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The Role of Financial Incentives in Balanced Scorecard-Based Performance Evaluations: Correcting Mood Congruency Biases


  • An earlier version of this paper was presented at the 2008 AAA Midwest Regional Meeting, the 2008 AAA Annual Meeting, the 2008 CAAA Annual Meeting, and the 2009 ABO conference. It is based on the PhD dissertation (University of Calgary) of the first author, supervised by the second author. The authors would like to thank the members of the committee, Cynthia Simmons, Kate White, and Michael Wright, and external examiners, Teresa Kline and Alan Webb. We also thank Douglas Skinner (the editor) and an anonymous referee, and acknowledge the helpful comments of Fodil Adjaoud, Cam Graham, Linda Grensing-Pophal, Susan Haka, Irene Herremans, Steven Kaplan, Joanne Leck, Tim Miller, Cam Morrill, Janet Morrill, Sean Peffer, Steve Salterio, Parbudyal Singh, and Gary Spraakman, and the comments of workshop participants at Brock University, Concordia University, University of Lethbridge, University of Manitoba, University of Ottawa, and York University. Financial support was provided by the University of Calgary to the first author. We thank Kate White for sharing her mood induction instrument.


Moods are low-intensity affective states that individuals bring to a decision, and may be especially important when the balanced scorecard (BSC) is used for performance evaluation purposes. We propose that financial incentives can motivate decision-makers to correct mood congruency biases, in which judgments and decisions are consistent with moods. In experiment 1, participants rated the performance of one division manager based on two accounting measures and another manager based on a 16-measure BSC; there were mood congruency biases at both levels of information load. Financial incentives to make benchmark-consistent judgments eliminated bias in the former condition but not in the BSC condition. In experiment 2, incentives were offered and performance evaluations were based on an eight-measure BSC; mood congruency bias was eliminated. Results suggest that management control systems, specifically financial incentives, should be included in future affect correction research.