The role of subjectivity in mitigating incentive contracting risks

We examine how subjectivity in performance measurement and reward systems (PMRS) is used to mitigate incentive contracting risks. Drawing on data from 38 interviews with supervisory and subordinate managers in four firms, we provide a more comprehensive explanation of the role of subjectivity in risk mitigation than is evident in the prior literature. We provide empirical evidence of the importance firms place on the use of subjectivity to mitigate the risk of incentive misalignment and employee sorting errors relative to its well-documented role in mitigating employee compensation risk. We find that incentive misalignment arising from unanticipated behavioral responses to performance measures is a particularly important risk, managed through subjective performance assessments. The extent of subjectivity we observe poses a significant risk of errors and bias. We observe that both vertical and horizontal information gathering and review by calibration panels are key strategies to mitigate the downside risk of subjectivity

Manufacturing strategy and performance measurement system design

Deposited with permission of the author. © 1998 Dr. Anne M. LillisThis study explores the link between strategy and the use and design of manufacturing subunit performance measures by profit centre managers. More specifically, it examines the relationship between manufacturing competitive strategy and 1. relative reliance on financial and non-financial performance measures for manufacturing management control 2. the way cost benchmarks used in financial performance measures are constituted to integrate non-financial dimensions of performance. These links between manufacturing strategy, reliance on performance measures and constitution of financial benchmarks are examined also for implications on performance measurement system effectiveness. Data were collected using a semi-structured interview in conjunction with a structured questionnaire administered to 36 profit centre managers and 12 manufacturing managers in 36 manufacturing firms in Victoria, Australia. (Open document for complete abstract

Simons\u27 levers of control framework: Commensuration within and of the framework

Abstract Purpose Despite extensive adoption of Simons’ Levers of Control (LoC) framework, there is still considerable diversity in its operationalization which impedes the coherent development of the literature and compromises its value to researchers. The purpose of this paper is to draw researchers back to the conceptual core of the framework as a basis for stable, consistent definitions of the domain of observables. Methodology/approach We derive the conceptual core of the framework from Simons’ writings. We highlight instability in existing operational definitions of the LoC, weaknesses in the extent to which these definitions reference this conceptual core, and inconsistencies in the restriction of LoC to formal information-based routines. Findings We draw on the inconsistencies identified to build the case for commensuration or a “common standard” for the framework’s use on two levels: the constructs within the framework (through reference to the conceptual core of the framework) and the framework itself (through explicit inclusion of informal controls). Research implications We illustrate the benefits of commensuration through the potential to guide the scope of the domain of observables in empirical LoC studies, and to study LoC as complementary or competing with other management control theories. Originality/value Our approach to resolving tensions arising from inconsistencies in the empirical definitions of LoC differs from others in that we focus on the strategic variables underlying the framework to define the conceptual core. We believe this approach offers greater potential for commensuration at the level of the constructs within the framework and the framework itself

Mixed Methods Research in Accounting

Purpose The purpose of this paper is to set the scene for this special issue by synthesising the vast array of literature to examine what constitutes mixed methods research, and the associated strengths and risks attributed to this approach. Design/methodology/approach This paper takes the form of a literature review. The authors draw on extensive methods research from a diverse range of social science disciplines to identify and explore key definitions, opportunities and risks in mixed methods studies. They review a number of accounting studies that adopt mixed methods research approaches. This allows the authors to analyse variance in how mixed methods research is conceptualised across these studies and evaluate the perceived strengths and limitations of specific mixed methods design choices. Findings The authors identify a range of opportunities and challenges in the conduct of mixed methods research and illustrate these by reference to both published studies and the other contributions to this special issue. Originality/value With the exception of Modell's work, there is sparse discussion of the application and potential of mixed methods research in the extant accounting literature

Building Performance Models from Expert Knowledge

Improving management control of knowledge-based organizations motivates building performance management models (PMM) of causally related, key success factors (KSF) . This study elicits knowledge maps of KSF from field experts. These knowledge maps are layered to create the foundation of the organization’s PMM. The study elicits causal knowledge from experts who through their experience, training, etc. have encoded relational or causal knowledge about complex systems; that is, they understand how things fit and work together, although they might not have articulated that knowledge. Converting experts’ tacit causal knowledge into organizational capability or explicit knowledge should a) perpetuate that knowledge in the organization, b) enable improved training of less experienced employees, and c) lead to deployment of improved systems (eg, PMM). Because no single method for eliciting mental models or knowledge maps dominates the literature, the study uses multiple methods and overlays their results to build a comprehensive causal model. This study reports the results of a field study to build the foundation of a PMM in a clinical department of a large hospital. The study uses three qualitative methods to elicit mental models of KSF and their interactions from key clinical program administrators, physicians, and nurses. The motivation of the present study is to report the results of (1) tapping the causal knowledge of individual experts in the field and (2) triangulating multiple methods of qualitative data analysis. The alternative method of building a PMM by using archival data-mining is rejected for reasons of (1) limited archival time-series data, (2) limited scope of archival data, (3) myopic focus on conveniently available data, and (4) inability to screen out spurious relations. Because these limitations are generally present in knowledge-intensive organizations, this study’s approach can have general application

Mixed methods research in accounting

Purpose – The purpose of this paper is to set the scene for this special issue by synthesising the vast array of literature to examine what constitutes mixed methods research, and the associated strengths and risks attributed to this approach. Design/methodology/approach – This paper takes the form of a literature review. The authors draw on extensive methods research from a diverse range of social science disciplines to identify and explore key definitions, opportunities and risks in mixed methods studies. They review a number of accounting studies that adopt mixed methods research approaches. This allows the authors to analyse variance in how mixed methods research is conceptualised across these studies and evaluate the perceived strengths and limitations of specific mixed methods design choices. Findings – The authors identify a range of opportunities and challenges in the conduct of mixed methods research and illustrate these by reference to both published studies and the other contributions to this special issue. Originality/value – With the exception of Modell's work, there is sparse discussion of the application and potential of mixed methods research in the extant accounting literature.Accounting, Research methods

The role of performance measurement and evaluation in building organizational capabilities and performance

This study examines the processes through which the availability of broad-based strategically relevant performance information impacts on the performance outcomes of organizations. We explore the role of evaluation mechanisms in influencing managers' use of broad-based performance measurement information for feedback and feed-forward control. We hypothesize that these resultant decision-making patterns impact the exploitation and identification of strategic capabilities within an organization and in turn organizational performance. Using a structural equation model, we find support for a model in which the degree of commonality between measures identified as decision-facilitating and decision-influencing is significantly associated with the use of decision-facilitating measures for both feedback and feed-forward control. In turn, the extent to which decision-facilitating measures are actually used by strategic business unit managers impacts on the strategic capabilities of the organization and subsequently its performance. Overall the results suggest that to encourage managers to use the multiple financial and non-financial performance indicators increasingly incorporated in contemporary performance measurement systems it is imperative that performance evaluation schemes are also designed to reflect these measures. To the extent performance evaluation schemes do not reflect such decision-facilitating measures it is less likely managers will use these indicators to effectively manage performance. The resultant performance implications for the organization arise from the impact of these decision effects on the exploitation of existing capabilities and the search for and identification of new strategic opportunities.