Managerial Influence in Performance Measurement System Design: A Recipe for Failure?

Abstract

ABSTRACT: Extant literature holds that business unit (BU) managers' influence in the design of their performance measurement system (PMS) is beneficial; however, empirical evidence is mixed. Using survey data from 293 BU managers, we study their perception that the PMS fails to support their decision-making. The findings indicate that, on average, managerial influence in PMS design decreases the perception of PMS failure and hence indeed seems to be beneficial. However, importantly, the effect differs depending on the situation. For instance, when there are higher levels of information asymmetry between managers and superiors, lower levels of interdependencies, or lower levels of information asymmetry between employees and managers, managerial influence in PMS design decreases failure. To the contrary, when there are lower levels of information asymmetry between managers and superiors, higher levels of interdependencies, or higher levels of information asymmetry between employees and managers, influence in PMS design increases PMS failure.