Managerial Influence in Performance Measurement System Design: A Recipe for Success?
35 Pages Posted: 13 Aug 2011
Date Written: August 12, 2011
Abstract
Allowing business unit (BU) managers to influence the design of their performance measurement system (PMS) is generally thought to be beneficial. It increases user satisfaction, improves system quality, and ensures consideration of managers’ functional expertise. However, we argue that giving managers this influence is not always a good strategy. We examine whether and when granting BU managers influence in the design of their PMS either exacerbates or partially mitigates PMS failure (i.e., the BU managers’ perception that it does not contain adequate information to enable decision making and control within the BU). In certain circumstances BU managers may not possess either the breadth or depth of functional expertise needed to design a successful PMS. Their level of influence may be incongruent with their level of expertise. Using survey data from 313 BU managers, we find that that the effects of incomplete translation of goals and the information advantage of the manager (relative to superior) on PMS failure are partially mitigated when BU managers have more influence in the design of the existing PMS. Hence, increasing BU managers’ influence under these circumstances is a ‘good’ strategy. We also find that interdependencies and the information advantage of the employees (relative to the BU manager) are not significantly associated with PMS failure unless BU managers are involved in the design of the existing PMS. Under these circumstances increasing managers’ influence is a ‘bad’ strategy.
Keywords: manager influence, performance measurement systems, failure, design, status congruence theory
JEL Classification: M40, L20
Suggested Citation: Suggested Citation