Financial and nonfinancial performance measures

How do they affect job satisfaction?

Chong M. Lau*, Mahfud Sholihin

*Corresponding author for this work

Research output: Contribution to journalArticle

99 Citations (Scopus)


Recent interest on the use of nonfinancial measures (e.g. in the Balanced Scorecard) generally assumes that such measures are essential to overcome the inadequacies of financial measures. However, it remains unclear (1) if the behavioural effects of these nonfinancial measures are different from those of financial measures; and (2) whether these effects are influenced by the relative importance of nonfinancial measures vis-à-vis financial measures. This study hypothesises that the use of performance measures for performance evaluation will significantly affect managers' job satisfaction. However, these effects are indirect through the managers' perceptions of the fairness of these measures and the interpersonal trust these measures promote. Based on a sample of 70 managers, these expectations are supported by the results. More importantly, the results also suggest that (1) the process by which nonfinancial measures affect employee job satisfaction is not different from that of financial measures, and (2) the relative importance of nonfinancial measures vis-à-vis financial measures has no significant effect on employee job satisfaction. These results may have important theoretical and practical implications.

Original languageEnglish
Pages (from-to)389-413
Number of pages25
JournalBritish Accounting Review
Issue number4
Publication statusPublished - Dec 2005


  • Fairness
  • Financial and nonfinancial measures
  • Job satisfaction
  • Trust

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