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Assessing the Performance of Business Unit Managers

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  • JAN BOUWENS
  • LAURENCE VAN LENT

Abstract

ABSTRACT Using a sample of 140 managers, we investigate the use of various performance metrics in determining the periodic assessment, bonus decisions, and career paths of business unit managers. We show that the weight on accounting return measures is associated with the authority of these managers, and we document that both disaggregated measures (expenses and revenues), and nonfinancial measures play a greater role as interdependencies between business units increase. The results suggest separate and distinct roles for different types of performance measures. Accounting return measures are used to create the proper incentives for managers with greater authority, while disaggregated and nonfinancial measures are employed in response to interdependencies. Copyright University of Chicago on behalf of the Institute of Professional Accounting, 2007.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Accounting Research.

Volume (Year): 45 (2007)
Issue (Month): 4 (09)
Pages: 667-697

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Handle: RePEc:bla:joares:v:45:y:2007:i:4:p:667-697

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References

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  10. Scott Keating, A., 1997. "Determinants of divisional performance evaluation practices," Journal of Accounting and Economics, Elsevier, vol. 24(3), pages 243-273, December.
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  15. Chenhall, Robert H., 2005. "Integrative strategic performance measurement systems, strategic alignment of manufacturing, learning and strategic outcomes: an exploratory study," Accounting, Organizations and Society, Elsevier, vol. 30(5), pages 395-422, July.
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Citations

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Cited by:
  1. Catherine Thomas, 2011. "Too Many Products: Decentralized Decision Making in Multinational Firms," American Economic Journal: Microeconomics, American Economic Association, vol. 3(1), pages 280-306, February.
  2. Allan Hansen, 2011. "Relating performative and ostensive management accounting research: Reflections on case study methodology," Qualitative Research in Accounting & Management, Emerald Group Publishing, vol. 8(2), pages 108-138, June.
  3. Stancic, Predrag & Todorovic, Miroslav & Cupic, Milan, 2012. "Value-Based Management and Corporate Governance: a Study of Serbian Corporations," MPRA Paper 42202, University Library of Munich, Germany.
  4. Daron Acemoglu & Philippe Aghion & Claire Lelarge & John Van Reenen & Fabrizio Zilibotti, 2006. "Technology, Information and the Decentralization of the Firm," NBER Working Papers 12206, National Bureau of Economic Research, Inc.
  5. Noeverman, J., 2010. "Not Just Because it is Fair - The Role of Feedback Quality and Voice in Performance Evaluation," ERIM Report Series Research in Management ERS-2010-048-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
  6. Ariela Caglio & Angelo Ditillo, 2012. "Interdependence and accounting information exchanges in inter-firm relationships," Journal of Management and Governance, Springer, vol. 16(1), pages 57-80, February.
  7. Grafton, Jennifer & Lillis, Anne M. & Widener, Sally K., 2010. "The role of performance measurement and evaluation in building organizational capabilities and performance," Accounting, Organizations and Society, Elsevier, vol. 35(7), pages 689-706, October.
  8. Tetlock, Philip E. & Vieider, Ferdinand M. & Patil, Shefali V. & Grant, Adam M., 2013. "Accountability and ideology: When left looks right and right looks left," Organizational Behavior and Human Decision Processes, Elsevier, vol. 122(1), pages 22-35.
  9. Predrag Stančić & Miroslav Todorović & Milan Čupić, 2012. "Value-Based Management And Corporate Governance: A Study Of Serbian Corporations," Economic Annals, Faculty of Economics, University of Belgrade, vol. 57(193), pages 93-112, April- Ju.

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