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

Rehydration Data for the Materials International Space Station Experiment (MISSE) Polymer Films

Atomic oxygen erosion of polymers in low Earth orbit (LEO) poses a serious threat to spacecraft performance and durability. Forty thin film polymer and pyrolytic graphite samples, collectively called the PEACE (Polymer Erosion and Contamination Experiment) Polymers, were exposed to the LEO space environment on the exterior of the ISS for nearly four years as part of the Materials International Space Station Experiment 1 & 2 (MISSE 1 & 2) mission. The purpose of the MISSE 2 PEACE Polymers experiment was to determine the atomic oxygen (AO) erosion yield (E(sub y), volume loss per incident oxygen atom) of a wide variety of polymers exposed to the LEO space environment. The Ey values were determined based on mass loss measurements. Because many polymeric materials are hygroscopic, the pre-flight and post-flight mass measurements were obtained using dehydrated samples. To maximize the accuracy of the mass measurements, obtaining dehydration data for each of the polymers was desired to ensure that the samples were fully dehydrated before weighing. A comparison of dehydration and rehydration data showed that rehydration data mirrors dehydration data, and is easier and more reliable to obtain. Tests were also conducted to see if multiple samples could be dehydrated and weighed sequentially. Rehydration curves of 43 polymers and pyrolytic graphite were obtained. This information was used to determine the best pre-flight, and post-flight, mass measurement procedures for the MISSE 2 PEACE Polymers experiment, and for subsequent NASA Glenn Research Center MISSE polymer flight experiments

Capital expenditure decision making in divisionalised companies: a study of the role of managerial performance measures and other contextual influences

© 1999 Anne Maree LillisThe accounting literature in the area of divisional performance measurement reflects a significant rift between theory and practice. Theoretical debate has tended to focus on dysfunctional decisions, particularly in the area of capital investment, that may be made by divisional managers seeking to maximise their divisional ROI result. The empirical evidence, however, still indicates the widespread use of ROI and other theoretically questionable performance measures in practice. This research is an attempt to shed light on the rift between theory and practice by studying the capital expenditure decision process intensively in three divisionalised companies. More specifically, an attempt is made to explore the use of accounting measures of managerial performance, the incidence of dysfunctional decision making factors that may mitigate the importance of accounting measurement of managerial performance as decision making. The development of a conceptual framework for the study is greatly influenced by the need to study the role of accounting within its organisational context (Hopwood, 1983; Kaplan, 1984). The conceptual framework has two key elements:1.The distribution of capital expenditure decision making authority within the divisionalised companies, and2. The general nature of organisational control systems. The distribution of authority is conceptually based on the distribution of knowledge and influence, rather than formal authority structures. The conceptualisation of organisational control is broad, and includes both formal and informal influences on managerial behaviour. The findings reflect a distribution of authority which is knowledge-based in relation to initiation and screening elements of the decision process. The findings also provide an insight into the influences on divisional management capital expenditure decisions. In particular they illustrate the role of managerial service histories, corporate familiarity with divisional operations, strategic planning and multiple performance measures within the organisational control system. The development of this understanding has potential to enable us to move beyond the simplified organisational contexts within which we teach and the control of divisionalised operations (Kaplan, 1986). The findings also provide a stimulus to further research – either hypothesis testing in contingency research, or further exploration through intensive field studies

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

The role of performance management and control systems in the implementation of public sector reforms: creating health care networks in Victoria

G5 - Minor Reports and Working Paper

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