Abstract
This paper presents an analysis of the resolution of organisational externalities through the use of nonfinancial performance measures for planning. Using a comparative case study, this paper illustrates how centralised controllers’ choice of nonfinancial performance measures and target setting in two companies provides critical information to decentralised agents regarding how to balance their performance with the performance of other decentralised agents in their organisation. This work complements current management accounting research in that it focuses on the role of nonfinancial performance measures with respect to the design of performance plans for decentralised agents that can be used to internalise externalities. To date, discussions of externalities in management accounting research have primarily focused on how performance measurements can be used as a price mechanism to provide decentralised agents with incentives to internalise externalities. In addition, this case study illustrates some of the difficulties related to acquiring general knowledge about the externalities of nonfinancial performance measures and, therefore, about whether specific nonfinancial performance measures are appropriate for a particular type of organisation.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.