andinstitutions with interests in the project, stake-holder analysis provides an early warning ofpotential problems. Similarly, stakeholderanalysis identifies potential allies and ways inwhich they may support the project. Negotia-tion is improved because of the increasedinformation flows generated by stakeholderanalysis, which enable a faster and moreaccurate response to potential opportunitiesand conflicts.

3. To improve go-ahead decisionmaking, promoteproject sustainability, and improve project perfor-mance. Stakeholder analysis will minimize therisk of financial losses after a project has begun.Furthermore, early assessments of conflicts ofinterest among stakeholders will enable taskmanagers to assess a project’s riskiness beforefunds are committed (ODA 1995). “Tradition-ally, good projects have been identified bylooking at the return on investment. Netpresent values are often used to rank projectsfor success. The outcome evaluations usedtoday, however, have a different focus. Theyincorporate techniques such as distributiveanalysis, which attempts to link the net benefitsor losses of a project to the groups who end upbeing net beneficiaries or net losers (Jenkins1998: 3).” These detailed analyses require taskmanagers to have an understanding of thestakeholders affected by their projects and howthe project affects them.

4. To minimize the Bank’s reputational risk.Effective stakeholder analysis (and the

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Strategies of Stakeholder Analysis to Improve Participation and Project Performance

Box 1. Stakeholder Analysis Summary

Keys to success for stakeholder analysis

� Iterate, iterate, reiterate

� Allow information to flow

� Master the art of listening

� Learn from what is heard and not heard: readbetween the lines

The process

Phase I. Identify, map, profile, and communicatewith stakeholders

Step 1• Identify and map stakeholders and stakeholder

groups• Anticipate needs of newly created stakeholder

groups• Profile stakeholders

Step 2• Consult with potential stakeholders• Listen to stakeholders

Step 3• Revise project concept

Phase II. Identify the participation of appropriatestakeholders

• Prioritize stakeholders• Conduct Strengths, Weaknesses, Opportuni-

ties, and Threats (SWOT) analysis

management of stakeholder expectations thatfollows) reduces public relations disasters likethe debacle over the antipoverty loan to China,whose proposal included the resettlement ofHan Chinese to traditionally Tibetan lands(The New York Times 1999; Kahn 2000).

5. To lay the groundwork for participatorydevelopment. Participatory decisionmakingcannot occur without good stakeholder analy-sis. Even if participatory decisionmaking is notwithin the scope of a particular project’s plan,stakeholder analysis minimizes the probabilityof unexpected stakeholder activities that cansubvert the project.

6. To enhance poverty reduction strategies ofempowerment, security, and opportunity. “Thepoor” are unorganized and have little or novoice in public policy. Yet groups of the poorare often organized on one level or another—afact that is all too often forgotten in the plan-ning phases of large projects. There existdistinct stakeholders within the “poor”—organized or unorganized groups—withdiffering interests who can effectively identify,help pursue, and participate in a specificcomponent of an overall poverty reductionproject. Stakeholder analysis can also contrib-ute to poverty reduction by identifying thestakeholders who will capture the benefit ofsocial protection programs intended to increasesecurity for the poor.

Sufficient forethought to the needs and pos-sible actions of stakeholders will improvespecific project performance and create aparticipatory, collaborative environment thatcan spill over to other Bank financed projectsand activities. Box 1 outlines a successful strategy.

Phase 1. Identify, Map, Profile, andCommunicate with Stakeholders

Step 1. Identify and Map Stakeholdersand Stakeholder Groups

Corporate officials who must identify stake-holders usually draw from a relatively simple

list: clients, suppliers, investors, employees,debtors, and the government. The Bank’sdiversified working environments precludecreating a similarly simple checklist (see table 1for an example of the kind of list a Bank projectmight use). The Bank’s Participation Sourcebookdescribes typical identification strategies asfollows:

Bank task managers have collaboratedwith government to identify relevantstakeholders by asking questions andseeking answers from both in-country andBank sources. Often the objective itself hasdefined the relevant actors. Sometimes,firsthand observation was used to identify

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National authorities National governmentPolitical figuresPolitical party organizationsMilitaryCentral ministry officialsFederal or central bureaucratsNational unions

Regional or local authorities Local ministry officialsMayors and city councilsLocal party officialsTownship or province administratorsLocal union representativesLocal law enforcementEducational institutions

Regional or local organizations Community-based organizationsRural or other cooperativesWater use groupsMass organizationsLabor or craft groupsAgricultural extension servicesPeasant unions

Nongovernmental organizations Advocacy NGOsOperational (or partner) NGOsLine agency representativesLocal and regional non-profitsInternational non-profitsEnvironmental groups (water, agricultural, or land use projects)Women’s advocacy groups

Religious organizations Priests, clerics, imamsLay organizationsChurch-based charitiesReligious institutions

Traditional groups Tribal leadersIndigenous leaders or organizationsInterpreters and intermediariesTraditional healers (health projects)Ethnic group organizations

Commercial and business groups Local credit cooperativesBank officialsInternational bank representativesBusiness organizationsCivic clubs of business people or chambers of commerce

Groups defined by beneficiary status, The poorsocial analysis, rural appraisals, or gender The landlessanalysis The displaced

Women/menThe elderlyYouthAgricultural workersTenants’ groups

Groups created by the project Downstream communities (water projects)Clients of created enterprisesService-user groupsThe displaced

The press Local pressNational pressInternational press

Other governments Governments in exileGovernments of other interested countries

World Bank Task managersCountry officesBoard of Directors

Table 1. Potential Stakeholders for World Bank-Financed Projects

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appropriate stakeholders. In other cases,disseminating information about theproposed activity enabled interestedstakeholders to show up by themselves.

(The World Bank ParticipationSourcebook 1996, III:1)

The task manager’s first job is to identify allpotential stakeholders and define their charac-teristics relevant to the project. Identification isnecessarily iterative because to identify stake-holders, one needs a clear idea of their relevantinterests; and to define their relevant interests,one needs a clear idea of the identity of thestakeholders. Identifying all of the relevantstakeholders is an anticipatory exercise thatattempts to see all possibilities for a project, notjust the expected outcome. A simple roundtablewith people who are already involved inproject planning and/or who are familiar withthe local environment facilitates the exercise.Who is expected to gain or lose as a result ofthe project’s success? Who could gain or lose ifthe project is initiated, but fails? Who couldgain or lose if the project is never begun? Arethere possible economic spillovers or externali-ties of the project that will benefit or harmpeople who are not intended to be directlyaffected by the project?

The easiest groups to identify, especially inmore strictly authoritarian regimes, are govern-mental groups or organizations that are likelyto support or oppose the project. Identifyinggovernment departments, ministries, agencies,and groups that will be actively involved withthe project is usually easy. These groups areimportant stakeholders, as are individualswithin them. There may exist groupings withina government along factional or ideologicallines as well as ministries, which compose the“deep structures” of society. More often thannot, these are people with whom the Bank isalready communicating or working. It is nevertoo early to try to identify people who willbecome effective allies to participation enter-prises as well as contributors to stakeholderconsultations.

There may be hidden structures of disincen-tives. Groups and factions in ministries notdirectly involved with the project may have

important reasons for supporting or opposinga project. Acquiring support or neutralizingopposition from such groups speeds theproject’s progress and their interests are ig-nored at the project’s peril. Interviewingspecific individuals in ministries or areas thatare directly involved often will help the taskmanager to seek out groups and factions inother ministries or agencies who may have adirect or indirect economic or political interestin the project. Overlapping interests are com-mon, so it is likely that these groups of peoplehave encountered such situations before.Territorial negotiation up front is preferable toa situation in which omitted governmentgroups covertly sabotage a project’s potential.

A scan of the institutional environment willhelp to identify these stakeholders. The taskmanager needs to look carefully at groups atdifferent hierarchical levels of the governmentas well. While projects often start with negotia-tions with national government officials, it isthe regional and local agencies and ministriesthat typically are responsible for project imple-mentation. In addition it is their representativeswho are most cognizant of potential opportuni-ties and pitfalls for the project. Wheneverpossible, the strongest relationships should bebuilt at these implementation levels. The MaliPilot Participation Project demonstrated thatthe project’s success depended on having a full-time contact point in the Bank’s country officeto reinforce participatory partnerships (“Find-ings” 1997).

An important strategy for identifying stake-holders is to recognize the limits of the localand national contexts. Some civil societystakeholders operate across local and nationalboundaries. Furthermore, it is important torecognize that the extent to which stakeholdergroups are organized will vary.

The search for stakeholders requires suffi-cient information about the ways in which thenational regime allows the organization ofoutside groups and whether and how it con-trols access to those groups (see Bianchi chap-ter in this volume). Government officials andbureaucrats may not assist or may even resistthe adequate identification of nongovernmen-tal interest groups. Mapping stakeholder

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interests will require a working knowledge ofthe government’s organizational and institu-tional structures—its deep structures and theinformal rules of the game. Since working withthe national government is a requirement, taskmanagers may have to adopt (when possible)creative strategies to identify and communicatewith nongovernmental groups. A systematicappraisal of known organizations and groupsinitiates the task. When possible, task managersshould then embark on “snowball identifica-tion” techniques. Snowball sampling is usedwhen locating respondents would be difficultor cost prohibitive. It relies on referrals frominitial subjects to generate additional subjects.Following the tenets of snowball sampling,snowball identification creates chains of refer-rals from quickly found stakeholders (such asgovernment officials) to those who are moredifficult to find.

Snowball identification can be especiallyuseful to identify groups whose organizationalcapacity is limited and who may not be knownin many government circles. The problem withsnowball identification is that it is an inevitablytop-down process because Bank staff almostcertainly will work on a project concept withthe national or central government. In conjunc-tion with snowball identification (when pos-sible), the task manager must devise bottom-upstrategies of identification.

The task manager must be sufficientlylocally aware to ensure that the benefits andcosts of identification and participation arebased on the realities of the community ratherthan on what Bank staff know about the techni-calities of a project. Local advisors and consult-ants are key personnel for identification.Furthermore, early use of local consultants andparticipants (who may be elders, professionalsfrom the community, or religious leaders)brings critical stakeholders into the projectearly and can help relieve the Bank of the onusof an expert-driven experience. Communitiesmay feel that if the Bank cedes some powerearly on (in identification, for example), it willalso do so in its negotiations with stakeholders.

As mentioned, snowball identification can bethought of as a top-down identification tech-nique. Nevertheless, its capriciousness (whoknows who will lead to whom?) means that

previously unknown groups—sometimessimply people with an identifiable commoninterest, meeting place, or goal—can emerge aseffective stakeholders in poverty reductionprojects. Examples could be women who sell atthe Saturday market, women who meet at thestand pipe, or members of a favela council orsquatters’ group. Similarly, local contacts willbe effective in identifying people with commonneeds, common goals, and common abilities.This group identity may not be associated withpoverty itself but coincident with it. Evenpeople who live in poverty, are unorganized,and have no official voice participate in institu-tions that represent vehicles for communicationand stakeholder consultation. The MatruhNatural Resources Management Project makesgood use of the local lineage group (Participa-tion Sourcebook, appendix II: 4). The key is toidentify well-defined groups.

Other techniques for identification of stake-holders include “scanning the environment” toidentify the political environment, key people,hot spots, and support systems. These tech-niques will help produce a “map” of thedifferent stakeholder groups.

Anticipate the Needs of Newly CreatedStakeholder Groups

The Bank’s involvement has already changedalignments in stakeholder groups. In addition,each Bank-financed project inevitably willcreate new stakeholder groups. Potentialclients, beneficiaries, and people harmed by theproject are unlikely to be constituted in identifi-able organizations. These groups, whose lack oforganization may make full participationunlikely, nonetheless will have interest in andinfluence on the project’s success. Their actionslater will be especially important if the project’sactivities require that they make tradeoffs (ifthey are beneficiaries) or if they can organizeenough to engage other, more powerful stake-holders to protect them from being harmed.

Profile Stakeholders

It has already been noted that stakeholderidentification is an anticipatory exercise. So isstakeholder profiling. Local ministry officials

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Strategies of Stakeholder Analysis to Improve Participation and Project Performance

and bureaucrats may not know that they willhave an interest in training and support forparticipatory processes (and that withoutthat support, participation and the projectmay be doomed), but the project staff cananticipate it.

In business management, the most commonstakeholder table is the interest/influence table,which outlines the interests and influence ofdifferent stakeholders, then separates stake-holders into four groups: high interest/lowinfluence, high interest/high influence, lowinterest/low influence, and low interest/highinfluence (Ernst & Young and others 1999).Managers focus on the needs of the highinterest/high influence group, while othergroups are monitored for changing circum-stances.

DFID and UNDP each have adopted aversion of the interest/influence table. Thegoals of a development agency differ fromthose of a commercial enterprise, and theanalysis used also will necessarily differ,especially if participation activities are anintegral part of project development. The tablepresented in this chapter is more extensive thanthe commercial model because it explicitlyassumes that the stakeholder profiling docu-ment is a dynamic blueprint for participatoryplanning and facilitation.

The stakeholder profile form (table 1) re-quires the analyst to match any given charac-teristic (“profile element”) with any associatedcritical success factors. Critical success factorsare key demands or requirements of the stake-holders that are related to the project and thatcan be managed, measured, and communicatedto them.

Although this chapter describes profilingand consulting with stakeholders as separatesteps, they are necessarily intertwined and willtake place together. Eliciting the informationabout these critical success factors will evolvealong with stakeholder consulting and involve-ment. Creative use of traditional methods ofcommunication and information exchange arerequired, through the use of techniques such asQ-sorts, scenario analysis, and participantobservation as well as informal discussions. Forexample, an informal discussion among a localelder, a female Bank project representative, and

women at the stand pipe could elicit informa-tion about their children’s health needs (inter-ests), their willingness to coalesce around ahealth initiative (commitment), and theirrelationships with the existing (if it does exist)medical community (relationships with otherstakeholders). Several such discussions aroundseveral stand pipes will build the stake-holder profile and engage the stakeholdersin consultation.

The Chad Education V task manager notesthat stakeholder meetings revealed what Bankstaff never would have known: parents werevery highly involved with their children’seducation, but felt they needed help in learninghow to run schools. This critical success factorbecame part of the project (ParticipationSourcebook, chapter II: 35-38).

These critical success factors may also formthe basis of stakeholder monitoring systems.The project may not be able to achieve everycritical success factor during its design orimplementation, but the Bank will be able toreport to the stakeholders which factors weremet and which were not. This reportingacknowledges that the Bank is obliged not justto take information from stakeholders but alsoto give it back. For key stakeholders to partici-pate, it is important that at least some criticalsuccess factors be met, but it is usually notnecessary that all of them are met for everystakeholder. Participation lends itself to anacknowledgement of the realities of tradeoffsand compromise.

Steps to Complete a Stakeholder Profile

1. Detail each stakeholder’s interests and indicateways in which they agree or conflict with theproject’s goals. What are the stakeholder’sinterests in the problems that the project istrying to address? What will be the stake-holder’s interest in the outcomes that theproject is designed to achieve? What are eachstakeholder’s goals, demands, expectations,and values?

Analysis of stakeholder interests may not bestraightforward. The ODA (1995) notes thatmany interests are covert, and agendas may notbe articulated publicly. This is especially likelyunder more authoritarian regimes. Of course,

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this is exactly the situation in which uncover-ing such agendas is costly to the Bank, andpotentially dangerous to the stakeholders.Bank country office personnel, in conjunctionwith intermediary individuals or groups, mayhelp uncover hidden interests. If the politicalsituation is not too sensitive, information aboutstakeholders can be sought from representa-tives of other stakeholder groups or organiza-tions. Several techniques can help identifyinterests, such as Q-sort, scenario analysis andobservational methods. Caution is warranted.Simple political insight may suggest that,unless the project’s prospects rely significantlyon a particular group, communication at facevalue, along with a few judicious assumptions,is “good enough.”

2. Articulate each stakeholder’s ability to influ-ence the project’s development and ultimate success.Influence will come from many sources. Whatare this stakeholder’s resources, legal authority,moral authority, and access to the public? Is thisa stakeholder with significant legal or moralauthority that coercive or persuasive tactics cansignificantly affect the project’s implementationand prospects? Does the stakeholder controlsignificant resources that the project needs?Does the stakeholder have important skills orknowledge critical to the project’s develop-ment? Can the stakeholder reach large numbersof people or influential people?

3. Assess the stakeholder’s position in the com-munity or country, and what impact participationmay have on the stakeholder or on the behavior ofother stakeholders. Participation by a particularstakeholder could bring about adverse reac-tions by authorities that could damage theproject’s potential. Is the stakeholder a govern-mental agency, nongovernmental organization,sanctioned, unsanctioned, formally or infor-mally organized, or not organized at all (suchas many beneficiary groups)? At what leveldoes it operate (local, regional, national, inter-national)? What is its place on the organiza-tional and institutional map? This profileelement may not be necessary in many nationalcontexts, but it serves as a useful reminder incountries in which competing interests and

unsanctioned organizations may have a re-stricted ability to participate or in which theirparticipation may have unintended conse-quences. As the UNDP (1999: 7) points out,“participation can be a destabilizing force inthat it can unbalance existing socio-politicalrelationships and threaten the continuity ofdevelopment work.”

4. Detail the stakeholder’s capacity for participa-tion activities. What are the stakeholder’sorganizational resources; the number anddedication of its members; and its traditionalknowledge, expertise, and representativeness?Detailing this will be context specific: a farm-ers’ cooperative will have different capacityassessments for an irrigation project than for arural credit program.

5. Determine the stakeholder’s commitment to theproject and/or the project’s objectives. Participationcannot be effective without significant commit-ment. While an organization’s resources maybe large, they are of no use to the project if noone is willing to commit them. World Banktoolkits to determine political commitmentmay be useful here.

6. Explore how each stakeholder is related to otherstakeholders. Are there histories of conflict orcooperation? Are there natural alliance possi-bilities because of overlapping interests? Arethere conflicts that could be created by theproject (such as conflicts between men andwomen over birth control or reproductivehealth projects)?

The table above can be varied according tothe proposed project’s features, the nationalpolitical and social environments, and the localor regional needs and capacities. For example,based on the priority that the ODA gives tosatisfying stakeholders’ needs or interests, ODA(1995) suggests putting stakeholder importancein the table. Instead, the stakeholder profileapproach assumes that importance is a strategicdecision based on the stakeholder analysis(discussed later). Technical projects, in particu-lar, may best be served by having expertise,organizational strength, or traditional knowl-edge as a specific profile element.

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Stakeholder:

Profile Element Critical Success Factors

Interests

Influence

Status and constituency

Capacity

Commitment

Relationships with other stakeholders

Strengths as a participant

Weaknesses as a participant

Table 1. Stakeholder Profile Form

WARNING: Know when to back off fromcomprehensive stakeholder analyses. Insome environments, stakeholder profilescould be viewed as the compilation ofsensitive information for suspiciouspurposes. While this chapter discusses thebenefits of complete profiles, in suchcircumstances profiling activities shouldbe minimized. A simple prioritizing of keyand secondary stakeholders along withtheir influence characteristics (especiallythose that are negative for the project)may be more diplomatic.

Step 2. Consult with Potential Stakeholders

When possible, stakeholder groups should beconsulted both separately and together. Meet-ings facilitate each group’s understanding of

what other groups need or will bring to theproject. Joint meetings also will facilitate thedevelopment of participatory project planning.Furthermore, joint meetings tend to lessen theefforts needed to bring any particular group tothe stakeholder table. On the other hand,separate meetings help staff learn about differ-ent groups’ needs and commitment, but dolittle to help stakeholders learn about theproject’s whole environment—a critical featureof participatory success.

The myriad ways to consult and communi-cate with stakeholders will depend on the localand national environments of the proposedproject. Workshops, round tables, publicmeetings, focus groups, Q-sorts, appreciativeinquiry, and surveys all are ways to initiatecommunications with stakeholders. Inevitably,effective communication will take place in the

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field. Both Beneficiary Assessment (BA), whichis an assessment of the perceptions of beneficia-ries, and Systematic Client Consultation (SCC),which sets up communication processes anduses client feedback in project development,are commonly used in Bank-financed projects(Participation Sourcebook 1996). Creative projectworkers will accept the idea that Westernconcepts of “meetings,” “focus groups,” and“negotiation” are only one way of meeting,discussing needs, and working through prob-lems. Some cultural competency is criticalwhen devising stakeholder consulting strate-gies. What are traditional styles of communica-tion, traditional meeting places, traditionaltaboos on what is said or who says it? Bringingin local consultants or advisors to the consulta-tive process as early as possible significantlyimproves a project’s performance.

Do all stakeholders need to be consulted?For some, such as secondary stakeholders withlittle capacity for organization, consultationmay not be necessary. For others, it will not befeasible. But project staff must not dismiss thepublic relations generated by consulting andreporting activities. Some stakeholders willremain outside the purview of communication.Although the international press may play acritical spoiler role, communication is not oftenfeasible or useful. Local press (where it exists),however, may support or oppose a project andmay bring issues to the attention of the interna-tional press. Communication brings the interestand influence of the press to bear on theproject’s development. In general it is criticalthat a range of stakeholders be consulted.

Listen to Stakeholders

Whichever communication strategies are used,there are two simple listening frameworks:what is heard and what is not heard. A lack ofcommunication on the part of a group mayindicate a group’s suspicions, not its lack ofinterest or influence. Listening to stakeholdersis a learning activity. For the task manager’spurposes, its goal is the ability to produce morecomplete stakeholder profiles that anticipatethreats and opportunities for the project and that

generate revisions to the project that coalesceeffective support and diffuse opposition.

Active listening is a process of sensing,interpreting, and checking in order to under-stand stakeholders’ needs and demands and tofacilitate the development of an effectiverelationship.

What kind of information is sought in thesestakeholder consultations? Stakeholder con-sulting is concerned with learning about theparticipation needs, expectations, and capaci-ties of stakeholder groups. It is also focused onlearning how to make a project more respon-sive to the needs of stakeholders. TheBangladesh Health and Population Programprovides a best-practice example. Stakeholdermeetings revealed that money costs, time, andmale doctors’ attitudes toward women allimposed costs on health care. The projectcreated a Behavior Change CommunicationInstitute, and stakeholder committees havebeen established to monitor the health system(World Bank internal documents).

Consultation should place particular impor-tance on group dynamics that influence partici-pation possibilities. Even unorganized groupshave participation potential if their interests areconsistent and their attention is focused. Thelist in box 2 adapted from Weaver and Farrell(1999: 133), reveals the topics of importance tofuture participation.

Adopting a coherent listening strategy isespecially important when consulting withthose who traditionally have little voice.

Active listening promotes:

• Interpretation of what the group wants• Acquiring clear signals that give insights to

how a group is working• Awareness of the dynamics that affect a

group’s productivity and interdependence• Knowledge of how well a communication

process is going• Information about the changes occurring

within the group.

Box 2. Listening and Participation

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Step 3

Revise Step 1. Consulting with stakeholderswill bring out information about other stake-holders. Similarly, it will clarify stakeholderprofile elements.

Revise project concept. Identifying, profiling,consulting with, and listening to stakeholdersare only useful if these activities lead to infor-mation that can help the project staff assess thecosts and benefits of different participatoryoptions and/or improve project performance.

Phase 2: Strategic Decisions to IdentifyAppropriate Participation

Prioritize Stakeholders

The identification and profiling of stakeholdersare information gathering activities that areundertaken in order to aid decision-making.The ultimate decision is how to prioritizestakeholders and design a strategy for theirinvolvement so that the project’s performance isoptimized for the relevant context and risk ismanaged. Budget and time constraints willlimit the number of stakeholders who can beengaged in participation activities. Key stake-holders are those directly affected by the projectwhile secondary stakeholders are not directlyaffected but may play an intermediary role.

The World Bank has the capacity to helporganize entirely new interest groups—thelandless, the disabled, widows, ethnic minori-ties, social castes, and children (Narayan 2000).Task managers must make strategic choicesabout the extent to which they wish to involvepreviously unorganized groups.

Interest/Influence Ranking Schemes

How should one prioritize stakeholders forparticipation? While there is no single method-ology, most stakeholder techniques rankpotential stakeholders by some criteria. Theinterest/influence matrix and the importance/influence matrix are the most straightforward(see table 3). Stakeholders are given numericalranks on these elements individually. Inclusionis decided by considering their joint ranks.There are many different ranking scales (forexample, 1 to 3, 1 to 5, 1 to 10). If a scale of 1 to3 is adopted, the stakeholders would be scoredin the following way: “Are this stakeholder’sinterests high priority (1) to the project’ssuccess, some priority (2), or low priority (3)? Isthis stakeholder’s influence over the project’soutcome significant (1), scattered (2), or weak(3)?” Stakeholders with priority scores of 2(1+1) are critical for participation, as may be 3s.Strategic decisions to manage other stakehold-ers may be taken if, for example, a stakeholderis scored with a 1 for influence and a 3 forinterests because his or her interests are anti-thetical to the project’s success).

A more complex matrix can use the indi-vidual element-joint element ranking. In thiscase, the elements are sorted by priority to theproject’s success, then each element is sorted bystakeholder ranking. Stakeholders are priori-tized by high rankings on the most importantelements and jointly high rankings on severalelements.

Numeric rankings are relatively easy toimplement and help sort stakeholders intoidentifiable priority groups. They are usefulwhen first working with stakeholder analysis.However, ranking schemes have two unavoid-

Table 3. Importance/Influence Matrix

Importance of stakeholder

Influence of stakeholder High priority Some priority High importance

Weak influence Civil society Local government The poororganizations (CSOs)

Scattered influence Donors

Significant influence National government Representative assemblies

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able problems. First, simple scales do little toarticulate differences across stakeholders. Forinstance, what if a stakeholder has a level ofinfluence that is between middling and strong?What if many stakeholders are scored with 2,and constraints do not allow for participationby all? Second, complicated scales can bedifficult to combine and analyze meaningfully.As an example, is there a meaningful differencebetween a score of 77.8 and 78.1?

Strengths, Weaknesses, Opportunitiesand Threats Analysis

An alternative to ranking schemes is theanalysis of strengths, weaknesses, opportuni-ties and threats (SWOT). SWOT analysis is ahelpful tool for generating a summary of astrategic situation (Kluyver 2000). The SWOTanalysis for participatory projects differs from atypical organization’s SWOT analysis.

In the case of a World Bank operation, thepersons conducting the SWOT analysis exam-ine the individual elements of each stakeholderprofile. Then, making judgments about thegroup’s participation possibilities, they evalu-ate the strengths and weaknesses of eachstakeholder as a participant. Added to this isthe summary of the environment, whichaccesses the gathered information about all ofthe stakeholders to assess the opportunities forparticipation and the threats to participationposed by the external environment. (Rememberthat both the Bank and the government areconsidered stakeholders.) A SWOT analysis ismore holistic than a ranking scheme and moreexplicitly reveals the judgments of the peopleconducting the analysis. It is a normativeinterpretation of a stakeholder’s capacityand will for participation, and an assessmentof the benefits and costs to the project of thisstakeholder’s participation under alternativeconditions.

The bottom of the stakeholder profile articu-lates these participation strengths and weak-nesses for each stakeholder. What stands outabout each stakeholder? Is a group likely tomobilize for or against the project? What kindsof behavioral changes will have to take place

before participation will be effective? Is thestakeholder’s capacity a strength or a weak-ness? Can this stakeholder group mobilize itsmembers? Does the stakeholder have particularorganizational resources, alliances, or coopera-tive arrangements with other groups who maythemselves be critical stakeholders?

Stakeholders who are directly affected by theproject (such as beneficiaries or the displaced)necessarily are key stakeholders who must playa role in project development (even if fullparticipation is not possible). Beneficiaries, forexample, are not typically involved withidentifiable groups or organizations. Whatstrengths can be identified for such stakehold-ers? What are their weaknesses and whatamount of resources will it take to overcomethose weaknesses? Stakeholders who areindirectly affected by the project must be madeallies or have their opposition muted.

To successfully evaluate a stakeholder’sparticipation strengths and weaknesses, con-sider the stakeholder characteristics in box 3.

It will be important that this analysis ofstrengths and weakness be considered underseveral possible scenarios. Will an electionchange a government ministry’s influence? Isthere a change in policy that could influence astakeholder’s ability to commit certain re-sources? Analyzing the stakeholder groupsunder alternative conditions can help to iden-tify groups who may not initially be chosen toparticipate, but who should remain on a

Box 3. Foundations for ParticipationEvaluation

• Cultural context and indigenous forms ofcommunication

• Commitment• Community involvement• Concern about problems or the project’s

goals• Collaboration potential• Conflict potential• Crisis potential• Cooperation potential• Capacity for consensus• Collective agendas

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consultation list and can be brought in as alliesif circumstances change.

What will the project gain by having thisstakeholder participate? What will the projectlose? An extensive cost/benefit analysis maynot be necessary or possible for these purposes,but a simple back-of-the-envelope calculationof the project’s gains and/or losses from eachstakeholder group’s participation anchors theparticipation decisions in project performance.It is critical to evaluate the possible changes indesigns, goals, service users or clients, out-comes, and the implementation cost.

Self-assessments by the task manager, projectteam, the Bank’s country office, and other Bankfunctionaries are a necessary part of thisexercise. What are the Bank’s strengths andweaknesses for participation in this particularenvironment and for this particular kind ofproject? Are project staff members trained inparticipatory techniques? Will they be goodfacilitators in the local environment? Will theymake sure that participation is embedded inproject development activities?

The information about all of the stakeholdersshould be gathered in a summary that assessesthe opportunities for participation and thethreats to participation posed by the externalenvironment. It is useful to think about thispart of the analysis as small-scale country riskassessments. There are three critical issues toconsider during this summary. First, are thereany fatal threats to participation or to theproject itself? If so, a project (or participation)will not be viable. A fatal threat is a situationthat would cause a project to be reconceived, orits participation strategies reconsidered, inorder to remain viable. A government thatrefuses to cooperate in participatory endeavorsmay be such a fatal threat.

Second, are there any significant threats tothe Bank’s critical success factors? These threatsincrease the risk of the project and, because theBank and other stakeholders may be workingat odds, mean that careful consideration oughtto be taken before the project moves forward.

Third, are there strong possibilities foralliances of different stakeholder groups thatcould make participation activities cheaper andcould improve project performance?

The act of conducting an organized SWOToften removes the need for a specific ranking ofstakeholders. The stakeholders who must beincluded should become obvious. They arethose whose interests are important to theproject and for whom the benefit of participa-tion outweighs the cost. Similarly, stakeholderswho will not be included but who may pose athreat to the project may be managed. Finally,some stakeholders will be tangential enough tothe project’s goals and impacts that they neednot be participants at all.

SWOT analysis can be useful for evaluatingthe participatory capacities of stakeholdergroups when poverty reduction is the goal, butthe tendency in SWOT is to focus on the morepowerful stakeholders who can sabotage aproject. When SWOT is used to assess stake-holder strategies, a complimentary strategy,like social analysis, gender analysis, or rapidrural assessment is advised.

Summary

Stakeholder analysis is one method to set upparticipation strategies. Stakeholder analysisitself may be conducted in the expert or partici-patory framework. A critical benefit of stake-holder analysis is that it can be maintained forthe life of the project. As circumstances change,the changing risk to the project can be assessedwithin a framework of local information—shortening the time to deal adequately with thechanging circumstances. When potentialconflicts become real, an accurate backgroundassessment has already suggested ways to dealwith them.

References

Danish Ministry of Social Affairs and others.1999.“Building Stakeholder Relations. Third Interna-tional Conference on Social and Ethical Account-ing, Auditing, and Reporting.” November 14-16.Copenhagen, Denmark. http://www.stakeholder.dk/contact.htm.

Ernst & Young LLP, KPMG, Pricewaterhouse-Coopers, and the House of Mandag Morgen. 1999.“The Copenhagen Charter. A Management Guideto Stakeholder Reporting.” Copenhagen, Den-mark: House of Mandag Morgen.

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“Findings.” 1997. “Best Practice in ParticipationPlanning and Development of the Mali PilotParticipation Project.” Vol.18 (July). Africa Region,World Bank, Washington, D. C. www.worldbank.org/afr/findings/infobeng/infob18.htm

Friedheim, D. V. 2000. “Interest Groups as Stake-holders: Concepts and Field Techniques.” Mimeo.

Jenkins, G. 1998. “Evaluation of Stakeholder Impactsin Evaluation Analysis.” Development DiscussionPapers no. 631. Harvard Institute of InternationalDevelopment, Cambridge, Ma.

Kahn, J. 2000. “World Bank Rejects China’s Proposalto Resettle Farmers.” The New York Times, Lateedition (East Coast), July 8. A.3

Kluyver, C. A. 2000. Strategic Thinking: An ExecutivePerspective. Upper Saddle River, N. J.: PrenticeHall.

The New York Times. 1999. “Loan for a Land Grab.”(Editorial). June, 23, Late Edition (East Coast), A.18.

Overseas Development Administration. 1995.“Guidance Note on How to Do StakeholderAnalysis of Aid Projects and Programmes.”http://www.oneworld.org/euforic/gb/stake1.htm. United Kingdom.

United Nations Development Programme. 1998.“Empowering People: A Guide to Participation.”http://www.undp.org/csopp/CSO/NewFiles/docemppeople.html.

A CSOPP document: http://www.undp.org/csopp/CSO/NewFiles/documents.html

Empowering People: A Guide to ParticipationUNDP, 1998

Weaver, R. G., and J. D. Farrell. 1999. Managers asFacilitators. San Francisco Cal.: Barrett-KoehlerPublishers.

World Bank. 1996. The World Bank Participation Source-book. Washington, D.C. www.worldbank.org/wbi/sourcebook/sbhome.htm.