Advanced Performance Management · Performance hierarchy

Stakeholders and Performance Objectives in ACCA APM

Updated 11 October 2026 · Fact-checked

Stakeholders are groups who affect or are affected by an organisation. Each wants different outcomes, so they shape which objectives and measures matter. Use Mendelow's power-interest matrix to rank them, then judge which objectives to prioritise, how to resolve conflicts, and which measures show progress for each group.

Understand Stakeholders and Performance Objectives

An organisation does not have one objective. It has many people with a stake in it: shareholders, lenders, employees, customers, suppliers, regulators, the community. Each group wants something different from the business.

This matters in APM because performance measures follow objectives, and objectives follow stakeholders. If shareholders matter most, you will lean on measures like return on capital and share value. If employees or the community hold real power, you need measures for pay, safety, turnover or environmental impact too.

Stakeholders are often grouped as internal (directors, managers, employees), connected (shareholders, lenders, customers, suppliers) and external (government, regulators, pressure groups, the community). Grouping helps you spot who you have missed.

Mendelow's matrix sorts stakeholders by power (ability to influence strategy or force a change) and interest (how much they care about what the organisation does). High power and high interest gives key players. High power and low interest gives keep satisfied. Low power and high interest gives keep informed. Low power and low interest gives minimal effort. Positions change over time, so a group can move between boxes.

Conflict is normal. Shareholders may want higher profit while employees want higher pay and the community wants lower emissions. You cannot maximise everything. Management must decide priorities, negotiate trade-offs, and set targets that balance the groups with most power and legitimacy. In exam answers, link each stakeholder to a specific objective and a specific measure.

Key rules to remember

Mendelow: key players: High power + High interest → Key players; Involve them in decisions. Their objectives get the highest priority and the most detailed measures.
Mendelow: keep satisfied: High power + Low interest → Keep satisfied; Consult them and avoid upsetting them. They can become key players if their interest rises.
Mendelow: keep informed: Low power + High interest → Keep informed; Communicate regularly. They can influence others or gain power through alliances.
Mendelow: minimal effort: Low power + Low interest → Minimal effort; Monitor only. Do not spend scarce management time here.
Stakeholder to measure link: Stakeholder → Objective → Measure → Target; Use this chain in every answer so your measures are tied to a named group.

How to solve Stakeholders and Performance Objectives questions

Use this method for any question on stakeholders, conflicting objectives or the measures that follow from them.

1Read the requirement and note whether it asks you to identify, analyse, evaluate or recommend. This decides your depth.
2List the stakeholders from the scenario. Use the internal, connected and external groups to check you have not missed any.
3State each group's likely objective, using facts from the scenario, not generic textbook statements.
4Place the main stakeholders on the power-interest grid and explain why, using evidence of their power and interest.
5Identify where objectives conflict. Name the two groups and say exactly what they disagree on.
6Recommend how to prioritise and resolve the conflict, for example negotiation, trade-offs, communication or a balanced set of targets.
7Link each priority objective to a measure and a target, and mention the risk of measuring the wrong thing.
8Finish with a clear recommendation or conclusion, written in the format asked for, such as a report or email.

Quickest way: Stakeholder, Objective, Measure in one pass

When to use it: Use this when time is short, such as a 10 to 15 mark requirement, or when you need a plan before writing a longer answer.

Jot three or four stakeholders from the scenario in a column.
Beside each, write power (H/L) and interest (H/L), which gives the Mendelow box.
Beside that, write one objective and one measure.
Circle the one conflict that matters most and decide how you will resolve it.
Write the answer in that order, one short paragraph per stakeholder, then a conclusion.

Common mistakes in Stakeholders and Performance Objectives

Listing Mendelow's four boxes without applying them to the scenario.
Students memorise the theory and treat it as the whole answer.
Fix: Name real stakeholders from the case, place each one, and justify the position with scenario facts.
Assuming shareholders always come first.
Finance students are used to profit and share value as the main goal.
Fix: Judge priority by power, interest and legitimacy in the scenario. A regulator or major lender may outrank shareholders in a given case.
Naming objectives but giving no measures.
Students forget APM is about performance measurement, not just stakeholder theory.
Fix: Always finish the chain: stakeholder, objective, measure, target.
Saying conflicts can simply be removed.
Students look for a perfect answer.
Fix: Say conflicts must be managed. Discuss trade-offs, negotiation, priorities and the cost of favouring one group.
Treating stakeholder positions as fixed.
The matrix looks like a static diagram.
Fix: Comment on how power or interest may change, for example after a media campaign, a new law or a takeover bid.
Ignoring professional skills in the written answer.
Students focus on content and write in a disorganised way.
Fix: Use the format requested, keep paragraphs short, show scepticism about the evidence, and give a clear recommendation.

Worked examples

Example 1

A listed manufacturer plans to close a plant to raise profit. Institutional shareholders support this. Employees and the local community oppose it. The local council can refuse planning permission for a replacement site. Analyse the stakeholders using Mendelow's matrix and explain the conflict in objectives. (10 marks)

Show the solution

Stakeholders: institutional shareholders, employees, local community, local council.
Institutional shareholders: high power through voting and ability to sell shares, high interest because returns are affected. They are key players. Objective: higher profit and share value. Measure: earnings, return on capital.
Employees: interest is high because the closure threatens their jobs. The scenario gives no evidence that they act collectively, so individual power is low. They are keep informed. If they organise, for example through a union or by threatening disruption, they could move to key players. Objective: job security. Measure: redundancies, staff turnover.
Local community: high interest but low power, so keep informed. Objective: local employment and the firm's local reputation. Measure: local jobs retained.
Local council: high power, because it can refuse planning permission for the replacement site. The scenario does not state its interest, so you cannot infer it from its power. Without evidence of interest, place it in keep satisfied. If it shows concern for local employment or economic stability, it would move to key players. Objective (assumed): local economic stability. Measure: planning approval status and local jobs retained.
Conflict: shareholders want cost reduction and profit, while employees and the community want the plant open. The council can block the replacement site, so ignoring it puts that part of the plan at risk.
Recommendation: management should prioritise shareholders, but consult the council early and keep it satisfied. Engage employees and their representatives, and watch for signs that their power is growing. Options include a phased closure, redeployment or retraining. Add measures such as redeployment rate and planning approval status next to the profit measures.

Answer: Shareholders are the key players. The council has high power but no stated interest, so it is keep satisfied and could become a key player if it shows concern for local jobs. Employees and the community are keep informed. Employees could move up if they organise collectively. The conflict is profit against jobs. Management should keep shareholder returns as the main objective but consult the council and engage employees early to reduce risk, and track both financial and social measures.

Example 2

A private hospital group reports on bed occupancy and profit. Patients want short waiting times, doctors want clinical freedom, and the regulator wants safety standards met. The owners want a return on capital. Explain how conflicting objectives could affect the choice of performance measures, and recommend how the group should respond. (10 marks)

Show the solution

Identify each group's objective: owners want return on capital, patients want short waiting times and good care, doctors want clinical freedom, and the regulator wants compliance with safety standards.
Show where the conflict arises: high bed occupancy raises profit, but it can lengthen waiting times and strain safety. Cost control may limit the time doctors spend with patients and override their clinical judgement.
Assess power: the regulator has high power through licensing and high interest in safety compliance, so it is a key player on safety. Its safety standards act as fixed constraints on everyone else. Owners have high power and high interest, so they are key players. Doctors have high power because the business depends on them, and high interest in clinical freedom, so they are key players too. Where owners and doctors conflict, owners hold final authority over budgets, but doctors can leave or withhold support. Management should therefore negotiate with doctors and keep cost controls within safety and clinical limits, rather than simply overriding them. Patients have low individual power but high interest, so they are keep informed. Collectively, their choice of hospital and their reputation effects give them real influence, so they could move up the grid.
Measure effect: a profit-only set of measures would push managers to maximise occupancy and cut costs, which could harm patient, doctor and regulator objectives.
Recommend a balanced set of measures: return on capital and occupancy for owners, waiting time and patient satisfaction for patients, clinical outcomes and incident rates for the regulator, and for doctors the proportion of clinical decisions overridden by cost controls, doctor satisfaction and staff retention.
Set limits as well as targets, for example a maximum occupancy level so profit growth does not breach safety.
Communicate priorities openly so each group understands the trade-offs, and review the set of measures regularly.

Answer: The conflict is between profit through high occupancy and the patient, doctor and regulator need for quality, safety and clinical freedom. The regulator, owners and doctors are key players, with the regulator's safety standards acting as fixed constraints. Patients are keep informed but hold collective power through reputation and choice. The group should use a balanced set of measures, including the proportion of clinical decisions overridden by cost controls, set constraints such as a maximum occupancy level, and make the priorities clear to each stakeholder group.

Exam tips

Use names and facts from the scenario for every stakeholder. Generic points earn few marks.
Always show how conflicts affect the choice of measures, not just that they exist.
If asked to evaluate, state which stakeholders you would prioritise and give a reason.
Format your answer as requested and end with a short recommendation to earn professional skills marks.
Mention that stakeholder power and interest can change over time, since examiners often reward this point.

Practice questions from Performance hierarchy

Stakeholders and Performance Objectives in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Stakeholders and Performance Objectives: frequently asked questions

What is Mendelow's matrix in APM?

It is a grid that ranks stakeholders by power and interest. The four boxes are key players, keep satisfied, keep informed and minimal effort. You use it to decide how much attention each group needs and whose objectives to prioritise.

How do I deal with conflicting stakeholder objectives in the exam?

Name the two groups, say exactly what they disagree on, and judge who has more power and legitimacy. Then recommend a way to manage it, such as negotiation, trade-offs or a balanced set of targets. Support it with measures.

Do shareholders always have priority?

No. Priority depends on the scenario. A regulator, lender or powerful employee group may have more influence in a given case, so judge each group by its power, interest and legitimacy.

How do stakeholders link to performance measures?

Each stakeholder group has objectives, and each objective needs a measure and a target to show progress. If a group is ignored, its objectives go unmeasured and may be neglected.