Surrogation: The Roles of Measurement and Cognitive Effort

Measurement is a fundamental component of accounting. In part, firms use measures as representations of 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 the strategic constructs and behaving as though the measures are the constructs of interest. Prior research has found that tying compensation to a performance measure exacerbates surrogation. In this study, we predict and find that the mere presence of a measure (even absent compensation) is sufficient to lead managers to surrogate. We also provide support for theory that suggests it is less cognitively costly to surrogate than to not surrogate. These findings have implications for any accounting setting where measures are used to represent a construct of interest, and highlight the importance of understanding surrogation and developing strategies to reduce its

effects.