Michael L. Roberts

Individual Performance Measures: Effects of Experience on Preference for Financial or Non-Financial Measures

Abstract Purpose Prior research identified conflicts in implementing performance measurement systems that include both financial and non-financial measures. Attempts to incorporate non-financial measures, for example, balanced scorecards (BSCs), have shown short-term success, only to be replaced with systems that rely on financial measures. We develop a theoretical model to explore evaluators’ choice and use of the most important performance measurement criterion among financial and non-financial measures. Methodology/approach Our model links participants’ prior evaluation experiences with their attitudes about relative accounting qualities and with their choice of the most important performance measure. This choice subsequently affects their evaluation judgments of managers who perform differentially on financial versus non-financial measures. Findings Experimental testing of our structural equation model indicates that it meets the accepted goodness of fit criteria. We conclude that experience has an influence on choice of performance measures and on decision heuristics in making such evaluations. We suggest that an “experience gap” must be considered when deciding which performance metrics to emphasize in scorecards or similar performance reports. We analyzed four accounting qualities, importance, relevance, reliability, and comparability and found that importance, relevance, and reliability have strong effects on how managers prioritize and use accounting measures. Originality/value We conducted our study in a controlled, experimental setting, including participants with diverse experiences. We provide direct evidence of participants’ experience and attitudes about the relative accounting qualities of financial and non-financial measures which we link to their choice of the most important performance measure. We link this choice to their performance evaluations.

Effects of Experience, Task Specific Information, and Risk on Tax Professionals’ Judgments

This research examines whether (1) less experienced tax accountants exhibit a pro-client bias (a tendency to conclude a client-favorable [unfavorable] outcome is more [less] likely as compared to more experienced tax accountants’ judgments), (2) whether task-specific declarative information (a summary of relevant IRC and Congressional intent) can reduce this bias, and (3) whether tax seniors and managers can make judgments similar to partner experts in a closed-cue judgment situation as suggested by prior research in medical decision making. The results show tax seniors judge taxability significantly less likely when the facts are against the client or neutral than both tax managers and partners. This pro-client bias is significantly reduced when the seniors are provided with relevant declarative information. In contrast, tax managers are able to make taxability judgments similar to the partner experts across all three risk conditions. I discuss implications for training, practice management, and future research.

An efficient method for acquiring auditing procedural knowledge

In light of advances in the theory of cognition (Anderson, 1996, 2000; Anderson & Fincham, 1994; Anderson & Lebiere, 1998) and research on learning from worked examples (Atkinson et al., 2000; Cooper & Sweller, 1987; Sweller & Cooper, 1985), this study extends earlier research findings that auditors need practice and certain kinds of feedback to acquire procedural knowledge to identify causes of variations between expected and actual financial ratios. We test an alternative form of instruction: worked examples. As predicted by Andersons ACT-R 4.0 theory, the results indicate individuals’ pre-test declarative knowledge interacts significantly with learning method (with or without examples) on procedural knowledge acquisition. In contrast to prior findings, this study shows that improvements in auditing procedural knowledge can be achieved by passive instruction in worked examples, a potentially more efficient (cost-effective) method than practice and feedback for auditor training.

Évaluation de la performance des managers : L'effet de l'ordre de présentation et de l'importance relative des indicateurs financiers et non financiers

Debate on the weight of financial vs. non financial indicators in performance measurement process is still going on. The purpose of this research is to examine, experimentally, factors that influence whether corporate managers exhibit bias toward financial versus nonfinancial corporate performance measures. First, we manipulated presentation order of financial and nonfinancial measures to test whether cognitive processing limits result in decision makers placing more weight on the first few items presented. Second, we manipulated the importance of the financial performance measures to examine whether prior mixed results of financial measures bias among corporate managers can be explained by differences in the relative importance of the particular set of financial and nonfinancial measures.