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ACCA Strategic Professional · Advanced Performance Management · Performance hierarchy

Calder Hospitality plc has shareholders who want rising profits, local councils who want the company to support community employment, and lenders who want stable cash flows. The board is deciding how to set its performance objectives. Which approach best reflects the stakeholder-based view of performance objectives?

The best approach is to identify each key stakeholder group's expectations and set balanced objectives reflecting their power and interest. This is the stakeholder view of performance, which rejects focusing solely on shareholder wealth and recognises that several groups must be satisfied for the organisation to succeed.

  1. ASet objectives only for shareholder wealth, since other groups are served indirectly by profit
  2. BIdentify each key stakeholder group's expectations and set balanced objectives that reflect their power and interestCorrect
  3. CDelegate objective setting entirely to the council because it has the most public visibility
  4. DReplace financial objectives with non-financial ones to avoid conflict between groups

Explanation

The stakeholder view requires management to identify what each group expects and to set objectives that balance them, taking account of the group's power and interest. Focusing only on shareholders is the shareholder-primacy view, not the stakeholder approach. Dropping financial objectives would ignore lenders and shareholders.

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