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European Management Journal (2012) xxx, xxx– xxx

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Design issues in Balanced Scorecards: The ‘‘what’’
and ‘‘how’’ of control
Deborah Agostino *, Michela Arnaboldi

Dipartimento di Ingegneria Gestionale, Politecnico di Milano, Via Lambruschini 4b, 20156 Milano, Italy

KEYWORDS Summary The design and use of Performance Measurement Systems (PMS) have been
Performance Measure- widely investigated in management studies. However, recent work has highlighted the
ment System; potential importance of treating design and use not as separate dimensions, but rather
Balanced Scorecard; as mutually entangled features, calling for further research into their interaction. Focus-
Control style; ing on a specific, widely adopted performance technique, the Balanced Scorecard (BSC),
Diagnosis; this study explores how use of the PMS is interrelated with its design dimension. In inves-
Interaction tigating PMS use, a distinction between diagnostic and interactive control is adopted as a
framework of analysis. At the empirical level, the research is based on a two year multiple
case study of seven Italian companies.
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Introduction of organisational and contextual variables on the design of
the PMS, and its effects on performance outcomes. More re-
Both the design and use dimensions of Performance Mea- cently, the attention of scholars has been catalysed by the
surement Systems (PMSs) have been widely explored by topic of PMS use, with researchers striving to understand
managerial and accounting scholars (Broadbent & Laughlin, how managers use, or might use, the information provided
2009; Ferreira & Otley, 2009a; Li & Tang, 2009; Otley, by a PMS (Nilsson & Kald, 2002; Tuomela, 2005; Wouters,
1999). A PMS is defined as a set of mechanisms and pro- 2009), and the determinants of these different uses (Henri,
cesses used by an organisation to identify key objectives 2006a; Hoques & James, 2000; van Veen-Dirks, 2010;
and support the implementation of actions, planning, Verbeeten & Boons, 2009).
measurement, control, rewarding and learning (Ferreira & The above studies have investigated the determinants of
Otley, 2009a). Research on PMS design has mainly sought PMS design and use separately, finding evidence that both
to investigate how to define the PMS best suited to an these dimensions, here conceptualised as ‘‘what’’ and
organisationÕs characteristics, with a view to augmenting ‘‘how’’, influence the operation of the PMS. Yet, though it
performance effectiveness (see Chenhall, 2003 for a is recognised that the diversity of measurement and their
review). To this end, such studies have analysed the impact use are ‘‘two closely intertwined dimensions of PMSs that
must be examined specifically’’ (Henri, 2006a, p. 97), re-
* Corresponding author. Tel.: +39 02 23994073; fax: +39 02 search to date has overlooked the interaction between
23992720. them. PMS design has recently been investigated jointly
E-mail address: (D. Agostino). with its use (see for example Ahrens & Chapman, 2004; de

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Please cite this article in press as: Agostino, D., & Arnaboldi, M., Design issues in Balanced Scorecards: The ‘‘what’’ and ‘‘how’’ of control,
European Management Journal (2012), doi:10.1016/j.emj.2012.02.001

M. and give rise to heterogeneity in how the the fact that the studies in question simultaneously investi. results are measured and any needed corrective actions features. 2004. Earlier studies adopting this perspective indi- (2009b) instead emphasise the prominent role of use. p. other case studies acknowledge that (Lipe & Salterio. Henri. ent contingencies affect the PMS design and its ensuing per- tive control. investigating the association be- empirically assessing how the aspects of PMS design and tween contextual factors. pressures and pur- from ‘‘hard’’ contingency testing (Chapman. gated PMS design and use.emj. . is based on the notion that PMSs are not invariant. doi:10. & investigated. which was then brought to a wider audi- to the BSC design? We empirically address this question in ence by Simons (1995). on budgeting. providing an explanation of how differ- SimonsÕ (1995) distinction between diagnostic and interac. ranging from stakeholder theory as the predominant factor shaping the appropriateness of (Atkinson. Using a longitudinal Theoretical background and conceptual case study in a restaurant chain. Interactive systems instead support double-loop the concepts of design and use specifically for the BSC. 2009). Malmi. 1980). 1977). focusing specifically on a widely adopted technique: ‘‘design of organisational controls play a crucial role in fit. PMS design or use. we present previous studies on are involved only when results deviate from the established the design and use of PMSs. These findings have been Building upon ‘‘loose’’ contingency (Chapman. 35). 1980). 159) searcher (Otley. related use (Otley. Otley. 1998.001 . thereby treating design spectives of analysis. These studies suggest that the use. More specifically. size. When the aim is to investigate the factors that drive the way in which a PMS is used entrains differences in per. (Fink. which associated with a predominance of financial measures. sions in the field. Design issues in Balanced Scorecards: The ‘‘what’’ and ‘‘how’’ of control. plans implemented. 1991). In contrast. Marr. effectiveness. 2009b. reference to four attributes emerging from the previous For what concerns PMS use. at the end of a given per- styles of use (diagnostic or interactive). Siebe. ings.] even standard accounting reports can be used in the determination of target levels and the reward system many different ways in performance evaluation. allowing managers to simultaneously pursue This study explores the interaction between PMS design and efficiency and flexibility. Speckbacher. Diagnostic control corresponds to a identify two distinct types of Balanced Scorecards. exception control (Simons. European Management Journal (2012). Ferreira and Otley organisation. [. Waterhouse & Tissen. characterised as diagnostic or interactive. to behavioural theory a PMS. high. design choices and performance use are interrelated. instead shaped by the individual circumstances of each nance of non-financial measures. their interpretation and precise use is the out- choice of a ‘‘loose’’ contingency approach was driven by come of a personal. cate that organisational and contextual factors.. because top managers der of this paper. and are while a strategic use is mainly characterised by a predomi.1016/j. followed by a discussion of the results of the case interaction between design and use. Previous ting organisational behaviour to organisational goals’’ (de studies on PMS design or use have employed a variety of per- Haas & Kleingeld. These contributions have enriched the previ- formance measurement technique. Henri (2006a) found that 2003). in which he recognised that: financial performance measures. de Haas and Kleingeld (1999) propose a normative framework for designing a PMS that enables a specific type of use. ous literature with the concept of contingency fit (Van de ton. The balance between financial and non. 2003. beginning with HopwoodÕs (1972) seminal work Pfeiffer. & Arnaboldi. These contributions indirectly tackled the issue of plained. the majority of contributions draw on formance measures. providing assistance in identifying the purpose of explaining how we detected these dimen. thanks poses that are brought to bear by the managers using to a closer contact between the organisation and the re- data (Hopwood. 1978). 2003 for a review). p. Next. . 1992). 2000). Objectives we call Diag-BSC and Int-BSC. For example.g. For instance. the Balanced Scorecard (Kaplan & Norton. 1985). They call for active participation of Please cite this article in press as: Agostino. 234). Modell. taken. through a focus on a well-known per. 1980). Ahrens and Chapman perspective (2004) show how specific design principles foster an en- abling PMS use. 1997). which control framework based on a cybernetic model. PMS is implemented in practice (Chenhall. with learning (Argyris.02. emerging strategies. namely interactive.. Finally we draw some conclusions. the BSC (Kaplan & Nor. 1972. while the design dimension is analysed with formance outcomes. the topic has been widely BSC literature (e. 2000. Bischof. whether diagnostically or interactively.2012. 1997). Ferreira & Otley. Li & Tang. we and interactive styles. 2001. systems of belief. but overlooked their interaction. a monitoring use is contingency theory (see Chenhall. 2003). Through an in-depth investigation..2 D. 1999. p. technology. and different design iod. institutional theory (Brignall & Mod- ‘‘the use of the Management Control System (MCS) has the ell. we then go onto operationalise targets. 2009b. The are given. & Kuhle. Use is specifically investigated by adopting ven & Drazin. culture and strategy do mat- in PMS design. and. distinguishing between diagnostic least three years. and resource based view theory ability to counteract issues with MCS design’’ (Ferreira & Ot. but with mixed find. 2003). 2005. 1980. the cascading of the BSC. These mixed findings might be explained by ter in PMS design. studies. This approach is also known as management-by- The results of our research are discussed in the remain. while the accounting data PMS is used. and social process which is sustained the need for more accurate results than those obtainable by the meanings. Accordingly. Within associated with BSC measures are here related to how the the human consciousness. M. such as lighting how intensity of PMS use can counterbalance misfits environment. complemented by other contingency studies (Gerdin & the present work has the objective of theoretically and Greve. Lüneborg & Nielsen. D. associated with different are set. Arnaboldi Haas & Kleingeld. 1999. who conceptualised the style of con- seven non-financial firms that had been using a BSC for at trol relating to data use. Otley. Agostino. the research question investigated in this study is the following: how is the type This early contribution stimulated greater attention to of use. ley. the research methodology is ex- 2006a). First. 1992).

tigated the contingent role of organisational culture. extent to which BSC measures are used within the organisa. 2009b). strategy importance of financial and non-financial measures associ. Wouters (2009) instead focused on the use. PMSs are used to focus organisational Though there are no holistic investigations of this prob- attention.2 2004. p. in conjunction with use. (1995). doi:10. enacting an interactive style of ownership.. departmental tegic priorities. giving them the system design and use both impact on effectiveness.emj. Welker. enlarging the spectrum of contingency variables. openness and adaptability. transparency and employee on organisational learning. to con- More recently. Ferreira & Otley. Focus. cascading. They opportunity ‘‘to deal more effectively with the inevitable introduce the concept of design misfit to describe a Manage- contingencies in their work’’ (Ahrens & Chapman. distinguishing between to support them. Lib- reward. flexibility. namely production strategy. Henri (2006a) inves. identifying the 2004. by. Simons such as employee. adopting a ‘‘loose’’ contingency (Chapman. spect to the quality. based attributes: financial and non-financial measures. thereby enhancing dialogue dimensions to be linked to different aspects of PMS design and improving organisational performance. p. The above studies represent preliminary contributions tion. early that underscore the importance of investigating PMS design product lifecycle stage and weak market position are asso. Ahrens and Chapman (2004) have proposed strain operational managers. thus hinting at an interactive use. global transparency Adopting a wider perspective aimed at exploring the role means understanding where and how the local processes fit into the of management control systems (MCSs) in organisations that organization as a whole. values predominate. market/customer orientation or innovation) are asso. building on for evaluating intangible resources have an enabling effect employeesÕ professionalism. on spontaneity. and outside facilitators. Veen-Dirks (2010) found evidence that contingency in order to give managers more time to focus on their stra- variables. p. Expanding upon these views. and Ferreira providing capabilities for fixing them. and only indirectly: Ahrens and Chapman (2004). drive the control style with an explicit definition of goals. ment Control System (MCS) which has limitations with re- 271). tween the design elements of a PMS and its diagnostic or 2006b. the scorecard. and legiti. mance thanks to their intensity of use. the present work focuses on the interaction between diag- distinguishing between control values. customer or processes measures. van associating performance measures with the reward system. to facilitate dialogue among executives and managers about ciated with the use of non-financial performance measures. These contribu- and use. allowing experimentation.2012. in 2 Repair is associated with the breakdown of control processes.Design issues in Balanced Scorecards: The ‘‘what’’ and ‘‘how’’ of control 3 senior managers in managerial control. and critical success factors. we can draw some useful suggestions mate actions to a greater extent than when control values from SimonsÕ (1995) framework of diagnostic and interactive predominate.1016/j. suggests ing on performance measures in a production setting. based on predict. Fried (2010) developmental principles which foster this type of use: found evidence that non-financial performance measures experience-based. which allows several contextual in the target-setting process. ‘‘Coercive use refers repair. Shields & The increased attention given to understanding the Shields. We expand upon this by investigating four ing a holistic perspective for the study of PMSs. interactive use. and from previous studies more specifically focused on process for implementing a specific type of use-termed each individual design attribute. but also in an enabling manner another classification of uses. Ferreira and leave workers only limited scope for action. They provide evidence that organisational size. 1999. When flexible targets. internal transparency is and Otley (2009b) in the field of performance effectiveness. if four design characteristics are adopted: coercive and enabling styles of use. Furthermore. To our knowledge. D. there is a recognised need to better tions take some steps toward exploring the interactions be- understand the interaction between design and use (Henri.g. with detailed organisational rules that Drawing on the notion of contingency fit. Magner. (2004) discuss the concept of enabling use. and flexible values. and ciated with greater usage of the BSC. M. 1995.001 . highlighting the tionship between strategic learning and PMS. related to understanding working procedures. thereby also implying an expli- ated with two different uses: periodic evaluation and cit approach to target setting. nostic and interactive use with reference to four design ability. he associates the diagnostic interdependence and technological complexity. 271). in describing the diagnostic style of use. and reward system. the wider context of organisational structures. Please cite this article in press as: Agostino. and their regular design principles that foster this type of use. in order (e. Kaplan and Norton (2001) advocate cas- (2009) empirically demonstrate that strategic priorities cading the BSC down to individual business units. support strategic decision making. lem in the literature. Nonetheless. 2004. 276). suggesting that the Hoques and James (2000) searched for the contextual way in which MSCs are used may counterbalance limitations factors which impact on BSC use. internal transparency.02. aggregation and presentation Alongside these different conceptualisations of PMS use. Ahrens and Chapman discretion over the use of control processes (Ahrens & Chapman. 1997) approach. & Campbell.. global transparency and to the stereotypical top-down control’’ (Ahrens & Chapman. & Arnaboldi. They provide evidence several researchers have focused on investigating its deter. Other researchers (e. operationalised as the in the MCS design. also with a view to provid. formality and rigidity. They suggest involvement in face-to-face dialogue with subordinates.g. that MCSs with design misfits can still deliver high perfor- minants. scope. Verbeeten and Boons strategic control. of information to decision makers. that MCSs can be used not only in a coercive manner. Design issues in Balanced Scorecards: The ‘‘what’’ and ‘‘how’’ of control. Enabling use Otley (2009b) have investigated how management control instead puts the emphasis on employees. flexibility denotes organizational membersÕ pursue both flexibility and efficiency. In investigating the rela- enabling use-in operational settings. this question has been addressed by few stud- ies. 1998) have instead discussed the participative ap- determinants and consequences of PMS design and use has proach to budget setting as a way of involving employees yielded a broad picture. European Management Journal (2012).

other (e. 2004.2012. 2003). empha- acher et al.. in order to help mela (2005) instead. Ahn els and with different purposes of use (Malmi. Finnish companies ated with the BSC take place within the organisation?’’ On have BSCs with a number of performance measures ranging the strength of this definition. & Randall.02. tors (KPIs). the design decisions that occur at the time of the BSC imple- 2003. Agostino. The impor- investigation as embracing the ‘‘what’’: what choices man- tance of linking the PMS with a system of reward is long agers have to make when implementing the technology? recognised as fundamental to increase the motivation of More specifically. it has been widely adopted interlinked with each other (Speckbacher et al. 2003). 2001. The BSC is considered a significant technique to inves. & Arnaboldi. 2002. practice is characterised by wide variability in both the Operationally. Empirical studies Speckbacher et al. 2007).. The following section accordingly seeks to opera. 2006). but according to our definition of design it rep- alignment between the strategy and managerial actions. Malmi. Ittner. Some companies develop a single BSC at the organisa- contingency literature. Malina & Selto. D. Second. organisational. by companies of different size and industry around the The third design choice concerns target setting. Raja. while others do not (see neity when enacted in practice. & Gao. answer the question: ‘‘What are the relevant technical fea- The last design choice involves the link between the BSC tures managers have to consider when introducing a BSC in measures and the reward system. Below. achieve were defined for each performance measure. To conduct the analysis and derive tional or business unit level (Decoene & Bruggeman. 1972).g. we illustrate the tions. M. Some companies link the scorecard to the reward sys- components of the BSC design. be- characterised by 21 KPIs (Fernandes. First. providing an ideal field for the research sised the benefit of explicit targets: the exact values to at issue. 2003). Four design features emerge as recurrent and and dysfunctional behaviours associated with this linkage.. 2001). 2001. Larcker. 2001.g. & Yang. Bouwens. whether explicit or implicit. cause it emphasises the intensity of the communication 2006). ensures alignment and commu- nication of the strategy throughout the entire organisation. Larcker. which employees. insights. M. Guo. target setting and reward systems.4 D. The choice of this dis- the approach suggested by Kaplan and Norton (1996) for tinction is justified by the recognition that communication Please cite this article in press as: Agostino. Kaplan and Norton are not prescriptive in defining the number of measures to include. the BSC design covers all authors (Bonner & Sprinkle. doi:10.1016/j. targets for non-financial measures was seen as problematic due to the unavailability of past data for those performance metrics.. and the balance be.and consequently the control . 1998). be set. 2001) highlighted controversial effects mentation.emj. Focusing specifically on the BSC. Consequently. 2010). Kaplan The link with the reward system is sometimes referred to and Norton (1996) suggest establishing an incentive system as an attribute of PMS use (e. (2001).. business unit and personal BSC that are tigate PMSs at two levels. into a single template. of both financial and non-financial BSC use measures. 2003). the author recognised the importance of set- ting implicit targets to be subsequently discussed with BSC design refers here to structural characteristics.associ- financial and non-financial measures. which is nethy. Design issues in Balanced Scorecards: The ‘‘what’’ and ‘‘how’’ of control. process and the style of control adopted by managers (Aber- The second design choice relates to cascading. Nielsen & Sorensen. the the communication process associated with the technique. According to the authors. 2003). Ittner. & Meyer. we answer the question: ‘‘how does the com- number of performance indicators and the balance between munication process . the surveys by Malmi. provides contrasting evidence: defining us capture these two dimensions in the field. we focused on the performance framework of the Others instead adopt a cascading approach. developing BSC. Our empirical investigation of the relationship between PMS A variety of cascading design choices are observed in prac- design and use is grounded in the research perspective of tice. its wide scope entails a reveal different positions in the types of targets that should potential company-wide use at different organisational lev. and their interactions with the deploying the scorecard across the whole of the organisa- style of use. Speckb. Li. cascading. and their potential heteroge- tem (e. Extant literature shows their organisation?’’ We can thus define this first area of different positions with respect to this aspect. 2003). & van Lent. Given the difficulties in establishing the exact va- BSC design lue to achieve. resents a decision about the BSC structure. For instance. which world (Gautreau & Kleiner. implementation of the BSC at different levels of the organisation. European Management Journal (2012). At the same time. The inno- vative element introduced by the BSC is the incorporation. 2007). 2000. and as such falls but the practice is characterised by heterogeneous situa- within the ‘‘what’’ dimension. relates to defining the performance goals to be achieved 2003. Kald & Nilsson. Speckbacher et al. 2001 and Speckbacher et al. The concept of BSC use is analysed here placing emphasis on tween financial and non-financial KPIs.. BSC applications in healthcare ‘‘how’’ dimension: describing how the control style is en- organisations include between 13 and 44 measures (Gurd acted in practice. leading to heterogeneous results: Key Performance Indica- which can lead to internal conflicts (Wong-On-Wing. Speckbacher associated with performance measures in order to ensure et al..g. down to BSC design and use that of personal scorecards. tional hierarchy. Epstein & Manzoni. drawing upon previous empirical studies employees (Hopwood.001 . in analysing the BSC adopted by a company. The first design choice concerns KPI selection. and associating them with BSC measures. & Whalley. we label BSC use the from 4 to 25 (Malmi. Tuo- tionalise the BSC design and use dimensions. Arnaboldi attributes of PMS design.. the implementation of the BSC in a small to SimonsÕ (1995) distinction between interactive and diag- medium-sized manufacturing company was found to be nostic use is adopted to frame the ‘‘how’’ dimension.

Data collected from interviews were continuously distinguishing between a diagnostic and interactive use: cross-referenced with data from other sources. However. 1991). 311). quent personal attention from top management levels. European Management Journal (2012). p. Table 1 Description of the seven companies. expected targets. and BSC receives from operational managers. we conducted a two year study (2007–2008) versely. frequent involvement of senior managers. p. Specifically. D. observations and ar- ing his framework (e. 1991). electrical equipment 2920 14 000 USA MOTOR Motor vehicles and parts 11 196 26 461 Italy IND Industrial and farm equipment 350 1245 Italy Please cite this article in press as: Agostino. such as interviews.Design issues in Balanced Scorecards: The ‘‘what’’ and ‘‘how’’ of control 5 aspects are today ‘‘critical in increasing understanding of ered to be a powerful tool for in-depth exploration of how managers use accounting information in performing practices in use. the diagnostic style of control only use characteristics. This was useful. by operational managers. We conducted a total of 22 interviews with sign and use. comprehensive picture of the phenomenon under investiga- tion. Con. using led us to ground our research in ‘‘loose’’ contingency (Chap. having an average duration of chosen as the most suitable research method. 1997). ferent sources. and a follow up summary more in-depth and accurate results from a qualitative meth. Furthermore. and cross- intensiveness of use by top managers. which means that senior industries. This initial results. electrical equipment 900 850 Germany ELECT_2 Electronics. Name Industry Revenue 2007 (in mill€) No. 2003). calls for face-to-face dialogue when results deviate from We then further investigated these issues by interviewing the established targets. the results even more robust and compelling (Yin. The third element is the main characteristics of the BSC. The second element is the attention the We deliberately chose companies of different sizes. to be combined. a diagnostic use is characterised by control on an of seven Italian non-financial firms operating in different exception basis (Simons. some of them were interviewed in contingency research. tify some aspects of the communication that are useful for 1978). and the manner in the presence of face-to-face dialogue. the BSC. 2010. operating in different industries. & Arnaboldi.001 . it might seem odd to use a case-study methodology in the seven companies. different levels. Research design in particular. and thus involved in the communication process ‘‘any diagnostic control system can be made interactive associated with the control tool. 2003).. The attention that which it is used. The decision to also in- by continuing and frequent top management attention and clude users of the technique was made to obtain a more interests’’ (Simons. 2005).g. These studies iden. and allowed us to access BSC reports. in order to investigate a tem to be defined as interactive. Tuomela. also during informal interview gave us preliminary insights into the design and occasions. findings of previous studies on PMS design and use have A semi-structured interview approach was adopted. since it is characterised by involvement of managers at Relatively little is known about the interaction between de. An interactive system is characterised by fre. intensiveness of use checked against insights from similar cases in the sample. and the subsequent studies adopt. the decision The first element is the attention the BSC receives from to derive insights from multiple case studies serves to make top managers. Simons specifies that diagnostic at least one of the senior managers charged with use of and interactive uses are not mutually exclusive. for complex phenomena (Eisenhardt & Graebner. to avoid misunderstandings and obtain further clarifications. Outlines of the interviews were man. Table 2 lists the key informants glance..02. doi:10.2012. Design issues in Balanced Scorecards: The ‘‘what’’ and ‘‘how’’ of control. For a control sys. At a first one and a half hours each. 171). of employees Holding nation TEL Telecommunications 723 4800 Italy SEMIC Semiconductors and other electronic components 321 1200 USA PHARMA Pharmaceutical 1400 3500 France ELECT_1 Electronics. In contrast. and to explore in-depth how the communication pro- cess associated with the BSC takes place. which acknowledges the benefits of gaining sent to each company in advance. it must not only command heterogeneous array of BSC design and use settings. chives. and characterised by different ownership struc- managers intervene only when measures deviate from the tures and sizes (see Table 1). problems and opportunities.1016/j. so an exploratory case-study approach was CFOs and senior managers. we began by interviewing the Chief participation of operational managers across lower levels Financial Officer (CFO). 2007. moreover. the internal validity and reliability of the dialogue. It also has the advantage of allowing data from dif- we rely on Simons (1995). of the discussion was then sent to the interviewees in order odology. but also active In each company. 1994.emj. M. with particular attention to how informa- interactive systems require from both senior and middle tion derived from the scorecard is used. To practically capture these two styles of use in the field. the case-study approach is consid. and for deriving comparative explanations their activities’’ (Hall. and engagement in face-to-face In this way. rather. Yin. a check-list as a reference. which has traditionally been twice to further explore interesting issues emerging from strongly rooted in hypothesis testing. for fully capturing the interactive style of con- trol. achieving triangulation (Denzin. with the purpose of understanding of the organisation (Simons. case-study material was enhanced. communicated managers leads to frequent face-to-face meetings to discuss and disseminated throughout the organisation. the mixed analysis of the data from the first meeting.

and then we searched for common performance measure is highlighted in red. & Arnaboldi. tomer satisfaction respectively fell below the established tinction between diagnostic and interactive styles of use in target values. IND Chief financial officer 1 But we only prepare it once a year! So IÕm not continu- Sales manager 1 ously involved with it. I can say that it is for its use to be sufficiently well established within the a precious tool for me. and the remaining three ELECT_2 Chief financial officer 1 associated with a predominantly interactive control style. the with the BSC technique. indicating fail- patterns in the BSC design associated with these distinctive ure to achieve a target. Specifically. of This section presents the findings from the seven case stud- interviews ies. as discussed in plained that meetings are organised only when the BSC an- the previous section and subsequently confirmed by our nual report signals an exception. the business. the unique patterns of each case were identified.2012. Agostino. empirical evidence. insights from the cases department are structured around the ‘‘how’’ dimension and then linked Operation manager 1 to the ‘‘what’’ dimension. Arnaboldi Table 2 Interviews.. in order Three years after the BSC introduction. illustrating how the BSC is used. where the Italian CFO clarified: MOTOR Chief financial officer 2 I greatly appreciate the BSC because it is concise and Commercial manager 1 succinct: it is able to provide me with key essential data. First of all. It takes just a few minutes to vidual cases were written out as stand-alone histories. we clustered the seven sults. Third. Commercial manager 1 A typical example of diagnostic BSC use is provided by Operation manager 1 PHARMA. the BSC had to have CFO at TEL was appreciative of the instrument: been introduced at least three years previously. In all three cases. and use it to cial and non-financial measures. we clustered the BSCs BU Chief financial controller 1 of the case studies based on whether they were diagnostic BU performance controller 1 or interactive. doi:10. second. tive system. ing the results in different colours. obtaining four BSCs associated with a preva- lently diagnostic control style. his answer was clear: the BSC receives the attention companies according to the BSC style of control. we adopted three further criteria to The companies TEL. M. order to identify patterns of influence between the ‘‘what’’ Of the three companies classified as having an interac- and the ‘‘how’’. which provides evidence of their interaction. whether of operational or human resource managers only when a diagnostic or interactive. IND best exemplifies the category.1016/j. It is important to note that a given control tool to departmental managers: it is a tool solely in the hands of can be used either diagnostically or interactively within the the CEO and CFO. and the relationship TEL Chief financial officer 1 with its design features. Results Company Position No. M. and similar patterns were categorised under common themes.001 . the report is not distributed styles of use. discussions with them have so far oc- tic use may switch to an interactive use (Simons. 2005). In order to permit a thorough Performance controller 1 discussion and establish links between the theoretical Director in investor relation 1 framework and the empirical data. All seven indi- ately easy to understand. European Management Journal (2012). In particular.6 D. Business analyst 1 Though reflection about the data is thorough. By organising the analysis in this manner. get a clear and concise overview of multiple aspects of After that. depending on the In analysing the data.02. the collection in a single report. It is just a 3-page report highlight- company. the clustering of control the progress of the business by comparing the cur- such measures under at least three perspectives. the cost controller and the marketing manager. Design issues in Balanced Scorecards: The ‘‘what’’ and ‘‘how’’ of control. In fact. this pro- cess only happens once a year. 1995). D.g. we followed the guidelines sug- degree of achievement of the target. Other senior managers are involved only same organisation (e.emj. who ex- Given that BSC design features may differ.. This approach helped us to organise and summarise When asked about how often they discuss the BSC re- the collected data. and is thus immedi- gested by Eisenhardt (1989) and Yin (2003). we drew a clear dis. ELECT_1 and SEMIC were also classi- determine whether the selected organisations complied fied as having a diagnostic BSC style. PHARMA Chief financial officer 1 Cost controller 1 The Balanced Scorecard: how Marketing manager 1 ELECT_1 BU director 1 Following SimonsÕ (1995) framework. the presence of finan. when problems arise. when team productivity and cus- However. it is SEMIC Chief financial officer 2 possible to highlight specific links to the cases. for the purposes of our study. and that a diagnos. The CFO Please cite this article in press as: Agostino. and their rent value with the pre-defined target. This situation was also confirmed by All the companies had declared they were using a BSC. and does not give rise to internal discussion. and also Operation manager 1 illustrate the breadth of the gathered data. CFOs receive the report on a quarterly basis. curred just two times. Tuomela.

and not just Moreover. umns.1016/j. At ELECT_2. if necessary. without negotiation ELECT_2. in this case the communication generated by the BSC trol styles.. The controller clearly stated: support them every day. We do not wait until the report is complete to take ticipating in their management. Below. in this way. IND Link reward system No link TEL. we receive the report. SEMIC.. Table 3 Main findings. SEMIC. but the day-to-day use. how- associated respectively with diagnostic and interactive con- ever. formal emerges from the words of the sales manager: meetings between the CFO. CEO and the first line managers of each business unit are organised to discuss the BSC re- When a new KPI is introduced to control the sales activ- sults. We are rarely surprised when The BSC is used interactively also at ELECT_2 and at MO.ELECT_1 Corporate + depart linked ELECT_2. The interaction between the ‘‘how’’ and the the company produces and sells premium home appliances characterised by high technological content and the BSC ‘‘what’’ has the purpose of catalysing the attention of the entire In analysing the BSC design features in the seven case stud- organisation around this aspect. contents. mal communications. IND Yes. He gave the exam- Measures in the scorecard and target levels to achieve ple of the cost of quality: are discussed on a continuous basis with senior manag- ers. we label the BSC types associated goes beyond formal delivery of the document. As the CFO of with diagnostic use Diag-BSC. last year. Financial + non-financial objective TEL IND Financial + non-financial subjective ELECT_2. ELECT_1 Yes. the report is distributed to se. MOTOR BSC cascading Corporate only TEL Corporate + depart not linked SEMIC. which is recognised as a critical success factor.emj. targets are. we help them to shift from being threatened by the KPIs to actively par. tion of the entire organisation on the product technology. PHARMA. And this emerges from action. We decide together what the feasible and ambitious It was as a result of discussions among us that. D. it has the objective of focusing the atten. The report is prepared ies. as it gives us an idea of how much It follows that face-to-face discussions.Design issues in Balanced Scorecards: The ‘‘what’’ and ‘‘how’’ of control 7 pays continuous attention to the BSC measures. in this way. we decided to introduce this new KPI in the BSC. as well as infor- it costs for us to maintain high quality products. we found certain recurring dimensions of the ‘‘what’’ quarterly (as in the cases of TEL. Accordingly. but continue to do so now during its At MOTOR. ELECT_1. IND Target definition Explicit TEL. European Management Journal (2012). M. ‘‘What’’ controlling ‘‘How’’ controlling Diagnostic Interactive KPI balance Especially financial SEMIC. effects of the style of use on heterogeneity in the ‘‘what’’ I think it is important to share what we are doing and how. covered by the document. update ities of our employees.02. ELECT_1 Implicit ELECT_2. but rather try to control the progress of the busi- their ideas and proposals for improvements. with negotiation MOTOR Please cite this article in press as: Agostino. he noted that proposals about how to improve when he receives the monthly report: attainment of targets or new measures to include have of- ten emerged from informal discussions. report includes monthly data for the three-month period nior managers throughout the organisation.2012. their BSC has three col- everyone is aware of the overall situation of the business. since we already know its TOR. and the senior managers in the production or commercial areas. In fact. not only played a central role during the BSC design phase. Every month. dimensions. ness at least once a week. we describe I often discuss the progress of the BSC measures with the interaction between BSC use and design. doi:10. We try to the long term plans. & Arnaboldi. PHARMA. PHARMA. showing the corresponding devi- The interaction process associated with the BSC clearly ations from one month to the next. one for each month. PHARMA. the CFO receives the BSC quarterly. Furthermore. MOTOR. identify potential problems and.001 . Design issues in Balanced Scorecards: The ‘‘what’’ and ‘‘how’’ of control. ELECT_1 and SEMIC). Hence. and those associated with ELECT_2 specified: interactive use Int-BSC (see Table 3). we are like baby sitters. MOTOR. This mea- sure is extremely useful.

02. and absence of links know what the contents are because I donÕt check that with the reward system. unless they request them. here termed nisation. The remaining two companies instead employ both cor- The CFO at TEL likewise recognised the extreme impor- porate and departmental reports. The controller at PHARMA the advantages of the BSC. as confirmed case-study companies were found to adopt three columns: by the controller at PHARMA: the first giving the explicit value of the target. M. we can exactly know our ability to reach the was clarified by the manager responsible for the BSC imple. Cascading is defined as deployment as typified by ELECT_1 and SEMIC. tailed measures such as the number of patients or the num- The BSC of TEL exemplifies this situation. template of the four diagnostic companies. In terms of KPIs. top management can simply set the strategic guidelines. these docu- tance of the BSC. with non-financial ber of prescriptions for each of six therapeutic areas. of customer perspective.1016/j. I donÕt the corporate report. At TEL and SEMIC. and in its place With respect to target setting. The selection of more level of target achievement. M. and number of employees cascading. p. we found that During the interview with the marketing manager of the financial indicators tend to predominate and that non-finan- pharmaceutical department. During the interview. doi:10. and a third ‘‘status’’ column ThatÕs a good point because this facilitates benchmarking containing red. since they are stand-alone reports and not linked in the distribution team. It is derived from our approach. Among defined at the corporate level. All four duced if the selected measures are objective. This imbalance each performance measure in the BSC there is a detailed in favour of financial measures can be ascribed to the prev- statement of the exact value to be achieved in a given per- alently exception-based communication process surround- iod. which allows strate- tion’’ area was replaced by a ‘‘global competitiveness’’ gic measures to be translated into objectives and measures area. corporate and departmental BSCs cannot be regarded as number of items per employee. Not only this: we can also assess how much we mentation at TEL: are under. he explained. instead. are easily quantifiable. This finding is aligned with SimonsÕ description of a ing the BSC. the second Measures included in the BSC are easily quantifiable. new customer. and specified that the exact value of each ments are not related to each other. however. while for the market share indicator there is a target of 3% market share gained from a specific com- The absence of local BSCs cascaded down from the cor- petitor (name omitted for confidentiality reasons). collecting de- three out of a total of 20 or 25 KPIs included in the report. At SEMIC.. yellow or green bullet points. which consists mostly of financial measures. that are mainly financial and objective. the report is designed for the corpo- rate level only.2012. There are only a 1996).8 D. there is a 10% target value for sures that everyone knows we can avoid this problem. & Arnaboldi. target. Financial measures also pre- used by departmental managers as a tool for controlling dominate when the four traditional BSC areas are modified. percentage of occupational top managers. This means that for tion. filled in with the actual value. targets and then come back to the BSC measures at end-of- Please cite this article in press as: Agostino. we found diagnostic use contains a large number of measures pertaining to produc- to be associated with explicit targets. typically accounting for just two or adopts the BSC to monitor his own activities.emj. all the measures subjective or customised performance measures might in the corporate BSC are associated with specific targets have been problematic. or the lack of a link between the corporate CFO explained that this approach is extremely useful for and departmental BSCs. providing us with data that would determined by top management. is another feature of diagnostic keeping the business under control: use. D.. At ELECT_1. the report does not in- to each other. At ELECT_1 the ‘‘produc- of the BSC throughout the organisation. He measures accounting for just three out of a total of 15 KPIs: further explained that these figures are not delivered to number of orders acquired. The porate report. and learning hours. The decision to introduce the BSC was driven by a spe. relating appropriate to each particular group (Kaplan & Norton. departmental activities. Diagnostic companies prefer measures which diagnostic control system: ‘‘measures should be objective. 90). that highlights areas of weakness or improvement. he mentioned the possibility of was clear on this point: immediately evaluating critical measures by checking the The corporate BSC is the document we use to control and difference between actual and target values. clude the ‘‘innovation and learning’’ area. no cascading of BSCs from and wish to control their own specific activities. Arnaboldi We found that BSCs used diagnostically.or over-performing. By taking this monitor the overall business. and consists of aggregate measures relating By setting our desired objective for each performance to the organisation as a whole. departmental BSCs are voluntarily Diag-BSC. the existence of these few non-financial KPIs: number of orders issued by e-mail. Design issues in Balanced Scorecards: The ‘‘what’’ and ‘‘how’’ of control. he then clarified that he cial measures are few. analysing the BSC report. European Management Journal (2012). were associated with four design features: the developed by functional managers who like the instrument predominance of financial KPIs.001 . Given this conceptualisation. indicating the of BSCs for different subsidiaries. Instead. he noted the overall business situation on a single page. they are accidents. Achieving how defining clear targets fosters control at distance. since the need for interaction is re- complete and responsive’’ (Simons. Agostino. For example in the case not have been comparable. By selecting financial mea. but it is not extended across the orga. 1995. The controller at SEMIC emphasised the importance of cific objective: to have a report that is able to summarise setting explicit targets. pro- this objective did not require cascading the scorecard to viding top management with a precious end-of-quarter the lower levels: we need aggregate values! snapshot of the entire business. This means that the performance measure is explicitly defined in order to clo- measures in departmental BSCs are not derived from those sely monitor attainment of strategic objectives. mainly to sales figures or cost savings. The reason for this choice measure. explicit targets.

however their objectives remain centred on The cascading of departmental BSCs starting from the the budget. which is then used to de- Finally. hierarchy. intuitive with respect to the SimonsÕ explanation of the implicit targets. within ward system because.Design issues in Balanced Scorecards: The ‘‘what’’ and ‘‘how’’ of control 9 quarter. and links with the reward system. can be traced back to the initial strategic lever. In the first place. He explained that facilitated by the dialogue which managers promote sur- they specifically want aggregate measures to track the busi. they are fined. of a group of people. financial and non-financial performance measures. each manager is the commercial department we were developing KPIs evaluated on the basis of Economic Value Added (EVA): associated with service level.02. and this is departmental measures. contain measures each manager is directly able to influ- BSC measures are too aggregated and fall outside the scope ence. the ers when they meet their targets. cading of departmental BSCs from the corporate document. because everything is evaluated on the basis Within this company. as was explained during the meeting. whenever need to create a system of incentives based on BSC a measure is highlighted in red.1016/j. rive BSCs for departmental units. This advantage of conciseness is however BSC at MOTOR contains measures related to customer satis- offset by the inclusion of information that is too generic faction and brand image. This specific purpose of use does not elicit a cussions are initiated only on an exception-basis. therefore her document contains a This association between design and use appears to be measure associated with overall employee satisfaction in in contrast with SimonsÕ (1995) depiction of a diagnostic the innovation area of the corporate report. rather. At ELECT_2 they cascade where performance measures are not used for compensat. or when we need to define ManagersÕ objectives are determined by the budget. over time. A diagnostic approach to targets is appar. and this helps wise no association between the BSC measures and the re- us in defining departmental BSCs. European Management Journal (2012). tives: it provides a snapshot of the company at a precise mo. when the value for each measure is de. the finding is also confirmed by the SEMIC case. From our empirical evidence.. highlighting the interac- CFO at TEL explained to us that there is no association be. This means it is not extended across the pected of them. Diag-BSCs the planning phase. M. is defined. tives have to be clearly set out. a reward system associated with BSC measures was bound The adoption of implicit targets is also linked to an inter- up with two factors: the dissemination of BSCs at different active approach to the BSC The subjectivity in performance levels throughout the organisation. the ment in time. & Arnaboldi. It follows that all the objec. and features aggregate performance measures ent from the amount of time top managers spend on that make it difficult to base managersÕ rewards on them.emj. as they explained. including subjective ones. and during the control phase. incentives. How- The discussion of strategy with senior managers helps us ever these are insufficiently detailed for isolating the to translate the corporate performance measures into contribution of individual managers from them. The process of selecting BSC measures. cial measures. Dis. the lack of foster the well-being of people inside the organisation. are instruments for controlling the business. because first line managers know what it is ex. some new measures. which ing managers because. The com- ther clarified that the purpose of the report is to monitor mercial manager gave us an example: she is the coordinator the progress of their business. The BSCs here might explain the adoption of both financial and non-finan- investigated were found not used for compensating manag. discussing together great deal of attention to the EVA measure and how it which measures might be useful. strategy in fact drives the defini- of it. it is regarded by BSC at IND includes financial KPIs in the financial area of the CFOs of diagnostic companies as a tool for summarising the report only. Targets elicit the attention of top managers during The second explanatory factor is purpose of use. and these are used to set their direct experience in the field. tive dynamics: tween BSC measures and the reward system: When something is not clear. not on the BSC. which is instead counter. This cascading is set incentives based on BSC measures. them. For example. The fre- importance of linking target with compensation system in quent discussions between top managers and lower levels order to provide clear direction for effort.2012. which result in an Int-BSC: a better balance between The lack of links with the reward system is another char. a Diag-BSC is not cascaded through.. At ELECT_1 there is like- involved play a crucial role in this process. The CFO of ELECT_2 explained the for employee bonuses to be linked to such measures. rather. (Vice-director at ELECT_1) tion of the corporate document. D. it is designed for the corpo.001 . measures. defining the value to An interactive use of the BSC instead implies different achieve for each performance measure. corporate report is another design dimension we found to The CFO at PHARMA likewise specified that they do not be associated with an interactive use. rounding the control tool. tive measures which are related to employee satisfaction. The managers of the areas the reason why they lack this link. the cas- acteristic of the diagnostic style. the BSC in ELECT_2 includes a set of subjec- the overall situation of the business from various perspec. where use. targets are defined in terms of the desired variation – posi- out the organisation. For example. doi:10. rate level only. intended to control system. when actual results are implemented with the goal of monitoring performance compared with the previously established objectives. The informant fur. We sat around a table with During the budget definition process managers pay a the employees close to the business. According to the CFO of IND: ness and compare the results of different subsidiaries. and they provide us with those we have in the budget. This means that the KPIs in the personal scorecards for which this PMS is currently intended. and are arrived at Please cite this article in press as: Agostino. talent growth and effectiveness of learning programs. traits. the BSC down to the level of personal scorecards. and the purpose of measures is highlighted in the interactive companies. tive or negative – to be achieved. a discussion with the managers of There are a few indicators in the BSC which coincide with the areas involved is organised. Design issues in Balanced Scorecards: The ‘‘what’’ and ‘‘how’’ of control.

However ing an interview at IND. since the mea- ‘‘BSC measures are not merely tools for measuring. under- We need a talking number! BSC measures are useful if scoring how these two dimensions are closely intertwined they can represent aspects of company performance and need to be managed in concert. cascading of the BSC. and the result. The one exception was customer satis- Finally. negotiating incentives and discussing sively diminished because. because control is assured by the constant or talent growth. The Please cite this article in press as: Agostino. rather. The approach we use to define incentives The centralisation of decision making and the exclusion is quite demanding because it is directly negotiated with of all departments from strategy definition created prob- the people involved. style of use. This different style can again be ascribed to the communication process of use thus called for simpler and more objective measures. sible because we didnÕt know the strategic guidelines! son on the measure. This situation created problems of misalignment between the Int-BSC design and its diagnostic use. Arnaboldi through a negotiation process between the CFO and other in association with interactive design traits. cascading of corporate measures was SEMIC was included among the companies that have a diag. when the BSC BSC measures and the reward system. quality of the silicon wafers produced. The first cause of misalignment was related to the types He went onto explain that they do not set the exact tar. doi:10.. how to mea- nostic approach adopted. The result was that. SEMIC progressively abandoned the non-financial measures tunities makes it easier to also define the desired targets in previously included in the report. but retained its original interactive sures to include in the BSC and the respective target levels. discussions and meet- SEMIC) ings take place to understand the result achieved. for example a four per cent reduction in and the quality of the silicon wafer produced. M. Specifically. arriving at a BSC with a predominance of attention devoted to the BSC measures. When the com- senior managers. The reasons for the actual The inadequacy of the types of measures in the scorecard values achieved are discussed to detect changes in the can be ascribed to a shift in priorities at the top level. However. The market. Once it is negotiated. the pres- which are dependent upon people. the new corporate BSC coexisted with the Another particularly interesting comment emerged dur. it did not change top managers discussed with subordinates both which mea. structure. and non-financial measures was found to be incompatible sure in order not to limit the scope for action within the with the new diagnostic use. based on a few key variables: This relationship between the ‘‘how’’ and the ‘‘what’’ the costs and quality of the production. European Management Journal (2012). During such occasions. D.1016/j. Design issues in Balanced Scorecards: The ‘‘what’’ and ‘‘how’’ of control. The inclusion of financial get value. The attention that it reveals a dynamic philosophy behind the process of given by top management to departmental reports progres- selecting measures.02. as a comment by the CFO organisation. Our first line mangers. they had the opportunity to share ideas about The misalignment between the ‘‘how’’ and the strategic priorities and potential problems signalled by weak ‘‘what’’: the SEMIC case measures. M. (CFO at spare part delivery times. of measures in the corporate BSC. & Arnaboldi. pre-existing Int-BSC at the departmental level. the measures were useful when delivered and discussed with the top management team. This situation was clear at IND. financial measures. as well as to identify internal problems or companyÕs board was interested in controlling organisa- opportunities. which proved to be was introduced in 2002 it was initially used interactively. but also sures of the departmental reports were not linked to the tools for incentivising actions’’. without fuzzy interpretations. in which the CFO stated that the two documents were no longer related. plained the configuration of the reward system: The second cause of misalignment concerned the cascad- ing of the BSC measures.emj. each of which define measures to include in our departmental score- has a relative weight depending on the relevance of that card without knowing the overall strategy? It was impos- measure for the company and the influence of that per. tional activities at distance. the link between BSC measures and the reward faction. the BSC design features. A similar approach to targets is adopted at demonstrates: MOTOR. and only a corporate BSC retained.10 D. because The third cause of misalignment was the link between this is the PMS currently in place. discussing with them what to measure. Agostino. one year after the transition to a diagnostic use. After this. difficult to establish with a diagnostic style of use. as noted by the cost controller of BSC measures are used to define the rewarding of first the plant: line managers and lower levels: we call them profes- sional experts.2012. which was considered relevant given the companyÕs system is another design dimension associated with an inter. nostic style of use and a corresponding Diag-BSC.001 .. sure it. goal of achieving lower costs without compromising the active use. Usually each person is evaluated on lems in deploying the BSC at lower levels: how could we the basis of a set of measures in the BSC. This quote is significant in new financial measures of the corporate BSC. problems and oppor. They are set as percentage improvements specific objectives were centred on production costs in BSC measures. and need to involve employees who contribute to that mea- the reward system were found to be unsuited for the diag- sure. Targets are negotiated for the corporate BSC as We needed something clear and simple that everybody well as for departmental scorecards during meetings with could understand. irrespec- tive the percentage variation. they negotiate improvements in the mea. where pany shifted to a diagnostic style of use. This means that we ence of non-financial measures. as the cost controller clearly ex- results with the employees who are directly involved. abandoned. plained. it is consoli- During the first year following the shift to a diagnostic dated and enters the system. such as level of innovation broader terms. The CFO at MOTOR made this clear when he ex. adopted: the ability to discuss results.

an information purposes role. but also to motivate managers: what Malmi (2001) terms swer the call for investigating design jointly with use (Henri. rather. and The antecedents and the effects of PMS design and use have the purpose for which the BSC is used. This can be explained in terms of both the level of BSC dissemination within the organisation. we an.emj.. & These misalignments between a diagnostic style of use Meyer.Design issues in Balanced Scorecards: The ‘‘what’’ and ‘‘how’’ of control 11 reduction in dialogue surrounding the corporate report. doi:10. From an academic perspective. First of all. & Arnaboldi. Second. which differ for the been receiving continued attention in managerial research. to either the design attributes or style of use must be financial KPIs will be associated with a more interactive aligned with each other. of the organisation. The investigation of the specific relationships between ically on the BSC. lack of BSC cascading and absence of links be. The end result managers. ab. Ferreira & Otley. we did not observe this to be the case. 2003) and being complemented by dialogue among and interactive design features led to a progressive change executives and managers (Kaplan & Norton. conceptualising throughout the organisation. our results reveal the difficulties of setting cial KPIs. 1995).1016/j. Design issues in Balanced Scorecards: The ‘‘what’’ and ‘‘how’’ of control. 2009a). and a link to the re.02. A Diag-BSC sence of cascading. European Management Journal (2012). Conversely. without generating discussions be.g. The third hypothesis is that an interactive ficult to set incentives for managers: style of use will feature links with the reward system. since the measures included tween BSC measures and the reward system. the purpose of use is different. 1999). Henri. the study of PMS (Ferreira & Otley. and responding to ifying this association between the reward system and the the more general call for bringing a holistic perspective to interactive style of use. incentives based on a Diag-BSC. 2006a). one would expect the opposite: for the were no longer discussed and negotiated with our adoption of reward systems to be associated with diagnostic bosses?’’ (cost controller at SEMIC) use. Since man- interactive design features of the reward with a diagnostic agers are given specific metrics on which they are evalu- approach to BSC use. Larcker. took on a diagnostic character: predominance of finan. Following SimonsÕ How could we be evaluated on the basis of measures that (1995) thinking. mons. which runs counter to the existing literature. From 1995 onwards. but such an interaction indeed exists: BSCs used diagnostically not readily traceable to the contributions of individual man- are characterised by a prevalence of financial measures. there is cascading of the BSC. the organisation. M. this work explores the managers. entrained by the style of the features associated with a diagnostic control system (Si- use. 2009b). Diagnostic use is recognised as a mechanistic tool that This quote underlines the difficulties of reconciling the enables operation at a distance (Simons. arising from both a shift in type of ated. 1996).2012. The first hypothesis pre.g. Please cite this article in press as: Agostino. the abandonment of the cascading approach. SEMIC case give evidence that design and use are both but more specifically it provides insights on how the charac. Though some previous teristics of design are associated with an interactive or diag. On the ward system. it is a tool in the hands of senior Drawing on a multiple case study. The misalignment problems that emerged in the that design and use are closely intertwined (Henri. The ‘‘what’’ embraces the technical hierarchical levels makes it easier to set target for manag- features managers choose when implementing a PMS. ics and practitioners. Int-BSCs instead have the opposite traits: an overall conduct of the business – what Malmi (2001) terms evenly balanced set of financial and non-financial measures. two types. as advanced by previous work (e. which includes measures that are relevant. and no link with the re. Fried. as advocated by Simons (1995) and by other scholars measures at distance. 1995). agers. an Int-BSC is widely disseminated interaction between BSC design and use. an Int-BSC. with its reports spanning all levels These results offer some useful insights for both academ. based on controlling a few key style. The second hypothesis suggests that there is a rela- single corporate BSC containing mostly financial measures. tionship between implicit targets and an interactive control The diagnostic style of use. Given this purpose. Our findings indicate that rate report. Focusing specif. contributions (e. and style of control. The dissemination of an Int-BSC across multiple ‘‘how’’ dimension. highlighting the interaction contingency testing could prove particularly fruitful for ver- between the ‘‘what’’ and the ‘‘how’’.. implicit targets. ateness. represents a tool for making decisions and monitoring the ward system. the management-by-objective-function of the BSC. whether of a reciprocal interaction between the ‘‘what’’ and the diagnostic or interactive. 2006b). the approach to reward sys- was that top management decided not to use BSC measures tems has evolved being associated with multiple subjective to reward managers. since it adopts a cascading ap- PMS design as the ‘‘what’’ dimension and PMS use as the proach. no need to set incentives based on BSC measures. equally relevant for a PMS to work. suggesting a set of hypotheses for style of use plays a prominent role in shaping PMS appropri- ‘‘hard’’ contingency and testing. measures in a compensation formula (Ittner. other hand. our study shows that its design features design characteristics and PMS use indicates the existence differ depending on the specific style of control. there is limited need for intervention by top use and the withdrawal of BSC cascading. This is instead more difficult with a single corpo- information provided by the PMS. ‘‘Hard’’ 2006a. Ferreira & Otley. (Libby. is used not only for decision making. Unlike in the BSC design features which. because the measures are closer to the managerial the ‘‘how’’ concerns the control style associated with the activities. made it very dif. in the corporate report – though valuable for monitoring the overall business – are too generic to be used for setting Discussion and conclusions individual objectives.001 . investigating the participative approach to budget setting tween top and middle-level management.g. while ers. Any changes dicts that BSCs characterised by a predominance of non. the absence of cascading in a Diag- but recent contributions suggest a need to explore how BSC means that the scorecard is not disseminated across these two concepts are interrelated (e. 2009b) have found that nostic control style. explicit targets. resulted in a 2010). This finding supports the claim ‘‘how’’. D.

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