The balanced scorecard: the effects of feedback on performance evaluation

Abstract

PurposeThe use of a balanced scorecard (BSC) for performance evaluation is meant to help evaluators make more complete decisions, as they have a variety of financial and non‐financial measures to assess. The problem is that users have difficulty taking all of the measures into consideration. The tendency to place more weight on common measures (measures that are the same across divisions) while either ignoring or placing very little weight on unique measures (measures are unique to a particular division) has become known as a “common measures bias”. The purpose of this paper is to extend a line of research that works to understand how this common measures bias might be mitigated.Design/methodology/approachThis study examines whether the presence of task property feedback, a form of cognitive feedback, prior to a performance evaluation task, can help evaluators overcome the tendency to rely primarily on common measures. This study used a 2×2 experimental design where subjects were asked to evaluate the performance of two managers under either feedback or non‐feedback conditions. In the feedback condition, subjects were provided with their supervisor's suggestions about performance evaluation in the use of BSCs.FindingsThis study finds that when subjects were given task property feedback, a form of cognitive feedback, they tended to use more unique measures than if they were not given any feedback information at all.Practical implicationsIn practice, more straight forward and simple feedback information is likely easier for companies to implement and easier for evaluators to follow. Feedback information that is too complex or that requires too much effort may frustrate evaluators, at which point they may abandon the effort. The authors' findings also indicate that direct and clear guidance from the top manager of a business may be seen as pressure by lower‐level managers. It is important for top managers to create such a performance evaluation environment so that all BSC measures are considered.Originality/valueThe paper finds that when evaluators judge the performance of managers through the use of a BSC, they tend to weight common measures more heavily than they do unique measures, unless they are provided cognitive feedback to cue them into the importance of using all measures. This study is one of many, following LS (2000), documenting a finding of common measures bias in the use of BSCs. Where this study contributes to the literature is in the use of task property feedback, a form of cognitive feedback, to overcome this bias. Since the use of unique measures is a key attribute of BSCs as they help users capture the nuances of a specific division's or firm's strategy, it is crucial that performance evaluators pay careful attention to them.