Do we measure what we get?

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Do we measure what we get?

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Jennifer Kunz

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Jennifer Kunz

Abstract

Performance measures shall enhance the performance of companies by directing the attention of decision makers towards the achievement of organizational goals. Therefore, goal congruence is regarded in literature as a major factor in the quality of such measures. As reality is affected by many variables, in practice one has tried to achieve a high degree of goal congruence by incorporating an increasing number of these variables into performance measures. However, a goal congruent measure does not lead automatically to superior decisions, because decision makers’ restricted cognitive abilities can counteract the intended effects. This paper addresses the interplay between goal congruence and complexity of performance measures considering cognitively-restricted decision makers. Two types of decision quality are derived which allow a differentiated view on the influence of this interplay on decision quality and learning. The simulation experiments based on this differentiation provide results which allow a critical reflection on costs and benefits of goal congruence and the assumptions regarding the goal congruence of incentive systems.

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Paper provided by Department of Finance, Goethe University Frankfurt am Main in its series Working Paper Series: Finance and Accounting with number 188.

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Date of creation: Jun 2008
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Handle: RePEc:fra:franaf:188

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Find related papers by JEL classification:
M10 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - General
M41 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Accounting

This paper has been announced in the following NEP Reports:

NEP-ACC-2008-07-14 (Accounting & Auditing)
NEP-ALL-2008-07-14 (All new papers)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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Other versions:
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