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Strategy Selection, Surrogation, and Strategic Performance Measurement Systems

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  • JONGWOON (WILLIE) CHOI
  • GARY W. HECHT
  • WILLIAM B. TAYLER

Abstract

Strategic performance measurement systems operationalize firm strategy with a set of performance measures. A consequence of such alignment is the tendency for managers to lose sight of the strategic construct(s) the measures are intended to represent, and subsequently act as though the measures are the constructs of interest, a phenomenon referred to as surrogation. We investigate how involvement in strategy selection affects managers’ propensity to exhibit surrogation. We predict and find that strategy selection reduces surrogation. Surprisingly, we do not find that engaging in strategy deliberation, a key process underlying strategy selection, reduces surrogation. Thus, managers’ involvement in the actual choice of strategy appears to be both a necessary and sufficient condition to mitigate surrogation. Our paper broadens understanding of factors that influence surrogation, such as the effects of different aspects of managers’ strategic involvement and buy‐in. Further, by documenting how managers behave within (as opposed to simply with) strategic performance measurement systems, we highlight the potential for managers to endogenously influence the effectiveness of such systems.

Suggested Citation

  • Jongwoon (Willie) Choi & Gary W. Hecht & William B. Tayler, 2013. "Strategy Selection, Surrogation, and Strategic Performance Measurement Systems," Journal of Accounting Research, Wiley Blackwell, vol. 51(1), pages 105-133, March.
    • Handle: RePEc:bla:joares:v:51:y:2013:i:1:p:105-133
    DOI: 10.1111/j.1475-679X.2012.00465.x
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    References listed on IDEAS

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    2. Luft, Joan, 2016. "Management accounting in the laboratory and in social context: Four contrasts, 1975–2014," Accounting, Organizations and Society, Elsevier, vol. 49(C), pages 9-20.
    3. Lisa-Marie Wibbeke & Maik Lachmann, 2020. "Psychology in management accounting and control research: an overview of the recent literature," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 31(3), pages 275-328, September.
    4. Andrew H. Newman & Ivo D. Tafkov & Flora Hailan Zhou, 2020. "The Effects of Incentive Scheme and Task Difficulty on Employees' Altruistic Behavior Outside the Firm†," Contemporary Accounting Research, John Wiley & Sons, vol. 37(3), pages 1512-1535, September.
    5. Reinking, Jeff & Arnold, Vicky & Sutton, Steve G., 2020. "Synthesizing enterprise data through digital dashboards to strategically align performance: Why do operational managers use dashboards?," International Journal of Accounting Information Systems, Elsevier, vol. 37(C).
    6. Reinking, Jeff & Arnold, Vicky & Sutton, Steve G., 2020. "Synthesizing enterprise data to strategically align performance: The intentionality of strategy surrogation," International Journal of Accounting Information Systems, Elsevier, vol. 36(C).

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