Critical evaluation of the potential of stakeholder theory to contribute to understanding of large-scale public service IT projects and their implementation

1. Critical evaluation of the potential of stakeholder theory to contribute to
understanding of large-scale public service IT projects and their
implementation
Kennedy T. Mbwette, 2013
Introduction
As information technology (IT) becomes an important element in numerous industries, the number
of technology projects increases and their sizes get larger and more complex regardless the given
sector of implementation. This is due to the belief that IT can enhance organization performance,
both at the operational and strategic level (Ashurst, et al., 2008). One distinguishing characteristic
for large-scale IT projects compared to other IT projects according to a research by Bloch, et al.,
(2012) is that they cost not less than £10 million for implementation. Due to the great size and
complex nature, large scale IT services are commonly prone to risks of cost and schedule overun,
pausing high failure rate and most commonly poor value creation (Carr, 2003). In this essay,
public service IT projects will refer to those IT projects that are either financed by public funds, or
are mainly intended to become beneficial to the public. Some examples of large-scale public
service (LSPS) IT projects include eGovernment initiatives in New York State and NHS IT
project in UK (Brennan, 2005; O'Neill, 2000).
The nature of public services provision lets services be contracted by public officials with
organizations on behalf of the clients and end-users; the citizens in this case. Through this
approach the purchaser is usually not the beneficiary thus resulting in differences in interests and
information between involved parties. The agents may not always act in the interest of the
beneficiary intentionally or unintentionally. Moreover, the principal would commonly fail to have
influence on the agent to resolve occuring differences, most commonly due to additional costs and
difficulties of selecting another agent (Monroe, 1999 cited by Murdok, 2004).
Large-scale public service projects as part of public service systems suffer from public
sector bargain which Hood (2000, p 8) defines as “any explicit or implicit understanding between
senior public servants and other actors in a political system over their duties and entitlements
relating to responsibility, autonomy and political identity, and expressed in convention or formal
law or a mixture of both”. However, public-sector officials perform their tasks for public interests
hence have a desire to create project value to the public and preserve public trust. Due to public

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projects settings such as tight budget and increased tax money accountability from the
government, public-sector managers seek to adopt modern management and performance
measurement tools to understand and implement their projects (Flak & Dertz, 2006).
Public-sector managers often experience dilemmas and difficulties in conducting large-
scale public service projects due to conflicting objectives and stakeholder interests involved
throughout the project (Murdock, 2004). Moreover, improperly managed stakeholder concerns
often lead to conflicts and controversies about implementation of the project, which could result to
projects delays, cancellation or failure (Olander & Landin, 2005).
The description of large-scale public service IT projects appears to be of complex nature
causing difficulty in both understanding and implementation due to the number of stakeholders
involved, their differing interests and level of influence on the particular projects. This essay
describes the potential for stakeholder theory to contribute to our understanding of large-scale
public service IT projects and their implementation using an example of an e-Governance
initiative from New York.
Stakeholder Theory
Stakeholder theory has its roots from management literature and was developed as a response to
the need for attending to objectives of stakeholders with decisions that have rational foundation,
so as to successfully carry out strategic processes in the context of profit-organizations (Flak &
Dertz, 2006). Freeman (1984) proposed a managerial perspective that identifies key stakeholders
of the firm as owners, customers, employees and suppliers. He later added further groups to
include government, competitors, consumer advocates, environmentalists, special interest groups
and media (Bailur, 2006). Freeman (1984) argued that this was a better way to explain the
complex interaction between different interest groups in corporations.
As a management instrument, stakeholder theory’s attributes, power, urgency and
legitimacy are used as claims to define the importance of a certain stakeholder in organizations’
projects (Austen, et al., 2008; Flak & Dertz, 2006). The theory can be divided into three
approaches (Austen, et al., 2008; Donaldson & Preston, 1995), one of them (descriptive) depicting
“what happens” by describing and explaining specific corporate behaviours and characteristics
that help to understand how managers deal with stakeholders and how they represent their
interests. However, Treviño & Weaver (1999) as cited in Bailur (2006) believe that the
fundamentals of this approach are ill-defined as they are only descriptive and lack clear objective.

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The second approach described by the authors is instrumental, which outlines “what
happens if” by identifing the connections between stakeholder, management and achievements of
the corporate objectives in order to study the consequences of taking in to account stakeholders in
management (Austen, et al., 2008). A general critism to this approach when applied to both
private and public sector is that generally stakeholder involvement is not feasible and is not
always linked directly to organizational success (Bailur, 2006).
Lastly is normative which suggests “what should happen” by interpreting the function of
the corporation through identification of moral or philosophical guidelines as linked to the
activities or management of the corporation (Fontaine, et al., 2006; Donaldson & Preston, 1995).
However, this approach has led to controversial understanding when applied to private sectors
since businesses are not charities but profit making entities and that it is not possible to satisfy all
stakeholders all the time (Bailur, 2006).
The concepts of stakeholder theory as it originates and pertains to the private-sector
organizations establishes a potential to be applied in public-sector settings also for either
managerial decision making or understanding organizations and their implementations (Scholl,
n.d.; Donaldson & Preston, 1995). It has also been applied to a number of other fields such as
social responsibilities, education, environment management, and information technology (Austen,
et al., 2008).
It can be seen that the theory can contribute to understand projects by highlighting the
importance of consideration of the stakeholders during planning, whether due to moral value for
considering them or due to their influence on the project. It has a potential to assists in identifying
the stakeholders including who and what they affect. It can also assist to classify the stakeholders
as internal and external, primary and secondary, or based on evaluation of their influence and
importance towards the project. However, the theory does not give a clear guidance on how to
exactly understand the settings and implementation, thus various frameworks of stakeholder
theory exists that assist to achieve this as discussed in the next section.

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Applying Stakeholder Theory in LSPS IT projects
One way that stakeholder theory can contribute to researchers’ understanding of large-scale public
service (LSPS) IT projects and their implementation is by applying its frameworks in a normative
manner as a template against which actual project practises can be compared (Bailur, 2006). The
theory can alternatively be used as a research tool helping to derive even further explanation on
the basis of stakeholder behaviours and their possible ways to be managed (Donaldson & Preston,
1995).
Through an e-Government initiative example from New York (Pardo, et al., 2000),
stakeholder needs analysis was conducted for overhauling of the Central Accounting System of
the state (CAS). The major overhaul implementation was aligned with potential for business
process restructuring and cross government branches, agencies and level integration. The project
aim was also to provide a streamlined and integrated accounting system that serves both
government entities and private-sector firms. This created a sophisticated nature of the system
with a potential for reducing costs, process and services integration, improving service delivery
and enhancing transparency and accessibility.
Through a framework proposed by Tenner & Schroeder (1999) that uses a combination of
Mitchell et al.’s (1997) concept of stakeholder identification along lines of power, legitimacy and
urgency, and the diagnostic topology of their potential for collaboration against threats concept by
Blair & Whitehead’s (1988), the project team was able to identify three groups namely primary,
secondary and tertiary groups, that can advance or shut down the project at almost any given point
in time (Scholl, n.d.). However, this illustrates a shortcoming of the theory which Fassin (2008)
refers to as heterogeneity within stakeholders and pressure groups. Fassin argues that members
within groups are not all homogenous and the groups or subgroups may have multiple interests
and roles.
Furthermore, even though the theory holds the potential to identify and group stakeholders,
other authors argue that grouping approach of the theory widely focuses on heterogeneity across
groups than within groups hence resulting in false perceptions on some of the groups and their
members (Wolfe & Putler, 2002). This can be seen in the groups identified in the CAS project for
instance, while the Division of Budget and the Office for Technology were both placed under the
primary group as they have a common stake, they do not share exactly the same objective.
Likewise, the State Assembly, also identified in primary group, is not necessarily homogenous as
the legislative body consists of a number of members from different parties, each representing a

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different population with different backgrounds, thus they could have conflicting interests causing
clashing in project priority.
Additionally, the theory demonstrates another weakness that Fassin (2008) refers to as
multiple inclusion which occurs when some individuals belong to more than one stakeholder
group at the same time. This could be due to occupying more than one role simultaneously either
within subgroups or cutting across them. An example could be, while some individuals are
members of the Division of the Budget, they also fall under a group of Non-Governmental entities
which consists of citizens and tax payers, who are not categorized as primary groups. Thus such
individuals could have varying influences on the project at different stages according to their
given roles at particular instances.
Other authors suggest stakeholder analysis to be conducted in a manner that considers
specific stakeholders’ role at a given moment (Persquex, et.al 2005 as cited in Fassin, 2008).
Additionally, the official CAS Stakeholder Needs Analysis report states that “the stakeholder
analysis identified several hundred agencies and private sector organizations with a stake in the
CAS. It was not possible to include participants from all these stakeholders” (Pardo, et al., 2000,
p.9). This illustrates another key weakness of stakeholder theory as Trevino & Weaver(1999)
mention, hence proving that in a large-scale public service IT project it is impossible to
accommodate all stakeholders all the time due to the great number of stakeholders and their
complex nature.
The CAS Stakeholder Need Analysis reports recommended continued inclusion of
stakeholders creating a state similarly highlighted by Weiss (1995) that may result to difference
between the initially identified stakeholders and the actual stakeholders. Pouloudi and Whitley
(1997) suggest the identification process to be repeatitive in order to determine as many
stakeholders as possible. However, for large IT projects like CAS which identified more than 700
public and private organizations, and which state agencies process over 17.5 millions transaction
per day from different users through the system, it can clearly be seen that no matter how many
iterations were done it would still be impossible to include all the stakeholders.
The CAS analysis team applied Blaire & Whitehead’s diagnostic topology to understand in
more detail both the potential and threat for collaboration for the primary stakeholder groups, and
also to obtain similar perceptions in a more general manner for the secondary and tertiary groups
(Scholl, n.d.). On completion of stakeholder identification and mapping, the team’s strategic
management proposal was to keep the primary group informed throughout the project and seek

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continuous feedback from them on the project plans (Pardo, et al., 2000). This indicates the
benefit of using the system to help understand and determine how to manage the identified
stakeholders; however, based on the secondary sources, it does not appear as if behaviour of the
groups and the way they would work together was determined or even accomplished due to the
massive amount of identified stakeholders and their complex relationships.
Concession and bargains to the key groups done through a series of workshops that
involved 8 groups of CAS user representatives demonstrated the normative strength of the theory
that encourages acknowledging concerns of all stakeholders in a dialogue to help reconcile
conflicting interests (Olander & Landin, 2005). The approach was found to be of great importance
due to further discoveries and confirmation of major deficiencies of the existing system, and also
increased support from the stakeholders through continuous involvement (Scholl, n.d.).
The above discussion using CAS project example has clearly illustrated how stakeholder
theory has a potential to contribute to understanding of large-scale public services IT project
through the work of the CAS stakeholder analysis team. This has been through the way they were
able to identify, map, predict and identify behaviours, potential collaboration or threats, and
proposing the way forward, all through instrumental and normative application of the theory. As
highlighted, the CAS project had a social responsibility to all possible stakeholders and had to
ensure satisfaction of all groups even the indirect groups such as the tax payers. The project was
also responsible for providing reliable services to all primary stakeholders and meeting their
expectations and legislative trends. These issues could all be collaboratively addressed by the
descriptive, instrumental and normative approach of the theory.
A different instrumental approach which regards to implementation is that related to the
development and sustainability of the project to be achieved when all possible stakeholders have
been identified, and a relevant management approach is deployed through establishing strategic
importance of stakeholder groups (Austen, et al., 2008). This was evidently illustrated in the CAS
project as the stakeholder analysis process contributed to obtaining abundance of information,
integration and support from stakeholders and also state-wide visibility (Pardo, et al., 2000).
Stakeholder theory through its frameworks has shown its potential to contribute to LSPS
IT projects understanding when used in a normative manner, whereby it could be used as a best
practise template from which actual practice on large-scale public service IT project could be
associated to understand or determine the project implementation.

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An alternative approach is to use the theory as a tool on primary or secondary literature on
large-scale public service IT projects in order to get a deeper understanding of the large network
of stakeholders involved such as by iterative stakeholder identification, or through various existing
stakeholder mapping tools such as Mendelow’s (1981) original Power/Dynamism, Johnson and
Scholes (1999) Power/Interest or using Harrison and St John (1996) stakeholder managing
approach to identify their needs, behaviours and determine how they are managed.
Further contribution of Stakeholder Theory in LSPS IT projects
Stakeholder theory can be used as a tool to perform further investigation for instance, grouping
stakeholders in power/interest matrix can contribute to understand stakeholder effects to the
project and its implementation through illustration of their relationships and communications. It is
even more valuable in IT projects to analyse stakeholder perspectives to informatics lifecycle
since it is potentially useful at all stages, from initial development of technology through to
research on the impacts of technologies (Bailur, 2006).
On the other hand the theory has a potential to attempt but fails to clearly explain
behaviour of the stakeholders. For instance, the positive response by the agencies could be due to
actual willingness to participate as a result of their involvement or could be due to the political
power of the New York State Office on them. Similarly with the private agency behaviours;
perhaps they were proactive because they are self-financing organisations therefore they were
interested in the initiatives since it would save them the costs of deploying individual systems or
reduce operational costs imposed by the existing paper-based business process system.
The stakeholder theory can also be used for analysis of the management strategies
involved in a project such as those that were taken for the CAS projects. The strategy found
according to the official CAS stakeholder analysis (Pardo, et al., 2000) was to keep primary
stakeholders informed and seek for their continuous feedback and convergence of efforts, involve
users to assist their understanding of current CAS functionality and terminology, and to consult
agencies on their operational encounters in order to increase knowledge for extended
functionalities and future predictions. This therefore showed the contribution of the theory to
assist to identify both what was done in the projects and even what was later changed through
analysis. Moreover, it shows contribution through predictive capabilities in terms of those areas
that would have caused either success or failure and also how they should have been done;
example the consequences that could have resulted from exclusion of the initially unidentified
stakeholders.

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Conclusion
Even though the stakeholder theory was created for the private sector firm, the discussion from the
CAS project has given an insight of its potential to contribute to understanding of large-scale
public service IT projects and their implementation. It has demonstrated its ability to not only
contribute to our understanding, but also provide a guide to strategic management on such projects
based on their complicated composition that make their management resemble private-sector
particularly due to the network-nature.
However, major weaknesses of the theory have been highlighted such as subjectivity of
categorization process as analysis teams are likely to be influenced by their backgrounds,
environment or people involved in the process. It is also prone to indirect limitations such as in
terms of honesty and reliability of the collected stakeholder information. Similarly, stakeholders’
influence, interest and power changes with stages thus generalization is usually problematic, such
as grouping taxpayers in tertiary, while they have a great potential power to obstruct project
implementation.
Even with the demonstrated potential capacity to contribute to understanding large-scale
public IT projects, some authors find the theory unreliable to public project settings example due
lack of appropriate toolkits that facilitates identification of the stakeholders (Tennert & Schroeder,
1999). Furthermore it can be generalized as inadequate in explanation of process, linkage of
internal and external entities, sufficient attention to the context and also the levels for analysis that
the projects operate (Key, 1999).

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