Financial versus non-financial information: The impact of information organization and presentation in a Balanced Scorecard

This paper investigates how the organization and presentation of performance measures affect how evaluators weight financial and non-financial measures when evaluating performance. We conduct two experiments, in which participants act as senior executives charged with evaluating two business-unit ma...

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Bibliographic Details
Published in:Accounting, organizations and society organizations and society, 2010-08, Vol.35 (6), p.565-578
Main Authors: Cardinaels, Eddy, van Veen-Dirks, Paula M.G.
Format: Article
Language:English
Subjects:
Accounting
Balanced Scorecard
Balancing
Business
Business management
Categories
Charging
Evaluation
Executives
Impact analysis
Markers
Measurement
Organizational analysis
Organizational behavior
Organizations
Performance evaluation
Studies
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Summary:This paper investigates how the organization and presentation of performance measures affect how evaluators weight financial and non-financial measures when evaluating performance. We conduct two experiments, in which participants act as senior executives charged with evaluating two business-unit managers. Performance differences between business units are contained in either a financial or one of the three non-financial categories. Specifically, the first experiment studies how organizing measures in a Balanced Scorecard (BSC) format affects performance evaluations. Our results show that when the performance differences are contained in the financial category, evaluators that use a BSC-format place more weight on financial category measures than evaluators using an unformatted scorecard. Conversely, when performance differences are contained in the non-financial categories, whether measures are organized into a BSC-format or into an unformatted scorecard has no impact on the evaluation. The second experiment shows that when performance markers are added to the scorecards (i.e., +, −, and = signs for above-target, below-target, and on-target performance), evaluators that use a BSC-format weight measures in any category containing a performance difference more heavily than evaluators using an unformatted scorecard. Our findings suggest that firms should carefully consider how to present and organize measures to get the intended effect on performance evaluations.
ISSN:0361-3682
1873-6289
DOI:10.1016/j.aos.2010.05.003