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Formal Measures in Informal Management: Can a Balanced Scorecard Change a Culture?

Author

Listed:
  • Robert Gibbons
  • Robert S. Kaplan

Abstract

We extend traditional agency theory by exploring the roles for formal measures when managerial behavior is not governed by rules, formulas, or contracts. Part I describes relational incentive contracts with informal weights on formal performance measures. More importantly, it also explores how formal measures could be used in models of informal management, such as adaptation and coordination, politics and influence, leadership, and informal authority. Part II considers the benefits from allowing key stakeholders to develop their own, potentially inferior, performance measures. The collaboration to create a "balanced scorecard" of performance measures can help change an organization's culture.

Suggested Citation

  • Robert Gibbons & Robert S. Kaplan, 2015. "Formal Measures in Informal Management: Can a Balanced Scorecard Change a Culture?," American Economic Review, American Economic Association, vol. 105(5), pages 447-451, May.
    • Handle: RePEc:aea:aecrev:v:105:y:2015:i:5:p:447-51
    Note: DOI: 10.1257/aer.p20151073
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    References listed on IDEAS

    as
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    Cited by:

    1. Chih-Chao Chung & Li-Chung Chao & Chih-Hong Chen & Shi-Jer Lou, 2016. "A Balanced Scorecard of Sustainable Management in the Taiwanese Bicycle Industry: Development of Performance Indicators and Importance Analysis," Sustainability, MDPI, vol. 8(6), pages 1-21, May.
    2. Claude Ménard, 2018. "Organization and governance in the agrifood sector: How can we capture their variety?," Agribusiness, John Wiley & Sons, Ltd., vol. 34(1), pages 142-160, December.
    3. Bei Liu & Hong Chen & Shiyan Jiang & Qingqing Sun, 2021. "Why Can’t I Work in a Green Way? Research on the Influencing Mechanism of Employees’ Labor Intentions," Sustainability, MDPI, vol. 13(20), pages 1-13, October.
    4. Volker Stein & Arnd Wiedemann, 2016. "Risk governance: conceptualization, tasks, and research agenda," Journal of Business Economics, Springer, vol. 86(8), pages 813-836, November.
    5. Giuliano Carlo Rainatto & Orlando Roque Silva & Norberto Almeida de Andrade & Evandro de Almeida & Pedro Dornas Cipriani & Thiago Saboya & Rodrigo Teixeira Conceicao & Wellington Fernando Bastos, 2021. "A New Proposal for Innovation Indicators: A Study of the World’s Largest Patent Producing Countries," International Journal of Business and Management, Canadian Center of Science and Education, vol. 15(4), pages 201-201, July.
    6. Anja Prummer, "undated". "Discrimination in Promotion," Working Papers 905, Queen Mary University of London, School of Economics and Finance.
    7. Graham, John R. & Grennan, Jillian & Harvey, Campbell R. & Rajgopal, Shivaram, 2022. "Corporate culture: Evidence from the field," Journal of Financial Economics, Elsevier, vol. 146(2), pages 552-593.
    8. Margaret A. Abernethy & Chung-Yu Hung & Laurence van Lent, 2020. "Expertise and Discretionary Bonus Decisions," Management Science, INFORMS, vol. 66(1), pages 415-432, January.
    9. Ola Kvaløy & Trond E. Olsen, 2023. "Balanced Scorecards: A Relational Contract Approach," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 61(2), pages 619-652, May.
    10. Tran, Thanh & Nguyen, Harvey & Pham, Mia Hang, 2025. "Do financial markets value corporate culture?," International Review of Financial Analysis, Elsevier, vol. 98(C).
    11. Margaret A. Abernethy & Jan Bouwens & Christian Hofmann & Laurence Lent, 2023. "Altruism, social norms, and incentive contract design," Review of Accounting Studies, Springer, vol. 28(2), pages 570-614, June.
    12. Demartini, Maria Chiara & Otley, David, 2020. "Beyond the system vs. package dualism in Performance Management Systems design: A loose coupling approach," Accounting, Organizations and Society, Elsevier, vol. 86(C).
    13. Juan‐José Ganuza & Fernando Gomez, 2022. "Designing relational sanctions in buyer–supplier relationships," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(2), pages 470-491, April.
    14. Kopytova, Iryna & Zelinska, Antonina, . "Оцінка Ефективності Діяльності Управлінського Персоналу : Зміст І Соціально-Психологічні Аспекти," Agricultural and Resource Economics: International Scientific E-Journal, Agricultural and Resource Economics: International Scientific E-Journal, vol. 3(3).
    15. Mitra, Sovan & Lim, Sungmook & Karathanasopoulos, Andreas, 2019. "Regression based scenario generation: Applications for performance management," Operations Research Perspectives, Elsevier, vol. 6(C).

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    More about this item

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management

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