The Balanced Scorecard (BA)

7/23/2019 The Balanced Scorecard (BA)

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The Balanced Scorecard: Judgmental efects o inormation

organization and diversity

Group 7

• Dika Dwi Bayu 420

• Anik Puji Handayani 447

• Yosefa Maria J H 445

Marlys Gascho LipeRath Chair in AccountingUniversity of OklahomaPrice College of BusinessNorman O! "#$%&email: [email protected]

'teven 'alterioAssociate Professor of

AccountingUniversity of (aterloo'chool of Accountancy(aterloo Ontario Cana)a N*L#G%[email protected]



Objective of research

• In this study researcher explore whether andhow the B! a"ects jud#ments #iven commonhuman information processin# characteristics

and limitations.

• peci$cally% researcher investi#ate the jud#mental e"ects of the B!&s '() information

or#ani*ation% '+) inclusion of non$nancialmeasures% and ',) inclusion of measures thatare uni-ue to a particular business unit versusthose that are common to multiple units.



esearch problem

• Is the evaluations usin# the balanced scorecardformat will di"er from evaluations based on thesame measures without the scorecard format/

• 0re non$nancial measures in the balancedscorecard will a"ect performance evaluations/

• 0re performance evaluations usin# thebalanced scorecard will be more a"ected bycommon measures than by uni-ue measures/



esearch contribution

• 1his research contribute to helpreduce bias in jud#in# theperformance of mana#ers. 2hetherassessment on the common% anduni-ue measures% also of the $nancialand non3$nancial measures.



1eoritical review

+he ,alance) scorecar)

In the interests of brevity% only three important aspects of the scorecardwill be described here: the measures included% the strate#ic use of thescorecard% and the tie to performance evaluation and compensation.

•

4aplan and 5orton '(66,% (667a) view the scorecard as a strate#icmana#ement tool that should explicate the drivers of performance% aswell as provide measures of performance.

• 1he B! can provide early bene$ts to the or#ani*ation due to theprocess of determinin# the causal drivers of a unit&s success durin#

construction of the scorecard '4aplan and 5orton (667b% (89).

• 4aplan and 5orton '(667b% +(3++,) su##est there is a problem withcontinuin# to tie compensation and evaluation to traditional measureswhile as;in# subordinates to focus on the scorecard measures.



<ud#ment and decision ma;in#research

Information or#ani*ation

• esearch on learnin# and memory indicates thatschematically or#ani*ed information is recalledbetter than information without this or#ani*ation'=rederic; (66(>abinowit* and Mandler (69,)

0vailability of non$nancial measures• 5on$nancial performance measures added

explanatory power to $nancial performancemeasures in explainin# di"erences in ban;

mana#ers performance evaluations ?Larc;er andMeyer '(669)

!ommon and uni-ue measures• when two alternatives have a common attribute

alon# with uni-ue attributes% the common one iswei#hted more in jud#ments about the alternatives

?MacAhillamy '(68)



ypotesis

(: Cvaluations usin# the balanced scorecarad formatwill di"er from evaluations based on the same

measures without the scorecard format 'or#ani*ationhypotesis)

+: 5on$nancial measures in the balanced scorecardwill a"ect performance evaluations 'non$nancial

measures hypothesis)

,: Aerformance evaluations usin# the balancedscorecard will be more a"ected by common measuresthan by uni-ue measures 'common measures

hypothesis)



Method and resuld

• Aarticipants are presented with a casewhere they are as;ed to ta;e the role ofa senior executive of 2! Incorporated.

• 1he participants is then as;ed toevaluated the performance of each of

the two unit mana#ers on a scale withseven descriptive labels and numericalendpoints of DEF and D(EEF





• 0fter providin# the mana#er evaluations%the participants complete a -uestionnare.

• In experiment one the two divisionsdescribed are ad2ear and Alus2ear.

Cxperiment two also includes ad2ear% adi"erent second divisions is used'2or;2ear).

• Cxperiment one provides evidence relatedto ( and +. Cxperiment two is desi#nedto test ,.



Cxperiment one

• In experiment one we focused onwhether the B! format ma;es adi"erence in divisional mana#er

performance evaluation '().Cvidence related to the impact ofnon$nancial measures '+) is also

provided by havin# performance onnon$nancial measures di"er acrosstwo divisions within a $rm.







• Our analyses focus on the relative evaluations of thetwo mana#ers

• we expect that there will be a main e"ect for division%

showin# that di"erential divisional performance on thenon$nancial measures a"ects their mana#ers& relativeevaluations.

• we expect an interaction of or#ani*ation and division%

showin# that information or#ani*ation a"ects theserelative evaluations

Gependent Measure



• 2ithin the 5O=OM #roup% no di"erences were found forsubjects with the alphabetic versus the random order for anyof these -uestions 'all p3values H E.(E).

• 1he order of the presentation of divisions had no e"ects onresponses to the manipulation chec; -uestions 'all p3valuesH E.(E).

• 0lthou#h it was not related to the hypotheses% division orderdid interact with division in a"ectin# performance evaluations'=(E.J% pK.EE+).

• order is included in the statistical analysis but it is notdiscussed further.

esult



•

indicates statistically si#ni$cante"ects for division '=6.(8%pK.EEE) and the interaction ofdivision and or#ani*ation '=J.E%p K.E+).

• ad2ear&s mana#er is evaluatedhi#her than Alus2ear&s and that thescorecard&s or#ani*ation a"ects therelative evaluations of the two

divisional mana#ers.





• 1he interaction of or#ani*ation and division supports

(% showin# that information&s or#ani*ation a"ectsthe relative evaluations of the mana#ers.

• 1hese relative performance evaluations are di"erentwhen the performance measures are or#ani*ed intothe B! cate#ories versus provided without this

or#ani*ation.

• participants with the four cate#ory or#ani*ation of

measures evaluated ad2ear&s mana#er (.+points hi#her than Alus2ear&s while participants withthe 5O=OM format evaluated ad2ear&s mana#er+8.+6 points hi#her than Alus2ear&s.



• ypothesis + predicts that non$nancial measures includedin the B! will a"ect mana#er evaluations.

• sin# only the subjects in the B! condition of experiment

one% an 05O0 shows that the evaluations of the twodivisional mana#ers are si#ni$cantly di"erent '=+7.(J%df(%8+% p.EE).

• 1he B! subjects provided mean 'standard deviation)evaluations for ad2ear of 76. '(8.+() and for Alus2earof J+.JE '(7.6,).

• ypothesis + is predicated on the idea that the availabilityof the non$nancial measures leads to their use% since allsubjects in experiment one were presented with allmeasures% divisional di"erences due to customer relatedmeasures also had a si#ni$cant impact in the overall05O0 '=6.(8% df(%8% p.EE).

• 1his overall jud#mental e"ect of ma;in# non$nancialmeasures available is also consistent with +% the

non$nancial measures hypothesis



Cxperiment 1wo

• In the second experiment% we concentrate onthe issue of common and uni-ue measures.

•

ince the B! re-uires that performancemeasures be chosen to speci$cally addressthe operations and concerns of each businessunit% it is li;ely that the measures chosen for

the units will include some items that arecommon to all units and others that areuni-ue to each.







• 0s in experiment one% all subjects evaluated each mana#erusin# the evaluation form and scale shown in 1able (

• we want to determine whether relative performance on

common and uni-ue measures a"ects the evaluations ofthe mana#ers

• If common measures a"ect these evaluations% this willresults in an interaction of division and common measures.

• If uni-ue measures a"ect these relative evaluations% thiswill result in an interaction of division and uni-ue measures.

GependentMeasure



• 0 + x + x + repeated measures 05O0 wasperformed to test ,.

•

1he only statistically si#ni$cant e"ect wasdue to the interaction of common measuresand division '=,E.76% df(%J8% p K E.E()indicatin# that the pattern of performance

on common measures a"ected themana#ers& relative evaluations while thepattern for uni-ue measures did not.

esult



• 2hen common measures favored ad2ear%ad2ear&s mana#er was evaluated 7.EJ

points hi#her than 2or;2ear&s mana#er.• 2hen common measures favored 2or;2ear%

2or;2ear&s mana#er was evaluated .(points hi#her than ad2ear&s mana#er.

•

2hen uni-ue measures favored ad2ear'2or;2ear)% there was little di"erence in theevaluations of the mana#ers% a meandi"erence of E.78 '(.7).

• 1he results corroborate jud#ment and decisionma;in# research&s $ndin# that commonmeasures dominate uni-ue measures in their

jud#mental e"ect.





limitations

• Cxperimental participants were notinvolved in the choice of measures tobe included in the B!.

• Aarticipants were novices in the useof B! and did not necessarily have

business experience in the retailsector from which we pulled much ofour case material.



conclusions

• Mana#er evaluations were a"ectedby non$nancial performancemeasures included in the sorecard.

owever% whether the use of the bsclesds to improved decision ma;in# isstill in the -uestion.

• ni-ue measures received littleattention in the evaluation of

mana#ers.



!ritical eview

• 05O0 results which showed that theevaluation of the two divisionmana#ers di"er si#ni$cantly '=

+7.(J% df (.8+% p .EE)% not listedin the table.

The Balanced Scorecard (BA)

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