THE EFFECTS OF USING BALANCED SCORECARD MEASURES IN EXECUTIVE COMPENSATION ON ORGANIZATIONAL PERFORMANCE

Raili M. Pollanen
Carleton University

Kenneth Kangwu Xi
Justice Canada

ABSTRACT

This study investigates the effects of using balanced scorecard (BSC) measures in executive
compensation on organizational performance, including performance effects of their fit with
organizational context. Utilizing large public companies, the study found significant associations
between the use of BSC-based measures in executive compensation and overall organizational
performance, as well as, both the effectiveness and efficiency dimensions of performance. Moreover,
organizational performance is enhanced by the fit between BSC use and organizational
characteristics. The findings indicate that BSC measures that are tailored to fit the organizational
context and used appropriately in executive compensation can enhance performance.

Keywords: Balanced scorecard, executive compensation, organizational fit, organizational performance