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

2011 ◽  
Vol 23 (1) ◽  
pp. 81-98 ◽  
Author(s):  
Kerry A. Humphreys ◽  
Ken T. Trotman
Keyword(s):  
Boundary Condition ◽  
Performance Evaluation ◽  
Performance Measures ◽  
Balanced Scorecard ◽  
Research Finding ◽  
Complex Task ◽  
Managerial Performance ◽  
The Balanced Scorecard ◽  
The Common

ABSTRACT 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.

The Balanced Scorecard: Judgmental Effects of Common and Unique Performance Measures

2000 ◽  
Vol 75 (3) ◽  
pp. 283-298 ◽  
Author(s):  
Marlys Gascho Lipe ◽  
Steven E. Salterio
Keyword(s):  
Performance Measures ◽  
Balanced Scorecard ◽  
Business Strategy ◽  
Business Processes ◽  
The Balanced Scorecard ◽  
Business Unit Performance ◽  
Balanced Scorecards ◽  
The Common ◽  
Unit Performance ◽  
Multiple Units

The balanced scorecard is a new tool that complements traditional measures of business unit performance. The scorecard contains a diverse set of performance measures, including financial performance, customer relations, internal business processes, and learning and growth. Advocates of the balanced scorecard suggest that each unit in the organization should develop and use its own scorecard, choosing measures that capture the unit's business strategy. Our study examines judgmental effects of the balanced scorecard—specifically, how balanced scorecards that include some measures common to multiple units and other measures that are unique to a particular unit affect superiors' evaluations of that unit's performance. Our test shows that only the common measures affect the superiors' evaluations. We discuss the implications of this result for research and practice.

The Balanced Scorecard: The Effects of Assurance and Process Accountability on Managerial Judgment

2004 ◽  
Vol 79 (4) ◽  
pp. 1075-1094 ◽  
Author(s):  
Theresa Libby ◽  
Steven E. Salterio ◽  
Alan Webb
Keyword(s):  
Performance Evaluation ◽  
Balanced Scorecard ◽  
Theory And Practice ◽  
Performance Evaluations ◽  
Third Party ◽  
Managerial Performance ◽  
Strategic Objectives ◽  
The Balanced Scorecard ◽  
The Past

The balanced scorecard is one of the major developments in management accounting in the past decade (Ittner and Larcker 2001). Lipe and Salterio (2000) find that managers ignore one of the key scorecard features, the inclusion of measures that are unique to the strategic objectives of a business unit, when making performance evaluation judgments. This study identifies and tests two approaches to reducing this “common measures bias.” We examine whether increasing effort via invoking process accountability (i.e., requiring managers to justify to their superior their performance evaluations) and/or improving the perceived quality of the balanced scorecard measures (i.e., via an independent third-party assurance report on the balanced scorecard) increases managers' usage of unique performance measures in their evaluations. Results suggest that either the requirement to justify an evaluation to a superior or the provision of an assurance report on the balanced scorecard increases the use of unique measures in managerial performance evaluation judgments. Implications for theory and practice are discussed.

Controllability of performance measures and managerial performance: the mediating role of fairness

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sophia Xia Su ◽  
Kevin Baird ◽  
Nuraddeen Nuhu
Keyword(s):  
Performance Evaluation ◽  
Performance Measures ◽  
Evaluation System ◽  
Online Survey ◽  
Managerial Performance ◽  
Content Type ◽  
Financial Measures ◽  
Mediating Role ◽  
The Impact

Purpose This study aims to examine the mediating role of the fairness of the performance evaluation system on the association between the controllability of financial and non-financial measures and managerial performance. Design/methodology/approach Data was collected using an online survey questionnaire, with 220 responses received from middle and lower-level managers in Australian manufacturing organisations. Covariance-based structural equation modelling using software AMOS 25 was applied to analyse the data. Specifically, Anderson and Gerbing’s (1988) two-step approach was followed with confirmatory factor analyses first conducted to ensure that the measurement model was valid and reliable before running the structural model. Findings The findings reveal that the influence of managers’ controllability of performance measures on managerial performance is enacted through their perceptions of fairness. Specifically, the impact of controllability of financial (non-financial) measures on managerial performance is enacted through managers’ perceptions of distributive (interpersonal) fairness. Originality/value The empirical findings contribute to the literature investigating the empirical consequences of managers’ controllability of performance measures on performance evaluation processes, with the results revealing that the controllability of both financial and non-financial performance measures is positively associated with managerial performance via managers’ perceptions of different dimensions of fairness. Such results suggest that organisations, most of which do not prioritise the use of controllable performance measures in the design of their performance evaluation systems, need to reconsider the importance of the controllability of both financial and non-financial measures in the performance evaluation processes.

scholarly journals THE IMPACT OF A DISAGGREGATION STRATEGY WITH SUPPLEMENTARY DISPLAYS TOWARDS BALANCED SCORECARD PERFORMANCE EVALUATION

2017 ◽  
Vol 32 (3) ◽  
pp. 234
Author(s):  
Frisky Jeremy Kasingku ◽  
Goedono .
Keyword(s):  
Performance Evaluation ◽  
Balanced Scorecard ◽  
Decision Makers ◽  
Management Tool ◽  
Information Display ◽  
The Balanced Scorecard ◽  
The Common ◽  
The Impact ◽  
Graphic Displays

Balanced Scorecard has become a popular management tool around the world. Despite its benefits, the balanced scorecard creates a bias called the common- measures bias. The bias associated with a balanced scorecard should be eliminated so that the optimal benefits of the balanced scorecard can be obtained. To eliminate the bias, a disaggregation strategy is suggested. This disaggregation strategy is found to be a mitigation strategy to solve the common-measures bias. However, there is a small amount of empirical evidence about the quality of the decisions produced by using a disaggregation strategy. Furthermore, to increase the decisions’ quality, an information display was found to be helpful. Therefore, this study aimed to investigate the effect of a disaggregation strategy, in the context of a balanced scorecard, toward the decisions’ quality regarding the balanced scorecard’s performance evaluation with a different information display. This study used an experimental method with the design of 3x2x2 between the subject’s factorial designs. The results indicated that decision makers with supplementary tabular and graphic displays would exhibit a greater judgment consensus than decision makers who were given traditional separate displays. Moreover, those who received the supplementary table displays exhibit a greater judgment consensus and consistency than those who were given a graphical display. In conclusion, a disaggregation strategy with table and graphic displays could improve a judgment’s consensus, a traditional display can improve a judgment’s consistency, and a table display could exhibit greater judgmental consensus and consistency than a graphic display. This study contributed theoretically and practically.

scholarly journals Using the Balanced Scorecard: Both Common And Unique Measures Are Informative

2011 ◽  
Vol 22 (1) ◽  
Author(s):  
Margaret L. Gagne ◽  
Joan Hollister ◽  
Gregory J. Tully
Keyword(s):  
Performance Evaluation ◽  
Performance Measures ◽  
Balanced Scorecard ◽  
The Balanced Scorecard

The balanced scorecard (BSC), developed by Kaplan and Norton (1992), allows an organization to translate its strategy and objectives into a series of performance measures. A recent study by Lipe and Salterio (2000) found that subjects use common scorecard measures in performance evaluation but disregard unique measures. This study finds that both common and unique scorecard measures are used in performance evaluation.

scholarly journals THE INTERVENING EFFECTS OF PROCEDURAL FAIRNESS AND INTERPERSONAL TRUST ON THE RELATIONSHIPS BETWEEN MULTIPLE MEASURES-BASED PERFORMANCE EVALUATION AND MANAGERS' JOB SATISFACTION

2003 ◽  
Vol 5 (3) ◽  
pp. 321
Author(s):  
Mahfud Sholihin ◽  
Chong M. Lau
Keyword(s):  
Job Satisfaction ◽  
Performance Evaluation ◽  
Performance Measures ◽  
Balanced Scorecard ◽  
Interpersonal Trust ◽  
Procedural Fairness ◽  
Financial Measures ◽  
The Balanced Scorecard ◽  
Work Related ◽  
Nonfinancial Measures

Criticisms directed at the use of financial measures alone for performance evaluation have led to much interest in the use of nonfinancial performance measures to balance the financial measures. Hence, much recent research has been directed to investigate the effectiveness sand behavioral consequences of a mix of financial and nonfinancial measures (e.g. the Balanced Scorecard approach) in contemporary settings. However, there is evidence from prior studies to suggest that the manner or how performance measures are used may affect the subordinates' behavior and work-related attitudes indirectly through the subordinates' perception of the justness of these measures and the interpersonal trust these measures promote. There is also evidence to indicate that it is the extent of the subordinates' agreement with the performance measures used in the evaluation, rather than the measures per se, which affects their behavior and work-related attitudes. Subordinates are more likely to agree with performance measures which they regard as fair and which enhance their trust in their superiors. This study therefore investigates if the effects of a mix of financial and nonfinancial measures (such as those used in the Balanced Scorecard approach) on subordinates' job satisfaction are indirect through the subordinates' perception of the greater extent of fairness (justness) in the evaluation process and the greater extent of trust such a mix of measures promotes. The results, based on a sample of 70 managers, support the expectation that a mix of financial and nonfinancial has no direct effect on subordinates’ job satisfaction. Instead, the effects of such a mix of performance measures on subordinates’ job satisfaction are indirect through the enhancement of the subordinates’ favorable perceptions of procedural fairness and interpersonal trust.

Design and planning of the balanced scorecard: A case study

2007 ◽  
Vol 26 (3) ◽  
pp. 217-227
Author(s):  
Ming-Hon Hwang ◽  
Hsin Rau
Keyword(s):  
Performance Evaluation ◽  
Balanced Scorecard ◽  
Process Management ◽  
Planning Process ◽  
Company Performance ◽  
Correct Process ◽  
The Balanced Scorecard ◽  
Strategy Planning ◽  
And Performance

In the industrial economy, evaluating company performance based on financial results was good enough. However, in the current globalized and highly competitive environment, maintaining long term competitiveness requires companies to engage in overall strategic planning and performance evaluation. The balanced scorecard is a tool or method for balancing an organization's performance and can react to situations where a company's direction becomes disoriented. This approach assists in strategy planning, process management, and performance evaluation from four perspectives, including financial, customer, internal process, and learning and growth. Good strategy planning provides companies with a correct management direction, correct process management ensures the efficient execution of plans, and correct performance evaluation illustrates the execution results. This study mainly focuses on how a large rubber company in Taiwan utilizes the balanced scorecard in its organization. As the technical perspective is important in the rubber keypad industry, besides the four above perspectives, this company has added the technical perspective. By introducing this company and its progress in implementing the balanced scorecard, this study hopes to provide other companies, especially rubber companies, with a planning direction and reference for the future implementation of the balanced scorecard.

scholarly journals The relationship between employee and customer satisfaction in the balanced scorecard

2014 ◽  
Vol 9 (3) ◽  
pp. 285-298 ◽  
Author(s):  
DG Gouws ◽  
A Habtezion ◽  
FNS Vermaak ◽  
H P Wolmarans
Keyword(s):  
Customer Satisfaction ◽  
Empirical Study ◽  
Performance Measures ◽  
Balanced Scorecard ◽  
Employee Satisfaction ◽  
Direct Relationship ◽  
Preliminary Testing ◽  
The Balanced Scorecard ◽  
Key Drivers ◽  
The Relationship

This paper reports evidence of a direct relationship between employee satisfaction and customer satisfaction as they are linked in the balanced scorecard. The objective was to propose a framework that shows the linkage between employee satisfaction and customer satisfaction and to undertake some preliminary testing of this framework. An empirical study was undertaken in an airline business which investigated these relationships between employee and customer satisfaction and the correlations between these performance measures. The relationship between the key drivers of employee satisfaction and the key drivers of customer satisfaction was also investigated. The study provides empirical evidence supporting several linkages.

scholarly journals The Moderating Effect of Procedural Justice on the Effectiveness of the Balanced Scorecard in Improving Managerial Performance through Organizational Commitment

2010 ◽  
Vol 12 (3) ◽  
pp. 415
Author(s):  
Supriyadi Supriyadi
Keyword(s):  
Organizational Commitment ◽  
Procedural Justice ◽  
Balanced Scorecard ◽  
Moderating Effect ◽  
Managerial Performance ◽  
Financial Measures ◽  
The Balanced Scorecard ◽  
Nonfinancial Measures ◽  
The Impact ◽  
The Relationship

This study extends prior studies on the effectiveness of theBalanced Scorecard (BSC) to improve managerial performancedone by Lau and Mosser (2008) and Lau and Sholihin (2005).Specifically, the study empirically tests the moderating effects ofprocedural justice on the relationship between the financial andnonfinancial dimensions of BSC and managerial performance. Italso tests the impact of organizational commitment on performance.Based on survey data from 76 respondents, the results indicate thatperceived procedural justice in the use financial and nonfinancialdimensions of the BSC is associated with managers’ organizationalcommitment. It further finds that organizational commitment ispositively related to performance. The study extends the literatureby providing empirical evidence about the moderating effect ofprocedural justice on the relationship between the financial andnonfinancial dimensions of BSC and organizational commitment.Keywords: balanced scorecard; organizational commitment; financial measures;managerial performance; moderating effect; nonfinancial measures;procedural justice

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