Common-measure bias and trust on performance measurement in the balanced scorecard environment

This paper examines the common-measure bias phenomenon in a Balanced Scorecard (BSC) environment. Common-measure bias occurs when senior managers, faced with comparative evaluations of divisions/business units, use information that is common to all, whilst underweighting or ignoring the information that is unique to each division/business unit. A survey was forwarded to the divisions/business units of the top 300 companies listed on the Australian Securities Exchange to empirically test the hypotheses developed in this study. The findings show that participation in the development of performance measures positively influences the level of trust between parties involved in the performance evaluation process. The increase in the level of trust positively influences the use of performance measures in a way that the senior manager use both common and unique (financial and non-financial) measures to evaluate the divisional/unit manager's performance (hence, reducing the common-measure bias problem) and eventually improving managerial performance. However, this study does not support that participation is directly able to reduce the common-measure bias problem