What is it about?
We examine how causal inference biases affect performance evaluation judgments based on a Balanced Scorecard (BSC) structured performance measurement system. We find support for the violation of causal independence assumption, which manifests itself in greater weighting attributed to measures associated with the outer perspectives of the BSC than the inner perspectives. We further show that the use of a generic strategy map to represent and thus emphasize the causal relationships between the measures further exacerbates this bias resulting in increased weighting attributed to the outer perspectives of the BSC. This is of particular importance as the use of the strategy map has been found to be an effective remedy for other cognitive biases associated with the BSC. Results from our follow up experiments allow us to rule out a possible alternative explanation based on the importance individuals may place (implicitly or explicitly) on the financial versus other BSC perspectives.
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Why is it important?
Balanced Scorecards are very useful to organisations to achieve their strategic objectives. Thus, it is highly important to understand them in their entirety and to prevent design shortcomings.
Read the Original
This page is a summary of: Causal Inference in Judgment Using the Balanced Scorecard, Journal of Management Accounting Research, September 2019, American Accounting Association, DOI: 10.2308/jmar-52574.
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