How Balanced Scorecard Organization and Reputation Relating to Environmental Objectives Influence Performance Evaluations

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Abstract

This study explores how balanced scorecard organization and reputation from environmental performances influence performance evaluations. Balanced scorecards can help assess progress on achieving environmental strategic objectives. In such settings, environmental measures (e.g., energy cost savings) contain dual-natured features--they can be classified within either traditional (e.g., financial) or new nontraditional (e.g., environmental) scorecard perspectives. These options create a need to explore how organizing the dual-natured measures impacts decisions. When communication about environmental strategic objectives is low (a common occurrence among practitioners), prior studies (e.g., Kaplan and Wisner 2009) invoke a divide and conquer heuristic to explain decreased decision weight for measures clustered in a fifth perspective. However, the current study predicts, and finds supporting experimental evidence (n = 138), that environmental measures’ nontraditional feature becomes more (less) salient when they are clustered (embedded) in a new fifth (traditional) perspective. This differential saliency creates opportunities for analyzing factors previously unexplored in scorecard settings that may influence decisions more, such as an entity’s reputation based on its environmental performance. Prior studies assume a negative reputation, but a positive reputation would generate loss aversion concerns for protecting the good reputation. Results show that when a positive reputation exists, measures clustered in a fifth perspective are not discounted as observed in prior studies. These decision differences do not obtain when measures are embedded in traditional perspectives, where nontraditional features are less salient. Findings provide boundary conditions to prior studies demonstrating decreased decision weight for measures clustered in a fifth perspective. Practitioner implications are discussed.

Authors

• Henry Claude Alewine, University of Alabama-Huntsville

• Tim C Miller, Xavier University