Highlights of management accounting research

Learn what the scholarly community has to say about the balanced scorecard, performance reviews, and other management accounting topics.
By Cynthia E. Bolt-Lee, CPA, CGMA, and Monte Swain, CPA, Ph.D.

Highlights of management accounting research
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Academic research in management accounting can provide companies with insight in using management accounting systems to better achieve strategic and operating objectives. It explains or predicts how the design of managerial accounting systems will affect management actions and an organization's success, or how internal and external organizational forces will affect the design of management accounting systems. Below, we summarize recent management accounting research from leading academic accounting journals.


The management of operations is largely a plan, control, and evaluate process that typically shapes itself as a complete feedback loop. However, the design and implementation of strategy is a much more open and evolutionary process. In their article, "Exploring How the Balanced Scorecard Engages and Unfolds: Articulating the Visual Power of Accounting Inscriptions" (Contemporary Accounting Research, Winter 2015), Cristiano Busco and Paolo Quattrone explore the balanced scorecard model as a helpful but somewhat "incomplete" way to energize and anchor dialogue among managers in an organization's process of refining and deploying strategic objectives and measures.

The authors report on their experience in a large multinational corporation operating in the oil and gas industry. They collected data over a four-year period through interviews, documentation, observation, and participation as the organization designed and rolled out its balanced scorecard system.

In describing the balanced scorecard's success for this company, the authors propose four functions that it can perform. The scorecard can act as (1) a "visual performable space" for shared strategy development, (2) a "method of ordering and innovation" that invites employees to debate crucial processes, (3) a "means of interrogation and mediation" for community dialogue, and (4) a "motivating ritual" that provokes recurring discussion.

The authors conclude that the balanced scorecard does not always provide an obvious way to define strategy and build performance measures around it. Instead, and perhaps more importantly, the authors' research demonstrates how this scorecard model guides the evolving work that managers do to build and deploy strategy.


Often, companies provide numerically weighted scales on employee evaluations to help ensure evaluators' assessments are in line with organizational goals. However, weighting the measures can also create problems. Specifically, it may make evaluators less likely to take important external information (i.e., factors beyond the control of the employee being evaluated) into account. A Spring 2015 article in the Journal of Management Accounting Research ("The Effects of Firm-Provided Measure Weightings on Evaluators' Incorporation of Non-Contractible Information," by James H. Long, Lasse Mertins, and Brian Vansant) examines how weighted measures affect employee evaluations.

The authors conducted an experiment in which they asked MBA students with prior corporate experience to complete a performance evaluation for a fictional retail store manager. The evaluations were based on four measures: sales, profit margin, customer satisfaction, and employee satisfaction. One group was given weights for each measure, but another group received no instructions about weights. Each group was then provided with uncontrollable external data such as growth in the economy and competitor actions. No instructions were provided to either group regarding how to use the uncontrollable data to evaluate how much the store manager's work actually affected the performance measures.

The authors found that, when performance evaluators were given a weighted measure, they placed less emphasis on the impact of external information on the employee's performance (e.g., how changes in the economy may have affected sales) than performance evaluators who were not provided a weighed measure. As a result, they assessed the employee's performance differently.

The authors note that unintended consequences such as these can bias an evaluation, suggesting that organizations should be conscientious in their subjective performance evaluation design.


The management of creativity presents a dilemma. How can an organization plan, control, motivate, and evaluate creative people and processes without stifling creativity? Isabella Grabner and Gerhard Speckbacher discuss the complexities of managing creative and innovative employees in their article, "The Cost of Creativity: A Control Perspective" (Accounting, Organizations and Society, January 2016).

Organizations that depend on creativity rely on employees who are internally motivated to engage in crucial innovative tasks. However, creativity without external control can pose significant risk to an organization. Creative individuals run the risk of getting lost in details, striving too much for perfection, and becoming more concerned about their own work than about the organization as a whole. Also, creative employees often have more knowledge about their innovative task than do their managers, which creates unique challenges in control and evaluation processes. That's why managing creativity requires a trade-off between creating "space" for creative employees and overseeing them to ensure that they pay attention to corporate policies and goals.

The authors used a carefully developed survey to explore managers' trade-off decisions on three types of management controls: (1) hiring, (2) limiting how much choice employees have about how they perform their tasks, and (3) performance evaluations. Their results show that when a creative employee's internal motivation is more important to an organization, managers will reduce controls by delegating decision rights to their employees and by not setting targets on specific creative results. However, managers will then increase controls that emphasize goals important to the whole organization and will invest more in hiring the right creative employees.


Organizations often suffer when they lose senior executives to other companies that offer higher pay. Recent research reveals that companies can improve executive retention when they make certain adjustments after the loss of a key employee.

The article's authors used executive compensation statistics from Standard & Poor's ExecuComp database to track 510 instances of movement among top executives at publicly held companies from 1993 to 2011.

The study confirmed that companies generally lose executives because they offer less-competitive pay relative to their industry. The authors also found that, for executives who stayed at a company following another executive's departure, median compensation increased 46%, with median cash compensation increasing 18% and median stock-based compensation jumping 102%. Accordingly, companies can make it less likely that executives will leave if they effectively "re-equilibrate" their compensation schemes by increasing their remaining employees' pay.

"Effects of Managerial Labor Market on Executive Compensation: Evidence From Job-Hopping," by Huasheng Gao, Juan Luo, and Tilan Tang, appeared in the February 2015 issue of the Journal of Accounting and Economics.


Many measurement and management systems intended to create strategic or operational advantages for organizations fail to live up to expectations. In their article, "Behavioral-Economic Nudges and Performance Measurement Models" (Journal of Management Accounting Research, Spring 2015), Mary Malina and Frank Selto show how a balanced scorecard system in use for 15 years at one Fortune 500 company remained effective even though managers are, candidly, biased.

These researchers investigate the presence of four particular biases and how a successful balanced scorecard system can interact positively with the managers' decision processes. For example, some decision-makers anchor too much on an immediate opinion as soon as information starts arriving. Another bias is that decision-makers often believe that a business event is more (or less) important to the final decision based on how easily they can recall the same event happening in other situations, regardless of how relevant the information may actually be. Or a decision-maker who sees himself or herself as part of the organization will want to perform in a way that conforms to the organization's values or style. Finally, the choice to present information that highlights either the potential for gains or the potential for losses will affect the manager's approach to risk-taking.

The authors used interviews and a Fortune 500 company's balanced scorecard results from 1998 to 2013 to examine how a balanced scorecard system interacts with managers' biases and decision processes. Their research shows that a company's balanced scorecard system can be used to beneficially "nudge" managers into making decisions that align with organizational goals by taking into account their potential for particular biases. For example, the company studied by the authors took advantage of certain inherent biases by periodically publishing all of its distributors' results companywide. Distributors could then benchmark their performance against their peers' (an anchoring bias) and improve their performance if they felt they were not meeting company expectations (a conformity bias).


Budgets provide essential information for planning a business's operations and providing financial incentives for performance evaluation. In theory, companies should use a separate budget for these conflicting tasks since the motivation to incentivize employees with performance evaluation budget goals clashes with the need for accurate resource allocations in a planning budget. Yet evidence from practice reveals that typically only one budget is used.

However, authors Markus Arnold and Robert Gillenkirch find that there are advantages to using only one budget. Their article, "Using Negotiated Budgets for Planning and Performance Evaluation: An Experimental Study" (Accounting, Organizations and Society, May 2015), explains the potential benefits of using a single budget for planning and performance evaluation.

To investigate budget effectiveness, the authors developed a computer simulation experiment covering three scenarios: use of separate budgets for planning and performance evaluations, use of a single budget for both purposes, and use of one budget for performance evaluation only. One hundred eighty participants were randomly grouped into manager-subordinate pairs. The subordinates completed a task that the managers then evaluated. The managers and subordinates were also asked to complete budget negotiations for the tasks. The authors explore how the choice to include the manager's planning task in the process of setting performance expectations affected subordinates' cooperation and performance in the budgeting process.

The authors determined that, even though using a single budget for planning and performance evaluation reduces flexibility, it enhances subordinates' performance and increases their cooperation during budget negotiations as well. This increased cooperation improves budget accuracy, providing a payoff for both the subordinate and the superior.

The Pathways Commission was created by the American Accounting Association and the AICPA to study the future structure of higher education for the accounting profession and develop recommendations to engage and retain the strongest possible community of students, academics, practitioners, and other knowledgeable leaders in the practice and study of accounting. Recommendation No. 1 of the Pathways Commission report was to "build a learned profession for the future by purposeful integration of accounting research, education, and practice for students, accounting practitioners, and educators." The dissemination of practice-related research to practitioners—as is done in this article—supports this recommendation.

Editor's note

This article is part of an occasional series that samples accounting research and distills key findings for busy practitioners and preparers. These summaries explain the implications of a wide range of research and give CPAs the opportunity to apply the results in day-to-day activities. Readers interested in more detail should review the full text of each article to explore the hypothesis, research process, statistical analysis, supporting theories, and conclusions.

About the author

Cynthia E. Bolt-Lee (boltc@citadel.edu) is an associate professor of accounting in the School of Business at The Citadel in Charleston, S.C. Monte Swain (monte@byu.edu) is the Deloitte Professor in the School of Accountancy at Brigham Young University in Provo, Utah.

To comment on this article or to suggest an idea for another article, contact Courtney Vien, associate editor, at cvien@aicpa.org or 919-402-4125.

AICPA resources



  • Budgeting, Planning, and Forecasting in Uncertain Times (#PCG1306P, paperback; #PCG1306E, ebook)
  • Strategic Business Management: From Planning to Performance (#PCG1305P, paperback; #PCG1208E, ebook)

CPE self-study

  • CGMA Strategic Management Accounting (#165350, one-year online access)
  • Management Control Systems (#165336, one-year online access)
  • MBAexpress: Balanced Scorecard (#BLIMBA5, one-year online access)
  • MBAexpress: Key Concepts of Performance Management (#BLIMBAC3, one-year online access)
  • Performance Measurement Techniques (#165307, one-year online access)

For more information or to make a purchase, go to aicpastore.com or call the Institute at 888-777-7077.

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