ESTRATEGIAS PARA JUGAR

Guided by the research framework, the following hypotheses and their justifications are employed to formalise the arguments.

4.4.1 Participation, common-measure bias, fairness perception and trust

Previous research on participation in the decision-making process in the legal setting and budgeting setting has illustrated mixed results regarding the level of participation ranging from low to high level. However, most of the prior studies conclude that any level of participation enhances the fairness perception on the decision-making process (see, for example, Thibaut and Walker, 1975; Tyler and Lind, 1992; Little et al., 2002; Lau and Sholihin, 2005). Yet, there are no specific studies that examine the effect of participation on the development of performance measures in the BSC environment.

Therefore, the present research will employ: the participation concept; procedural fairness theory; and distributive fairness theory to investigate the effect of participation on the development of performance measures in the BSC environment. The present research argues that since the senior manager invites the participation of the division/business unit manager in the development of the performance measures, then intuitively, it can be expected that her/his senior manager will use all of the performance measures regardless of whether it is financial or non-financial measure. Consequently, the common-measure bias problem which currently exists in the BSC environment will be reduced. This argument can be re-stated in hypothesis 1.

H1: The higher the level of participation in developing the performance measures, the lower the common-measure bias.

The present research also argues that the participation of a manager in the development of the performance measures will enhance their fairness perception of the performance measures, both procedural fairness and distributive fairness. As procedural fairness theory claims, participation is one factor which can

increase the fairness perception of the decision process (see, for example, Lind et al., 1990; Korsgaard and Roberson, 1995; Greenberg, 1990b; Organ and Moorman, 1993; Tyler and Lind, 1992; Muhammad, 2004; Brownell, 1982; Ross, 1994; Dunk, 1989; Lau, et al., 1995; Lau and Tan, 1998; Lau and Lim, 2002a). In this present study, the decision process is the process that will develop the performance measures which will be used in the performance evaluation process in the BSC environment. This argument can be re-stated in hypotheses 2a and 2b.

H2a: The higher the level of participation in developing the performance measures, the greater the procedural fairness perception of the performance measures.

H2b: The higher the level of participation in developing the performance measures, the greater the distributive fairness perception of the performance measures.

In the case of performance measures, non-financial measures are perceived to be fairer than financial measures. As Kaplan and Norton (1993) argue, one of the important strengths of the BSC is that each unit in the organisation develops its own specific or unique measures that capture the unit’s strategy. Subsequently, the present study will employ distributive fairness theory to investigate the fairness of the performance measure (financial and non-financial measures) as an output of the process of development of performance measures in a BSC environment. This argument can be re-stated in hypothesis 3.

H3: Non-financial measures are perceived to be more fair than financial measures.

Previous research shows that participation in decision-making not only enhances the fairness perception of the decision-making process, but also increases the trust between parties involved in the process (Lau and Sholihin, 2005). However, as yet, no one has examined the effects of participation on trust if the parties involved in the performance evaluation process also participated in the

development of performance measures used to evaluate performance in the BSC environment. It could be argued that if all parties involved in the evaluation process participate in the development of the performance measures used for their performance evaluation, that trust between the parties will increase as will the performance of the people being evaluated. This argument can be re-stated in hypothesis 4.

H4: The higher the level of participation in developing the performance measures, the stronger the trust between parties involved in the evaluation process.

4.4.2 Managerial Performance

The common-measure bias problem in the BSC environment (Lipe and Salterio, 2000) has an implication that the benefits of the BSC cannot be fully exploited. There is also the possibility that it could impact on managerial performance since this performance is a product of the performance evaluation process. Additionally, the common-measure bias problem also can detract from a manager’s decision-making ability since the decision will be based on the performance measures which are used to evaluate their performance. Consequently, their managerial performance could be sub-optimal. Therefore, it is reasonable to argue that if all of the performance measures being set in the development of the performance measures are used in the performance evaluation process, then one can expect improved managerial performance. This argument can be re-stated in hypotheses 5a and 5b.

H5a: The lower the common-measure bias, the better the managerial performance of the divisional/unit managers (division manager’s self- assessment).

H5b: The lower the common-measure bias, the better the managerial performance based on division manager’s view of senior manager’s perception of performance.

As argued above, a manager’s participation in the development of performance measures can enhance the fairness perception of the performance measures being used in the performance evaluation process. Eventually, if the managers perceive the performance measures to be fair then it can be expected that their managerial performance will improve accordingly since they realise that their efforts will be evaluated fairly. This argument can be re-stated in hypotheses 6a, 6b, 6c and 6d.

H6a: The higher the procedural fairness perception of the performance measures by divisional/unit managers, the better the managerial performance of the divisional/unit managers (division manager’s self-assessment).

H6b: The higher the procedural fairness perception of the performance measures by divisional/unit managers, the better the managerial performance based on division manager’s view of senior manager’s perception of performance.

H6c: The higher the distributive fairness perception of the performance measures by divisional/unit managers, the better the managerial performance of the divisional/unit managers (division manager’s self-assessment).

H6d: The higher the distributive fairness perception of performance measures by divisional/unit managers, the better the managerial performance based on division manager’s view of senior manager’s perception of performance. Additionally, a manager’s participation in the development of performance measures increases the level of trust between parties involved in the performance evaluation process. In these instances, prior research argues that trust is an important factor in the performance evaluation process (see, for example, Ross, 1994; Tomkins, 2001; Johansson and Baldvinsdottir, 2003; Lau and Sholihin, 2005). However, none of those studies examined the effects of trust in the performance evaluation process on managerial performance. It might be argued that if divisional/unit managers trust that their senior managers incorporated the performance measures they participated in to evaluate their managerial performance, then it is expected that this trust will impact on their performance in a positive manner. This argument can be re-stated in hypotheses 7a and 7b.

H7a: The stronger the level of trust between parties involved in the performance evaluation process, the better the managerial performance of the divisional/unit managers (division manager’s self-assessment).

H7b: The stronger the level of trust between parties involved in the performance evaluation process, the better the managerial performance based on division manager’s view of senior manager’s perception of performance.

As mentioned above, the fairness perception of performance measures and trust between parties involved in the performance evaluation process are the two important factors in the performance evaluation process. Both of the factors are expected to be a positive influence for managers and lead to improved managerial outcomes. Currently, no study has focused on the relationship between fairness perception of performance measures and trust between parties involved in the performance evaluation process. However, it can be argued that there is a positive relationship between fairness perception of performance measures and the trust between parties involved in the performance evaluation process. Accordingly, the present research will assess the relationship between fairness perceptions, both procedural and distributive fairness, of performance measures and trust in the performance evaluation process. This can be formalised into hypotheses 8a and 8b.

H8a: The higher the procedural fairness perception of the performance measures by divisional/unit managers, the stronger the trust between parties involved in the evaluation process.

H8b: The higher the distributive fairness perception of the performance measures by divisional/unit managers, the stronger the trust between parties involved in the evaluation process.