Investigating causality relationship of balanced scorecard, bonus, and managers’ time allocation: An experimental study

Download This Article

This work is licensed under a Creative Commons Attribution 4.0 International License.

Abstract

This study investigates the causal relationship between a comprehensive reporting system (balanced scorecard — BSC) and managerial time allocation when incentives are involved. The study examines whether managers adjust their time according to different performance areas when both financial and non-financial indicators are used for evaluation and reward. An experimental methodology was employed, involving managers from private and state-owned enterprises in Indonesia. The data were analyzed using analysis of variance (ANOVA). The findings indicate that managers do not spend more time on non-financial areas when a BSC is used, and do not spend less time on financial areas when bonuses are based on both financial and non-financial goals. These results challenge agency theory, which suggests that performance-based incentives align managerial behavior with organizational objectives. The study concludes that BSC and financial incentives do not significantly affect managerial time allocation as expected. Overall, the results of the research support Lipe and Salterio (2000), and Ullrich and Tuttle (2004), but the study also highlights that additional factors may need to be considered to fully understand how incentives and reporting systems influence managerial behavior. This paper contributes to the understanding of performance measurement and incentive systems in Indonesian enterprises by offering ideas for the design of effective management control systems.

Keywords: Balanced Scorecard, Bonus, Performance

Authors’ individual contributions: The Author is responsible for all the contributions to the paper according to CRediT (Contributor Roles Taxonomy) standards.

Declaration of conflicting interests: The Author declares that there is no conflict of interest.

JEL Classification: M410, M400, M490

Received: 09.03.2024
Accepted: 10.09.2024
Published online: 13.09.2024

How to cite this paper: Dewi, F. G. (2024). Investigating causality relationship of balanced scorecard, bonus, and managers’ time allocation: An experimental study. Corporate Board: Role, Duties and Composition, 20(2), 111–119. https://doi.org/10.22495/cbv20i2art11