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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! "#$%&email: MLipe@ou.edu
'teven 'alterioAssociate Professor of
AccountingUniversity of (aterloo'chool of Accountancy(aterloo Ontario Cana)a N*L#G%sesalterio@uwaterloo.ca
7/23/2019 The Balanced Scorecard (BA)
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Objective of research
• In this study researcher explore whether andhow the B! a"ects jud#ments #iven commonhuman information processin# characteristics
and limitations.
• peci$cally% researcher investi#ate the jud#mental e"ects of the B!&s '() information
or#ani*ation% '+) inclusion of non$nancialmeasures% and ',) inclusion of measures thatare uni-ue to a particular business unit versusthose that are common to multiple units.
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esearch problem
• Is the evaluations usin# the balanced scorecardformat will di"er from evaluations based on thesame measures without the scorecard format/
• 0re non$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/
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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.
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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$ts to the or#ani*ation due to theprocess of determinin# the causal drivers of a unit&s success durin#
construction of the scorecard '4aplan and 5orton (667b% (89).
• 4aplan and 5orton '(667b% +(3++,) su##est there is a problem withcontinuin# to tie compensation and evaluation to traditional measureswhile as;in# subordinates to focus on the scorecard measures.
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<ud#ment and decision ma;in#research
Information or#ani*ation
• esearch on learnin# and memory indicates thatschematically or#ani*ed information is recalledbetter than information without this or#ani*ation'=rederic; (66(>abinowit* and Mandler (69,)
0vailability of non$nancial measures• 5on$nancial performance measures added
explanatory power to $nancial performancemeasures in explainin# di"erences in ban;
mana#ers performance evaluations ?Larc;er andMeyer '(669)
!ommon and uni-ue measures• when two alternatives have a common attribute
alon# with uni-ue attributes% the common one iswei#hted more in jud#ments about the alternatives
?MacAhillamy '(68)
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ypotesis
(: Cvaluations usin# the balanced scorecarad formatwill di"er from evaluations based on the same
measures without the scorecard format 'or#ani*ationhypotesis)
+: 5on$nancial measures in the balanced scorecardwill a"ect performance evaluations 'non$nancial
measures hypothesis)
,: Aerformance evaluations usin# the balancedscorecard will be more a"ected by common measuresthan by uni-ue measures 'common measures
hypothesis)
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Method and resuld
• Aarticipants are presented with a casewhere they are as;ed to ta;e the role ofa senior executive of 2! Incorporated.
• 1he participants is then as;ed toevaluated the performance of each of
the two unit mana#ers on a scale withseven descriptive labels and numericalendpoints of DEF and D(EEF
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7/23/2019 The Balanced Scorecard (BA)
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• 0fter providin# the mana#er evaluations%the participants complete a -uestionnare.
• In experiment one the two divisionsdescribed are ad2ear and Alus2ear.
Cxperiment two also includes ad2ear% adi"erent second divisions is used'2or;2ear).
• Cxperiment one provides evidence relatedto ( and +. Cxperiment two is desi#nedto test ,.
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Cxperiment one
• In experiment one we focused onwhether the B! format ma;es adi"erence in divisional mana#er
performance evaluation '().Cvidence related to the impact ofnon$nancial measures '+) is also
provided by havin# performance onnon$nancial measures di"er acrosstwo divisions within a $rm.
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7/23/2019 The Balanced Scorecard (BA)
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• Our analyses focus on the relative evaluations of thetwo mana#ers
• we expect that there will be a main e"ect for division%
showin# that di"erential divisional performance on thenon$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
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• 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
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•
indicates statistically si#ni$cante"ects for division '=6.(8%pK.EEE) and the interaction ofdivision and or#ani*ation '=J.E%p K.E+).
• ad2ear&s mana#er is evaluatedhi#her than Alus2ear&s and that thescorecard&s or#ani*ation a"ects therelative evaluations of the two
divisional mana#ers.
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• 1he interaction of or#ani*ation and division supports
(% showin# that information&s or#ani*ation a"ectsthe relative evaluations of the mana#ers.
• 1hese relative performance evaluations are di"erentwhen the performance measures are or#ani*ed intothe B! cate#ories versus provided without this
or#ani*ation.
• participants with the four cate#ory or#ani*ation of
measures evaluated ad2ear&s mana#er (.+points hi#her than Alus2ear&s while participants withthe 5O=OM format evaluated ad2ear&s mana#er+8.+6 points hi#her than Alus2ear&s.
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• ypothesis + predicts that non$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$nancial measures hypothesis
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Cxperiment 1wo
• In the second experiment% we concentrate onthe issue of common and uni-ue measures.
•
ince the B! re-uires that performancemeasures be chosen to speci$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.
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7/23/2019 The Balanced Scorecard (BA)
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• 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
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• 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
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• 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 $ndin# that commonmeasures dominate uni-ue measures in their
jud#mental e"ect.
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limitations
• Cxperimental participants were notinvolved in the choice of measures tobe included in the B!.
• Aarticipants were novices in the useof B! and did not necessarily have
business experience in the retailsector from which we pulled much ofour case material.
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conclusions
• Mana#er evaluations were a"ectedby non$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.
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!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.
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