Peter F. Luckett

Feedback and management accounting: A review of research into behavioural consequences

Abstract While feedback has been viewed as a central component of an organizations management accounting and control system, much of the research on system design has not explicitly considered the behavioural consequences of providing organizational members with feedback. In order to redress this situation, this paper reviews some of the research conducted in psychology, as well as related work in accounting, in order to identify future research opportunities. In particular, issues relating to (a) the psychological closeness, credibility and power of feedback sources, (b) the sign, frequency and type of feedback messages, and (c) the individual differences of locus of control and self-esteem, are discussed. In the case of sources of feedback, particular attention is paid to the interpersonal relationships betweeen superiors and subordinates and between managers and accountants. Furthermore, the review of the literature reveals that the feedback phenomenon is a complex one. Thus it is argued that care must be exercised in making both predictions about the impact of feedback and general statements about feedback effectiveness. In order to place the complexity in perspective, a contingency view is taken and the relevance of certain contingency factors, when investigating the behavioural consequences of feedback in accounting settings, is discussed. Finally, several avenues for future research into feedback in management accounting are identified and described.

Effects of Feedback and Task Predictability onTask Learning and Judgment Accuracy

This study examines the effect of different types of feedback on task learning and judgment accuracy across different levels of task predictability. The results of a laboratory study show that outcome feedback, alone, and in combination with task properties feedback, promotes judgment accuracy for both high and medium levels of task predictability. The beneficial impact of outcome feedback resulted from learning effects. Specifically , the outcome feedback improved judgment accuracy because of improved task knowledge and, in contrast to previous psychology research, it did not cause a deterioration in judgment consistency where task predictability was less than perfect. The results suggest that the negative effects of outcome feedback on judgment accuracy found in the psychology literature, where task predictability is less than perfect, may be limited in accounting settings where judges have experience with the task.

Data Fixation and the Use of Traditional Versus Activity‐Based Costing Systems

An important debate in the contemporary accounting literature relates to the relative merits of activity-based versus volume-based product costing methodologies. Traditional volume-based costing systems are said to be flawed and may seriously mislead strategic decision making. Such arguments assume that decision makers use such information in an unproblematic way. This article reports on an experiment designed to investigate whether decision makers are able to overcome data fixation in a setting involving the use of product cost information. In response to criticisms of previous accounting studies of data fixation, subjects received some feedback after each decision, and were rewarded based on performance. The experiment involved subjects making a series of production output decisions based on detailed case information of a hypothetical firm facing different market conditions for each decision. A between-subjects design was utilized with two cost system treatments: activity-based costing (ABC) and traditional costing (TC). It was hypothesized that the group provided with ABC cost data would make ‘optimal’ decisions and the group provided with TC cost data would overcome fixation. The results of the experiment indicated that there was, in general, evidence of data fixation among TC subjects, but a small number of subjects did adjust to ABC costs. These results are discussed in the light of previous research and some future directions are outlined.

The effects of understanding rules and a worked example on the acquisition of procedural knowledge and task performance

Previous research (for example, Bonner and Walker, 1994) has investigated the impact of alternative forms of instruction and practice on both the acquisition of procedural knowledge and task performance. Responding to the call to consider alternative forms of instruction, this study reports the results of an experiment designed to distinguish between the effects of understanding rules and a worked example. Worked examples (such as previously prepared working papers, analysis sheets and spreadsheet templates) are of particular interest as they constitute an important source, frequently used by novice accountants, for understanding and performing various tasks. The results indicate that understanding rules increase task performance through the acquisition of procedural knowledge, while a worked example provides task-specific heuristics that increase task performance but not procedural knowledge. The different benefits of the two forms of instruction emphasise the importance of matching instruction methods to learning objectives. Furthermore, combining the two forms of instruction lead to the highest levels of task performance even with limited practice and no feedback. JEL classification: I20; M41

The impact of feedback on inter-rater agreement and self insight in performance evaluation decisions

Abstract Previous research on staff performance evaluation decisions in audit firms has indicated low inter-rater agreement and suggested that improvements may be achieved by providing raters with information about the firms official policy weighting system. In this study the impact of outcome feedback, task properties feedback and a combination of both types of feedback on inter-rater agreement, conformity with the official policy weighting system and self insight were investigated. Results of a laboratory experiment, using 48 subjects from an audit firm, indicated that feedback improved inter-rater agreement and conformity with the official policy weighting system but did not improve self insight.