Strategic view of performance
Strategic view of performance

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1.3 Stakeholders

The balanced scorecard framework (Kaplan and Norton, 1998) is one approach to taking account of stakeholder interests. It is based on the principle that organisations need to serve the interests of multiple stakeholder groups simultaneously. Failure to serve the needs of one is likely to prevent them from effectively serving the needs of the others. For example, failure to serve the needs of customers will damage a firm's ability to serve the financial needs of shareholders.

Kaplan and Norton explicitly recognise three stakeholder groups in their work on the balanced scorecard: employees, customers and shareholders. However, for most organisations a much wider range of stakeholders potentially needs consideration. Figure 1 shows a typical set of stakeholders. While failure to serve the needs of one set of stakeholders is likely to cause problems in serving the needs of others, there may also be conflicts between their interests. Organisations often have to make trade-offs between conflicting objectives: for example, short-term return on shareholders’ funds versus job security versus environmental concerns.

Figure 1
Figure 1 An organisation's stakeholders

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