The role of non-financial measures in controlling myopic activities: the case of hard selling

Dhinu Srinivasan and Alex Thevaranjan

International Journal of Accounting, Auditing and Performance Evaluation, 2016, vol. 12, issue 2, 103-130

Abstract: Using a principal-agent framework, many analytical studies have examined the role of non-financial or additional performance measures in enhancing long-run efforts such as customer service. However, myopic activities that enhance short-term firm performance at the expense of long-term profitability are prevalent across industries (and perhaps nations). Accordingly, the purpose of this paper is to investigate when and how non-financial measures may be used to control such myopic activities. Specifically, we investigate the interaction between a myopic behaviour known as hard selling and a specific non-financial measure (customer satisfaction), often used to measure the customer irritation that results from hard selling. Prior studies suggest that non-financial measures are always a valuable addition because they increase the level of long-run efforts and decrease the (over) reliance on financial incentives. In contrast, we find that non-financial measures may not always be valuable in controlling myopic activities, and when valuable, they may either increase or decrease the reliance on a financial measure such as accounting earnings. In addition, the impact of non-financial measures on myopic activities varies widely, ranging from no impact at all to complete elimination. Overall, these insights enhance our understanding of the role of non-financial measures in controlling myopic activities, in contrast to enhancing long-run efforts.

Keywords: customer satisfaction; non-financial measures; hard selling; sales force incentives; myopic activities; short-term performance; long-term profitability; customer irritation. (search for similar items in EconPapers)
Date: 2016
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