An experiential approach to learning about the balanced scorecard

The balanced scorecard (BSC) is an integrated strategic performance management framework that helps organizations translate strategic objectives into relevant performance measures. This paper offers guidelines for implementing an experiential approach to learning about the BSC through the study of “real-world” organizations. This approach emphasizes hands-on experience with the team-based, cross-functional, and strategic aspects of management accounting designed to address several educational objectives, including: understanding organizational strategy and critical success factors; gaining insight into how to measure performance; and developing oral presentation and team-building skills. Specific examples of classroom materials to facilitate implementation of this approach in management accounting courses at both graduate and undergraduate levels are also offered.     

The judgmental effects of strategy maps in balanced scorecard performance evaluations

We examine whether supplemental information displays affect decisions made using a common strategic performance measurement system, the balanced scorecard. A distinguishing feature of the balanced scorecard (BSC) is the number and diversity of its metrics. To effectively formulate a decision from such a complex information set, managers must view these measures within their strategic context ( [Kaplan and Norton, 1993] and [Kaplan and Norton, 1996] ). However, academic studies indicate that problems in communication and comprehension of the strategic logic underlying the scorecard hinder its implementation and use ( [Lipe and Salterio, 2000] , [Malina and Selto, 2001] , [Ittner et al., 2003a] and [Ittner et al., 2003b] ). We investigate whether a supplemental information display, in the form of a strategy map, results in performance evaluation judgments consistent with the recognition of relations between performance metrics and strategy. Strategy maps are causal diagrams depicting temporally-separate and non-linear relations between scorecard performance measures and overriding strategic objectives. As predicted, we find that performance evaluation decisions are more consistent with the achievement of strategic objectives when participants are provided with strategy maps.     

The impact of the corporate balanced scorecard on corporate control—A research note

The paper explores the adoption of the corporate balanced scorecard (CBSC) and its impact on corporate control of business units. Following interviews with senior corporate managers in 15 of Sweden's largest multinational companies, 8 were found to adopt CBSC. However, CBSC had little impact on control at the corporate level. Corporate control was financially focused in all the companies: mainly financial measures were important, standards were only set for financial measures and rewards were largely based on financial performance measures. Top management's need for simplicity and comparability internally, and capital market pressures motivated the financial focus.     

The impact of strategy communications, incentives and national culture on balanced scorecard implementation

Professionals are challenged daily with difficult decisions. Capital budgeting decisions are one type of difficult decision, especially in firms that embrace a Balanced Scorecard management philosophy. In these firms, the decision maker frequently must choose among multiple options on the basis of multiple criteria with no one option dominating across all criteria. Not only must the decision maker evaluate each option on each criteria, the decision maker also must weigh the relative importance of each criteria when making a final judgment. When faced with difficult decisions, decision makers will resort to various coping behaviors, such as decision avoidance or delay, status quo bias, deferral to others' preferences, or reliance on decision aids. In a Balanced Scorecard environment, one important type of decision aid is the strategy map. The ambiguity introduced by multiple options and multiple criteria also creates a condition in which the subjective biases of the decision-maker can easily manifest in the absence or despite decision aids. Among those potential biases are self-interests and national culture. In this study we examine the effects on capital budgeting decisions of two common types of strategy maps as well as incentive effects and national culture. An objective of Balanced Scorecard management practices is to overcome a common North American fixation on short-term financial outcomes. Recent research submits that an appropriate strategy map will facilitate that end by overcoming certain other cognitive limitations (such as fixation on common metrics). Our inquiry will examine whether biases related to self-interests and national culture persist in the presence of two common strategy maps. A behavioral experiment was conducted in which 140 MBA students from Spain and the U.S. with average work experience of 10 years participated. Findings were that significant fixation on short-term financial outcomes persists in the presence of one common strategy map, but not in the presence of an alternate common strategy map, and that incentive and national culture biases persist in the presence of both. In addition, all three experimental variables exhibited significance and equivalent influence, although prior research has only addressed the influence of incentives.     

Joint selection of balanced scorecard targets and weights in a collaborative setting

Information asymmetries may create problems in developing both the balanced scorecard (BSC) targets and weights. In practice, the process of assigning weights to performance measures can be challenging in terms of reaching a consensus between top management and divisional managers. In this research, we address the issues of target and weight selection using a collaborative decision-making model. Most of the previous research related to performance measurement has assumed self-interested agents. When weights are assigned subjectively, there is evidence in the literature of common-measure bias leading to BSC disagreement (conflict). We contribute to the literature by considering actor preferences in a novel approach that permits the parties jointly to determine optimal (or approximately optimal) BSC targets and weights.     

The American balanced scorecard versus the French tableau de bord: the ideological dimension

Much attention is currently given to strategic measurement systems, the balanced scorecard being by far the most highly profiled among them. The balanced scorecard has not, however, received a particularly warm welcome in France, where the tableau de bord has been used for at least 50 years. This paper investigates the ideological assumptions of the two methods, the aim being to explain the differences between them and investigate the extent to which the ideological assumptions are coherent with the local ideologies of American and French society, respectively. The paper concludes that the main differences between the balanced scorecard and the tableau de bord may be explained in terms of ideological assumptions, which means that, to a large extent, these management tools are coherent with the local ideologies in the countries of origin. In addition, this analysis provides some insight into the more general question of the transferability of management methods and the appropriateness of globalising management theories.     

Unobservable transfer price exceeds marginal cost when the manager is evaluated using a balanced scorecard

This study investigates the optimal level of transfer prices chosen by managers in a divisionalized firm when they are evaluated based on a balanced scorecard. A unique assumption of our model is that transfer prices are unobservable to a competing firm's managers. In contrast to the findings in several studies that examine strategic transfer pricing, this research shows that a manager who is evaluated using a balanced scorecard chooses a transfer price that exceeds marginal cost given a market competitor in a specific economic environment. This result is caused mainly by our model's assumption that a manager considers the competitor's profit in his/her in decision-making when the objective is to maximize long-term profit. This study makes a significant contribution to the strategic transfer pricing literature by showing that even if the transfer price is unobservable to rivals, the optimal transfer price exceeds marginal cost when the final product market is characterized by price competition, something not shown in previous analytical accounting research.     

20 years of studies on the balanced scorecard: Trends,accomplishments, gaps and opportunities for future research

Robert Kaplan and David Norton introduced the Balanced Scorecard in their 1992 Harvard Business Review article. 2012 marks 20 years since that article. This anniversary has motivated me to review the state of research on the balanced scorecard, to highlight gaps in that research and to outline some ideas for further research. To this end, I reviewed 114 articles published in 25 accounting journals and 67 articles in business and management journals in the period 1992–2011. The findings of this literature review are presented in three parts. First, the reviewed articles are categorised by topics, research settings, theories, research method, and primary data analysis techniques. Second, the contributions of research to the field and the lessons learned from these studies are discussed. Third, knowledge gaps in existing balanced scorecard research are identified, leading to consideration of several ideas for future research. The last section offers my final remarks.     

XVA analysis from the balance sheet

XVAs denote various counterparty risk related valuation adjustments that are applied to financial derivatives since the 2007–2009 crisis. We root a cost-of-capital XVA strategy in a balance sheet perspective which is key to identifying the economic meaning of the XVA terms. Our approach is first detailed in a static setup that is solved explicitly. It is then plugged into the dynamic and trade incremental context of a real derivative banking portfolio. The corresponding cost-of-capital XVA strategy ensures for bank shareholders a submartingale equity process corresponding to a target hurdle rate on their capital at risk, consistently between and throughout deals. Set on a forward/backward SDE formulation, this strategy can be solved efficiently using GPU computing combined with deep learning regression methods in a whole bank balance sheet context. A numerical case study emphasizes the workability and added value of the ensuing pathwise XVA computations.     

关于加强对跨境资本流动均衡管理的思考

随着季度金融数据的发布,国内再度引起了对热钱的热议。文章分析认为,由于任何开放经济都会面临跨境资本流动冲击,任何资本流动也部是逐利的,因此区分热钱、冷钱实际意义有限。同时,在很多情况下,套利是正常的财务运作,通常不应该一概加以限制。应对跨境资本流动的冲击,应从解决对外经济失衡人手,采取一揽子措施。     

The effects of task outcome feedback and broad domain evaluation experience on the use of unique scorecard measures

Prior research has found that division evaluators using balanced scorecards in a performance evaluation process relied almost solely on common measures and virtually ignored unique measures. Other studies have found certain situations in which measures that are unique to a particular division are not completely ignored. However, no study has addressed whether outcome feedback over a period of time can motivate evaluators to rely more on unique measures that are predictive of future financial results. Our study involving executives with varying levels of prior evaluation experience examines two factors that may lead to increased use of unique measures: task outcome feedback and broad domain evaluation experience. Results provide evidence of increased reliance on unique measures after multiple periods as evaluators receive outcome feedback showing the predictive value of these unique measures. Further, results indicate that unique measures are used more over time when the prior evaluation experience of the participants is relatively high.     

Effects of sterilising a balance of payments surplus on domestic yields—A formal analysis

This paper examines the effects of sterilising a surplus, using open market operations, on the level and structure of interest rates. The framework adopted is a portfolio balance model of the financial sector. The paper begins by assuming residents hold assets in only three forms—domestic money, domestic bonds, and foreign assets. Initially, the surplus emerges in one of three ways—the foreign interest rate falls, there is an exogenous inflow, or there is an ongoing current account surplus. The analysis is then extended to the case where there is some direct real investment. Finally, the model is refined to allow residents to hold four assets, including new equities.     

The effects of devaluation on the trade balance: A critical view and re- examination of Mile's ‘new results’

In a often cited article, Miles (1979) claims to have shown empirically the validity of the global monetarist proposition that devaluations do not affect the balance of trade. This paper first uses Mile's own framework of analysis to reveal serious deficiencies in his methodology and tests that cast doubt on the validity of his results. In a respecified trade balance equation, we show that devaluations do affect the trade balance in the traditionally predicted direction. The pivotal difference between the two specifications arises from our inclusion of relative-price effects and longer lag structure for the exchange-rate variable.     

The measurement of meaning in accounting: A critical analysis of the principal evidence

The process of communication between preparers and users of accounting information involves, in part, the sharing of meaning between those parties. Using the framework of Osgood et al. (The Measurement of Meaning, University of Illinois Press, 1957), Haried [The Semantic Dimensions of Financial Reports, Journal of Accounting Research (1972) pp. 367–391, and Measurement of Meaning in Financial Reports, Journal of Accounting Research (1973) pp. 117–145] provided a first attempt at the ‘measurement of meaning’ in accounting. Haried found that the structure within which meaning in accounting was held was different to the standard structure proposed by Osgood et al. (1957). Based on the results of measurements of meaning within this structure, Haried (1973) concluded that such measurements were not particularly relevant to accounting research. The present paper presents a critical re-analysis of Haried's (1973) own data. The results are inconsistent with Haried's and show that (1) the structure within which accounting meaning is held is, largely, consistent with the seminal work of Osgood et al. (1957); and, (2) the measured meaning of accounting concepts within that structure is consistent with expectations.     

Sterilization and the monetary approach to balance of payments analysis

The authorities can sterilize the balance of payments in both the short and long run if domestic capital markets are not fully integrated with those of the rest of the world. The degree of sterilization which the authorities employ is an important determinant of the economy's response to any outside changes.     

The effect of VATs on government balance sheets

The value-added tax, VAT, has become a popular means of raising funds for governments around the world. Countries seeking to reduce variation in tax revenues as well as raise revenue to solve deficits often consider a VAT, and the IMF in particular has become an advocate for the tax for countries seeking tax reform. For all its popularity, its ability to deliver on these promises remains understudied. Countries with a lower cost of raising funds may instead choose to spend more instead of paying down their debts. This paper uses matching techniques to estimate the impact of a VAT on government debts and deficits. The tax is associated with falls in central government debt and deficits as well as expenditures as a share of GDP. There is limited evidence of increases in tax revenue and increases in stability of government spending. The choice of VAT rate is positively correlated with deficit reduction, and the effects of the tax are heterogeneous with respect to the probability of adoption of the treatment and what taxes it is replacing.     

Accounting on trial: The critical legal studies movement and its lessons for radical accounting

It is now time, after a decade of development, to take stock of the growing, varied, interdisciplinary Critical Accounting movement appearing in the pages of Accounting, Organizations and Society and elsewhere throughout the 1980s. Critical Accounting bears remarkable resemblance to the highly important Critical Legal Studies movement (or CLS) in American academic law. This paper introduces CLS to accounting audiences and surveys Critical Accounting from the perspective of its larger, older, more fully articulated, more radical and more divisive legal cousin. This paper argues that if Critical Accounting continues to share CLS's theoretical and intellectual stance, but not its targeted critical practice and institutional or political stance, Critical Accounting is destined to remain an interesting sidelight rather than a fully articulated theory of accounting. Finally, this paper comments on existing Critical Accounting work from a CLS perspective, and suggests new directions for Critical Accounting as an intellectual movement.     

A note on the optimal control of a cash balance problem

This paper provides an analytical solution to a cash management problem when cash income and demand are described by Compound Poisson processes. The paper generalizes past results in the cash management literature to arbitrary income and demand distribution functions. Further, our results can be applied as well in the area of banking. Throughout the paper we restrict attention to the family of control barrier policies. These consist in hedging cash up to a critical level and investing all incoming cash exceeding this level. We employ a long-run average cost criterion to determine an optimal control barrier. A diffusion approximation of the cash level process (income less demand) is used to obtain a simpler expression for the average cost and to yield a closed form solution to the optimal control barrier. For demonstration purposes, an example is resolved.     

The formalisation of work thesis: a critical evaluation

The aim of this paper is to evaluate critically the popular prejudice that economic development is characterised by a natural and inevitable shift of economic activity from the informal to the formal sphere which culminates in full-employment (the formalisation of work thesis). We show not only that this end-state has never been achieved in most advanced economies but that some nations have now moved into a ‘post-formalisation' stage of economic development characterised by informalisation. Drawing upon new empirical evidence from Southampton in the UK, the view that informalisation is due to marginalised populations adopting informal survival strategies out of economic necessity is refuted. Instead, informal work is found to be higher in employed households who conduct such work for mostly non-economic reasons. In consequence, we argue that unless it is accepted that societies are moving into an era of informalisation and policies embraced which recognise this shift, then many will be left excluded not only from employment but also from informal coping strategies.