Article: An Exploratory Study of the Relationships Among Environmental Characteristics, Organization Structure and Accounting-Based Performance Evaluation/Reward Systems Journal: Journal of Business and Management (JBM) 1995 Vol.3 No.1 pp.9 - 36 Abstract: Designing effective management controls requires evidence on how alternate performance evaluation and reward systems affect performance. In collecting and evaluating such evidence, it is important to recognize that operationalizing an evaluation/reward system requires decisions regarding three elements: a performance measure, a performance standard, and a performance-based reward. Prior studies on effective management control systems tended to focus on only a few variables at a time. Thus, they have limited ability to reveal how the broad set of organizational variables interact in affecting the design and effects of performance evaluation/reward systems. This study simultaneously considers a broader set of organizational characteristics and performance evaluation/reward systems variables, thereby permitting the interactions and interrelationships among such variables to be directly assessed. This study has found that firms' design of accounting-based performance evaluation/reward systems is contingent on their environmental uncertainty and degree of external competition. Firms have considerable latitude in adjusting their performance evaluation/reward systems to these environmental variables, as such systems +have multiple facets that can act as complements or substitutes for one another. Our results also indicate that the \'fit\' between a firm's performance evaluation/reward system and its environment significantly affect its overall performance. Thus, the results of this study provide further support for the claims of prior research that effective management control requires attention to both internal and external factors and the congruence between them. Inderscience Publishers - linking academia, business and industry through research

Title: An Exploratory Study of the Relationships Among Environmental Characteristics, Organization Structure and Accounting-Based Performance Evaluation/Reward Systems

Authors: Chee W. Chow; Kamal Haddad; Howard Toole

Addresses: Author address listing can be found in the "About the Authors" section at the end of the article.

Abstract: Designing effective management controls requires evidence on how alternate performance evaluation and reward systems affect performance. In collecting and evaluating such evidence, it is important to recognize that operationalizing an evaluation/reward system requires decisions regarding three elements: a performance measure, a performance standard, and a performance-based reward. Prior studies on effective management control systems tended to focus on only a few variables at a time. Thus, they have limited ability to reveal how the broad set of organizational variables interact in affecting the design and effects of performance evaluation/reward systems. This study simultaneously considers a broader set of organizational characteristics and performance evaluation/reward systems variables, thereby permitting the interactions and interrelationships among such variables to be directly assessed. This study has found that firms' design of accounting-based performance evaluation/reward systems is contingent on their environmental uncertainty and degree of external competition. Firms have considerable latitude in adjusting their performance evaluation/reward systems to these environmental variables, as such systems +have multiple facets that can act as complements or substitutes for one another. Our results also indicate that the \'fit\' between a firm's performance evaluation/reward system and its environment significantly affect its overall performance. Thus, the results of this study provide further support for the claims of prior research that effective management control requires attention to both internal and external factors and the congruence between them.

Keywords: Management controls; evaluation/reward systems; performance evaluation; environmental uncertainty; organizational characteristics.

DOI: 10.1504/JBM.1995.141010

Journal of Business and Management, 1995 Vol.3 No.1, pp.9 - 36

Published online: 05 Sep 2024 *

Title: An Exploratory Study of the Relationships Among Environmental Characteristics, Organization Structure and Accounting-Based Performance Evaluation/Reward Systems

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