The Balanced Scorecard: The Effects of Assurance and Process Accountability on Managerial Judgment

The balanced scorecard has been hailed as one of the major developments in management accounting in the past decade. Lipe and Salterio (2000) show that one of the key scorecard features, the inclusion of measures that are unique to the strategic objectives of a business unit, tend to be ignored by managers when making performance evaluation judgments. This study employs an adapted version of Kennedy’s (1993, 1995) debiasing framework to motivate two approaches to reducing this “common measures bias.” We examine whether increasing effort via invoking process accountability (i.e., requiring managers to justify to their superior their performance evaluations) and/or improving the perceived quality of the balanced scorecard measures (i.e., via assurance over the reliability and relevance of the performance measures) leads to managers’ increased usage of unique performance measures in their evaluations. Results suggest that either the requirement to justify an evaluation to a superior or the provision of an assurance report over all measures increases the use of unique measures in managerial performance evaluation judgments. Interestingly, the combination of the two approaches is not as powerful as the individual debiasers by themselves. Furthermore, we provide evidence that the common measures bias is not an easily correctable cognitive illusion that disappears when the potential for judgment inconsistency is pointed out to participants. Implications for theory and practice are discussed.