The Balanced Scorecard: Judgmental Effects of Performance Measures Linked to Strategy

The balanced scorecard provides a framework for selecting multiple performance measures that supplement traditional financial measures with operating measures of customer satisfaction, internal processes, and learning and growth activities. An essential aspect of the balanced scorecard lies in its a...

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Bibliographic Details
Published in:The Accounting review 2004-01, Vol.79 (1), p.1-23
Main Authors: Banker, Rajiv D., Chang, Hsihui, Pizzini, Mina J.
Format: Article
Language:English
Subjects:
Accounting
Accounting methods
Analysis
Balanced Scorecard
Balanced scorecards
Business accounting
Business performance management
Business strategies
Corporate strategies
Customer satisfaction
Economic performance
Evaluation
Financial ratios
Management
Marketing strategies
Means tests
Measurement
Performance metrics
Retail stores
Retail trade
Sales growth
Strategic management
Strategic planning (Business)
Studies
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Summary:The balanced scorecard provides a framework for selecting multiple performance measures that supplement traditional financial measures with operating measures of customer satisfaction, internal processes, and learning and growth activities. An essential aspect of the balanced scorecard lies in its articulation of the linkage between performance measures and business strategy. This study conducts an experiment to assess how individuals' evaluations of the performance of business unit managers depend on strategically linked performance measures of a balanced scorecard. Statistical test results indicate that performance evaluations are influenced by strategically linked measures more than non-linked measures only when evaluators are provided detailed information about business unit strategies. The results also confirm Lipe and Salterio's (2000) finding that evaluators rely more on common measures than on unique measures. Evaluators rely more on strategically linked measures than on common measures when they are provided information on strategic linkages, but the reverse relation holds when they are not.
ISSN:0001-4826
1558-7967
DOI:10.2308/accr.2004.79.1.1