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A central feature of most organizations is the use of measures to represent key elements of performance across multiple strategic objectives. Prior research demonstrates a tendency for individuals to treat these measures as though they are the higher order strategic objectives the measures were intended to represent as opposed to imperfect representations of those strategic objectives—a phenomenon labeled "surrogation." We employ an experiment to further understand this phenomenon. In this study, we capture neural activation when processing measures and when processing strategic objectives. We find that, in regions of the brain with greater (less) activation for concrete versus abstract words, brain activation is greater (less) when processing measure phrases versus when processing strategy phrases. We further find evidence that greater brain activity and longer response times are associated with less surrogation. This affirms the notion that increased cognitive involvement can reduce surrogation. This paper was accepted by Ranjani Krishnan, accounting. Funding: This work was supported by Auburn University, Brigham Young University, Utah Valley University, and an IMA Research Foundation grant from the Institute of Management Accountants. Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2022.01405. [ABSTRACT FROM AUTHOR]

Technology makes it possible for management to personalize communication with individual investors on a broad scale. Building on information processing research, we predict and find that personalized communication prompts investors to process financial information more systematically and rely less on summary measures, such as earnings. Investors receiving more (as opposed to less) personalized communication respond less to management's myopic decisions that boost short-term performance in their assessments of investment attractiveness, such that they assess a company that increases R&D (at the expense of net income) as more attractive and a company that decreases R&D as less attractive. Further analysis suggests this result is driven by investors with greater experience evaluating financial statements processing the longer-term implications of R&D expenditures for performance more fully when personalization is present. Our paper speaks to investor earnings fixation and myopic behavior from management and provides insights for implementing investor communication strategies. JEL Classifications: O33; O31; L14; M41; D12; D83. [ABSTRACT FROM AUTHOR]

Measurement is a fundamental part of accounting. A primary purpose of measurement is to provide more concrete representations of abstract strategic objectives. A potential consequence of using measures to proxy for less-tangible strategic constructs is the tendency for managers to fall prey to surrogation, losing sight of strategic constructs and behaving as though measures are the constructs of interest. We show that surrogation is a nonconscious process. We also extend understanding of the conditions necessary for surrogation to occur by showing that mere awareness of measurement (even absent compensation) is sufficient to induce surrogation. These findings have implications for any setting where measures are used to represent a more abstract construct. While using measures is clearly very beneficial, we highlight the importance of understanding when and why surrogation can occur and developing strategies to reduce its effects. Data Availability: Data are available upon request. [ABSTRACT FROM AUTHOR]

We investigate whether the type of performance feedback (individual versus relative) firms provide employees on one task alters employees' willingness to help other employees on a subsequent, unrelated task. Consistent with prior research, results from our experiment show that employees perform better on a production task when they receive relative performance feedback as opposed to individual performance feedback about the task. However, we document that the valence of RPI feedback appears to moderate the effect of RPI on subsequent helping behavior. Specifically, those who receive RPI feedback indicating that they performed (better) worse than another participant exhibit (lower) higher levels of helping behavior relative to those who receive only individual feedback. Our results highlight the complex tradeoffs confronting managers and management accountants when designing performance feedback systems and the need for them to consider employees' tasks holistically rather than in isolation when deciding what type of performance feedback to provide. JEL Classifications: C71; M41; J31. Data Availability: Available upon request. [ABSTRACT FROM AUTHOR]