Strategy Selection, Surrogation, and Strategic Performance Measurement Systems

Forthcoming, Journal of Accounting Research

48 Pages Posted: 16 Aug 2011 Last revised: 6 Jul 2012

See all articles by Willie Choi

Willie Choi

University of Wisconsin - Madison

Gary Hecht

University of Illinois at Urbana-Champaign

William B. Tayler

Brigham Young University

Date Written: July 4, 2012

Abstract

Strategic performance measurement systems operationalize firm strategy with a set of performance measures. A consequence of such alignment is the tendency for managers to lose sight of the strategic construct(s) the measures are intended to represent, and subsequently act as though the measures are the constructs of interest, a phenomenon referred to as surrogation. We investigate how involvement in strategy selection affects managers’ propensity to exhibit surrogation. We predict and find that strategy selection reduces surrogation. Surprisingly, we do not find that engaging in strategy deliberation, a key process underlying strategy selection, reduces surrogation. Thus, managers’ involvement in the actual choice of strategy appears to be both a necessary and sufficient condition to mitigate surrogation. Our paper broadens understanding of factors that influence surrogation, such as the effects of different aspects of managers’ strategic involvement and buy-in. Further, by documenting how managers behave within (as opposed to simply with) strategic performance measurement systems, we highlight the potential for managers to endogenously influence the effectiveness of such systems.

Keywords: strategic performance measurement systems, surrogation, strategy selection, buy-in

Suggested Citation

Choi, Jongwoon and Hecht, Gary and Tayler, William B., Strategy Selection, Surrogation, and Strategic Performance Measurement Systems (July 4, 2012). Forthcoming, Journal of Accounting Research, Available at SSRN: https://ssrn.com/abstract=1910383 or http://dx.doi.org/10.2139/ssrn.1910383

Jongwoon Choi

University of Wisconsin - Madison ( email )

Wisconsin School of Business
975 University Avenue
Madison, WI 53706
United States

Gary Hecht (Contact Author)

University of Illinois at Urbana-Champaign ( email )

601 E John St
Champaign, IL 61820
United States

William B. Tayler

Brigham Young University ( email )

Brigham Young University
519 TNRB
Provo, UT 84602
United States
(801) 422-5972 (Phone)
(801) 422-0621 (Fax)

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