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Evaluating conflicting performance on driver and outcome measures: the effect of strategy maps

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Abstract

This study examines how strategy maps affect balanced scorecard (BSC) evaluators’ assessments of managerial performance. We examine a setting in which managers achieve target levels of performance on driver measures but not outcome measures. Without a strategy map, the more evaluators believe the outcome was beyond the manager’s control, the more they indemnify the manager. In contrast, evaluators with strategy maps do not use their beliefs about the uncontrollability of the outcome when making evaluation decisions. Rather, evaluators with strategy maps evaluate the manager without regard to the extent to which they believed the poor outcome was due to uncontrollable factors. Thus, strategy maps affect how evaluators implement control over the firm’s strategy. The finding suggests that the use of strategy maps, which is an integral part of the BSC, may actually have detrimental effects for organizations whose outcomes are influenced significantly by uncontrollable factors.

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Notes

  1. From here on, we use “outcome” to describe financial outcome measures and “driver” to describe nonfinancial operational measures that are drivers of future financial performance.

  2. Eighty percent of 100 large U.S. organizations that have adopted the BSC are using, or are planning to use, the BSC for incentive compensation (Towers Perrin 1996). Thus, evidence suggests that the BSC is used for evaluation and bonus purposes.

  3. Meanwhile, other management accounting scholars contend that testing the strategy may not always be useful; see, e.g., Huelsbeck et al. (2011).

  4. Participants in neither condition were more likely than another to miss the manipulation check questions. As a sensitivity check, we also performed our analyses including all participants. Results are qualitatively consistent.

  5. The software’s random assignment algorithm presented options to either ensure an equal number of participants would be assigned to each condition or to use a purely random assignment process where each participant would have an equal chance of assignment to each condition. We chose to rely on the pure random assignment algorithm; it ended up assigning more participants to the strategy map condition.

  6. The purpose of this review question was to ensure all participants equally understood the basic facts of the scenario because, in the natural environment, evaluators are likely to have a basic knowledge of the factors that affect strategic outcomes. Also, ensuring participants in the strategy map and no-strategy map treatment conditions equally understood the scenario helps us to rule out differential strategy comprehension as a potential alternative explanation for the results.

  7. Evaluators in our study made slightly different decisions for bonus and evaluation, which is consistent with prior research (e.g., Van Veen-Dirks (2010) shows that evaluators reward managers differently than they evaluate them).

  8. We also split the sample using all responses. Because the average response was between 3 and 4, and the median was 3, we categorized participants as having low (high) uncontrollability beliefs as those who responded with a 1 to 3 (4 or 5) to the uncontrollability question. Results are the same, albeit slightly less strong.

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Authors and Affiliations

  1. Xavier University, Cincinnati, OH, USA

    Christian Mastilak

  2. Northern Illinois University, DeKalb, IL, USA

    Linda Matuszewski

  3. Worcester Polytechnic Institute, Worcester, MA, USA

    Fabienne Miller

  4. College of William and Mary, Williamsburg, VA, USA

    Alexander Woods

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  1. Christian Mastilak
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  2. Linda Matuszewski
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  3. Fabienne Miller
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  4. Alexander Woods
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Correspondence to Alexander Woods.

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Mastilak, C., Matuszewski, L., Miller, F. et al. Evaluating conflicting performance on driver and outcome measures: the effect of strategy maps. J Manag Control 23, 97–114 (2012). https://doi.org/10.1007/s00187-012-0159-6

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