Managers performance evaluation judgments and dynamic resource allocation decisions using the balanced scorecard framework
The balanced scorecard (BSC) framework is considered to be one of the most significant innovations in management accounting. While a defining attribute of the framework is its linkage of strategy and performance measures, research indicates that organisations often fail to implement the strategy map component and its efficacy in facilitating more complex decisions has been questioned. In this dissertation, two studies are conducted to investigate the effects of strategy information on managers performance evaluation judgments and dynamic resource allocation decisions using the BSC framework. Prior research has established a bias in managers performance evaluation judgments, towards measures common (as opposed to unique) to two divisions. In Study One, two experiments are conducted to investigate the role of strategy information and strategically linked performance measures in eliminating this bias, and to establish a boundary condition for this common measures bias. The results of this study demonstrate that when strategy information is provided to managers and only some measures are strategically linked, the common measures bias exists; and when all performance measures are strategically linked, but no strategy information is provided, this 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. Most management decisions are multi-period in nature, leading to calls in the literature to examine BSC framework impacts on dynamic decision making. Study Two examines the effect that causal linkages and delay information in a strategy map have on managers mental model accuracy and dynamic decision performance. The results from this computer simulation-based experiment show that presenting strategic objectives with causal linkages enhances both the accuracy of managers mental models of strategic causal relationships in the business environment and long-term profit. This study also finds that presenting strategic objectives with both causal linkages and delay information together increases the accuracy of managers mental models of strategic causal relationships and strategic delays in the business environment, but does not further increase long-term profit. Both mental model accuracy components are found to partially mediate the direct effects observed on long-term profit.
Strategic performance measurement system, Balanced scorecard, Strategy information, Common measures bias, Performance evaluation, Mental model, Dynamic management decision making
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