Formal Measures in Informal Management: Can a Balanced Scorecard Change a Culture?
American Economic Review
vol. 105,
no. 5, May 2015
(pp. 447-51)
Abstract
We extend traditional agency theory by exploring the roles for formal measures when managerial behavior is not governed by rules, formulas, or contracts. Part I describes relational incentive contracts with informal weights on formal performance measures. More importantly, it also explores how formal measures could be used in models of informal management, such as adaptation and coordination, politics and influence, leadership, and informal authority. Part II considers the benefits from allowing key stakeholders to develop their own, potentially inferior, performance measures. The collaboration to create a "balanced scorecard" of performance measures can help change an organization's culture.Citation
Gibbons, Robert, and Robert S. Kaplan. 2015. "Formal Measures in Informal Management: Can a Balanced Scorecard Change a Culture?" American Economic Review, 105 (5): 447-51. DOI: 10.1257/aer.p20151073Additional Materials
JEL Classification
- D86 Economics of Contract: Theory
- M12 Personnel Management
- M14 Corporate Culture; Social Responsibility
- M54 Labor Management