The Balanced Scorecard: The Effect of Strategy Information on Performance Evaluation Judgments

Judging divisional performance using the balanced scorecard is a complex task, with prior research finding a bias toward measures common to two divisions when managerial performance is evaluated. We conduct two experiments investigating the role of strategy information and strategically linked perfo...

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Bibliographic Details
Published in:Journal of management accounting research 2011-12, Vol.23 (1), p.81-98
Main Authors: Humphreys, Kerry A., Trotman, Ken T.
Format: Article
Language:English
Subjects:
Balanced Scorecard
Bias
Decision theory
Divisions
Experiments
Information
Performance evaluation
Studies
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Summary:Judging divisional performance using the balanced scorecard is a complex task, with prior research finding a bias toward measures common to two divisions when managerial performance is evaluated. We conduct two experiments investigating the role of strategy information and strategically linked performance measures in eliminating this bias and establish a boundary condition for the common measures bias. We demonstrate that when strategy information is provided to managers and only some measures are strategically linked, the common measures bias exists (consistent with Banker et al. 2004). We find that when all the performance measures are strategically linked, but no strategy information is provided, the common measures bias also exists. However, if strategy information is provided and all measures are strategically linked (a condition which did not exist in previous research), the common measures bias is eliminated.
ISSN:1049-2127
1558-8033
DOI:10.2308/jmar-10085