Interpreting the balanced scorecard: an investigation into performance analysis and bias

Abstract

PurposeThis research seeks to explore the human interpretation of performance management information using Kaplan and Norton's Balanced Scorecard (BSC) as a research vehicle.Design/methodology/approachThe paper uses the controlled environment of an experiment to explicitly investigate whether experienced managers weight all performance measures in a BSC equally when making comparative decisions.FindingsExperimental results suggest that managers do not rate the importance of individual performance measures equally, and at the outset of the decision process often rely on simplifying strategies to help process the information in the time available. Further analysis indicates that the decision approaches used were in themselves biased, and that decision outcomes were not always related to the factors which managers thought were important at the beginning of the process.Originality/valueThe research found that managers do not consider the measures in a scorecard equally, but will apply their own weighting if none is provided. Furthermore, managers are unlikely to use all of the performance measures available to them. These findings have significant implications for those designing scorecards whilst contributing to the academic debate on weighting of measures and cognitive bias in decision making.