Common-Measures Bias in the Balanced Scorecard: Cognitive Effort and General Problem-Solving Ability

Hibbets, Aleecia R.

doi:10.2139/ssrn.921473

Cited by 7 publications

(6 citation statements)

References 25 publications

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“…The second between-subjects factor, feedback, was manipulated as the presence (or absence) of feedback. Roberts et al (2004) and Hibbets et al (2006) suggest that evaluators' lack of adequate knowledge and experience may make them incorrectly rely on a subset of measures (e.g. common measures) rather than all measures (both common and unique) in performance evaluation.…”

Section: Experimental Designmentioning

confidence: 99%

“…This "Common Measures Bias" has been found in many studies since Lipe and Salterio (2000), as researchers attempt to understand why and when this bias may be more likely to occur and what could be done to mitigate it. These researchers have found that the following factors may influence evaluators' use of more common measures than unique measures in performance evaluation: complexity of performance evaluation tasks (Roberts et al, 2004), evaluators' perception of the accountability and reliability of BSC measures (Libby et al, 2004), evaluators' ability and experience in performance evaluation (Dilla and Steinbart, 2005;Hibbets et al, 2006), and evaluators' understanding of a company's strategy network (Banker et al, 2004).…”

Section: Introductionmentioning

confidence: 99%

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The balanced scorecard: the effects of feedback on performance evaluation

Kang

Fredin²

2012

Management Research Review

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Purpose -The use of a balanced scorecard (BSC) for performance evaluation is meant to help evaluators make more complete decisions, as they have a variety of financial and non-financial measures to assess. The problem is that users have difficulty taking all of the measures into consideration. The tendency to place more weight on common measures (measures that are the same across divisions) while either ignoring or placing very little weight on unique measures (measures are unique to a particular division) has become known as a "common measures bias". The purpose of this paper is to extend a line of research that works to understand how this common measures bias might be mitigated. Design/methodology/approach -This study examines whether the presence of task property feedback, a form of cognitive feedback, prior to a performance evaluation task, can help evaluators overcome the tendency to rely primarily on common measures. This study used a 2 £ 2 experimental design where subjects were asked to evaluate the performance of two managers under either feedback or non-feedback conditions. In the feedback condition, subjects were provided with their supervisor's suggestions about performance evaluation in the use of BSCs. Findings -This study finds that when subjects were given task property feedback, a form of cognitive feedback, they tended to use more unique measures than if they were not given any feedback information at all. Practical implications -In practice, more straight forward and simple feedback information is likely easier for companies to implement and easier for evaluators to follow. Feedback information that is too complex or that requires too much effort may frustrate evaluators, at which point they may abandon the effort. The authors' findings also indicate that direct and clear guidance from the top manager of a business may be seen as pressure by lower-level managers. It is important for top managers to create such a performance evaluation environment so that all BSC measures are considered. Originality/value -The paper finds that when evaluators judge the performance of managers through the use of a BSC, they tend to weight common measures more heavily than they do unique measures, unless they are provided cognitive feedback to cue them into the importance of using all measures. This study is one of many, following LS (2000), documenting a finding of common measures bias in the use of BSCs. Where this study contributes to the literature is in the use of task property feedback, a form of cognitive feedback, to overcome this bias. Since the use of unique measures is a key attribute of BSCs as they help users capture the nuances of a specific division's or firm's strategy, it is crucial that performance evaluators pay careful attention to them.

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Section: Experimental Designmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

The balanced scorecard: the effects of feedback on performance evaluation

Kang

Fredin²

2012

Management Research Review

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“…In the BSC context, Lipe and Salterio (2000) found evidence that in their evaluations, BSC users only use measures that are common among multiple units, ignoring measures that are unique to one business unit. Several authors have qualified and enhanced these findings (Lipe and Salterio, 2002;Libby et al, 2004;Banker et al, 2004;Dilla and Steinbart, 2005;Hibbets et al, 2006).…”

mentioning

confidence: 84%

Functional fixation and the balanced scorecard

Schauß

Hirsch

Sohn

2014

Journal of Accounting &Amp; Organizational Change

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Purpose – This paper aims to examine how balanced scorecard (BSC) users change their judgement processes according to qualitative changes in the BSC. Prior experimental studies have found that decision-makers do not fully adapt their judgements according to changes in financial reports, known as functional fixation. Although previous research has examined functional fixation in several management accounting-related disciplines, the research has not been completely successful in developing a deeper understanding of the cognitive processes that are responsible for the occurrence of this judgemental bias. Design/methodology/approach – To fill this gap, a combination of structural modelling and a process tracing method that monitors participants’ information acquisition to better understand the underlying cognitive processes that affect BSC users’ judgements is used. Findings – Overall, the results indicate that functional fixation is present both from an input–output (structural modelling) and a process tracing perspective. Stable general individual differences, particularly in terms of intuitive versus deliberative preferences in decision-making, influence the probability of functionally fixated behaviour. Additionally, previous findings concerning the over-reliance on financial information in the BSC setting is replicated. Using process data, it was found that BSC users rely more on financial measures than on non-financial measures in the pre-decisional phase of exercising their judgement. Originality/value – This paper contribute to management accounting research on the BSC by investigating two cognitive biases (functional fixation and overreliance on financial measures) from an input–output and a process tracing perspective.

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“…Penelitian selanjutnya lebih berfokus pada bagaimana mengurangi common measure bias yang telah teridentifikasi sebelumnya oleh Lipe dan Salterio (2000). Beberapa solusi yang diteliti diantaranya: meminta manajemen puncak untuk menilai kualitas strategi dalammenentukan kinerja suatu divisi (Wong-on-wing et al, 2007), pemberian pengetahuan BSC (Dilla dan Steinbart, 2005), pemberian informasi mengenai strategi unit bisnis (Banker et al, 2004), peta stretegi (Banker et al, 2009), General Problem solving (Hibbets et al, 2006), pendekatan "disaggregated/mechanically aggre gated (Robert et al, 2004), dan toleransi terhadap ambiguitas (Liedtka et al, 2008).…”

Section: Isu Kognitif Balanced Scorecardunclassified

Pengaruh Perspektif Dan Jenis Ukuran Dalam Balanced Scorecard Terhadap Evaluasi Kinerja

Bone

Sholihin

2018

EKUITAS

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This study aims to investigate whether an evaluator has propensity to more weigh common financial measurement than unique financial measurement and common nonfinancial measurement when evaluating performance. We conduct two experiments where participants act as senior management to evaluate two divisions. The first experiment examines the existence of propensity of managers to more weigh common financial measurement than unique financial measurement. The ANOVA repeated measurement show that participants more weigh common financial measurement than unique financial measurement. The second experiment examines the existence of propensity of participants to weigh common financial measurement than common nonfinancial measurement. The result shows that participants more weigh common financial measurement than common nonfinancial measurement in their performance evaluation.

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Common-Measures Bias in the Balanced Scorecard: Cognitive Effort and General Problem-Solving Ability

Cited by 7 publications

References 25 publications

The balanced scorecard: the effects of feedback on performance evaluation

The balanced scorecard: the effects of feedback on performance evaluation

Functional fixation and the balanced scorecard

Pengaruh Perspektif Dan Jenis Ukuran Dalam Balanced Scorecard Terhadap Evaluasi Kinerja

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