THE EFFECTS OF INCENTIVE STRUCTURE AND GOAL DIFFICULTY ON TIME PLANNING DECISIONS WITHIN A BALANCED SCORECARD FRAMEWORK

Recent innovations in management control systems, such as the Balanced Scorecard System, reflect today’s complex business environment by accounting for performance in multiple areas. When individuals must allocate their time between multiple areas that compete for their time, the manner in which incentives are structured is hypothesized to influence their decisions differently depending on goal difficulty. A decision-making experiment was conducted to test this proposition. When incentives were structured so that each area of the Balanced Scorecard is rewarded separately, challenging goals received more planned attention than easy or unattainable goals following previous findings. When incentives were structured so that goals in all areas must be achieved together, the influence of goal difficulty on the time planning decision diverges from previous findings such that areas having unattainable goals receive the same planned attention as areas having challenging goals. The results suggest that companies must consider how performance is rewarded within a Balanced Scorecard framework.