Causality in a Performance Measurement Model: A Case Study in a Brazilian Power Distribution Company
STUDIES IN MANAGERIAL AND FINANCIAL ACCOUNTING - PERFORMANCE MEASUREMENT AND MANAGEMENT CONTROL: MEASURING AND REWARDING PERFORMANCE, Marc J. Epstein, Jean-François Manzoni, eds., Vol. 18, No. 1, pp. 273-299, Bingley, UK: Emerald Group Publishing Limited, 2008
Posted: 21 Aug 2007 Last revised: 19 Nov 2008
Date Written: January 2008
This study extends prior balanced scorecard research by incorporating the effects of uncertainty, payment schemes and the strength of causal relations proposed in the performance measurement model (PMM) on the budgetary dynamics. Our analysis was restricted to two strategic business units, engineering projects and electricity distribution service, from a Brazilian electric power concessionaire. We postulate a mediated moderation association between uncertainty (treatment), bonus scheme (mediator), dispersion of payment scheme and the strength of causal relations proposed in the PMM (moderators) on budgetary slack (outcome). Additionally, we postulate that the use of accounting based measures also mediates the effect of uncertainty on budgetary slack. We gathered monthly observations from 102 indicators containing the target and achievement values throughout 2002-2006. Managers were later asked to answer questionnaires about the possible cause-effect relations between these indicators, then 215 causal maps of the department and corporate indicators were drawn up. Econometric analysis provided evidence that the budgetary slack observed is directly impacted by uncertainty, and this impact is moderated by the dispersion of payment scheme. However, we did not find any evidence that supported the mediation process proposed between uncertainty, accounting-based measures and budgetary slack. Incomplete implementation of balanced scorecard and the level of analysis adopted are possible explanations for that.
Keywords: performance measurement, balanced scorecard, incentives, goals, field study
JEL Classification: L21, M41, M10
Suggested Citation: Suggested Citation