The Judgmental Effects of Strategy Maps in Balanced Scorecard Performance Evaluations

Abstract

We investigate the impact of supplemental information displays on the quality of decisions made using a common strategic performance measurement system, the Balanced Scorecard. A distinguishing feature of the balanced scorecard (BSC) is the number and diversity of its metrics. To effectively formulate a decision from such a complex information set, managers must view these measures within their strategic context (Kaplan and Norton 1993, 1996). However, academic studies indicate that problems in communication and comprehension of the strategic logic underlying the scorecard hinder its implementation and use (Lipe and Salterio 2000; Malina and Selto 2001; Ittner, Larcker, and Meyer 2003). We investigate whether a supplemental information display, in the form of a strategy map, results in performance evaluation judgments consistent with the recognition of relations between performance metrics and strategy. Strategy maps are one-page visual frameworks that depict cause-and-effect relations between scorecard performance measures and overriding strategic objectives. Consistent with our hypotheses, we find that the quality of performance evaluation decisions is higher when participants are provided with strategy maps.