The Role of Visual Attention in the Managerial Judgment of Balanced‐Scorecard Performance Evaluation: Insights from Using an Eye‐Tracking Device

• DOI: http://doi.org/10.1111/1475-679X.12102
• Published date: 01 March 2016
• Date: 01 March 2016

DOI: 10.1111/1475-679X.12102

Journal of Accounting Research

Vol. 54 No. 1 March 2016

Printed in U.S.A.

The Role of Visual Attention

in the Managerial Judgment of

Balanced-Scorecard Performance

Evaluation: Insights from Using

an Eye-Tracking Device

YASHE NG CHE N,

∗JOHNNY JERMIAS,

†

AND TOTA PANGGABEAN

‡

Received 4 February 2014; accepted 14 November 2015

ABSTRACT

This paper investigates the role of visual attention in managerial judg-

ments during balanced-scorecard performance evaluations. Using the Lo-

carna eye tracker to establish the amount of time managers spent focused on

∗School of Management, Xiamen University; †Beedie School of Business, Simon Fraser

University and JCU Singapore; ‡College of Business Administration, California State Univer-

sity, Sacramento.

Accepted by Christian Leuz. The authors thank the Social Sciences and Humanities Re-

search Council of Canada (SSHRC) for financial support. This project was funded by an

SSHRC Research and Development Initiatives Grant. We thank Rajiv Banker, Hsihui Chang,

and Mina Pizzini for sharing their research instrument with us. This paper has benefited

from comments and suggestions of the Editor and the two anonymous reviewers of this jour-

nal, Michael Shields, Steven Salterio, Peter Clarkson, Theresa Libby, Peter Tingling, Den-

nis Chung, Craig Emby, Irene Gordon, and Kim Trottier as well as seminar participants

at Simon Fraser University, Nanjing University, Peking University HSBC Business School,

the 2012 American Accounting Association Annual Conference, and 2013 European Ac-

counting Association Annual Congress. The research instrument is available upon request

from the corresponding author. An Online Appendix to this paper can be downloaded at

http://research.chicagobooth.edu/arc/journal-of-accounting-research/online-supplements.

113

Copyright C, University of Chicago on behalf of the Accounting Research Center,2015

114 Y.CHEN,J.JERMIAS,AND T.PANGGABEAN

visual cues, we found that managers who look more at strategically linked

performance measures are more likely to make decisions consistent with the

achievement of their subordinates’ strategic objectives. When aware of strat-

egy, managers focused more on strategically linked performance measures

than on nonlinked measures. The presentation format of the strategy in-

formation did not significantly affect this focus. Our findings indicate that

awareness of strategically linked performance measures, but not their pre-

sentation, appears to be important in helping managers to make better de-

cisions. This study contributes to the management accounting literature by

generating useful insights into the impact of visual attention on judgments

and decision-making processes.

JEL codes: C91; D23; D83; M12; M41

Keywords: visual attention; balanced scorecard; eye tracking; managerial

judgment

1. Introduction

This study examines the role of visual attention in the managerial judg-

ments made during balanced-scorecard (BSC) performance evaluations.

Examining the relationship between attention and judgment is crucial to

understanding managers’ behavior (Ocasio [1997]). Managers’ limited ca-

pacity to process information requires them to be selective about the types

of information they use (Simon [1947]). Hoffman and Ocasio [2001] pro-

posed that attention involves the subjective interpretation of available in-

formation, which requires managers to ignore some aspects of the infor-

mation to process others more effectively. Lavie et al. [2004] found that

attention guides the interpretation of information and, in turn, influences

behavior.

Previous studies in accounting have emphasized the importance of at-

tention in understanding managers’ behavior. Kaplan and Norton [1996],

for example, asserted that the BSC is designed to focus top executives’ at-

tention on companies’ critical performance indicators. Lipe and Salterio

[2000] stated that managers tended to pay insufficient attention to leading

indicators and nonfinancial measures, which defeats the purpose of imple-

menting a BSC.

Although the importance of attention has been recognized, scant re-

search in accounting has measured it directly or investigated its effect on

managerial judgment. Previous studies in accounting assume that man-

agers pay attention to any cue that can reasonably be predicted and re-

searchers determine ex ante significant relationships between those cues

and decision variables, without directly measuring the level of attention

(Birnberg and Shields [1984]). Previous studies have been unable to mea-

sure levels of attention because of the lack of devices or software programs

that effectively track the cues to which managers respond when process-

ing accounting information (Birnberg and Shields [1984]). The inability

THE ROLE OF VISUAL ATTENTION IN MANAGERIAL JUDGMENT 115

to measure attention could also be the result of cost or time limitations, or

difficulty collecting data on attention.1

Previous BSC studies have focused on the underlying stimulus drawing

attention. They assumed that managers’ attention is linked exclusively to

the format of the stimulus. This line of research is primarily concerned

about how BSC should be designed or formatted to draw attention (e.g., by

using a strategy map (Banker, Chang, and Pizzini [2004, 2011], Cheng and

Humphreys [2012]), causal chain (Tayler [2010]), and different formats

(Cardinaels and van Veen-Dirks [2010]). The main objective of this line of

research is to improve the future design of the BSC.

Although useful, these studies ignored the role of informativeness of

the stimuli in attracting attention. Recent developments in eye movement–

based research (e.g., Summerfield et al. [2011], Foulsham and Kingstone

[2012]) suggest that visual attention is predominantly driven by the infor-

mativeness of the stimuli (goal awareness) rather than its salience (for-

mats). We argue that managers are more likely to focus on strategically

linked measures if they are previously aware of their existence, and the

company strategy, regardless of the format of the information.

Drawing upon psychology and marketing literature, and utilizing the Lo-

carna eye tracker, we developed and tested hypotheses about the role of

visual attention in judgment and decision-making. Using the eye-tracking

device offers a unique advantage in investigating the use of information

in management decisions, compared with an approach relying solely on

decision outcomes. An eye-tracking device allows us to investigate how de-

cision quality is affected by the amount of time managers spend looking

at linked measures and whether understanding of a firm’s strategy and the

presentation format affect managers’ focus. Previous studies relying solely

on decision outcomes could not open the “black box” of how visual atten-

tion affects decision quality and what drives visual attention.

We argue that visual attention is closely related to improved decision

quality. We hypothesize that the relative amount of visual attention that

decision makers pay to the cues available to them can be used to pre-

dict the quality of their decisions. We also expect that visual attention

will be predominantly driven by goal awareness rather than the format of

the stimuli (Foulsham and Kingston [2012]). Specifically, we hypothesize

that increased attention to strategically linked measures will increase the

1The cost of an eye-tracking device might be prohibitive to most accounting researchers.

The market price for a commercial eye-tracking device is around US$35,000. It is only re-

cently that new software has allowed researchers to analyze eye-tracking data effectively. In

the past, researchers have had to analyze eye-tracking data frame by frame, which is very time-

consuming. The cost of eye-tracking devices has decreased significantly in recent years because

more companies, including Apple, Microsoft, and Google, are interested in integrating eye-

tracking features in consumer electronic devices (see, e.g., Luk and Ovide [2013]). Other

companies, such as Gazepoint, Eye Tribe, and Tobii, have recently produced more affordable

desktop eye trackers.