Managerial Auditing Journal

Managing strategic uncertainty: The diversity and use of performance measures

in the balanced scorecard
Mandy M. Cheng, Kerry A. Humphreys,
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Issue: 4/5, pp.512-534, https://doi.org/10.1108/MAJ-12-2015-1286
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MAJ
31,4/5
Managing strategic uncertainty
The diversity and use of performance
measures in the balanced scorecard
512
Mandy M. Cheng and Kerry A. Humphreys
School of Accounting, University of New South Wales, Sydney, Australia

Abstract
Purpose – Strategic uncertainty from emerging threats and opportunities in the business
environment can significantly impact managers’ abilities to successfully implement their
business strategy. A key strategic control and governance mechanism designed to enable
managers to respond to strategic uncertainty is a strategic performance measurement
system, such as the balanced scorecard (BSC). This study aims to investigate whether
strategic uncertainty is associated with the diversity and types of performance measures in a
BSC, which are used by managers for various strategic control and governance purposes.
Design/methodology/approach – A survey of senior-level managers within strategic
business units of Australian Stock Exchange listed organizations was conducted.
Findings – This study finds that the extent to which managers face strategic uncertainty is
positively associated with performance measurement diversity. Further, managers faced with
greater strategic uncertainty use performance measures relatively more to evaluate subordinates’
performance, communicate business strategy, track performance against targets, identify problem
areas and guide future directions. Outcome measures are used to a greater extent for all five
purposes, whereas leading measures are used more only for future-oriented purposes.
Practical implications – Strategic performance measurement systems, such as the BSC,
can and are being used to provide managers with the information and control
mechanisms necessary to meet the challenges associated with strategic uncertainty.
Originality/value – This study provides the first evidence on the relations between strategic
uncertainty, performance measurement diversity and managers’ use of performance
measures for five key purposes. Understanding these relations is important, as managers
need to formulate appropriate responses to strategic uncertainty, to protect and create value
by exploiting emerging opportunities and managing associated threats.
Keywords Balanced scorecard, Different performance measure purposes,
Performance measurement diversity, Strategic uncertainty
Paper type Research paper

1. Introduction
The rapid pace at which changes in economic and business conditions are occurring has
been highlighted as a major challenge for managers and C-suite executives (IBM
Institute for Business Value, 2013; PwC, 2015). Such a change directly impedes
managers’ ability to implement their intended strategy (Simons, 2000). Within this
environment, managing strategic uncertainty becomes especially important; that is, the
Managerial Auditing set of uncertainties that managers believe must be monitored personally for their
Journal Vol. 31 No. 4/5,
2016 pp. 512-534
organization’s strategy to be achieved (Simons, 1990, p. 136). Faced with limited time
© Emerald Group Publishing and cognitive constraints, a key strategic control and governance mechanism from
Limited 0268-6902
DOI 10.1108/MAJ-12-2015-1286 which managers are expected to benefit under conditions of strategic uncertainty is a
strategic performance measurement system (SPMS), such as the balanced scorecard Managing
(BSC) framework (Widener, 2007; Kaplan, 2009). strategic
The BSC framework plays an influential role in bringing together strategic uncertainty
considerations with management control (Otley, 1999; Hoque and James, 2000; Otley
and Soin, 2014) and governance (Daniel et al., 2008). While prior literature has
highlighted the potential of an SPMS, such as the BSC, to assist managers in responding
under conditions of strategic uncertainty (Chenhall, 2005; Kasperskaya and Tayles, 513
2013), the ability of the BSC to handle conditions of strategic uncertainty has also been
questioned (Nørreklit, 2003). Importantly, to date, BSC use in managing strategic
uncertainty has not been empirically investigated in the accounting literature. Further,
while prior studies have examined the relationship between an SPMS and its uses
(Henri, 2006a, 2006b), they generally consider an SPMS as a whole, but fail to recognize
that often only parts of the SPMS are used for specific purposes. For example, if 20
performance measures are reported in a BSC, performance evaluation may be linked to
mostly financial outcomes, whereas planning may be based on another subset of
performance measures. The degree to which managers use performance measures may
be high for strategic planning purposes, but low for performance evaluation purposes. It
is the aim of this study to examine whether strategic uncertainty affects managers’ use
of performance measures contained in a BSC, specifically, the diversity of performance
measures used, the purposes for which they are used and the types of performance
measures used for various purposes.
A key feature of a BSC is the presentation of multiple performance measures across
categories, to compensate for the limitations of focusing only on financial measures
(Kaplan and Norton, 1996; Kaplan, 2009). By presenting a diverse set of performance
measures across the four perspectives of financial, customer, internal business process
and learning and growth, the BSC allows managers to obtain a more comprehensive
view of the organization, and their progress toward its strategic goals. Extant research
examines the impact that factors such as organization size and market position have on
diversity of BSC performance measures (Hoque and James, 2000). We extend this stream
of research by examining differences in the diversity of performance measures used by
managers that result from varying levels of strategic uncertainty. We propose that as
strategic uncertainty increases, this property of a BSC becomes even more important,
and managers will increase the diversity of performance measures upon which they
rely.
Performance measures are used for a variety of purposes (Grafton et al., 2010; Hall,
2010). With most prior research examining these roles independently and little attention
paid in the literature to the purpose of using performance measures, there have been
calls for more research in this area (van Veen-Dirks, 2010; Grafton et al., 2010). Notable
exceptions that have examined performance measurement system use generally focus
on conceptual classifications of purpose, such as the interactive versus diagnostic use of
performance measures (Henri, 2006b; Widener, 2007). With various purpose
classifications used in the literature over time (Grafton et al., 2010; Hall, 2010), we extend
this stream of research by drawing on current practice to examine how strategic
uncertainty influences managers’ tendency to use performance measures for five
strategic control and governance purposes (Atkinson et al., 2012; Langfield-Smith et al.,
2015), namely, performance evaluation, communicating strategy, tracking performance,
identifying problems and guiding future directions. We propose that as strategic
MAJ uncertainty increases, managers will increase the diversity of performance
31,4/5 measures used for each of these purposes.
Performance measures in the financial and customer perspectives of the BSC
are typically referred to as outcome measures, while performance measures in the
internal business process and learning and growth perspectives measures are
generally referred to as leading measures, as they are drivers of the outcome-
514 oriented measures (Ittner et al., 2003; Atkinson et al., 2012; Cheng et al., 2015).
Although both types of performance measures are considered important in a BSC,
they are not given equal emphasis by managers. For example, Ittner et al. (2003)
find that when evaluating performance, managers subjectively focused on outcome
measures, even though some of the leading measures are better predictors of
organizational performance. We contribute to this research stream with a research
question that examines whether there is a differential focus on outcome and
leading measures by managers, in response to strategic uncertainty.
To examine our research hypotheses and question, we conduct a survey of
senior-level managers within the strategic business units (SBUs) of organizations
listed on the Australian Stock Exchange (ASX). Our major findings are as follows.
First, we find that the extent to which managers face strategic uncertainty is
positively associated with performance measurement diversity. Second, managers
faced with greater strategic uncertainty use performance measures relatively more
to evaluate subordinates’ performance, communicate business strategy, track
performance against targets, identify problem areas and guide future directions.
Third, while outcome measures are used by managers to a greater extent for all
five of these purposes, leading measures are used more only for future-oriented
purposes, in particular, to identify problem areas and guide future directions.
We make several contributions to the accounting literature. First, while rapid
changes in the business environment challenge managers’ ability to successfully
implement their intended strategy, little is known about how the BSC is used to
manage this strategic uncertainty (Kasperskaya and Tayles, 2013). Our study is
the first to provide evidence that managers are responding to this strategic
uncertainty by increasing the diversity of performance measures they rely upon,
particularly with respect to performance measures in the financial and customer
perspectives of the BSC. Further, when we decompose strategic uncertainty into its
component types, we find evidence that performance measurement diversity
increases with innovation and product uncertainties, but not technology
uncertainties. This result suggests that managers’ use of performance measures in
responding to changes in their external and business environments varies
depending on the type of strategic uncertainty they perceive to be important.
Second, we respond to calls for empirical research that recognizes and examines the use of
performance measures for different purposes (Ittner and Larcker, 2001; Merchant et al.,
2003; van Veen-Dirks, 2010), with a particular focus on these uses under varying conditions
of strategic uncertainty. We examine the use of performance measures in the BSC
specifically, as despite being the most widely used SPMS in practice (Rigby and Bilodeau,
2015), there has been limited research examining the various purposes for which managers
use the BSC (Wiersma, 2009). We demonstrate that strategic uncertainty increases the
extent to which performance measures in the BSC are used for all five purposes examined.
This highlights the role of the BSC as a performance
management, rather than merely measurement, system (Kaplan, 2009) when managers Managing
are faced with high strategic uncertainty. strategic
Third, we contribute to our understanding of the use of outcome and leading
measures for different purposes in organizations. Depending on the uncertainty faced, uncertainty
managers are expected to use different combinations of performance measures
(Mouritsen et al., 2009) and different decision strategies will then be appropriate
(Kasperskaya and Tayles, 2013). Our finding that outcome measures are used for all 515
purposes in response to strategic uncertainty, but leading measures are primarily used
for future-oriented purposes, highlights the importance of understanding the various
purposes for which a BSC is being used when managing strategic uncertainty.

2. Literature review and hypothesis development

2.1 Strategic uncertainty and performance measurement diversity
Strategic uncertainty is the set of uncertainties that managers believe must be
monitored personally for their organization’s strategy to be achieved (Simons, 1990, p.
136). More specifically, Simons (2000) defines strategic uncertainty as “the emerging
threats and opportunities that could invalidate the assumptions upon which the
current business strategy is based” (215). These emerging threats and opportunities are
“unknowable in advance and emerge unexpectedly over time” (Simons, 2000, p. 215),
and represent the “changes in competitive dynamics or internal competencies that top
managers monitor” (Widener, 2007, p. 763). Strategic uncertainty is therefore
conceptualized as relating to an organization’s business strategy (as opposed to
corporate strategy or operational strategy), and the perceptions of managers who are
tasked with developing and refining their organization’s competitive approach (Simons,
1995, 2000; Chenhall, 2005; Widener, 2007).
Strategic uncertainty can be distinguished from strategic risk, which
describes unexpected events that reduce the ability of managers to implement
their intended business strategies (Simons, 2000, p. 255). Similar to strategic
risk, however, strategic uncertainty increases managers’ information needs, as
it implies a gap between information that is known and that which is desired
(Galbraith, 1973). In summary, strategic uncertainty triggers a focus by
managers on understanding and asking questions about how best to realign
their business strategy to achieve their strategic vision.
While some critical researchers suggest that a BSC can be challenged by conditions
of strategic uncertainty (see discussion in Kasperskaya and Tayles, 2013), field research
finds that in uncertain environments, both financial and non-financial performance
measures have roles to play in informing managers (Tuomela, 2005) and experimental
research finds that a BSC enhances managers’ ability to interpret external business
trends (Cheng and Humphreys, 2012). While performance measures in the financial
and customer perspectives of a BSC reflect performance consequences of strategic
uncertainty, performance measures relating to internal business processes and learning
and growth allow better understanding of the impacts strategic uncertainty has on the
organization’s developing capabilities (Henri, 2006b). Further, by its nature, the
potential implications of strategic uncertainty on an organization’s strategy cannot be
predicted in advance; hence, using a diverse set of performance measures allows
managers to recognize weak performance signals from different parts of the internal
value chain that are indicative of an emerging trend. Hence, focusing on a narrow set of
MAJ performance measures is insufficient; managers need a thorough and comprehensive
31,4/5 understanding of their organizations to respond to strategic uncertainty.
Based on the above discussions, we therefore argue that the extent to which
organizations are faced with strategic uncertainty is associated with a greater
diversity of performance measures in their BSC. We formally hypothesize that:

516 H1. The extent to which organizations face strategic uncertainty is

positively associated with performance measurement diversity.

2.2 Strategic uncertainty and the purpose of using performance measures on a BSC
Performance measures in a BSC can be used for a variety of purposes. Extant research
has examined performance measure use through Simons’ (2000) levers of control
framework (Henri, 2006b; Widener, 2007; Chenhall and Moers, 2015), for decision-
influencing versus decision-facilitating purposes (Grafton et al., 2010), for evaluation
versus reward purposes (van Veen-Dirks, 2010) and for management by objectives
versus performance improvement purposes (Malmi, 2001). This literature (Wiersma,
2009) has also considered a range of drivers that influence BSC usage by individuals in
organizations, including organizational use, BSC design, opinions of others and other
control system elements present within the organization.
In this study, we focus on five common purposes for which performance measures in
a BSC are used in practice. Early research by the Institute of Management Accountants
(Frigo, 2001) looks at several purposes for which organizations use the BSC (including
supporting strategic objectives and initiatives, and communicating strategy), and
compares BSC users with non-users in organizations surveyed. Our study expands the
set of purposes considered by Frigo (2001), based on Langfield-Smith et al. (2015) and
other prior literature discussed below. The five purposes are to evaluate subordinates’
performance, communicate business strategy, track performance against targets,
identify problem areas and guide development of future strategy and operations. We
now discuss each purpose in turn, including related literature, and examine the use of
performance measures for each purpose under conditions of high strategic uncertainty.
First, we consider use of performance measures to evaluate subordinates’
performance. Although not initially designed as a performance evaluation tool, the BSC
is commonly used to evaluate subordinates’ performance (Lipe and Salterio, 2000;
Malina and Selto, 2001, 2015; Ittner et al., 2003; Sale and Lair Sale, 2005). We propose
that under conditions of high strategic uncertainty, managers are more likely to use a
diverse set of performance measures to evaluate their subordinates’ performance. As
strategic uncertainty increases, the risk of managers engaging in goal incongruent and
unethical behaviors also increases (Merchant, 1990; Widener, 2007). This makes
including a diverse set of measures in regular performance evaluation more important.
Further, changes in the business and internal environments increase information
asymmetry between subordinates and supervisors; performance evaluations can
provide opportunities for supervisors to give feedback to subordinates, exchange
information and clarify performance priorities and goals.
Second, we discuss use of performance measures to communicate business strategy.
Performance measures can be used to communicate strategic goals and directions (Murby
and Gould, 2005; Atkinson et al., 2012). Communicating strategy is a key purpose for which
Kaplan and Norton (1996, 2004) intend the BSC to be used, and both Malina and Selto (2001)
and Speckbacher et al., (2003) provide empirical evidence on the
use of the BSC for effective strategy communication. This communication purpose of the Managing
BSC is argued to enable knowledge sharing and facilitate cultural and strategic strategic
change (Malina and Selto, 2001). As strategic uncertainty increases, strategic initiatives uncertainty
that are required to meet external and internal challenges are likely to change
frequently. Hence, managers’ use of performance measures to communicate business
strategy is likely to be greater under conditions of high strategic uncertainty.
Third, we examine use of performance measures in a BSC to track performance 517
against targets. The BSC is designed to include targets, against which performance is
monitored (Kaplan and Norton, 1996; Mackay, 2004; Henri, 2006a; Atkinson et al., 2012).
When faced with high strategic uncertainty, it is important for managers to be able to
identify issues that arise and make corrective actions in a timely manner. In such
situations, performance measures are used to track and monitor performance, and
allows corrections of deviations from the intended strategy (Kaplan and Norton, 1996;
Chenhall, 2005). Consistent with this, Malina and Selto (2015) find that BSC performance
measures are used to nudge decision makers into focusing on achieving strategically
aligned targets. This suggests that strategic uncertainty can drive the use of
performance measures to track performance against targets.
Fourth, we consider use of performance measures to identify problem areas . The need
to use both financial and non-financial measures to identify the problems that require
managers’ attention is one of the earliest purposes identified for performance
management systems (Simon et al., 1954), including the BSC (Mackay, 2004; Murby and
Gould, 2005; Henri, 2006a; Kaplan, 2009). Directing attention to identify problems that
managers should focus on is entirely consistent with the construct of strategic
uncertainty – that is, the set of uncertainties that managers need to monitor personally
(Simons, 1990; Adler and Chen, 2011). High strategic uncertainty means that managers
are faced with unknown changes in competitive dynamics and internal competency
requirements (Henri, 2006b). This requires greater vigilance by the managers in
recognizing problems early, and this greater vigilance can be achieved by using the full
range of performance measures in a BSC to focus attention on strategic uncertainty
(Bisbe and Otley, 2004) and identify problem areas (Kaplan, 2009).
Fifth, we discuss the use of performance measures in a BSC to guide future directions .
Performance measures can also lend themselves to facilitate discussion and better
understanding of the progress of the organization as managers continue to refine
strategies and their operations (Cheng and Humphreys, 2012). The BSC is argued to
provide “a comprehensive picture of the state of the organization” (Malina and Selto,
2001, p. 52). Further, as a double-loop learning system (Kaplan and Norton, 1996),
managers can use the BSC to track performance (as outlined previously), and, where the
feedback they receive indicates significant changes in the environment or the success of
the organization’s strategy, both the performance measures in a BSC and the strategy
captured by those measures may evolve and develop over time (Kaplan, 2009). This
latter use of performance measures is particularly important in the presence of high
strategic uncertainty. As business trends and opportunities continue to evolve and
change, managers need to have a comprehensive mental model of their organization’s
strategy to evaluate the appropriateness of their strategy and operations (Cheng and
Humphreys, 2012), and guide future directions and formation of strategies (Simons,
2000; Bisbe and Otley, 2004).
MAJ In combination, these arguments provide the basis for H2, which we
31,4/5 formally hypothesize as follows:
H2. The extent to which a diverse set of performance measures is used
is greater under higher strategic uncertainty, for the purposes of:
(a) evaluating subordinates’ performance; (b) communicating
518 business strategy; (c) tracking performance against targets; ( d)
identifying problem areas; and (e) guiding future directions.
2.3 The use of outcome versus leading measures on a BSC for different purposes Next,
we consider the type of performance measures used for different purposes to manage
strategic uncertainty. We specifically focus on leading measures versus outcome
measures. Performance measures in the financial and customer perspectives of the BSC
reflect the consequences of strategic initiatives and are generally considered as outcome
measures. In contrast, performance measures in the internal business process and
learning and growth perspectives are generally referred to as leading measures, as they
are leading indicators of the outcome measures (Ittner et al., 2003).
Prior research suggests that outcome measures are generally more heavily weighted
in managers’ judgments and decisions, particularly in the case of performance
evaluations (Ittner et al., 2003). Some of the reasons include: outcome measures are
often considered as more objective and more quantifiable, they reflect known results
rather than actions taken and they are more directly tied to valued organizational
goals. Given our earlier predictions that managers will respond to strategic uncertainty
by using performance measures to a greater extent, and this extant literature
indicating that managers prefer to rely on outcome measures, we expect that when
faced with higher strategic uncertainty, managers will use outcome measures to a
greater extent in relation to all five purposes.
In contrast, use of leading measures is more critical for some, but not all, purposes
in responding to strategic uncertainty. First, to communicate business strategy,
managers need to explain not only the outcomes but also the causal chain associated
with the “strategy story” that links actions taken now with future outcomes for the
organization (Malina and Selto, 2001; Cheng and Humphreys, 2012). Achieving this
communication objective requires both outcome and leading measures. Further, leading
measures, which tend to be non-financial and operationally focused (Ittner et al., 2003),
enable managers to communicate the association between employee actions and their
strategic goals for the organization (Ittner and Larcker, 2001). Second, problems
associated with strategic uncertainty can occur in any part of the organization;
therefore, performance measures on internal business processes are important to direct
attention and identify problem areas that result from strategic uncertainty. Further,
changes in the business environment have implications for the management of
intangible assets, including human capabilities and innovations (Kaplan, 2009).
Learning and growth measures are thus also important for problem identification.
Third, to guide future directions for both the organization’s strategy and operations, an
understanding of all aspects of the organization is required, drawing upon both leading
and outcome measures. As Malina and Selto (2001) describe, outcome measures in a
BSC provide feedback for learning, while leading measures allow managers to predict
the consequences of both their decisions and changes in environmental conditions.
 It is less clear whether there is greater use of leading measures to evaluate Managing
subordinates’ performance and track performance against targets, under conditions of strategic
strategic uncertainty. Prior research has shown that managers are generally reluctant to
use “softer” leading measures to evaluate subordinates ’ performance (Malina and Selto, uncertainty
2001; Ittner et al., 2003), instead focusing on financial outcome measures (Grafton et al.,
2010). Further, a high level of strategic uncertainty means greater flexibility is required
to respond to changing business and internal dynamics, which in turn may mean more 519
frequent changes to leading measures. This is in contrast to outcome measures, which
are generally seen as the ultimate goal in the strategy causal chain, and therefore are less
likely to be subject to regular changes resulting from strategic uncertainty. Similarly,
when managers use a BSC to track performance against targets, the targets associated
with leading measures are more likely to be impacted by environmental changes,
compared with outcome measures such as profitability targets and customer measures
such as customer satisfaction. This may cause managers to focus on outcome measures.
On the other hand, however, a key reason that managers track performance against
targets is to implement corrective actions when appropriate. As both internal business
process and learning and growth measures tend to be more actionable, strategic
uncertainty may increase managers’ use of leading measures for this purpose.
Based on the above discussions, we pose the following research question regarding
the relative use of outcome and leading measures under conditions of strategic
uncertainty:
RQ1. Does strategic uncertainty have differing effects on the use of outcome
measures and leading measures for different purposes?

3. Methodology
3.1 Sample selection and data collection
To test our hypotheses and research question, we conduct a survey on senior-level
managers of SBUs in companies listed on the ASX. As strategic uncertainty relates to
business level strategy, we target senior managers responsible for SBUs who are most
likely to have an overview of both the performance measures used and the strategic
uncertainty faced by their organizations. To maximize response rate, we first pre-tested
our research instrument with a number of business school professors and teaching
faculty with substantial work experience for clarity, understandability and face
validity. We then sent out pre-notice survey letters to senior SBU managers of the top
200 ASX companies by market capitalization. These managers included chief operating
officers, general managers, vice presidents and others with similar job titles. A week
after the pre-survey notices were sent, we mailed out a self-administered survey package
to each potential participant containing a signed cover letter, a participant information
sheet (as required by the university ethics committee), a survey questionnaire and a
reply paid envelope. To encourage participation, we offered a $5 donation to charity for
each survey response received. Approximately three weeks after the initial mail out, we
sent out a reminder with another complete survey package.
Of the 200 survey packages mailed out, we received 44 responses, which yield a
response rate of 22 per cent. On average, the participants have been working for their
company for 8.57 years, suggesting that they are likely to be familiar with the
company’s external and internal environments. The 44 respondents include 23 general
managers, nine chief operating officers/director of operation, nine managing directors/
MAJ chief executive officers/vice president and two with other titles (as well as one
31,4/5 respondent who did not indicate a job title). Participants are from a range of industries,
including materials and industrials (eight), energy (six), financial (six), consumer
products (five), mining/resources (four), telecommunications/utilities (three), healthcare
(two), others (nine) and one respondent who did not indicate an industry.
To test for non-response bias, we compare early respondents to late respondents,
520 based on return date, for all survey constructs. We find no significant differences for
any of our constructs, which supports the absence of significant non-response bias. To
test for the extent of common method bias, we conduct a Harman’s single-factor test on
all the survey questions. The factor solution shows 11 factors with eigenvalues greater
than 1, with the first factor explaining 28.47 per cent of the total variance. This result
suggests an absence of significant single-source bias (Podsakoff and Organ, 1986).

3.2 Measurement of variables

We measure all of our constructs on seven-point scales, where 7 to a large extent, and 1
to a small extent, or not used at all, depending on the nature of the question. We draw
on validated research instruments from prior research where appropriate. A list of the
questions used to measure our constructs is presented in Table I.
For strategic uncertainty, we adapt the survey instrument in Widener (2007).
Specifically, respondents are asked to indicate the extent to which they and their
management team monitor a list of nine different strategic uncertainties to ensure
that the goals of their business units are achieved[1]. Strategic uncertainty is then
computed by averaging the responses for these nine items[2].
For performance measurement diversity, we adapt the instrument used by
Henri (2006a)[3]. Consistent with prior literature (Hoque and James, 2000; Henri,
2006a), we define performance measurement diversity as the extent to which
managers use a broad set of financial and non-financial measures based on the
four BSC perspectives[4]. We focus our attention on the BSC framework to identify
performance measurement diversity both to be consistent with prior literature
(Henri, 2006a) and in recognition that the BSC framework is the most influential
form of SPMS in practice (Tayler, 2010; Hoque, 2014). We follow Henri’s (2006a)
approach and compute an average score for the 15 measures listed, with a higher
average score indicating that the organization uses all of the measures to a greater
extent (i.e. a higher degree of performance measurement diversity).
For performance measurement purpose , we ask participants to indicate the
extent to which they use measures for each of five purposes: evaluate subordinates’
performance, communicate business strategy, track performance against targets,
identify problem areas and guide future strategies and operations. For each of
these five purposes, participants indicate the extent of use for measures contained
in each of the four BSC perspectives (see Table I Panel C for more details).

4. Results
4.1 Strategic uncertainty and performance measurement diversity
Table I Panel A presents the descriptive statistics for strategic uncertainty and Table I
Panel B presents the descriptive statistics for performance measurement diversity. H1
predicts that the extent to which organizations face strategic uncertainty is positively
associated with performance measurement diversity. We test this hypothesis using a
 Managing
Survey item Mean SD Min Max
strategic
Panel A: Strategic uncertainty uncertainty
To what extent do you or your management team monitor the following strategic uncertainties, in
order to ensure the goals of your business unit/firm are being achieved? (1 to a small extent, 7 to
a large extent)
Product technology that affects user 4.66 1.58 1.00 7.00
New technology 5.00 1.51 1.00 7.00
521
Product introduction in adjacent industries 3.91 1.66 1.00 7.00
Diffusion of proprietary knowledge outside the organization 3.98 1.49 1.00 7.00
Scale effect (product depth) 4.77 1.49 1.00 7.00
Scope effects (product breadth) 4.77 1.34 2.00 7.00
Input costs 5.91 1.03 4.00 7.00
Internal product innovation 4.98 1.39 2.00 7.00
Market tactics of competitors 5.43 1.58 2.00 7.00
Average strategic uncertainty (average across all items) 4.82 0.81 2.78 6.67
Panel B: Performance measurement diversity
Please rate the extent to which the following measures are used in your business unit/firm (1 not
used at all, 7 to a large extent)
Financial and shareholder measures
Revenue measures (e.g. sales, revenue growth) 6.30 1.03 2.00 7.00
Profit measures (e.g. net profit, profit margin, EVA) 6.07 1.17 2.00 7.00
Return on investment (e.g. ROI, ROA) 6.32 0.83 4.00 7.00
Cost measures (e.g. unit costs) 5.07 1.59 2.00 7.00
Customer measures
Market share and/or account share 4.44 1.99 1.00 7.00
Customer satisfaction (e.g. number of complaints, ratings
from surveys) 4.55 1.89 1.00 7.00
Customer acquisition and/or retention (e.g. sales from new
customers, customer loyalty) 4.14 2.03 1.00 7.00
Value as defined by the customer (e.g. time to resolve queries,
on-time delivery) 4.02 1.92 1.00 7.00
Process and operational measures
Process/production efficiency (e.g. volume, cycle time) 5.16 1.41 1.00 7.00
Process/production quality (e.g. defect rate, errors) 5.09 1.68 1.00 7.00
Responsiveness (e.g. time to develop new products) 3.59 1.85 1.00 7.00
Safety and environment (e.g. number of workplace injuries,
environmental compliance) 5.89 1.57 1.00 7.00
Learning, growth and innovation measures
Employee capabilities (e.g. level of experience, training hours) 4.46 1.64 1.00 7.00
Technology (e.g. ranking of technology capabilities,
investment in technology) 4.05 1.75 1.00 7.00
Employee motivation and culture (e.g. ratings from employee
surveys, turnover) 5.27 1.37 1.00 7.00
Performance measurement diversity (average across all Table I.
items) 5.05 0.96 2.67 6.42 Descriptive statistics
(continued) for survey items
MAJ Survey item Mean SD Min Max
31,4/5
Panel C: Performance measurement purpose
To what extent do you use the following measures to [. . . purpose]? (1 not
used at all, 7 to a
large extent)
522 To evaluate subordinates’ performance
Financial and shareholder (e.g. profit, return on
investment) 5.55 1.58 1.00 7.00
Customer (e.g. market share, customer satisfaction) 4.23 1.91 1.00 7.00
Process and operations (e.g. efficiency, safety) 5.52 1.19 3.00 7.00
Learning, growth and innovation (e.g. employee
capabilities) 4.68 1.29 2.00 7.00
Column average 5.00 0.98 3.00 7.00
To communicate business strategy
Financial and shareholder (e.g. profit, return on
investment) 5.64 1.30 1.00 7.00
Customer (e.g. market share, customer satisfaction) 4.52 1.95 1.00 7.00
Process and operations (e.g. efficiency, safety) 5.48 1.27 2.00 7.00
Learning, growth and innovation (e.g. employee
capabilities) 4.55 1.21 2.00 7.00
Column average 5.05 0.88 3.00 7.00
To track performance against targets
Financial and shareholder (e.g. profit, return on
Table I. investment) 6.05 1.24 3.00 7.00
Customer (e.g. market share, customer satisfaction) 4.50 1.89 1.00 7.00
Process and operations (e.g. efficiency, safety) 5.57 1.28 2.00 7.00
Learning, growth and innovation (e.g. employee
capabilities) 4.40 1.35 2.00 7.00
Column average 5.14 0.99 3.00 7.00
To identify problem areas
Financial and shareholder (e.g. profit, return on
investment) 5.52 1.50 2.00 7.00
Customer (e.g. market share, customer satisfaction) 4.77 2.01 1.00 7.00
Process and operations (e.g. efficiency, safety) 5.68 1.34 2.00 7.00
Learning, growth and innovation (e.g. employee
capabilities) 4.30 1.27 2.00 7.00
Column average 5.08 1.08 3.00 7.00
To guide/develop future strategies and operations
Financial and shareholder (e.g. profit, return on
investment) 5.98 1.34 2.00 7.00
Customer (e.g. market share, customer satisfaction) 4.89 1.78 1.00 7.00
Process and operations (e.g. efficiency, safety) 5.43 1.37 2.00 7.00
Learning, growth and innovation (e.g. employee
capabilities) 4.79 1.26 2.00 7.00
Column average 5.28 0.97 3.25 7.00
regression model where performance measurement diversity is the dependent variable, Managing
and strategic uncertainty and size[5] (control variable) are the independent variables strategic
(see Model 1 in Table II). The regression results show that the coefficient for strategic
uncertainty is positive and significant ( p 0.01), providing support for H1. uncertainty
To further explore the relationship between strategic uncertainty and performance
measurement diversity, we conduct a factor analysis on the nine items we use to
measure strategic uncertainty (see Table III). The factor analysis reveals three factors 523
with eigenvalue greater than 1.0 (variance explained 70.44 per cent, see also Table IV
for the related descriptive statistics). The Cronbach’s alphas for the three factors are
0.856, 0.713 and 0.772 (untabulated), respectively. As the Cronbach’s alphas suggest an
acceptable level of reliability, we compute the averages of the items included in each

Variables Model 1a Model 2b

Size 0.04
Strategic uncertainty 0.65** 0.01
Technology uncertainties 0.13
Innovation uncertainties 0.31*
Product uncertainties 0.47**
Adjusted R2 0.41 0.40
df 40 38
F 15.39 8.04
No. of observations 44 44

Notes: * p 0.05; ** p 0.01; all p-values are two-tailed; a dependent variable is performance
measurement diversity and the OLS model is: Performance Measurement Diversity
a b1Size b2Average Strategic Uncertainty «; VIFs for both independent variables are
1.027; b dependent variable is performance measurement diversity and the OLS model is: Performance Table II.
Measurement Diversity a b1Size b2Technology Uncertainties b3Innovation Uncertainties Regression results
b4Product Uncertainties «.; VIFs for the independent variables range from 1.052 to 1.296 for H1

Components
Strategic uncertainty items 1 2 3

Eigenvalues 3.12 1.85 1.37

a. Product technology that affects user 0.01 0.09 0.91
b. New technology 0.06 0.14 0.91
c. Product introduction in adjacent industries 0.19 0.69 0.34
d. Diffusion of proprietary knowledge outside
the organization 0.31 0.78 0.08
e. Scale effect (product depth) 0.83 0.35 0.04
f. Scope effects (product breadth) 0.87 0.25 0.04
g. Input costs 0.65 0.27 0.15
h. Internal product innovation 0.00 0.81 0.07Table III. Different
i. Market tactics of competitors 0.66 0.23 0.21 types of strategic
uncertainty: factor
Notes: Principal component factor analysis with varimax rotation yields three factors; analysis for strategic
together, these three factors explain 70.44 % of variance uncertainty
MAJ factor to proxy for three types of uncertainties, which we label as technology
31,4/5 uncertainties, innovation uncertainties and product uncertainties (see Table IV)[6]. We
then conduct a second regression with performance measurement diversity as the
dependent variable, and technology uncertainties, innovation uncertainties, product
uncertainties and size (control variable) as the independent variables (see Model 2 in
Table II). The regression results from Model 2 show that both innovation uncertainties
524 and product uncertainties are positively associated with performance measurement diversity,
but this is not associated with technology uncertainties. Our finding suggests that managers’
tendency to use a more diverse set of measures in response to strategic uncertainty varies
not only with respect to the degree of uncertainty, but also its nature.

4.2 Strategic uncertainty and performance measurement purpose

H2 concerns the relationship between strategic uncertainty and how a diverse set of
performance measures is used by managers. We specifically predict that the extent to
which a diverse set of performance measures is used is greater under higher strategic
uncertainty for the following purposes, being to: (a) evaluate subordinates’ performance;
(b) communicate business strategy; (c) track performance against targets; (d) identify
problem areas; and (e) guide future directions.
Table I Panel C presents the descriptive statistics on the extent to which
performance measures are used for each of the above-mentioned five purposes. Of the
five purposes, the diverse performance measures contained in the four BSC perspectives
are used for the purpose of guiding future directions to the greatest extent (means 5.28).
To formally test H2, we split the responses into two groups based on the median level of
strategic uncertainty: high strategic uncertainty (where respondents indicate a level of
strategic uncertainty that is at the median of 4.99 or higher), and low strategic
uncertainty (where respondents indicate a lower-than-median level of uncertainty). We
then conduct independent Mann–Whitney U-tests to compare the extent of use for each
purpose between the high and low strategic uncertainty groups. The results are
presented in Tables V and VI. Table V shows that the extent of use for each purpose is
greater under high strategic uncertainty, and the Mann–Whitney U-tests shown in
Table VI reveal significant differences for all five purposes. Overall, our results provide
support for H2. Further, when we examine the three specific types of uncertainties, we
only find significant differences for all five purposes in relation to product uncertainties,
but not the other two types of uncertainties. A possible explanation for this finding is
that product uncertainties are more operational in nature, and have a more immediate
impact on the organization. Consequently, managers are more likely to use a diverse set
of performance measures within their internal SPMS to respond to this type of
uncertainty.

Table IV.
Different types of
Types of uncertainties Mean SD Min Max
strategic uncertainty:
descriptive statistics Technology uncertainties (items b, c) 4.83 1.45 1.00 7.00
for the three types of Innovation uncertainties (items c, d, h) 4.28 1.20 1.67 6.67
strategic uncertainty Product uncertainties (items e, f, g, i) 5.22 1.06 2.50 7.00
 Managing
Evaluate Communicate Track Identify Guide
subordinates’ business performance against problem future strategic
Type of uncertainty performance strategy targets areas directions uncertainty
Strategic uncertainty High: median (4.99); low: 4.99
Low (n 24) 4.68 4.77 4.76 4.60 4.88
High (n 20) 5.39 5.38 5.59 5.65 5.76
525
Technology uncertainties High: median (5.00); low: 5.00
Low (n 15) 5.00 4.83 4.97 4.90 5.42
High (n 29) 5.00 5.16 5.22 5.17 5.21 Table V.
Performance
Innovation uncertainties High: median (4.33); low: 4.33
Low (n 21) 4.80 4.96 4.89 4.91 5.06 measurement
High (n 23) 5.19 5.12 5.36 5.24 5.48 purpose for high
versus low strategic
Product uncertainties High: median (5.50); low: 5.50 uncertainty:
Low (n 21) 4.58 4.60 4.67 4.41 4.80 descriptive statistics
High (n 23) 5.39 5.46 5.57 5.70 5.72 (means)

Track
Evaluate Communicate performance Identify Guide
subordinates’ business against problem future
Type of uncertainty performance strategy targets areas directions

Strategic uncertainty
Z 2.56 2.69 2.77 3.20 3.03
p 0.01 0.01 0.01 0.01 0.01
Technology uncertainties
Z 0.21 1.37 1.33 0.92 0.358
p 0.83 0.17 0.18 0.36 0.73 Table VI.
Performance
Innovation uncertainties
Z 1.41 1.23 1.62 1.06 1.45 measurement
p 0.16 0.22 0.11 0.29 0.15 purpose for high
versus low strategic
Product uncertainties uncertainty:
Z 2.82 3.35 3.03 3.98 2.97 Mann–Whitney U-
p 0.01 0.01 0.01 0.01 0.01 tests

4.3 Use of outcome measures and leading measures to respond

to strategic uncertainty
We next examine our research question, which asks whether strategic uncertainty
has differential effects on the use of outcome measures and leading measures for
different purposes. To do so, we group participants’ responses to questions on
financial and customer measures together to form a construct named “outcome
measure use”, and internal business process and learning and growth measure
responses are grouped to form the construct “leading measure use” for each
performance measurement purpose. The descriptive statistics for the different
MAJ purposes categorized by outcome versus leading measures, and the related
31,4/5 Mann– Whitney U-tests, are presented in Table VII.
We first examine outcome measure use and leading measure use for each purpose
under high versus low strategic uncertainty. Table VII Panel A shows that outcome
measure use is significantly higher for all five purposes under high strategic
uncertainty compared with low strategic uncertainty (p 0.05 for all purposes). In terms
526 of leading measure use, we find significant differences for the purposes of identifying
problem areas and guiding future directions (p 0.05 for both), and marginal differences
for the purposes of evaluating subordinates’ performance and tracking performance
against target (p 0.10 for both). Unexpectedly, there is no difference in leading measure
use for the purpose of communicating business strategy.
We then conduct similar analysis for the three types of uncertainties; that is,
technology uncertainties, innovation uncertainties and product uncertainties (see
Table VII Panel B, C and D, respectively). These further analyses reveal some
interesting additional insights. Technology uncertainties do not appear be
associated with any difference in either the use of outcome or leading measures
(see Table VII Panel B). For innovation uncertainties (see Table VII Panel C),
managers’ tendency to use outcome measures to track performance against targets
is marginally higher under high innovation uncertainties (p 0.08), while their use
of leading measures is marginally higher for the purpose of guiding future
directions (p 0.08). With respect to product uncertainties (see Table VII Panel D),
we find that managers use outcome measures to a greater extent under high
product uncertainties than low product uncertainties for all five purposes of use ( p
# 0.01). However, when it comes to leading measure use, we only find a significant
difference for the purpose of identifying problem areas ( p 0.01), and a marginally
significant difference for the purpose of guiding future directions ( p 0.06).
Overall, these patterns of results suggest that while managers generally
rely more on outcome measures to respond to different types of strategic
uncertainty, the value of using leading measures becomes more salient to
managers when performance measures are used for the purposes of
identifying problem areas and guiding future directions. As problematic issues
associated with strategic uncertainty can arise from anywhere in the
organization’s value chain, leading measures, which provide managers with
performance information on internal business processes and capabilities, are
useful for managers to identify and understand unexpected problem areas.
Similarly, managers require a comprehensive understanding of both leading
measures and outcome measures to predict the viability of their operational
and strategic plans (Malina and Selto, 2001; Cheng and Humphreys, 2012),
and to develop bottom-up, emergent strategic initiatives (Henri, 2006b).
Therefore, as strategic uncertainty increases, the extent of leading measure
use for the purpose of guiding future directions also increases. Overall, leading
measures appear to be used more extensively for future-oriented purposes.
In contrast, prior research consistently finds that managers tend to rely more on
outcome measures when evaluating employee’s performance (Ittner et al., 2003).
Consistent with these prior findings, our results show that strategic uncertainty causes
managers to respond by using outcome measures to a greater extent to evaluate their
subordinates’ performance, but does not affect the use of leading measures for this
 Managing
Type of uncertainty and performance measurement purpose Outcome measure use Leading measure use
strategic
Panel A: Strategic uncertainty (means and Z-statistics)
Low uncertainty n 24; high uncertainty n 20
uncertainty
To evaluate subordinates’ performance Low uncertainty 4.48 Low uncertainty 4.9
High uncertainty 5.43 High uncertainty 5.35
Z 2.31 Z 1.72
p 0.02 p 0.09 527
To communicate business strategy Low uncertainty 4.69 Low uncertainty 4.85
High uncertainty 5.55 High uncertainty 5.2
Z 2.88 Z 1.31
p 0.01 p 0.19
To track performance against targets Low uncertainty 4.77 Low uncertainty 4.75
High uncertainty 5.88 High uncertainty 5.3
Z 2.76 Z 1.75
p 0.01 p 0.08
To identify problem areas Low uncertainty 4.56 Low uncertainty 4.65
High uncertainty 5.85 High uncertainty 5.45
Z 3.02 Z 2.39
p 0.01 p 0.02
To guide future directions Low uncertainty 4.98 Low uncertainty 4.77
High uncertainty 5.98 High uncertainty 5.55
Z 2.82 Z 2.64
p 0.01 p 0.01
Panel B: Technology uncertainties (means and Z-statistics)
Low uncertainties n 15; high uncertainties n 29
To evaluate subordinates’ performance Low uncertainties 4.83 Low uncertainty 5.17
High uncertainties 4.95 High uncertainty 5.07
Z 0.05 Z 0.27
p 0.96 p 0.79
To communicate business strategy Low uncertainties 5.03 Low uncertainty 4.63
High uncertainties 5.1 High uncertainty 5.21
Z 0.44 Z 1.58
p 0.66 p 0.11
To track performance against targets Low uncertainties 5.13 Low uncertainty 4.8
High uncertainties 5.35 High uncertainty 5.1
Z 0.44 Z 1.13
p 0.66 p 0.26
To identify problem areas Low uncertainties 5.07 Low uncertainty 4.73
High uncertainties 5.19 High uncertainty 5.16
Z 0.24 Z 1.51
p 0.81 p 0.13
To guide future directions Low uncertainties 5.8 Low uncertainty 5.03
High uncertainties 5.24 High uncertainty 5.17
Z 1.03 Z 0.23
p 0.31 p 0.82
Panel C: Innovation uncertainties (means and Z-statistics) Table VII.
Low uncertainties n 21; high uncertainties n 23 Strategic uncertainty,
To evaluate subordinates’ performance Low uncertainties 4.67 Low uncertainty 4.95 performance
High uncertainties 5.13 High uncertainty 5.24 measurement
Z 1.02 Z 1.32 purpose and type of
p 0.31 p 0.19 performance
(continued) measures
MAJ Outcome measure use Leading measure use
31,4/5
To communicate business strategy Low uncertainties 4.91 Low uncertainty 5.02
High uncertainties 5.24 High uncertainty 5
Z 1.29 Z 0.57
p 0.2 p 0.57
528 To track performance against targets Low uncertainties
High uncertainties
4.93
5.59
Low uncertainty
High uncertainty
4.86
5.13
Z 1.73 Z 1.36
p 0.08 p 0.18
To identify problem areas Low uncertainties 4.88 Low uncertainty 4.93
High uncertainties 5.39 High uncertainty 5.09
Z 1.36 Z 0.56
p 0.17 p 0.58
To guide future directions Low uncertainties 5.19 Low uncertainty 4.93
High uncertainties 5.65 High uncertainty 5.3
Z 1.41 Z 1.75
Table VII. p 0.16 p 0.08
Panel D: Product uncertainties (means and Z-statistics)
Low uncertainties n 21; high uncertainties n 23
To evaluate subordinates’ performance Low uncertainties 4.29 Low uncertainty 4.88
High uncertainties 5.48 High uncertainty 5.3
Z 2.59 Z 1.59
p 0.01 p 0.11
To communicate business strategy Low uncertainties 4.38 Low uncertainty 4.81
High uncertainties 5.72 High uncertainty 5.2
Z 3.51 Z 1.42
p 0.01 p 0.16
To track performance against targets Low uncertainties 4.57 Low uncertainty 4.76
High uncertainties 5.91 High uncertainty 5.22
Z 3.54 Z 1.29
p 0.01 p 0.2
To identify problem areas Low uncertainties 4.29 Low uncertainty 4.52
High uncertainties 5.94 High uncertainty 5.46
Z 3.78 Z 2.92
p 0.01 p 0.01
To guide future directions Low uncertainties 4.76 Low uncertainty 4.83
High uncertainties 6.04 High uncertainty 5.39
Z 3.18 Z 1.89
p 0.01 p 0.06

purpose. Target setting for leading measures, such as employee development, can be
difficult in times of high strategic uncertainty, which may explain why strategic
uncertainty does not affect the use of leading measures to track performance against
targets. Finally, it is somewhat surprising to find that strategic uncertainty does not
affect the use of leading measures to communicate business strategy. One plausible
explanation is that when faced with a high degree of strategic uncertainty, managers
use performance measures as a common language to explain their priorities across
divisions within their SBU; as leading measures tend to be unique and vary across
divisions, managers therefore rely more on common, outcome measures for this purpose
rather than using leading measures (Kraus and Lind, 2010)[7].
 In summary, our results show that when faced with strategic uncertainty, Managing
managers respond by using outcome measures to a greater extent for a wider range strategic
of purposes than leading measures. Nonetheless, our results suggest that leading
measures are perceived to be as a useful way for responding to strategic uncertainty, uncertainty
particularly for the future-oriented purposes of identifying problem areas and
guiding future directions.
529
5. Conclusion and discussion
Strategic uncertainty has the potential to result in significant control and governance
issues for organizations. As managers strive to respond to emerging threats and
opportunities, they are required to refine and modify their strategy, to coordinate and
communicate new priorities and to ensure that employees’ actions remained aligned
with the priorities established. SPMSs, such as the BSC framework, have the potential to
provide managers with both the information and the control mechanisms necessary to
meet these challenges. In this study, we examine the association between strategic
uncertainty and managers’ use of a diverse set of performance measures for a range of
strategic control and governance purposes.
Consistent with our expectation, the results show that the extent to which managers
face strategic uncertainty is positively associated with performance measurement
diversity. Our results also reveal three types of uncertainties faced by these
organizations: technology uncertainties, innovation uncertainties and product
uncertainties. Of these, performance measurement diversity is strongly associated with
the latter two types of uncertainties. Further, managers faced with high strategic
uncertainty tend to use their diverse performance measures to a greater extent than
those faced with low strategic uncertainty for five key purposes of performance
measurement systems: to evaluate subordinates’ performance, communicate business
strategy, track performance against targets, identify problem areas and guide future
directions. When the performance measures in a BSC are further categorized into
outcome measures and leading measures, our analysis shows that managers respond to
strategic uncertainty by using outcome measures to a greater extent for all five
purposes. However, the results for leading measure use are mixed; the use of leading
measures is only significant between high and low strategic uncertainty for the
purposes of identifying problem areas and guiding future directions. Overall, our results
provide evidence that managers use a diverse set of performance measures to respond to
strategic uncertainty.
Our study makes a number of important contributions to the literature. First, to
our best knowledge, we are the first to provide evidence on the relation between
strategic uncertainty, performance measurement diversity and managers’ use of
performance measures for different purposes. Understanding these relationships is
important, as organizations are increasingly faced with fast moving external and
internal changes; the role of managers is to ensure that their organizations can
respond appropriately to such strategic uncertainty, to protect and create value by
exploiting emerging opportunities and managing the associated threats. Second,
few studies to date have paid attention to the specific purposes for which managers
use their performance measures (van Veen-Dirks, 2010). Our study highlights five
key purposes for which managers use their performance measures to respond to
strategic uncertainty. Third, our finding that managers use outcome and leading
MAJ measures differently for these five purposes provides a more in depth
31,4/5 understanding of the BSC in practice.
Similar to other studies, our results need to be interpreted in light of some
limitations. First, we have a relatively small sample size. Although the response
rate of 22 per cent is in line with prior survey research, our study can benefit from
a larger sample size. It is possible that we will find stronger results for leading
530 measure use with more responses from our target survey participants. Second, we
do not extend our analysis to organizational performance. The performance
implications of using a diverse set of performance measures for responding to
strategic uncertainty provides a potentially useful opportunity for future research
to explore. Third, while our study focuses on strategic uncertainty, prior research
distinguishes between strategic risks and strategic uncertainty (Widener, 2007). A
fruitful future research avenue is to examine whether managers have differential
responses to strategic uncertainty and strategic risks when using performance
measures for control and governance purposes. Future research can also examine
organizations’ corporate-level response to strategic uncertainty arising from their
SBUs, how responses to strategic uncertainty are cascaded down the operational
level and the management control implications of these responses. Finally, another
valuable future research opportunity is to examine how the use of outcome and
leading performance measures evolves over time, in response to different types of
strategic uncertainties.

Notes
1. In our research instrument, we exclude the two items that Widener (2007) finds cross-
load on two factors (and which she later excluded from her analysis). We also exclude one
item, “new industry entrants”, which was conceptually similar to strategic risk (“ease of
entry to industry” is considered as a strategic risk in Widener, 2007).
2. As will be discussed later, we also analyze the sub-dimensions (i.e., different
types) of strategic uncertainties based on our factor analysis results.
3. Unlike Henri’s (2006a, 2006b) instrument, which lists a range of common measures under each
BSC dimension, we use sub-groups that correspond to Kaplan and Norton’s original intent. For
example, in Henri’s instrument, he lists six items under financial perspective: operating income,
sales growth, return-on-investment, return-on-equity, net cash flows and costs per unit. In our
instrument, we refer to these measures in more generic terms (with examples), which result in
four items (refer to Table I Panel B): revenue measures (e.g., sales, revenue growth), cost
measures (e.g., unit cost), profit measures (e.g., net profit, profit margin) and return-on-
investment measures (e.g., ROI, ROA). The primary reason for this departure from Henri’s
instrument is that, unlike Henri (2006a, 2006b) who surveys on manufacturing companies, we
target a wider range of industries, which makes it difficult to compile a list of measures that are
equally meaningful to various industries.
4. As this study focuses on strategic uncertainty (which relates to business strategy), we examine
performance measurement diversity at the business level. The BSC framework, however, is
designed to cascade throughout the organization, making performance measurement diversity
also relevant at the corporate and functional levels. With different stakeholder interests at the
corporate level (e.g., greater capital market pressure), it has been suggested that corporate
BSCs may have a greater focus on financial communication (Kraus
 and Lind, 2010); while performance measures for a business function should Managing
reflect the functional level strategy, performance measurement diversity is also strategic
important at the functional level. Examining specific factors that may
uncertainty
differentially impact performance measurement diversity at these levels
(compared to the business level) is beyond the scope of the current study.
5. We control for firm size by using a dummy variable where 1 firms with 1,001
employees, and 2 for firms with$1,001 employees. In all, 44 per cent of the 531
survey respondents work in an organization with 1,001 employees.
6. In contrast to the results of our factor analysis, Widener’s (2007) analysis reveals three
factors (three types of strategic uncertainty): technology uncertainties, operational
uncertainties and competitive uncertainties. The technology uncertainties factor is the
same as in our study. Our product uncertainties factor is similar to the operational
uncertainties factor in Widener (2007), with two exceptions: “market tactics of
competitors” is loaded on her competitive uncertainties factor and “internal product
innovations” is loaded on her operational uncertainties factor. Our innovation
uncertainties factor share one item, “product introduction in adjacent industry” with
Widener’s competitor uncertainties factors, but also includes two other items: “diffusion
of knowledge” and “internal product innovation”. Given these differences, we therefore
use different labels to describe the three factors in our study.
7. For example, Kraus and Lind (2010) find that organizations who adopt a
corporate BSC nonetheless focus on financial measures for corporate control
purposes, because of their preferences for comparability and simplicity.

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Corresponding author
Mandy M. Cheng can be contacted at: m.cheng@unsw.edu.au

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