Strategic performance measurement systems and managers' understanding of the strategy

Carmen Aranda and Javier Arellano

Journal of Accounting & Organizational Change, 2010, vol. 6, issue 3, 330-358

Abstract: Purpose - The paper aims to explorehowmanagers change their strategic view so that they come with a better understanding of the strategy. It uses two proxies for such understanding: balance in beliefs (taken from performance measurement system literature) and consensus on strategic priorities (taken from strategic literature). Design/methodology/approach - A longitudinal study is conducted in a financial institution during a strategic change communicated through a tailor‐made balanced scorecard (BSC). The changes are measured in the degree of understanding experienced by a set of 45 middle managers in each of the two phases in which the BSC implementation has been divided. The paper tests to what extent as the BSC implementation progresses there is a balancing in users' beliefs, an increase in consensus and alignment of managers' priorities; and finally, whether or not those proxies of managers' understanding are interchangeable. Findings - Results show that the implementation of this BSC brought about a change in managers' beliefs by increasing the importance given to measures located in the lower BSC perspectives (called balancing effect), as well as an increase in the degree of consensus on strategic priorities. However, in the paper more balance in managers' beliefs were not necessarily associated with a higher degree of consensus and alignment. The two proxies are not interchangeable and the balancing effect was found to be ineffective and insufficient in providing an explanation for the consensus formation process. Originality/value - The paper provides empirical evidence onhowmiddle managers change their mental models and improve their understanding of the strategy. The paper helps in aligning performance measurement systems literature and strategic literature.

Keywords: Management accounting; Performance measures (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jaocpp:18325911011075213

DOI: 10.1108/18325911011075213

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