Frank G. H. Hartmann

Testing contingency hypotheses in budgetary research: An evaluation of the use of moderated regression analysis

In the contingency literature on the behavioral and organizational effects of budgeting, use of the Moderated Regression Analysis (MRA) technique is prevalent. This technique is used to test contingency hypotheses that predict interaction effects between budgetary and contextual variables. This paper critically evaluates the application of this technique in budgetary research over the last two decades. The results of the analysis indicate that the use and interpretation of MRA often do not conform to proper methodology and theory. The paper further demonstrates that these problems seriously affect the interpretability and conclusions of individual budgetary research papers, and may also affect the budgetary research paradigm as a whole.

Top Management Team Heterogeneity, Strategic Change and Operational Performance

This study examines the role of top management team (TMT) heterogeneity in facilitating strategic change. Based on the upper echelons literature, we argue that heterogeneous management teams are better able to handle the simultaneous and conflicting demands of refocusing the organization strategically and keeping up operational performance. We expect this to be true only for teams that are heterogeneous with respect to factors directly related to job requirements, however. Data were collected from 92 full TMTs of hospitals in Spain that were confronted with institutional pressures that challenged their current strategies. In support of our hypotheses, the results show job-related TMT heterogeneity moderates the relation between strategic change and operational performance. No moderating effect is found for non-job-related TMT heterogeneity.

Testing contingency hypotheses in budgetary research using moderated regression analysis: a second look

Abstract This paper addresses the use of moderated regression analysis (MRA) in contemporary management accounting and control research. It follows up on a discussion started by us [Hartmann & Moers, Accounting, Organizations and Society 24 (1999) 291–315] in this journal and provides a reaction to arguments put forward by Dunk (this issue). In doing so, this paper addresses the relationship between substantive theory and statistical test, emphasizes the need to distinguish between confirmatory and exploratory uses of MRA and argues that the importance of moderated hypotheses and tests may have been overstated in the management accounting literature under review.

The Effects of Leadership Styles and Use of Performance Measures on Managerial Work-Related Attitudes

In this paper we investigate the effects of superiors’ performance evaluation behaviors on subordinates’ work-related attitudes. In response to critique on the multidimensional nature of the ‘supervisory style’ construct in the RAPM literature, we argue that the two dominant dimensions underlying this construct are leadership style and performance measure use. We develop and test a path model that allows us to disentangle the effects of leadership style (initiating structure and consideration) and performance measure use (objective and subjective measures) on managerial work-related attitudes (goal clarity and evaluation fairness). We test our hypotheses using survey data from 196 middle-level managers in 11 organizations. Results show that an initiating structure leadership style affects subordinates’ work-related attitudes through the use of objective performance measures. Consideration leadership behavior instead only has a direct impact on work-related attitudes. These findings have important implications for management accounting research on superiors’ use of performance measures, and provide an explanation of some of the problematic findings in the literature.

The Effects of Uncertainty on the Roles of Controllers and Budgets: An Exploratory Study

This paper explores how contextual uncertainty and the use of the budgetary system explain cross-sectional variation in the organisational role of business unit controllers. We argue that there are complementarities between the role of the budgetary control system (i.e. coercive vs. enabling) and the role of the controller (i.e. corporate policeman vs. business partner). Thus, we explore both the direct effect of uncertainty on the role of the controller and the indirect effect through the role of the budgetary control system. Using survey data from 134 business unit controllers, we find that uncertainty provides a partial explanation of the variation in the role of budgetary control systems and in the role of controllers. In particular, our data suggest alignment between the coercive (enabling) use of the budgetary control system and the role of controllers acting as corporate policemen (business partners). These findings add to our understanding of the functioning of business unit controllers within their organisational context.

Carbon Accounting: Challenges for Research in Management Control and Performance Measurement: Carbon Accounting

Carbon reduction programs and corporate emissions reporting have expanded rapidly across firms in response to climate change and global warming. This development is partly driven by institutional demands and partly by value creation considerations. The consequences of these developments for management accounting and control (MAC) are not clear, despite anecdotal evidence that suggests an increasing effort to incorporate carbon accounting into traditional decision and reporting processes. The reasons for this lack of clarity are the disproportionate focus in practice on carbon disclosure, compared to a small number of empirical studies, and the absence of an academic debate in this novel area from a MAC perspective. This paper seeks to stimulate such an academic debate by reviewing the extant literature, identifying key theoretical and empirical shortcomings of extant academic research, and outlining some directions for future studies on carbon accounting. These directions are inspired by more established MAC research that may help to guide and organize MAC research in the emerging and exciting field of carbon accounting.

Do Accounting Performance Measures Indeed Reduce Managerial Ambiguity Under Uncertainty

Research on budget-based performance evaluation traditionally predicts that the use of accounting performance measures (APM) in complex, dynamic, and uncertain situations results in dysfunctional managerial attitudes and behaviors. Although this suggests that such situations require the use of subjective performance measures (SPM), empirical evidence is inconclusive, as APM, rather than SPM, have been found to also have a negative effect on managerial ambiguity. This suggests that APM may be more, rather than less, appropriate than SPM in situations of high uncertainty. This paper explores whether acknowledgement of different types of uncertainty may explain these apparently conflicting research findings. It develops hypotheses that predict differential interactions between the environmental uncertainty and task uncertainty and APM and SPM on managerial ambiguity. These hypotheses are tested using survey data from 250 managers in 11 organizations. Tests using moderated regression analysis provide support for the existence of different interactions between uncertainty and the use of performance measures, and provide reconciliation for the opposing findings in the extant literature.

The Impact of Social Pressure and Monetary Incentive on Cognitive Control

We compare the effects of two prominent organizational control mechanisms—social pressure and monetary incentive—on cognitive control. Cognitive control underlies the human ability to regulate thoughts and actions in the pursuit of behavioral goals. Previous studies show that monetary incentives can contribute to goal-oriented behavior by activating proactive control. There is, however, much less evidence of how social pressure affects cognitive control and task performance. In a within-subject experimental design, we tested 47 subjects performing the AX-CPT task to compare the activation of cognitive control modes under social pressure and monetary incentive beyond mere instructions to perform better. Our results indicate that instructing participants to improve their performance on its own leads to a significant shift from a reactive to a proactive control mode and that both social pressure and monetary incentive further enhance performance.

Rankings, Performance and Sabotage: The Moderating Effects of Target Setting

Competitive performance rankings are widely used in organizations. Such incentive systems enable agents to improve their performance ranking not only by increasing their own performance, but also by undermining their competitors’ performance. While previous accounting studies have stressed the positive effect of ranking systems on managerial effort, the present paper investigates when such ranking systems may induce sabotage, and how this unintended effect can be mitigated. Our study is based on a laboratory experiment designed to investigate (a) whether competitive performance feedback increases an agent’s inclination to disrupt the efforts of competitors, in a case where ranking has no effect on compensation and (b) whether the presence of a self-set absolute performance target moderates these effects. Our results show that ranking increases both performance and sabotage. Adding an absolute performance standard appeared to reduce sabotage. However, when there is an absolute target, performance is higher in the absence of ranking. Overall, our results thus suggest that performance benefits from the use of either a relative or an absolute performance target, but not from their simultaneous use.

Long-Term Incentives, Managerial Effort and Supervisor Evaluation Bias

We study the incidence of supervisors’ evaluation biases in a biannual incentive system in an Italian public administration. Using performance reports for 106 employees over three biannual evaluation periods (2001-2006), we analyze supervisors’ intertemporal evaluation biases. We find evidence for lenient and compressed performance ratings especially in the second year of each biannual evaluation period. We explain these biases, and their intertemporal variation, by supervisors’ relative emphasis on subjective and objective performance metrics. We further analyze the effect of performance categorization and find that leniency is enhanced for ratings closer to the lower boundary of each performance category. The results have important implications for understanding the trade-offs supervisors face when enhancing their subordinates’ long-term performance, and short-term performance measure accuracy.