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

Abstract

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.

Impact of Sustainability Balanced Scorecard Types on Environmental Investment Decision-Making

“…The participants were randomly assigned to one of the three experimental conditions. In this study, the participants applied four metrics for each perspective, derived from [17,46,47].…”

“…Managers with limited knowledge in using SBSC types based their performance evaluations on common measures across units and ignored any unique strategy measures of each unit [17,21]. Dilla and Steinbart found that after participants had training and experience in designing SBSCs, those who were knowledgeable about the SBSC emphasized both common and unique measures [20].…”

“…The measures for the SBSC type was based on Alewine and Stone [2]. Their measurement was based on various scorecard research such as [17,47,48]. Based on the sequence in [2], a value of one was given to the four-perspective BSC conditions, a value of two to the four-perspective SBSC conditions, and a value of three to the five-perspective SBSC conditions.…”

Developing A Strategy Map Based on Sustainability Balanced Scorecard Framework for Manufacturing Industry in Indonesia

“…The strategy map describes a causal relationship in a sequence. The causal chain is connected to all indicators through four balanced scorecard perspectives reflecting dynamic changes and indicating how the organization creates value [15].…”

How Incentive Contracts and Task Complexity Influence and Facilitate Long-Term Performance

“…First, this study extends accounting research that examines the use of forward-looking and contemporaneous measures in organizations. Existing research considers how organizations use forward-looking and contemporaneous measures to: manage their businesses (Malina and Selto 2001;Hendricks et al 2004); establish relationships between forward-looking and contemporaneous results (Ittner and Larcker 1998;Bryant et al 2004); and evaluate managers' performance (Lipe and Salterio 2000;Banker et al 2004;Libby et al 2004). Other research examines how individuals use forward-looking and contemporaneous information to make decisions (Webb 2004;Kelly 2007;Farrell et al 2008).…”