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International Conference on Engineering and Business Management (EBM 2010 PAPERBACK)

Chengdu,China,China,3.24-3.26,2010

ISBN: 978-1-935068-05-1 Scientific Research Publishing, USA

Paperback 6066pp Pub. Date: March 2010

Category: Engineering

Price: $280

Title: Can Improving Strategy Description and Stimulating Cognitive Effort Alleviate the Judgmental Bias in Performance Evaluaton?— Evidences from A BSC Experimental Study
Source: International Conference on Engineering and Business Management (EBM 2010 PAPERBACK) (pp 204-209)
Author(s): Guocan Wu, Business School, Zhejiang Wanli University, Ningbo, China
Yifei Gong, College of Economics and Management, Southwestern University, Chongqing, China
Abstract: Abstract: Each business unit in a diversified company needs to establish its individual operating strategy, and accordingly develops its own Balanced Scorecard (BSC). However, prior studies found that there is a judgmental bias when senior executives evaluate the performance of business units using their BSCs, which impairs the application value of the BSC. This study proposes two methods of alleviating the judgmental bias: (1) Improving strategy description to enhance evaluators, understanding of the strategy and unique measures of business units; (2) Adopting a disaggregated evaluating pattern with requirement to justify performance evaluation so as to stimulate evaluators, cognitive effort. We conducted an experimental study to examine the effectiveness of the two methods, requiring participants to play the role of executives of a corporation and evaluate the overall performance of its two business units using their divisional BSCs and strategic information. We manipulated the performance of two business units so that the performance (better-than-target percentage) of each of four measures in each BSC aspect varies according to common measures or unique measures, but their sum of percentages is the almost same. Results of the experimental study indicate that either improving strategy description or stimulating cognitive effort lowers the difference of weightings evaluators assign to common and unique measures, therefore reducing effectively the extent of the judgmental bias.
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