The Balanced Scorecard: Judgmental Effects of Information Organization and Diversity

Abstract

This paper examines the judgmental effects of the balanced scorecard. The balanced scorecard contains a large number of financial and nonfinancial performance measures divided into four categories. Based on judgment and decision making theory we examine whether the organization of the information and the diverse (common and unique) measures contained in the scorecard result in differences in managerial performance evaluation judgments. We find that relative performance evaluations are affected by organizing the measures into the balanced scorecard categories. Further, when scorecards for two divisions contain some common and some unique measures, performance evaluations are affected only by the common measures.

JEL Classification: M46