Lourdes Ferreira White

Executive compensation and dividend policy

Abstract This study examines the use of dividend provisions in executive compensation contracts to influence dividend policy. A sample is constructed with the largest companies in the oil and gas, defense/aerospace and food processing industries, where dividend-related agency costs are expected to be high. The results indicate that the existence of a dividend incentive in the compensation plan is positively associated with higher dividend payouts and yields, and higher annual changes in dividend levels. Evidence is also provided on firm characteristics associated with the use of a compensation contract with a dividend provision. The results are consistent with the theory that firms link compensation incentives to dividend payments to reduce conflicts between shareholders and management over dividend decisions.

An experiential approach to learning about the balanced scorecard

Abstract The balanced scorecard (BSC) is an integrated strategic performance management framework that helps organizations translate strategic objectives into relevant performance measures. This paper offers guidelines for implementing an experiential approach to learning about the BSC through the study of “real-world” organizations. This approach emphasizes hands-on experience with the team-based, cross-functional, and strategic aspects of management accounting designed to address several educational objectives, including: understanding organizational strategy and critical success factors; gaining insight into how to measure performance; and developing oral presentation and team-building skills. Specific examples of classroom materials to facilitate implementation of this approach in management accounting courses at both graduate and undergraduate levels are also offered.

Budgeting, Performance Evaluation, and Compensation: A Performance Management Model

Performance management involves budgeting, performance evaluation, and incentive compensation. This study describes a model that encompasses these three elements of performance management. To illustrate the model, survey data were examined using path analysis. The empirical evidence supports the model, and suggests several intervening variables that mediate the direct and indirect effects of budgeting, performance evaluation, and incentives on gaming behaviors and individual performance.

An exploratory study of strategic performance measurement systems

This exploratory study aims at identifying the main characteristics of strategic performance measurement systems (SPMS) that influence SPMS outcomes, which, in turn, impact firm performance. Using data from 1,990 companies in a wide range of industries, we employed path analysis and stepwise regression to test the model. We found empirical support for the model, in that SPMS have a significant effect on human resource practices and business results. The degree of BSC adoption, the impact of SPMS on human resources, the purposes for which the SPMS were designed, and the use of nonfinancial performance measures were found to have the most effect on the impact of the SPMS on business results.

Strategic Performance Management Systems: Impact on Business Results

This study proposes and tests a model to explain the impact on business results of a specific type of information systems: Strategic Performance Measurement Systems (SPMS). Drawing from the literatures in management, information systems, and accounting, the model proposes that SPMS information technology (IT) variables, which include both technical characteristics and technical outcomes, affect business results. Those IT variables are, in turn, affected by SPMS system variables (information quality and system design). Finally, IT and system variables are affected by organizational variables related to information processing capabilities and requirements. Using path analysis, we found empirical support for the model by analyzing data from large-scale survey with a sample of 1,990 respondents. System effectiveness and Internet usage were the two IT variables found to have the most impact on business results. Furthermore, system design had a significant role in determining all IT variables that had an impact on business results.

The stigma of obesity and discrimination in performance appraisal: a theoretical model

We propose a theoretical model to study the effect of obesity stigma on performance appraisal. The model draws from the appraisal, obesity, stigmatization, and prejudice literatures to examine three sets of factors: individual factors in the appraiser(s) and the obese appraisee; factors in performance appraisal; and contextual factors. According to the model, these factors make it easier or harder for obesity stigma to affect the performance appraisal of obese employees, potentially biasing the process and resulting in discrimination. While examining the interplay of forces that facilitate or inhibit the expression of obesity stigma in the affective, cognitive, and behavioral responses of appraisers, we introduce the concept of ‘aversive weightism’. This concept enhances understanding of the tensions between the ethos of objectivity in performance appraisal and the deeply rooted, often unconscious influences of societal prejudice and stigma against obesity. We conclude with implications for research and practice.

THE MEASUREMENT GAP IN PAYING FOR PERFORMANCE: ACTUAL AND PREFERRED MEASURES

What is measured gets managed – especially if rewards depend on it. For this reason many companies (over 70% in this survey) have upgraded their performance measurement systems so as to include a mix of financial and non-financial metrics. This study compares how companies currently measure performance for compensation purposes with how their managers think performance should be measured. We find significant measurement gaps between actual and preferred measures, and we find that larger measurement gaps are related to lower overall performance. The choice of performance measures for compensation purposes is also related to the attitudes of managers towards manipulation of reported results.

Congruence in management control practices

We investigate the degree of congruence between preferred and actual levels of ten management control system (MCS) practices in the areas of budgeting, performance evaluation, and compensation. Survey results from responsibility centre managers indicate significant disagreements between preferred and actual levels for most MCS practices. Congruence states of deprivation, satisfaction, and saturation exist for eight MCS practices, and deprivation is the most frequent state for seven MCS practices. Congruence is significantly correlated with performance, and eight MCS congruence variables are markedly related to the congruence variables found to have performance effects.

Presentation Formats, Performance Outcomes, and Implications for Performance Evaluations

Abstract Purpose This study examines the impact of different Balanced Scorecard (BSC) formats (table, graph without summary measure, graph with a summary measure) on various decision outcomes: performance ratings, perceived informativeness, and decision efficiency. Methodology/approach Using an original case developed by the researchers, a total of 135 individuals participated in the experiment and rated the performance of carwash managers in two different scenarios: one manager excelled financially but failed to meet targets for all other three BSC perspectives and the other manager had the opposite results. Findings The evaluators rated managerial performance significantly lower in the graph format compared to a table presentation of the BSC. Performance ratings were significantly higher for the scenario where the manager failed to meet only financial perspective targets but exceeded targets for all other nonfinancial BSC perspectives, contrary to the usual predictions based on the financial measure bias. The evaluators reported that informativeness of the BSC was highest in the table or graph without summary measure formats, and, surprisingly, adding a summary measure to the graph format significantly reduced perceived informativeness compared to the table format. Decision efficiency was better for the graph formats (with or without summary measure) than for the table format. Originality/value Ours is the first study to compare tables, graphs with and without a summary measure in the context of managerial performance evaluations and to examine their impact on ratings, informativeness, and efficiency. We developed an original case to test the boundaries of the financial measure bias.

The Impact of Production Variance Presentation Format on Employees’ Decision Making

Abstract Purpose This paper proposes and tests a model to explain the outcomes of three different information presentation formats. Based on cognitive fit theory, information visualization formats that best fit task characteristics are expected to lead to improved decision-making outcomes. We apply the Judgment and Decision-Making framework (Bonner, 2008) to investigate how certain factors can impact decision quality. Design/methodology/approach This study tests whether certain production variance presentation formats (percentages, dollar amounts, and schematic faces), task complexity, understanding of the presentation format, motivation, and effort increase the accuracy of a supervisor’s bonus calculation. A total of 281 students and professionals participated in this experiment. Their responses were examined using regression analysis. Findings Our results indicate that individuals mostly prefer the percentages presentation format and that the use of the percentages presentation format, a lower level of task complexity, and a better understanding of the variance presentation format lead to more accurate calculations in the experimental task. Research implications Our study provides a call for further research on factors that influence the choice of presentation format as a potentially fruitful area for management accounting researchers. Practical implications We exhort practicing management accountants to exert direct influence on employees’ decision making through the use of variance presentation formats that fit their tasks and promote understanding. Originality/value Our experiment introduced two major innovations: it uses an interactive data visualization approach allowing subjects to select their preferred presentation format; and it focuses on production variances, a topic that has received less attention in the academic managerial accounting literature, but is still very relevant to practitioners.