Financial versus non-financial information

The impact of information organization and presentation in a Balanced Scorecard

E. Cardinaels, P.M.G. Van Veen-Dirks

Research output: Contribution to journalArticleScientificpeer-review

Abstract

This paper investigates how the organization and presentation of performance measures affect how evaluators weight financial and non-financial measures when evaluating performance. We conduct two experiments, in which participants act as senior executives charged with evaluating two business-unit managers. Performance differences between business units are contained in either a financial or one of the three non-financial categories. Specifically, the first experiment studies how organizing measures in a Balanced Scorecard (BSC) format affects performance evaluations. Our results show that when the performance differences are contained in the financial category, evaluators that use a BSC-format place more weight on financial category measures than evaluators using an unformatted scorecard. Conversely, when performance differences are contained in the non-financial categories, whether measures are organized into a BSC-format or into an unformatted scorecard has no impact on the evaluation. The second experiment shows that when performance markers are added to the scorecards (i.e., +, −, and = signs for above-target, below-target, and on-target performance), evaluators that use a BSC-format weight measures in any category containing a performance difference more heavily than evaluators using an unformatted scorecard. Our findings suggest that firms should carefully consider how to present and organize measures to get the intended effect on performance evaluations.
Original languageEnglish
Pages (from-to)565-578
JournalAccounting, Organizations and Society
Volume35
Issue number6
Publication statusPublished - 2010

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Balanced Scorecard
organization
performance
experiment
evaluation
Balanced score card
Non-financial information
senior executive
Evaluator
Scorecard
manager
firm

Cite this

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title = "Financial versus non-financial information: The impact of information organization and presentation in a Balanced Scorecard",
abstract = "This paper investigates how the organization and presentation of performance measures affect how evaluators weight financial and non-financial measures when evaluating performance. We conduct two experiments, in which participants act as senior executives charged with evaluating two business-unit managers. Performance differences between business units are contained in either a financial or one of the three non-financial categories. Specifically, the first experiment studies how organizing measures in a Balanced Scorecard (BSC) format affects performance evaluations. Our results show that when the performance differences are contained in the financial category, evaluators that use a BSC-format place more weight on financial category measures than evaluators using an unformatted scorecard. Conversely, when performance differences are contained in the non-financial categories, whether measures are organized into a BSC-format or into an unformatted scorecard has no impact on the evaluation. The second experiment shows that when performance markers are added to the scorecards (i.e., +, −, and = signs for above-target, below-target, and on-target performance), evaluators that use a BSC-format weight measures in any category containing a performance difference more heavily than evaluators using an unformatted scorecard. Our findings suggest that firms should carefully consider how to present and organize measures to get the intended effect on performance evaluations.",
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Financial versus non-financial information : The impact of information organization and presentation in a Balanced Scorecard. / Cardinaels, E.; Van Veen-Dirks, P.M.G.

In: Accounting, Organizations and Society, Vol. 35, No. 6, 2010, p. 565-578.

Research output: Contribution to journalArticleScientificpeer-review

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