Does Functional Experience Impair the 'Balance' in Balanced Scorecards?

Abstract

In this paper, we examine the effect that individual characteristics, specifically functional experience and level of work experience, have on how managers acquire and use balanced scorecard information. Using Hambrick and Mason's information processing theory, we predict that a manager's functional experience will be associated with his or her information-acquisition behavior and final choice in an investment decision. We test our hypotheses using a laboratory experiment in which participants make a capital investment decision from a menu of available opportunities. We do not detect an association between individual characteristics and information-acquisition behavior but we do detect an association between individual characteristics and investment choice. We discuss how our findings help resolve the discrepancies in previous studies and suggest implications for companies that use the balanced scorecard.