Michael L Roberts, Bruce R Neumann, Eric Cauvin
Advances in Management Accounting,Pages: 191-221.
Purpose Prior research identified conflicts in implementing performance measurement systems that include both financial and non-financial measures. Attempts to incorporate non-financial measures, for example, balanced scorecards (BSCs), have shown short-term success, only to be replaced with systems that rely on financial measures. We develop a theoretical model to explore evaluators’ choice and use of the most important performance measurement criterion among financial and non-financial measures. Methodology/approach Our model links participants’ prior evaluation experiences with their attitudes about relative accounting qualities and with their choice of the most important performance measure. This choice subsequently affects their evaluation judgments of managers who perform differentially on financial versus non-financial measures. Findings Experimental testing of our structural equation
Bruce R Neumann, Eric Cauvin, Michael L Roberts
Advances in Management Accounting, Volume 20, pp. 1-28.
In the growing debate about designing new management control systems (MCS) to include stakeholder values, there has been little discussion about information overload. Stakeholder advocates call for including more environmental and related social disclosures but do not consider how information overload might impair the use and interpretation of corporate performance measures. As we know, shareholders and boards of directors are most concerned with market data such as earnings per share, dividend rates and market value growth. In this chapter we assert that management control system designers must consider information overload before expanding MCS to include social and nonfinancial disclosures.
Bruce R. Neumann, Michael L. Roberts and Eric Cauvin
Review of Managerial Science Vol. 5, Issue 2-3, Pages: 195-212
In the growing debate about stakeholder values, there has been little discussion about information overload or whether the requested disclosures can be effectively used. Stakeholder advocates call for complicated and massive environmental and related social disclosures while not considering how information overload might affect the discourse about corporate performance. Stakeholders, including shareholders, plead for more transparency in financial statements, management discussion and analysis (MDA), and other corporate disclosures. As we know, shareholders and boards of directors are most concerned with the ‘Holy Trinity’ of earnings per share, dividends and market value changes. We believe that managers and stakeholders involved in performance evaluations have multiple interests that extend beyond traditional shareholder value measures. We note that the Balanced Scorecard (BSC) was developed as one tool to reflect and communicate these multiple measures. We test how managers use (or ignore) multiple performance measures and we posit that stakeholders will face many of the same constraints when using and processing multiple disclosures including Corporate Social Reports (CSR), environmental, or similar disclosures. While we do not directly test a wide variety of stakeholder disclosures, we examine eight (four for a single subject) shareholder values (financial measures) and four stakeholder values (nonfinancial measures). The eight measures included in our research instruments serve as proxies for the multiple concerns that might be of interest to many stakeholders. Note that stakeholders are likely to be extremely interested in nonfinancial performance measures, while many shareholders will likely concentrate on financial performance measures. Field research has reported managers tend to favor financial measures while discounting or ignoring nonfinancial measures when evaluating subordinates, making it difficult to align performance evaluations and incentives with corporate strategies (Ittner et al. Account Rev 78:725–758, 2003). In this study, we find the relative weights managers place on financial and nonfinancial performance measures are influenced by both (1) presentation order and (2) the relative importance of specific measures. When financial measures are presented first, the manager who performs better on financial measures is rated higher than the manager who performs better on nonfinancial measures. However, when nonfinancial measures are presented first, managers who excel on nonfinancial measures are rated higher. Reports that include financial measures that are relatively more (less) important also produce higher (lower) ratings for the manager who excels on financial measures. Thus, the relative weights that superiors place on financial and nonfinancial measures in evaluating corporate managers’ performance are substantially anchored both by the order in which measures are presented as well as by the importance of the specific performance measures employed. Other stakeholder disclosures are likely to be similarly anchored, perhaps biased, by primacy and a priori importance rankings.
Neumann, Bruce R., Roberts, Michael L. and Cauvin, Eric
Journal of Corporate Accounting & Finance; Mar/Apr 2010, Vol. 21 Issue 3, pp. 61-66, 6p
Information overload has been rightly called one of the “deadly sins” of balanced scorecards. To help organizations make their scorecards balanced, this article discusses how many and what types of measures to use.
Bruce Neumann, James Gerlach, Hyo-Jeong Kim
International Journal of Public Information Systems, vol 2010 Issue 1, Pages: 83-109
When a government entity outsources IT projects, consideration must be given early in the project to potential disputes and/or litigation with other parties, particularly thirdparty
vendors, the public-at-large, and other parts of the supply chain. In this case, the State contracted for the Colorado Benefits Management System (CBMS) and the counties throughout the state were expected to deliver client services using the new system. The public expected transparency of government reporting while the State focused on accountability measures of the CBMS project. We use Agency Theory to help explain why certain public expectations were not initially met by CBMS and how some of these “disconnects” could have been avoided. Since the State, IT vendors, the public, and counties have different goals, risk preferences, and information needs, they used different measures to evaluate any government IT project. These mismatched measurements help explain the cause of any unmet expectations that can lead to disputes and/or litigation. We found that the State and IT vendors evaluated this IT project using more process-based accountability measures while the public and counties evaluated the project more with outcome-based measures. Therefore, we recommend that the State and IT vendors should emphasize both outcome-based and process-based measures in order
to be more transparent when designing and implementing IT projects. The Colorado Benefits Management System (CBMS) provides an interesting case study showing how Agency Theory can be applied to a governmental IT project and how different measurements used by the State, IT vendors, the public, and counties contributed to the
tension and turmoil experienced while implementing CBMS.