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Performance metrics that entice agents to consider the long-term firm effect of their actions

In: Research Handbook on Performance Measurement for Management Control

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  • Jan Bouwens

Abstract

To assure that decision makers make decisions that are consistent with attaining long-term (sustainability) objectives, it is imperative that employees are incited to consider the long-term effect of their decisions. In this chapter, I discuss whether the choice of performance metrics potentially affects the likelihood of agents to consider the long-term effects of their decisions. Some existing research would suggest that accounting return metrics - like residual income - and nonfinancial metrics may lead agents to redirect attention from the short- to the long-term effects of their actions. I observe potential avenues for future research. At this stage we know little of how firms prioritize in deciding what metrics to use, how many metrics to use or what weights they want to put on these metrics.

Suggested Citation

  • Jan Bouwens, 2024. "Performance metrics that entice agents to consider the long-term firm effect of their actions," Chapters, in: Anne M. Lillis & Jennifer Grafton (ed.), Research Handbook on Performance Measurement for Management Control, chapter 12, pages 226-246, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:21441_12
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    File URL: https://www.elgaronline.com/doi/10.4337/9781803920672.00022
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