Identifying Those on Board 'The Moving Train': Towards a Stakeholder-Focused

Methodology for Organisational Decision-Making

John Simmons, Paul Iles and Maurice Yolles

John Simmons and Maurice Yolles

Liverpool Business School
Liverpool John Moores University

Paul Iles
Teeside Business School
University of Teeside

Systems Research and Behaviour Science, 2004, 22: 41-53.

ABSTRACT: The paper draws significantly on the proposition that the stakeholder
concept is an appropriate way of acknowledging socio-political aspects of organisation
decision making. Stakeholder analysis is proposed as a means of reconciling organisation
concern for control of system outputs with potentially conflicting expectations of other
stakeholder groups inside and outside the organisation. The paper’s hypothesis is the
incorporation of stakeholder perspectives in decision-making processes will enhance
effectiveness, employee motivation and organisational justice as system outputs. The
viability of the method is demonstrated by its application within a stakeholder analysis of
performance management in knowledge based organisations. Evidence from the case study,
together with recent developments in systems theory and OD, is used to develop a viable
systems stakeholder model of performance management that can achieve an appropriate
balance between effective management, good governance and organisational justice in
knowledge based organisations of the twenty-first century.

Keywords: stakeholder analysis, soft systems methodology, performance management,

organisational justice.

Introduction
What accommodation is possible and appropriate between quantitative and qualitative
traditions of enquiry? Can the divide between them be bridged by identifying research
methods and problem solving approaches that draw from the conceptual clarity and rigour
of ‘objective’ epistemologies alongside an acceptance of the ‘soft’, ill structured and value
based nature of organisation problems? In this paper we argue that stakeholder analysis has
a significant contribution to make to organisation analysis and decision making as this type
of ‘middle ground ‘ research method, especially if it is integrated with complementary soft
or ‘subjective’ methodologies and frameworks. We support this proposition by describing
the philosophy and processes of stakeholder analysis and soft systems methodology (SSM)
within their common view of organisations as complex, pluralist, socio-political entities
with operational and ethical concerns for effective governance and organisational justice.
We demonstrate the value of the stakeholder perspective within a case study of
performance appraisal in academic institutions, and recognise that this type of stakeholder
analysis can lead into a more instrumental ‘stakeholder synthesis’ process in which
competing claims of different stakeholder groups are identified and reconciled. We
illustrate the benefit of integrating stakeholder analysis and SSM within a viable systems
stakeholder model of performance management, noting that combining SSM methodology
with other research approaches is a characteristic of SSM in its ‘mature form’ (Mingers,
2000). The model we offer is complemented by a new methodological cycle of organisation
enquiry that includes the stakeholder contribution and decisions required at each stage. The
paper concludes by confirming the benefits of this stakeholder-focused methodology to
those inside and outside the systems research paradigm, and suggests ways in which a
collaborative research agenda can be progressed.

Key Elements of SSM Modes of Enquiry

Two problems encountered by those applying traditional systems methods in a management
context are the unfamiliarity of concepts used and unreality of assumptions made within
systems applications to the management audiences they are trying to influence. Approaches
following an ‘objective’ epistemology assume systems and constructs within an area of
organisational enquiry have identical meanings across that setting, and that researchers can
define the problem and engineer systems solutions to it ‘at a distance’ through the use of
symbolic logic and dispassionate analysis (Checkland and Scholes, 2001). The possibility
that researchers and stakeholders have different views of the world in relation to the
phenomena under investigation is rarely considered, or that there could be important
differences in meaning between stakeholder groups. Such approaches give higher priority
to the purity of models and mathematical rigour in decision making than to organisational
relevance. In fact a key characteristic of ‘soft‘ real world problems is that there is likely to
be a level of disagreement between stakeholder groups about what the problem is and how
it should be responded to. While these forms of enquiry start with a ‘define the problem’
stage, soft systems epistemologies recognise particular stakeholder groups have their own
definitions of the problem that imply the starting point is not “a problem”, but “a situation
that is problematic” (Wilson, 2001, 7). Moreover, “these problem situations …are
unbounded and messy and may vary in definition according to the weltanschauung of an
inquirer” (Yolles,1999 p.275). This failure to integrate the socio-political context of
decision making in multiple criteria decision making aids (MCDA) is identified as a
significant barrier to the development of organisationally relevant transdisciplinary research
(Banville et al, 1998).
SSM’s acceptance of the subjective dimension in organisation enquiry has significant
implications. In particular it implies those seeking to solve complex organisation problems
should recognise they are 'boarding a train that is already moving' [Landry and Malouin,
1983]. This analogy suggests a particular structure, culture, power relationships,
stakeholder attitudes etc have developed during the train’s or the organisation’s journey so
far. Pursuing the analogy, on board are various passengers or stakeholder groups who differ

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in their definition of the problem in question and the action that should be taken in relation
to it. Failure to recognise the significance of identifying and interpreting the viewpoints of
these interested parties will render the research process sterile and irrelevant. Therefore this
paper offers a structured methodology for identifying train passengers [stakeholders with a
vested interest in the problem] and their luggage [particular perspectives on the problem
that accompany each of them on their journey] within a new model of organisational
enquiry based on viable systems theory. This stakeholder analysis process can facilitate a
synthesis of different stakeholder views that enable passengers to travel forward to a new
destination [a point where there is agreement on how the problem should be responded to].
In essence then, SSM consists of three phases. Identifying a real world problem of concern.
Selecting issues relevant to improving the situation and modelling these using systems
concepts via consultation with salient stakeholder groups. Then comparing the models with
actual perceptions of the situation to create new insights that hopefully accommodate the
different stakeholder views and interests. SSM combines robust methods of enquiry with an
interpretivist approach that acknowledges the reality of organisations and addresses real
world problems in a systemic way. We suggest this approach is both feasible and
necessary- not least because it gives management scientists the potential to influence
problem situations in an organisation context rather than being restricted to the research
equivalent of train spotting!

Key Elements of Stakeholder Modes of Enquiry

Although stakeholder theory has burgeoned in recent years (Friedman and Miles, 2002) it is
a relatively recent inclusion within mainstream research methods and management
literature. Freeman’s definition is the most widely quoted in the literature- “any group or
individual who can affect or is affected by the achievement of the organisation’s
objectives” (Freeman, 1984, p. 46). The basic tenet of the theory is that organisations have
a number of stakeholders or interested parties who influence and are influenced by them.
Stakeholder analysis involves identifying stakeholders seen as significant to the
organisation and the investigation prior to collecting data on their perceptions, actions,
expectations etc. Constraints of time and resources will impose limits on the number of
stakeholder groups included. Data on salient stakeholder perspectives are obtained at one
point in time or on different occasions, and used in inductive, deductive or comparative
research designs.
Stakeholder analysis is therefore a method of identifying, classifying and managing
disparate stakeholder interests that is relevant to practitioner and research concerns. For
practitioners, it can contribute to the resolution of ethical dilemmas in corporate decision
making and to organisation development initiatives. For researchers, it has the potential to
integrate themes in economic and social inquiry (Donaldson and Preston, 1995) and to
bridge the divide between different research paradigms (Burgoyne, 1995).

Issues in SSM

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One benefit of integrating stakeholder analysis and SSM is that the resultant mode of
organisational enquiry addresses a number of criticisms of the latter- especially those that
relate to SSM’s earlier, more prescriptive form. While it is outside the scope of this paper to
give a detailed critique of SSM, we demonstrate how SSM has evolved parallels similar
developments within stakeholder analysis and OD. Early forms of SSM represented a
functional and regulatory philosophy that required adherence to a formalised, organisation-
driven protocol. The weltanshuuang concept assumed uniform and persisting views within
stakeholder groups (Bergvall-Kareborn, 2001), and lacked an explanation of how these
views might be changed (Mingers, 1980). The approach was also regarded as having
greater utility as a diagnostic technique than as an intervention strategy.
The paper demonstrates how SSM, stakeholder analysis and OD share the aim of the
holistic development of organisational systems. Specifically it shows how they can
contribute to an emancipatory methodology that facilitates meaningful dialogue between
stakeholder groups (Payne and Calton, 2002), and which recognises performance and
ethical rationales for doing so (Introna and Pouloudi, 1999). The approach represents a
problem-solving protocol and organisational learning system rather than a prescriptive
methodology, and the stakeholder systems model offered is a recognition of strategic
management’s failure to provide principles to guide stakeholder identification and analysis
(Atkinson et al, 2002). The complimentary contributions of SSM and stakeholder analysis
within the interpretivist research paradigm are now reviewed.

SSM and Stakeholder Analysis within the Interpretivist Research Paradigm

Our contention is that SSM and stakeholder analysis are located within the broad
interpretivist research paradigm, and have complimentary strengths that enable them to be
combined in a new mode of organisation enquiry. We review the main elements of the two
approaches below to confirm this assessment.
As a ‘subjective’ epistemology, SSM assumes organisations are made up of different
stakeholder groups engaged in purposeful activity- each of which has a particular world
view. Whereas hard systems thinking seeks to develop a single integrated model of the
situation, SSM involves a model that accepts and expresses in a systemic way the different
worldviews of particular stakeholder groups. Its intention is to use representations of these
worldviews in systems concepts to structure that complexity for purposes of problem
analysis and problem solving. Thus, while hard systems approaches see the world as
systems that can be ‘engineered at a distance’ to achieve an objective, SSM accepts the
messy nature of management problem solving while still acknowledging that the process of
inquiry should be undertaken in a systematic manner (Checkland and Scholes, 2001).
Stakeholder analysis also leans towards this subjective and pluralist view of reality and its
‘expectations’ perspective is similar to that of role theory (Burgoyne, 1995). Key
propositions of this ‘qualitative’ or ‘phenomenological’ approach are that different
stakeholders experience the ‘same’ reality differently; that phenomenon under investigation
are shaped by the interaction of multiple purposes and stakeholder agendas; and that
individual views in these situations are influenced by situation dynamics as well as actors’

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personalities. Stakeholder theory takes a similarly eclectic stance on research philosophy
and methods to that of SSM. It offers researchers the opportunity to avoid ‘mindless
empiricism’ without ‘disappearing into the realm of meta-theory’ (Burgoyne, 1995, p. 188).
Burgoyne also confirms the importance of using statistical methods for those stakeholder
phenomena that lend themselves to quantitative analysis alongside qualitative data on the
experiences and expectations of stakeholders. In his words, its middle-range position on the
qualitative-quantitative research method continuum means it makes sense to ‘count the
countable’.
SSM and stakeholder analysis are both within a pluralistic and socio-political view of
organisations that regards social reality as a complex of socially constructed meanings.
Both are middle range theories with management as their parent discipline and in the action
research tradition (Ledington and Ledington, 1999; Rose, 1997). Both view organisations
as dynamic coalitions of different stakeholder groups which have to managed because of
the implications for performance, governance and corporate ethics. Both are ‘soft’
organisation development methodologies used in complex problem-solving situations to
facilitate change management strategies by modifying stakeholders’ ‘appreciative settings’
(Rose, 1997; Yolles, 1999). They align with a post-modernist view of organisations as
open, interactive and dynamic systems that need to be responsive to stakeholder claims for
participation and organisational justice (Takala et al, 2001). This point is particularly
significant within knowledge based organisations (such as those with the case study) where
employees have increased leverage because of their value as ‘intellectual capital’, and
where acknowledging these employee viewpoints has both performance and effective
governance rationales.
There are undoubted problems in aligning the language and logic of ‘objective’
epistemologies with an interpretivist philosophical stance (Ledington and Ledington, 1999),
but those who ignore differences in the values and goals of stakeholder groups ‘cast a veil
of deceit’ (White, 2001) over the whole research area. Our case study on performance
appraisal in academic institutions illustrates ways in which stakeholder analysis and SSM
approaches can be used in research settings. Both can contribute to theory testing, problem
structuring or to action research interventions in a management context (Ledington and
Ledington, 1999), and the appraisal study described illustrates these uses. For ‘theory
testing’ purposes, stakeholder views could be identified over time to test whether particular
performance appraisal practices result in specified organisation or individual behaviour
outcomes. In a ‘problem structuring’ application, they could provide a degree of structure
when identifying the ‘soft’ and ’messy’ problems inherent in the operation of performance
appraisal systems. In action research, their use can go beyond theory testing and problem
formulation to contribute to an organisation development problem solving process. In each
of these research scenarios the methodologies take the subjective dimension of human
affairs seriously and treat it in an intellectually rigorous way.
However, neither SSM or stakeholder analysis are prescriptive or predictive in themselves.
They do not specify how particular stakeholder groups should be evaluated and
incorporated in organisation decision making- even though they could be used as a means

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of achieving more ethical organisation practice. Nor do they predict that certain outcomes
result from specific forms of stakeholder involvement. Rather they have heuristic value as
frameworks for exploring problem situations in organisations. Nevertheless a continuing
criticism of both methodologies is that they give insufficient attention to the related issues
of organisational justice and stakeholder saliency. These are examined in the following
section.

An Organisational Justice Rationale for SSM and Stakeholder Analysis

There are strong organisational justice and governance rationales for the use of SSM and
stakeholder analysis within organisation development processes. The approaches align with
multiple constituency models of organisations (Ahmed, 1999), and to themes in political
science where the concept of accountability to external stakeholders is seen as a form of
democratic representation (Middlewood and Cardno, 2001). Governance is both the
procedures by which stakeholders influence organisation decision making, as well as the
decision making structures themselves (White, 2001). The previous section described the
process of involving stakeholders through a SSM or stakeholder analysis process. We now
outline the organisational justice rationale for stakeholder involvement (Brown, 1999;
Banathy, 1996) and the related issue of stakeholder saliency (determining the legitimacy
and influence particular stakeholder groups should be given).
Organisational justice subsumes members’ view of equity in the distribution of organisation
resources - distributive justice- and perceived fairness of organisational decision making
processes- procedural justice (Andrews and Kacmar, 2001; Taylor et al 1998). Perceptions
of the latter affect a range of outcome variables with positive links to acceptance of
selection decisions (Truxillo et al, 2001), commitment and job satisfaction (Lemons and
Jones, 2000) and a negative association with turnover (Pettijohn et al, 2001). Employees
perceiving a higher level of procedural justice in organisational decision making are likely
to demonstrate greater acceptance of organisational goals and values, and be more willing
to exert effort to achieve these (Pettijohn et al, 2001). Organisations can therefore increase
the perceived procedural justice or legitimacy of their systems of governance by facilitating
greater employee involvement in system design and modification. This provides an ethical
or normative rationale for involving stakeholder groups (Jones and Wicks, 1999), but the
issue can also be considered from descriptive and instrumental perspectives (Donaldson
and Preston, 1995).
The normative ‘stakeholder identification’ question asks which stakeholder groups
managers should regard as salient to their organisation, the descriptive ‘stakeholder
saliency’ issue identifies which stakeholder groups managers do pay attention to. An
instrumental approach assesses the impact of managerial decisions on stakeholder saliency
on the achievement of organisational goals. Thus, the normative question relates to moral
values and organisational justice concepts. A descriptive analysis of managerial decisions
on stakeholder involvement may demonstrate the degree to which stakeholder groups are
perceived as having power, legitimacy or urgency in their claims on the organisation
(Mitchell et al, 1997). Decisions to involve stakeholder groups for the instrumental reason

6
of achieving organisation goals could be evaluated by the extent to which this contributed
to desired outcomes.
Stakeholder Analysis of Performance Appraisal in Academic Institutions
This case study illustrates the use of stakeholder analysis to analyse the operation of
performance appraisal systems in universities and colleges (Simmons and Iles, 2001). The
identification and classification of stakeholders in any enquiry is situation dependant, and
the full study included ‘standard’, ‘fiduciary’ and ‘silent’ stakeholders (Banville et al,
1998). ‘Standard’ stakeholders are those who affect and are affected by the situation,
‘fiduciary’ stakeholders are those who act on behalf of others but are not directly affected
themselves, and ‘silent’ stakeholders are those with no direct influence on the situation but
are affected by the problem. A range of internal and external stakeholder groups was
recognised as influential on performance appraisal policy and practice in the institutions
studied. However, constraints of space mean it is principally the perspectives of senior
managers, line managers (appraisers) and academic staff (appraisees) as key stakeholder
groups that are considered in this paper.

Key Research Questions

The research study is based on the hypothesis that a key factor in the acceptability and
effectiveness of performance appraisal systems is the degree to which those appraised
regard the performance criteria used as under their control, view the appraisal interview as
a motivational experience, and believe that the outcomes of performance review are used in
a developmental way. The survey therefore sought information on a number of questions:
the extent to which ‘in-house’ academic expertise is utilised in the design and development
performance appraisal systems in higher and further education; the criteria used to assess
lecturer performance and the acceptability of these to academic appraisees; and the views
of appraisers and appraisees regarding the motivational impact of performance appraisal in
their institutions.

The Methodology and Its Rationale

A recent article reviewing stakeholder theory provides convincing justification for the use
of case studies as a research method. It argues “small sample, case based studies can be a
source of rich data …(and are) an excellent method of theory building" (Harrison and
Freeman, 1999, p. 482). Guidelines on what constitutes “case research with a purpose” are:
commence the research with specific ‘how’ and ‘why’ questions; incorporate an
appropriate selection of cases, research instruments and data analysis procedures; use
multiple sources of evidence, follow a logical sequence of enquiry, and have key
informants review the case study report on its completion. Detailed documentation of the
case study protocol and database is also needed so that other researchers can replicate the
study. Our case study accords with these recommendations.
The study is distinctive as its conclusions are based on the perspectives of key stakeholders
or ‘expert witnesses' in stakeholder accountable organisations (Bathmaker, 1999; Brown,
1999). The fieldwork was carried out in two stages between November 1999 and April

7
2000. One ‘expert witness’ group constituted the teaching staff of two Business Schools,
together with those in line or HR management roles in these institutions. The other
comprised academic staff from universities and colleges across the UK whose research
interests, professional expertise and teaching responsibilities are in performance appraisal.
A ‘triangulation’ method of enquiry obtained data on performance appraisal within the two
Business Schools in three ways. First by conducting structured interviews with key
stakeholders, second via a questionnaire to all academic staff, and third by accessing
documentation on performance appraisal policy and practice. Interviews were conducted
with parallel stakeholders in the two Schools - heads of School, appraisers, appraisees,
personnel managers, and trade union representatives- over a three-month period. Over the
same period a broader base of staff opinion was obtained via a questionnaire to all
academic staff. This focused on respondent experience of appraising and being appraised,
as well as general attitudes to performance appraisal. Appraisal system documentation in
the two Schools was analysed by transcription, coding, and identifying specific themes.
As appraisal practice at the two institutions may not be representative of that in other
universities and colleges, a modified version of the questionnaire was sent to a second
group of ‘expert witnesses’. This group was obtained from the first author's personal
contacts with HR specialists who teach on Chartered Institute of Personnel and
Development (CIPD) courses at UK universities and colleges, and who are assumed to have
an ‘expert witness perspective’ on performance appraisal in their respective institutions.
Respondents were also asked to provide appraisal documentation from their own institution
for analysis.
The study sought information on particular aspects of performance management: the
criteria used to assess lecturer performance and the acceptability of these to academic
appraisees; and views of appraisers and appraisees regarding the motivational impact of
performance appraisal. Nine main measures of performance used to appraise academic staff
were identified from a performance appraisal literature review and from appraisal
documentation provided by respondents. These were: curriculum development; classroom
observation; number of students recruited; contribution to administration; examination
results of courses taught; student evaluation of courses taught; number of research
publications produced; research funding generated; and liaison with external bodies.
Respondents were asked to evaluate these in terms of usage and acceptability within their
own organisation’s performance appraisal system. Key findings from the research are
summarised below.

Findings
Appraisal Criteria in Use
Appraisal criteria most commonly used across HE and FE sectors are (in order of
prevalence): ‘contribution to administration’, ‘curriculum development’, ‘liaison with
external bodies’, 'classroom observation' and ‘student evaluation of courses taught’.
However, in a majority of HE establishments ‘number of research publications produced’

8
and 'research funding generated' are additional performance criteria used; while ‘number of
students recruited’, and ‘examination results of courses taught' are additional measures of
performance in most FE colleges. Interview data and the published literature suggest the
different histories, ethos and stakeholder groups of the two sectors as reasons for this.
Views of ‘Legitimate’ Appraisal Criteria
Significant commonality was found across universities and colleges regarding performance
criteria that ‘expert witnesses' regard as legitimate. In both sectors ‘curriculum
development’, ‘contribution to administration’, and ‘liaison with external bodies’ are seen
as valid and acceptable performance measures. However interesting differences are
apparent in university and college responses. A majority of those in HE regard ‘number of
research publications produced’ and ‘amount of research funding generated' as appropriate
measures. However, ‘examination results of course taught’, ‘classroom observation’ and
‘number of students recruited’ are criteria academic staff in FE additionally regard as
acceptable.
These differences suggest that, although a common philosophy of appraisal and ‘system
architecture’ (Purcell, 1999) is highly desirable in both sectors, the criteria particular
institutions use as performance measures need to be agreed with their major stakeholders-
especially those whose performance will be assessed by the measures chosen.
Motivational Impact of Performance Appraisal
Those with formal responsibility for conducting appraisals were asked if they believed
these had improved staff performance. Around half thought their appraisal interviews had
either a major influence or some influence in improving staff performance. However, there
was also a significant ‘tail’ where appraisers believe the activity has no noticeable effect on
staff performance and motivation!
The whole sample was asked about their experience as appraisees in relation to possible
appraisal outcomes. Outcomes included: greater understanding of job or organisation
objectives, increased job motivation and links to salary progression. ‘Increased clarity of
job responsibilities’ and ‘clearer understanding of organisation objectives’ were outcomes
for around a third of university respondents compared with a clear majority of those in
colleges. Interview data suggests the greater focus on quantifiable and organisationally
linked objectives for lecturers in FE may account for this. In contrast, a ‘self contained’
approach to appraisal focusing on personal development is more likely in HE. Very few
respondents from either sector believe the appraisal interview influences their salary
progression and, perhaps most importantly, only around a fifth of each group are motivated
to improve job performance as a result of the appraisal discussion’!
The latter point is indicative of a wider pattern within the study. Questionnaire and
interview data indicate that appraisers believe appraisal interviews have a far greater
motivational impact than those being appraised. This self-serving bias in appraiser
evaluation of their behaviour in appraisal interviews is consistent that found in other studies
(e.g. Steensma and Otto, 2000).

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Achieving Stakeholder Synthesis
We now relate the study and conclusions from it to the instrumental use of stakeholder
theory. This goes beyond using stakeholder analysis to assess an existing situation to
possible intervention in it through a process of stakeholder management (Donaldson and
Preston, 1995), and relates to the managerial issue of how to achieve stakeholder consensus
on performance measures that recognise the views of stakeholder groups and relationships
between them.
One method of developing an effective and ethical performance management system seeks
to achieve ‘stakeholder synthesis’ by involving key stakeholders in the development of
performance objectives and measures (Winstanley and Stewart-Smith, 1996). The ‘robust
and ethical’ approach advocated was used successfully at the British School of Osteopathy
(BSO) as an effective means of responding to both the traditional and the radical critiques
of performance appraisal. Interestingly, the salient organisational characteristics identified
in the BSO have striking similarities to those found in universities and colleges. Both types
of organisation have powerful stakeholder groups with different objectives operating within
a public service ethos. Both the BSO and Business Schools within HE and FE institutions
aspire to be ‘learning organisations’, suppliers of high quality professional services and
income generating centres. Staff within each type of organisation are ‘archetypal
professionals’ - potentially mobile and not easily controlled by non-specialist managers or
administrators. Moreover, such organisations are all striving to identify and to operate
effective performance management systems that their stakeholder groups will ‘buy into’.
Appropriate performance measures are identified via a ‘consensus seeking process’,
embedding these within an organisation's aims and culture in a way that engages the
commitment and motivation of all stakeholders. In outline, the process involves: identifying
key stakeholder groups; conducting structured interviews with key stakeholders to agree
strategic objectives using ‘SWOT’ and ‘PEST’ analysis; utilising the Delphi technique to
obtain the views of different stakeholder groups to identify the extent of consensus and
conflict between them; and relating these findings back to the senior stakeholder group for
further analysis. If after this process genuinely different interests remain, these competing
interests are transformed into ‘competing claims’ so that each group's requirements are
viewed collectively and openly in relation to available resources and to rival claims.
Similarly, Williams (2002) and Fisher (1994, 1995) emphasise the need to design appraisal
schemes acceptable to key stakeholders. The latter puts forward a model that identifies
similarities and differences in management and staff perspectives on appraisal as a
precursor to a negotiated and iterative development phase.

A Viable Systems Model of Performance Management

Our contention is that there are similarities between (Frooman, 1999), and synergistic
benefits in combining (Banville et al, 1998), the stakeholder analysis approach we advocate
with developments in SSM and OD within a stakeholder systems model of performance
management. We now review the main elements of each to confirm their incorporation in
the model.

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Stakeholder analysis / synthesis identifies and seeks to reconcile differences between an
organisation’s stakeholder groups. In a performance appraisal context its aim is a scheme
that achieves consensus between the interests of salient stakeholders, while giving
particular significance to the concerns of knowledge based workers whose commitment is
central to the organisation's success. SSM developed as a response to problems encountered
when seeking to apply ‘objective’ systems engineering approaches to complex management
problems that are perceived differently by different stakeholders (Checkland and Scholes,
2001). Proponents believe ‘objective’ epistemologies do not recognise socio-political
aspects of organisation decision processes, and their methodology is unsatisfactory for
representing and analysing such situations (Bergvall-Kareborn, 2002). In contrast SSM’s
interpretative stance takes the subjective characteristic of human affairs seriously, and treats
it in an intellectually rigorous way (Mingers, 2000). Recent approaches within OD (Iles,
2001: Yolles, 1999; Harrison, 1994) advocate the use of a political model of the
organisation to diagnose stakeholder stances on organisation issues, then to identify change
strategies that recognise different stakeholder viewpoints of organisation effectiveness.
Once identified, these stakeholder perspectives are reviewed within a consultation process
as a means of consensus building. Within this multiple, and possibly contradictory, views
of reality are explored with the overall purpose of introducing change that creates a new
balance with the system environment.
These developments, together with conclusions from the case study, can be combined to
produce a stakeholder systems model of performance management. In outline the model
involves: exploration of organisation situation and purposes; assessment of external and
internal environments, especially stakeholder expectations; negotiation or ‘stakeholder
synthesis’ to produce a robust, relevant and equitable performance management system;
performance management operation, system evaluation and modification. It is
complemented by a new methodological cycle of organisation inquiry that identifies the
stakeholder contributions and decisions required at each stage. From an organisation
systems perspective, the incorporation of stakeholder analysis within multiple criteria
decision-making models is crucial where the viability of the developed system
[performance appraisal] is dependent on its acceptability to different stakeholder groups- or
where decision quality or acceptability is likely to be enhanced by consideration of
different stakeholder viewpoints (Bergvall-Kareborn, 2002; Banville et al, 1998). The
stakeholder systems model of performance management with related actions and methods
is shown in Table 1 below (Yolles, 1999).

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Phase Step Action & Context Explanation and tools
Current/ 1. Explore Exploration of organisational Interaction with clients, awareness
future situation & mission. Consultation process, of power, control and possible
state purposes identifying where the organisation is resistance to change.
going and what it wants to achieve.
Diagnosis 2. Define relevant Gather data. Identify stakeholders. Interviews and use of diagramming
system Explore perspectives of the situation techniques (system maps, power
to create system representations. context diagrams, activity sequence
Identify structures and processes. diagrams, organisation matrix).
3. Assess contexts Outer contexts Brainstorming. SWOT analysis,
Inner contexts Identify commodities force field diagrams. Mind maps,
of power, control mechanisms, multiple cause diagrams.
and input constraints.
4. Confirmation of Strategic change requires different Stakeholder consultation.
participation & views to be heard as part of the Techniques to encourage
relevant process to win support and participation. Exploration of
system commitment. Ensure participation of resistance to change.
appropriate stakeholders and confirm
relevant systems.
Manage 1. Identify Change can cause confusion about Scan for targets and milestones for
change targets & roles, responsibilities and decision performance management. Consider
design making channels needs of components of system,
performance evaluate conflicts & tensions, actual
management against official practices. Define
models effectiveness criteria. Use control
diagrams.
6. Evaluation / Evaluate models and associated Consultation with major
selection of performance management targets, stakeholders/clients.
performance and confirm selection with most
management important stakeholders/clients.
models
7. Performance Reinforce change helped through (1) Work through organisation matrix.
management individuals having a personal stake Tabulate activities.
activities and being accountable for
development; (2) new working
relationships and boundaries
between work groups negotiated; (3)
finding ways of recognising and
rewarding desirable behaviours.

8. Evaluation Effectiveness criteria Multiple success criteria

Table 1: A Stakeholder Systems Model of Performance Management and Related Action

Tools (Yolles, 1999)
Conclusions
What conclusions can be drawn from our review of SSM and stakeholder analysis and their
potential application within organisation analysis and development contexts?

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First, we hope to have demonstrated the integrity and value of SSM and stakeholder
analysis as ‘middle ground’ research methods. While they are within a subjective and
interpretivist view of organisations (Rose, 1997; Burgoyne, 1995), they incorporate systems
rigour and quantitative analysis alongside this. Their scope to combine different research
philosophies and methods in a pragmatic but robust way will appeal to those who put
dialogue and accommodation between different research paradigms before purity of
approach (Bussell, 2000). This recognition of attitudinal and political differences between
constituencies or stakeholder groups in organisations also aligns with recent thinking in
OD.
The convergence in philosophy and intervention strategy between SSM, stakeholder
analysis and OD coalesces within the new mode of organisation inquiry we offer. The
stakeholder systems model of performance management and its related action tools
provides a sequence of interventions together with initiatives and methods likely to be
required at each stage. This model describes the ‘how’ of stakeholder involvement through
the incorporation of SSM concepts and methods. We believe this provides a framework for
organisation analysis and action research. The stakeholder systems model can also make a
significant contribution to organisation strategy and governance where the viability of the
developed system is dependant on its acceptability to a number of potentially conflicting
stakeholder groups, or where decision quality is likely to be enhanced by consideration of
different stakeholder viewpoints. While the paper uses stakeholder analysis and SSM to
demonstrate the synergistic benefits of linking ‘hard’ and ‘soft’ epistemologies, we believe
there is significant scope to align other research tools within the two paradigms in similar
ways
The ‘stakeholder saliency’ concept illustrates different rationales for stakeholder
involvement. Descriptive, normative and instrumental explanations for stakeholder saliency
each provide researchers and managers with insights for analysis and action. We suggest
that the greater significance of knowledge based workers as valued intellectual capital
within many contemporary organisations adds a powerful instrumental rationale for more
considered incorporation of their viewpoints in organisation decision making to the
normative or moral one (Simmons, 2002).
The case study cited analysed performance appraisal systems in academic institutions from
a stakeholder perspective. Specific findings from the study are described above, but its
overall conclusion supports this normative or organisational justice case for more specific
incorporation of the views of key stakeholder groups in appraisal system design and
modification. Progression from the stakeholder analysis stage into a subsequent stakeholder
synthesis process would accord with an instrumental or managerial use of the theory to
achieve organisationally desirable outcomes. This can be regarded as a pilot study
illustrating the potential of stakeholder analysis to researchers and practitioners. The
convergence and overlap we have demonstrated between this approach, SSM and OD
enables the three to be combined in a new stakeholder systems model. The model
demonstrates how management science can be utilised to achieve an appropriate balance

13
between effective management, good governance, and organisational justice in the
knowledge based organisations of the twenty-first century.
Finally, we believe that the converging philosophy and approach of stakeholder analysis,
SSM and OD offers exciting possibilities for further research and organisational
application. The stakeholder systems model is proposed as a step towards realising the
benefits of such an alignment as this “exploration offers the possibility of stimulating the
development of new understandings about….important organisation phenomena” (Bartunek
and Seo, 2002, 240), it contributes to clarifying the conceptual domain (Stoney and
Winstanley, 2001), and it accords with recent developments in action research that
emphasise collaboration with those in the organisation to develop viable systems (Larsson,
2001). We hope this will be refined and progressed by other researchers.

Acknowledgement
The authors acknowledge contributions from an anonymous reviewer and the Assistant
Editor of Systems Research and Behavioral Science in developing this paper.

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