Performance-measurement system design and functional strategic decision influence: The role of performance-measure properties

Although conceptual research in the accounting literature suggests that the use of performance-measurement systems affects the influence of organizational actors, empirical evidence for this suggestion is largely limited to anecdotal evidence and a few qualitative case studies. Drawing on institutional theory, we develop predictions that link the use of performance measures to the influence of functional subunits in strategic decision making. Our research model tests the effects of two types of performance-measure use on functional strategic decision influence: (1) decision-facilitating use and (2) use for accountability. Moreover, we propose that the effects of using performance measures for these two purposes depend on the reliability and functional specificity of the measures the functional subunits use. We empirically test our hypotheses and a research question with survey data from 192 marketing directors of German firms. We find that the effect of performance-measure use on functional strategic decision influence depends on the two properties of the performance measures. We find no significant effects when these properties are not considered. However, decision-facilitating use of performance measures has a positive effect on functional strategic decision influence when the measures are specific to the functional subunit. With respect to the use of performance measures for accountability we find countervailing effects, as the effect on functional strategic decision influence is positive when the measures are more reliable but negative when they are more specific to the functional subunit. We discuss these findings in light of existing evidence and theory.