Formal Measures in Informal Management: Can a Balanced Scorecard Change a Culture?
Robert Gibbons, Robert S. Kaplan
American Economic Review · 2015 · Volume 105 · Issue 5
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.
Keywords
Economics of Contract: Theory, Personnel Management, Corporate Culture, Social Responsibility, Labor Management
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