The Effect of Leadership Style and Use of Performance Measures On Managerial

European Accounting Review
Vol. 19, No. 2, 275 310, 2010
The Effects of Leadership Styles and

Use of Performance Measures on
Managerial Work-Related Attitudes
FRANK HARTMANN , DAVID NARANJO-GIL and
PAOLO PEREGO
Department of Accounting, RSM Erasmus University, Rotterdam, the Netherlands and

Department of Business Administration, Pablo de Olavide University, Seville, Spain
(Received: October 2000; accepted July 2009)

ABSTRACT In this paper we investigate the effects of superiors performance evaluation
behaviors on subordinates work-related attitudes. In response to critique on the
multidimensional nature of the supervisory style construct in the RAPM literature, we
argue that the two dominant dimensions underlying this construct are leadership style
and performance measure use. We develop and test a path model that allows us to
disentangle the effects of leadership style (initiating structure and consideration) and
performance measure use (objective and subjective measures) on managerial workrelated attitudes (goal clarity and evaluation fairness). We test our hypotheses using
survey data from 196 middle-level managers in 11 organizations. Results show that an
initiating structure leadership style affects subordinates work-related attitudes through
the use of objective performance measures. Consideration leadership behavior instead
only has a direct impact on work-related attitudes. These findings have important
implications for management accounting research on superiors use of performance
measures, and provide an explanation of some of the problematic findings in the literature.
1. Introduction
The managerial accounting literature suggests that the way in which managers
performance is evaluated by their supervisors is an important determinant of
their subsequent work-related attitudes (Hopwood, 1972; Otley, 1978; Merchant,
1985; Hartmann, 2005). A large body of literature has explored this effect by
analyzing the consequences of a construct called supervisory style. Studies
Correspondence Address: David Naranjo-Gil, Pablo de Olavide University, Carretera Utrera Km. 1,
41013 Sevilla, Spain. E-mail: dnargil@upo.es
0963-8180 Print/1468-4497 Online/10/02027536 # 2010 European Accounting Association
DOI: 10.1080/09638180903384601
Published by Routledge Journals, Taylor & Francis Ltd on behalf of the EAA.
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on supervisory style typically compare the effects of supervisors who rely strictly
on the achievement of budget-based performance measures, with the effects of
supervisors who make a more lenient use of budgetary measures, or who use
other than budget-based measures (Briers and Hirst, 1990; Kren, 1997). Although
supervisory style has been defined as a single construct in these studies, it in fact
captures two dimensions of the way in which supervisors evaluate performance.
A performance measure dimension relates to the characteristics of the performance indicators and metrics (e.g. budget-based or other) that supervisors use. A
style dimension addresses the manner (e.g. rigid or lenient) in which supervisors
use those performance measures. As these two dimensions have always been
analyzed in conjunction, however, supervisory style studies have not provided
evidence on the separate effects of performance measure and style dimension.
Moreover, the implicit assumption that the use of certain performance measures
is related to a certain style of evaluation has never been tested (cf. Marginson
and Ogden, 2005). These problems are considered important causes of the
mixed and unsatisfactory evidence in this stream of literature (cf. Hartmann,
2000; Otley and Fakiolas, 2000; Pollanen and Otley, 2000; Noeverman et al.,
2005; Derfuss, 2009).
In this paper we develop and test a model of the relationships between supervisory style and subordinate managers work-related attitudes to address these
concerns. We distinguish between the measure dimension and the style dimension of supervisory style to show their separate effects on work-related attitudes
of subordinate managers and to explore their relatedness. Based on early studies
on supervisors use of control systems (e.g. Hofstede, 1967; DeCoster and
Fertakis, 1968; Hopwood, 1973, 1974), we argue that the style in which supervisors evaluate their subordinates may be seen as an expression of their general
leadership style. We draw upon the leadership literature (e.g. Yukl, 2005;
Schriesheim et al., 2006; Van Knippenberg et al., 2007) to examine the effects
of initiation of structure leadership and consideration leadership (cf. Bass,
1990) on work-related attitudes. We investigate the direct relationships
between leadership styles and work-related attitudes, but particularly analyze
whether these relationships are mediated by the use of performance measures.
Regarding the use of performance measures, we explore the use of objective
and subjective measures. We examine the effects of style and performance
measure use focusing on two work-related attitudes (goal clarity and evaluation
fairness) that are both immediate criterion variables of leadership style and
performance measure use as well as relevant predictor variables of subordinate
satisfaction and performance (cf. Landy, 1989; Briers and Hirst, 1990, p. 395;
Lau and Sholihin, 2005; Lau and Moser, 2008).
We believe that this study contributes to the management accounting literature
in the following three ways. First, we provide an explicit conceptualization of
the supervisory style construct that disentangles the relationship between the
evaluative focus of the supervisor (i.e. the measures dimension that captures
the use of specific performance measures) from the superiors way of handling
Effects of Leadership Styles and Use of Performance Measures
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the evaluation process (i.e. the style dimension that captures specific leadership
traits). Such a distinction explicitly tests Hopwoods initial argument (1972)
assuming a match between measures and style dimension that remained
largely unquestioned in prior literature (cf. Briers and Hirst, 1990). This analysis
is particularly warranted since the emphasis of later studies on evaluative style
has shifted to a narrow focus about performance measures use that neglected a
superiors style of evaluation. The joint investigation of both dimensions underlying the concept of supervisory style addresses a fundamental concern in the
management accounting literature about the construct validity of its central
variables (cf. Bisbe et al., 2007; Derfuss, 2009). Second, we explore the separate
and combined effects of leadership styles and the use of performance measures in
an integrated model combining insights from the management accounting and the
general management literature. Although a few prior studies in the supervisory
style tradition have addressed leadership style, they do not provide a proper
theoretical justification of the proposed relationship between these constructs.
Third, our paper contributes to ongoing management accounting research that
analyzes the effects of performance measures on managerial behavior (e.g.
Wentzel, 2002; Ittner et al., 2003; Moers, 2005; Lau and Tan, 2006; Lau and
Moser, 2008). We extend those studies by analyzing leadership styles as a
potentially important determinant of performance measures use in performance
evaluation. Taken together, our study contributes to the debate in management
accounting that is seeking the managerial antecedents and consequences of
performance-based evaluation (cf. Luft and Shields, 2003).
The remainder of this paper is structured as follows. Section 2 reviews the
relevant research literature, presents the constructs of the research model and
develops the hypotheses. Section 3 describes the empirical survey study.
Section 4 presents the results from the statistical analyses of the hypotheses.
Finally, Section 5 discusses the implications of the empirical results and provides
directions for future research.
2. Literature Review and Development of Hypotheses
Early studies on budgetary control documented that supervisors use of budgets
for performance evaluation could lead to dysfunctional managerial reactions (e.g.
Argyris, 1952; Hofstede, 1967). Hopwood (1972) and others examined whether
such dysfunctional reactions were the consequence of inherent properties of
budget-based performance measures, or rather of the way in which superiors
used these performance measures. Hopwood (1972) initially found that a
budget constrained evaluative style (i.e. a rigid emphasis on meeting shortterm budget targets) led to higher job-related stress, poorer working relationships
and more data manipulation than a profit conscious style (i.e. a more lenient use
of budget-based data) or a non-accounting style (i.e. using other than
budget-based measures, indicators or metrics). Subsequent studies either tried
to confirm the relationship between supervisory style and subordinates
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dysfunctional behaviors (e.g. Otley, 1978), or explored whether the relationship

between supervisory style and outcome was contingent on the performance
evaluation context (e.g. Brownell and Hirst, 1986, Ross, 1994). These studies,
which are often collectively addressed as the RAPM literature, produced inconclusive evidence as consecutive studies simply failed to show consistent patterns
in the relationships between supervisory style and work-related attitudes (see, e.g.
Briers and Hirst, 1990; Hartmann, 2000 for extensive reviews).
Reviews of this literature more or less unitedly blame the supervisory style
construct itself for the lack of consistent findings across studies (e.g. Noeverman
et al., 2005). They point to the literatures inconsistent use of operational definitions and neglect of the constructs multidimensional nature (cf. Otley and
Fakiolas, 2000; Pollanen and Otley, 2000; Derfuss, 2009). Indeed, whereas the
original supervisory style typology in Hopwood (1972) combined a measure
dimension (i.e. the extent to which a budget-based metric was used or not) and
a style dimension (i.e. rigid or lenient evaluative manner), later studies used
the construct in different and apparently ad hoc ways (cf. Briers and Hirst,
1990; Otley and Fakiolas, 2000).1 Brownell (1983) and Hirst (1987), for
example, used only two categories of supervisory style, which they label as
high and low budget emphasis. In doing so, they focused on the measure dimension and disregarded the style dimension. Similar procedures were followed in
related studies (e.g. Hirst, 1983; Brownell, 1985; Govindarajan and Gupta, 1985).
In their review of the use of the supervisory style construct in this literature, Otley
and Fakiolas (2000, p. 508) thus conclude a basic lack of understanding of the
overall meaning of the supervisory style construct, and of its dimensionality.
Based on a meta-analysis of supervisory style studies, Derfuss (2009) recently
confirmed that the variety in operational definitions of the supervisory style
construct explains many of the inconsistent findings across studies.
These problems seem to be especially associated with the constructs style
dimension. Whereas the use of performance measures has been broadly explored
in the management accounting literature and beyond (cf. Kren, 1997; Merchant
et al., 2003; Van der Stede et al., 2006), the style dimension has never been analyzed as a separate construct, as it also received less emphasis in RAPM studies
over time (cf. Hirst, 1983; Brownell, 1985; Govindarajan and Gupta, 1985). Due
to this limited attention, it has never become clear what the style dimension
exactly entails, whether it should be considered as a separate dimension of supervisory behavior at all, and whether it can be meaningfully distinguished from leadership style (cf. Marginson and Ogden, 2005, p. 443). Figure 1 depicts graphically
how the construct of supervisory style has been conceptualized in the RAPM
literature (panel A) and compares it with the approach proposed in this study
(panel B).
Indeed, the overlap of meaning between leadership style and supervisory style is
clearly implied in typical definitions of leadership as the process of influencing
others to understand and agree about what needs to be done and how to do it
and the process of facilitating individual and collective efforts to accomplish
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Figure 1.
shared objectives (cf. Yukl, 2005, p. 8). Moreover, as, for example, Bass (1990)
notes, the performance measurement and evaluation system represents an important way in which leaders communicate performance expectations and strengthen
subordinate confidence and, thus, express their leadership (e.g. Seltzer and Bass,
1990; Pillai et al., 1999; Podsakoff et al., 2006). Therefore, the leadership literature
strongly suggests that leadership style also, or perhaps even especially, predicts the
behavior of supervisors when evaluating their subordinates performance.
The supervisory style literature itself acknowledges the relationship between
leadership style and supervisory style, but considers them as separate constructs.
A number of RAPM studies address the impact of the leadership styles initiation
of structure (IS) and consideration (C) on performance evaluation outcomes.
IS-leadership aims to direct subordinates with clear working instructions and
performance targets (Bass, 1981, 1990). C-leadership is concerned with the
promotion of subordinates well-being through supportive and pleasant relationships (cf. Judge et al., 2004). Argyris early study (1952) already demonstrated
that subordinates felt less dysfunctional budget pressure when their superiors
were low on IS-leadership and high on C-leadership. Table A1 in the Appendix
provides an overview of theoretical models and main findings from subsequent
studies. Overall, the results seem to suggest that an IS-style (C-style) is related
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to the rigid (lenient) use of performance measures. Whether, however, this means
that leadership style is a causal antecedent of supervisory style, or rather that
leadership style and supervisory style are simply constructs with partially
overlapping meanings, has not been the subject of any analysis thus far.
In sum, extant literature on the relationship between leadership style and supervisory style suffers from several limitations for several reasons. First, the unclear
and varying meaning across studies of Hopwoods original instrument (1972) to
measure supervisory style (RAPM) has resulted in a lack of consistency in
conceptualization and empirical support (Hartmann, 2000; Otley and Fakiolas,
2000). Early contingency studies developed the construct to reflect a supervisory
evaluation style that was related to, yet different from, general leadership style
(cf. Briers and Hirst, 1990). No explicit attempt has been made to understand
further whether managerial work-related attitudes are affected by the use of
certain performance measures as such, or rather by the leadership style that is
expressed by their use. Second, past leadership studies do not provide a proper
theoretical justification of the proposed relationship between leadership style
and supervisory style. In fact, prior studies are very much in disagreement
about the nature of the relationships between leadership styles since they are conceptually posited as determinants of supervisory style (Merchant, 1984, 1985;
Marginson and Ogden, 2005), a consequence of supervisory style (DeCoster
and Fertakis, 1968), or moderator of supervisory style effects on manipulative
behavior (Merchant, 1990) and job-related tension (Hopwood, 1974). Third,
the empirical evidence from past leadership studies has limitations inherent to
the samples investigated (four studies collected data from a single organization)
and the empirical tests conducted (most studies showed univariate tests while
more recent statistical techniques would allow to more robustly assess construct
validity and relationships among latent variables using factor analysis and
structural equation modeling).
Our study will attempt to address the confusion in the extant literature. Below
we illustrate and motivate the choice of variables in our model, after which we
derive hypotheses about the relationships between leadership style, the use of
performance measures and work-related attitudes as outcome variables.
Leadership style. We use the Stogdill and Coons (1957) original typology of
leadership as consisting of the dimension initiating structure (IS-leadership)
and consideration (C-leadership). Although the leadership literature has developed alternative typologies over time, we use this original classification as it is
the only one used in previous supervisory style studies (cf. Otley and Pierce,
1995; Viator, 2001). Moreover, recent evidence in the leadership literature
confirms the validity of the initiating and consideration leadership traits as well
as their fundamental nature (Judge et al., 2004; Dionne et al., 2005). We
choose to address them separately as antecedents of the use of performance
measures. Although both traits may coexist in the same leader, prior research
that examined interacting effects of the two styles generated mixed findings
(cf. Bass, 1990).
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Use of performance measures. Concerning the measure dimension of

supervisory style, we distinguish between the use of objective and subjective
performance measures for managerial performance evaluation. This choice is
based on recommendations from the reviews of the supervisory style literature
(e.g. Otley and Fakiolas, 2000; Noeverman et al., 2005) and is in line with the
wider performance evaluation literatures interest in the objective subjective
distinction (e.g. Moers, 2005), and prior literature in organizational behavior
(e.g. Bommer et al., 1995). We define objective performance measures, consistent with these studies, as those measures which express performance in financial
and quantitative non-financial measures associated with formalized targets. In
doing so, we capture the essential measure characteristic of the original classification (cf. Hopwood, 1972; Harrison, 1993; Hartmann, 2000). In contrast, a
performance appraisal relying on subjective performance measures is based on
the supervisors judgment of performance, using one or more qualitative
expressions of employees performance, such as work attitude, interpersonal
skills, communication and motivation.
Work-related attitudes. We investigate two work-related attitude variables that
have been central to the RAPM literature, as consequences of supervisory style
and antecedents of job satisfaction (Kahn et al., 1964), namely, goal clarity
and evaluation fairness (Briers and Hirst, 1990, p. 395). Goal clarity signifies
the lack of ambiguity managers in decentralized organizations may have about
their role, their objectives and the scope of their responsibilities (cf. Vancil,
1979; Sawyer, 1992). Goal clarity plays a central role in goal theory, which predicts that managerial perceptions of the specificity (as opposed to the vagueness)
of the working goals they have to achieve has a positive effect on their subsequent
motivation and effort (Hollenbeck and Klein, 1987, p. 214; Locke et al., 1989,
pp. 271 272; Locke and Latham, 1990, p. 49). The evidence for goal clarity
as a relevant variable to assess the appropriateness of accounting performance
measures dates back to the study by Hopwood (1972) who found that an emphasis
on meeting the budget adds an important element of structure and clarity to the
job environment.
Evaluation fairness is concerned with the effect of (procedural) justice on
motivation and effort (Huseman et al., 1987; Cohen and Spector, 2001).
Empirical work suggests the importance of individuals perceptions of the fairness of the performance evaluations they receive, for subsequent work-related
attitudes and behaviors (cf. Landy, 1989, pp. 389 390). Perceived fairness of
evaluation criteria may also affect the acceptance of those criteria as working
goals, which is a prerequisite for the effectiveness of any form of target
setting (Earley et al., 1989). Recent management accounting studies (e.g. Lindquist, 1995; Libby, 1999; Wentzel, 2002; Lau and Tan, 2006; Lau and Moser,
2008; Lau et al., 2008) have paid increased attention to procedural fairness and
have found this form of fairness to be important in explaining the relationships
between accounting control systems and subordinates behaviors. The literature
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in organizational behavior confirms the central role of procedural justice in

leadership effectiveness (e.g. Pillai et al., 1999; Tyler and De Cremer, 2005;
Van Knippenberg et al., 2007). In particular, recent findings indicate that
leader reward and punishment behaviors are strongly related to employees
perceptions of justice and conclude that examining the mediating effects of
justice ought to be one of the priorities for future research (Podsakoff et al.,
2006, p. 135).
Initiating Structure Leadership, Objective Performance Measures and Goal
Clarity
According to the path goal theory of leadership, an important objective for
leaders is to positively influence the subordinates expectancy to achieve
organizational goals (e.g. Wofford and Liska, 1993; House, 1996; Yukl, 2005;
Schriesheim et al., 2006). This motivation comes from increasing personal
payoffs to subordinates for goal attainment and clarifying the path towards
these goals (House, 1971, p. 324). The initiating structure leadership style is
particularly relevant in this theory, since IS-leadership aims to structure the
roles of their subordinates toward the attainment of organizational goals (Yukl,
2005). IS-leadership insists on meeting deadlines, decides in detail what will
be done and how it should be done, and establishes clear channels of communication and clear patterns of work organization (Bass, 1990). In contrast, leaders
low in this dimension are hesitant about taking initiatives in the group, make
suggestions only when members ask for it, and let members do the work the
way they think is best (Bass, 1990). Downey et al. (1975) found that leaders
initiating structure was significantly related to the employees expectation that
their performance would result in desired outcomes. A meta-analysis of 120
studies using path goal leadership theory by Wofford and Liska (1993) indicated
that initiating structure is positively related to role clarity, lending support to the
hypothesis that structured leaders enhance subordinate direction and expectancies
by clarifying the paths for work-goal attainment. Consistent with this line of
thought, we expect that a leader scoring high on the IS-dimension will also
have a positive effect on subordinates goal clarity (H1).
H1:
IS-leadership style has a positive effect on goal clarity.
Pathgoal theory also emphasizes the use of performance measures as an important

source of information to subordinates about what is expected of them in their role
(Collins, 1982). The theory is built on the premise that performance measures
represent salient transaction exchanges that strengthen performance expectations
and subordinate confidence (Bass, 1990). As such, performance measurement
systems may serve individuals needs for knowledge about where the organization is heading, in order to feel capable of taking initiatives, to allow them to
see the big picture, and to develop a reference point for understanding their
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roles within the organization (Bowen and Lawler, 1992; Lawler, 1992). These
insights can be combined with the supervisory style literature to explore
whether specific performance measure use partially mediates the relationship
between a leadership style and work-related attitudes. In fact, Noeverman and
Koene (2000) argued that leadership that focuses on tasks, telling subordinates
what is expected of them and controls deviation from standard, will attach
high importance to quantitative measures of performance and deviations from
targets. Abernethy et al. (2007) find that supervisors high on IS-leadership
used more quantitative performance measures for compensation and promotion.
The empirical literature that investigates the appropriateness of objective
(accounting) performance measures suggests that its functional effects relate to
increased goal clarity (cf. Chapman, 1997; Hartmann, 2000; Luft and Shields,
2003).
Performance evaluation systems based on objective performance measures
enhance structure and clarity of the job environment, and enhance motivation
as they provide clear goals to subordinates (cf. Locke and Latham, 1990;
Hartmann, 2007). Budgetary control systems in particular act to buffer against
unpredictable market developments (cf. Merchant, 1984, p. 293), therefore
reducing ambiguity by shielding the managers immediate working environment
from its external context (cf. Olson and Rombach, 1996). In particular, objective
(accounting) performance measures may also educate managers about the
economics of the business, and the underlying drivers of costs, revenues and
performance, which helps to clarify and execute strategically relevant individual
actions (Malina and Selto, 2004). Recently, Marginson and Ogden (2005) and
Hartmann (2007) indeed confirm that the use of budgets as an antidote to role
ambiguity is a powerful influence on the managers budgeting behavior.
We therefore expect that the positive relationship between initiating structure
and goal clarity (H1) acts, at least partially, through the use of objective performance measures. This is formulated in H2.
H2: The positive effect of IS-leadership style on goal clarity is mediated
by the use of objective performance measures.
We choose not to develop a hypothesis about the potential relationship between
subjective measures and goal clarity. On the one hand, it can be argued that in
some situations subjective performance measures better account for subordinates performance dimensions that are not easily expressed in objective goals
(see, e.g. Locke and Latham, 1990; Luckett and Eggleton, 1991). In contrast,
subjective performance measures have been shown to introduce severe biases
in performance ratings (cf. Moers, 2005) which may in fact reduce goal
clarity. Because of these opposite effects, we choose not to derive a directional
hypothesis for the potential intervening effect of subjective measures on the
relationship between IS-leadership and goal clarity. Rather, we will add a
control path to our model to account for this potential mediation.
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Consideration Leadership, Subjective Performance Measures and Evaluation

Fairness
The social exchange view of leadership considers leadership style and its effects in
terms of the social relationships created between supervisors and subordinates
(e.g. Song et al., 2009). Good social relationships involve investment in the subordinates welfare by trust and enhancing fairness (cf. Van Knippenberg et al.,
2007). In line with this argument, C-leaders have been shown to develop a work
atmosphere of mutual trust, respect for subordinates ideas and consideration of
subordinates feelings (Tosi et al., 1994). C-leadership involves empowerment,
allowing subordinates a voice in decision-making processes, supporting them
for thinking on their own, treating them equitably through individualized consideration (see, e.g. Judge et al., 2004). It encourages good superior subordinate
relationships and two-way communication (Podsakoff et al., 1995). These are
instrumental to enhance the control the individual has over what happens on the
job which can increase effort and performance (cf. Ashkanasy and Gallois,
1994). Van Knippenberg et al. (2007) name fairness as the crucial factor in
these processes. When followers perceive that they can influence the outcomes
of decisions that are important to them and that they are participants in an equitable
relationship with their leader, their perception of procedural fairness is likely to be
enhanced (cf. Bass, 1990; Pillai et al., 1999). We therefore posit that consideration
positively affects evaluation fairness which we express in H3.
H3:
C-leadership style has a positive effect on evaluation fairness.
Regarding C-leadership and evaluation fairness, Noeverman and Koene (2000)

argued and found that considerate leaders that emphasized interpersonal aspect
rely more on qualitative aspects of performance evaluation, such as subordinates
explanations of their performance and possibility to improve it. Managers may
judge that the effort in their work is fairly represented in the outcomes in
terms of subjective performance dimensions, since these outcomes are mostly
determined by factors within their control. A recent study by Lau and Moser
(2008) provides evidence that performance appraisals based on subjective criteria
are positively linked to evaluation fairness. Subjective performance evaluation
allows subordinates to be in a better position to seek explanations about their
appraisals and to submit alternative interpretations. Following this line of reasoning, a consideration leadership style increases the likelihood for potential unfair
appraisals to be properly discussed, explained and rectified. In response to the
perception of a social exchange based on open communication and subjective
performance measures, subordinates are likely to reciprocate with corresponding
high levels of procedural justice (cf. Song et al., 2009). Therefore, we expect that
the positive relationship between consideration and evaluation fairness (H3) acts
through the use of subjective performance measures. Overall, we propose the
following hypothesis.
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H4: The positive effect of C-leadership style on evaluation fairness is

mediated by the use of subjective performance measures.
We choose not to develop a hypothesis about the potential relationship between
objective performance measures and evaluation fairness. The reason is that
existing evidence on the effects of objective performance measures on evaluation fairness reveals opposite effects. On the one hand managers may value
objectivity positively, which may enhance their agreement with the criteria
used in their evaluation. In an experimental setting, Lindquist (1995)
demonstrates the relevance of fairness to the acceptability of budgetary goals.
In contrast, the supervisory style literatures central claim has always been
that objective (i.e. accounting) performance measures reduce evaluation fairness, since superiors put an emphasis on attaining potentially uncontrollable
targets (cf. Earley, 1985; Locke and Latham, 1990; Ross, 1994). Since we
cannot judge the relative strengths of these opposite effects and studies have
shown mixed results about the relationship between objectivity and fairness
(cf. Hartmann and Slapnicar, 2009), we do not develop a directional
prediction. In our empirical analysis we will again add a control path to
account for potential mediation.
Our research model, depicting the four hypotheses, is outlined in Figure 2.
Figure 2. Research model and expected significant paths.
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F. Hartmann et al.
Method
Sample
To test the hypotheses, we gathered data through a questionnaire survey that we
conducted in the Netherlands. A sampling method was followed that had been
successful in previous accounting survey-based research, based on the selection
of participating organizations first and managers within those organizations subsequently (cf. Young, 1996). This method provides an acceptable approach to
random sampling in situations where full random sampling is not economically
feasible, and would result in large non-response bias (e.g. Pedhazur and
Pedhazur, 1991, p. 319; Brownell, 1995). The method ensured variation in the
key independent variables by selecting organizations from various types of
industries, reducing the risk of drawing inferences from potential idiosyncrasies
of single organizations (Pedhazur and Pedhazur, 1991, p. 320). Initially 12
organizations were approached and asked to take part in the study. Eleven
organizations eventually agreed to further participate in the research study.
Table A2 in the Appendix contains descriptive statistics on the sample. To maintain anonymity and avoid selection bias, in each organization an official was
asked to select respondents (cf. Brownell, 1995, p. 33). Selectors were asked
to select a diverse and large sample of responsibility center managers, across
functional areas and positions in the organizational hierarchy, including line
and staff managers, and of a single (Dutch) nationality.2 In total, a sample of
250 managers was selected. The sample size per organization ranged from 9 to
56 managers, reflecting the organizations size and responsibility center structure.
The response rate (196 usable questionnaires, 78.4%) compares favorably to
earlier and similar studies (Van der Stede et al., 2005). A test for potential
non-response bias was conducted, comparing mean scores on variables for
early and late respondents. The results of this analysis showed no evidence of
systematic non-response above chance. Table 1 contains descriptive statistics
of the respondents.
The average respondents age was 46.2 years. Respondents had, on average,
worked with their present employers for 17.9 years, and had been for 5.8 years
in their present positions. The average number of persons in the respondents
area of responsibility, which includes both the respondents department and
sub-departments, was 60.6 employees. On average, the respondents span of
control, as measured by the number of employees under direct supervision,
amounted to 8.8 persons.
Variable Measurement
The questionnaire was pre-tested with five faculty colleagues, four external
reviewers with senior management positions and eleven contact persons in the
participating organizations, after which it was field-tested with four potential
respondents in two firms. Minor alterations were made in each step. Several
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Table 1. Descriptive statistics

Theoretical
Actual
Variables
Min
Max
Min
Initiating structure leadership style

Consideration leadership style
Use of objective performance measures
Use of subjective performance measures
Goal clarity
Evaluation fairness
Job satisfaction
1.00
1.00
1.00
1.00
1.00
1.00
1.00
5.00
5.00
5.00
5.00
5.00
5.00
5.00
1.52
1.59
1.00
1.00
1.87
2.02
1.90
0.00
0.00
5.00
5.00
0.00
1.00
Control variables:
Task uncertainty
Environmental uncertainty
Size (no. of employees)
Span of control (no. of employees)
Age (years)
Tenure function (years)
Tenure organization (years)
Public organizations (dummy variable)
Max
4.86
5.00
4.88
5.00
5.00
5.00
5.00
Mean Std. dev.

3.35
3.85
3.00
3.89
3.90
3.80
3.90
0.69
0.64
0.81
0.74
0.56
0.61
0.68
1.63
4.89 3.45
0.00
5.00 2.68
1.00 700.00 60.57
1.00 72.00 8.81
31.00 61.00 46.20
1.00 42.00 5.80
1.00 41.00 17.91
0.00
1.00 0.44
0.69
1.10
97.65
8.99
6.85
5.62
10.42
0.49
procedures from Dillman (2000) were taken to optimize the response rate, such as
the promise of strict anonymity, the use of high-quality printing with handwritten signatures, the use of pre-stamped envelopes and separate cards to
request the studys results, and the inclusion of a pen as token. Wording of the
items in the questionnaire is provided in Table A3 in the Appendix.
Leadership behavior was measured with a 16-item instrument based on the
leadership behavior description questionnaire (Stogdill, 1963). The validity of
the instrument has been demonstrated by a recent meta-analysis (Judge et al.,
2004). The scale consists of five-point, fully anchored scales that measure respondents agreement with eight statements concerning consideration behavior, and
eight items concerning initiating structure behavior. Respective sample items
are My supervisor treats his employees as equal and My superior determines
in detail what should be done and how it should be done. None of the 16
items implicitly or explicitly referred to the use of performance measures for
the periodic evaluations. Instead, they expressed the leadership style in which
supervisors manage the activities of their subordinates.
The use of objective performance measures (UOPM) was measured with nine
items, drawing on the scale by Hirst (1981, 1983) and following the definition of
Harrison (1992). Respondents were asked to indicate the type of performance
measures their subordinate relied upon for respectively general performance
evaluation purposes, monetary rewards and non-monetary rewards. Three items
referred to the use of financial performance measures, three items related to
the use of quantitative performance measures and three items addressed the
288
F. Hartmann et al.
use of performance targets for managerial performance evaluation. Sample items

are When evaluating my performance, my superior relies on financial information (quantitative information, preset targets) and My monetary rewards
depend to a large extent on performance expressed through financial figures
(quantitative figures, preset targets). UOPM was subsequently derived as a
reflective construct, combining the scores about reliance on quantitative (financial and non-financial) measures and associated targets. We operationalized the
use of subjective performance measures (USPM) with three items relating to
the use of subjective judgment by the superior in evaluating managerial performance, that were formulated in line with the items on the other dimensions. Sample
items are When evaluating my performance, my superior relies on subjective
judgments and My monetary rewards depend to a large extent on performance
as subjectively perceived by my superior.
Goal clarity was measured using a scale that combined three items from
Steers task goal attributes questionnaire (1976) that measures goal specificity
(cf. Kenis, 1979) and five items from the Rizzo et al. (1970) and House (1971)
instrument for role ambiguity. A sample item is I know exactly what is expected
of me in this job. The combined set of questions instrument was expected to have
greater construct validity than either of its two constituting instruments, since it
combines a more objective goal characteristic (specificity) and a more subjective goal characteristic (ambiguity). Evaluation fairness was measured with nine
items derived from the scales by Hopwood (1972), Otley (1978) and Dunk
(1990), and from definitions of fairness in the psychology and accounting literatures (e.g. Landy et al., 1978; Landy and Farr, 1980; Govindarajan, 1984;
Emmanuel et al., 1990). For each of the nine statements, subjects were asked
to indicate their level of agreement on five-point fully anchored scales. A
sample item is I am very satisfied with the way I am evaluated.
We included a number of control variables (job satisfaction, public organization, seniority, size and uncertainty). In order to check whether goal clarity
and evaluation fairness are proximal antecedents of subordinate satisfaction,
we measured job satisfaction using an instrument developed by Kahn et al.
(1964) which has been applied in a budgetary context by Hopwood (1973) and
Swieringa and Moncur (1975). The five items included in the instrument relate
to different concepts underlying job satisfaction, such as satisfaction with the
job, satisfaction with the employing organization and the propensity to leave.
The public organization variable was a dummy variable that reflected whether
a sampled organization belongs to the not-for-profit sector, to account for possible differences between profit and non-profit sectors. The seniority variables
measured the respondents age, and tenure in the job and in the organization,
allowing the test for tenure effects. Prior studies have demonstrated that demographic characteristics of dyadic members as well as the length of dyadic
relationships tend to influence leader member exchange qualities (e.g. Dienesch
and Liden, 1986; Vecchio and Bullis, 2001). Age is commonly controlled in
studies involving job attitude dependent variables. There is a tendency for
289
older employees to have more favorable attitudes (Hanlon, 1986; White and
Spector, 1987). The size variable measured managers span of control (in
terms of the number of subordinates under direct and indirect supervision) and
the number of employees in a managers organization. Span of control is included
as control variable because prior studies about leadership (e.g. Cogliser and
Schriesheim, 2000; Schriesheim et al., 2006) found that when work unit increases
in size, low-quality leader member exchange increases; that is, relationships
between managers and staff become less positive, which in turn affects staff
performance. Size affects the formality of controls and the use of performance
measures in incentive schemes. For this reason, it is widely included as control
variable in management accounting studies (cf. Chenhall, 2003; Merchant
et al., 2003). Finally, we controlled for environmental uncertainty and task
uncertainty (cf. Chapman, 1997) as they may have contingent direct effects on
leadership (cf. Bass, 1981, pp. 593 596) or may interact with variables in the
model.3
4. Data Analysis and Results
We test the research model using Partial Least Squares (PLS), a multivariate
analysis technique for testing structural models (Chin, 1998). PLS is a general
method for the estimation of path models involving latent constructs indirectly
measured by multiple indicators (Chin and Newsted, 1999). This tool is primarily
intended for causal-predictive analysis in which the problems explored are complex
and theoretical knowledge is scarce. Because this technique uses a componentbased approach to estimation, it places minimal demands on sample size and
residual distributions, something not generally achievable with covariance-based
structural equation modeling techniques such as LISREL or AMOS. Finally, PLS
is robust for small to moderate sample sizes (e.g. Chenhall, 2005; Hall, 2008). In
our research model, all variables are constructs specified with reflective indicators.
A PLS model is analyzed using SmartPLS (version 2-M3) and interpreted in two
stages: (1) the assessment of the reliability and validity of the measurement
model, and (2) the assessment of the structural models. This sequence ensures
that the constructs measures are valid and reliable before attempting to draw
conclusions regarding relationships among constructs (Barclay et al., 1995).
Measurement Model
The measurement model in PLS is assessed in terms of individual item reliability,
construct reliability and discriminant validity. Individual item reliability is
considered adequate when an item has a factor loading that is greater than 0.707
on its respective construct (Carmines and Zeller, 1979). Those indicators with
very low values were deleted following an item trimming process (Barclay et al.,
1995; Chin, 1998).4 Construct reliability is assessed using the internal composite
reliability (ICR) (cf. Fornell and Larcker, 1981). As shown in Table 2, all ICRs
Table 2. Reliability coefficients and correlation matrix

Variables
ICR Alpha
1.
1. Initiating
structure
2. Consideration
3. UOPM
4. USPM
5. Goal clarity
6. Evaluation
fairness
7. Job
satisfaction
8. Task
uncertainty
9. Env.
uncertainty
10. Size
11. Span of
control
12. Age
13. Tenure
function
14. Tenure
organization
15. Public sector
organization
0.873 0.828
0.732
0.842
0.911
0.809
0.880
0.907
2.
3.
4.
0.764 20.072
0.719
0.101
0.731
0.888
0.347
20.051
0.767
0.671
0.172 20.001
0.234
0.366 20.012
0.841
0.162
0.169
0.053
0.881
0.056
0.592
0.835 0.736
0.129
0.390
0.890 0.863 20.155 20.015

0.808 0.691
0.116
0.129
0.124
0.067
5.
6.
0.718
0.289
0.745
0.436
0.390
0.280
0.061
20.167
0.085
20.296
0.364
0.036
0.140
7.
8.
9.
10.
0.108
20.105
0.711
0.005
20.078
0.119
13.
14.
0.721
0.126
0.058
20.089
20.082
0.165
0.190
0.087
20.024
0.145
0.135
0.095
20.065
0.215
0.177 0.051
0.061
0.084
0.083
0.013
0.034
0.129
20.060
20.058
0.134
0.096
0.089
0.019
0.120
0.106
0.020
20.098
0.051
0.123
0.023
20.028
0.027
20.013
0.118
0.011
0.131
20.142 20.008
0.051
20.339
20.277 20.217 20.158
12.
0.750
0.024
20.081
20.199 20.044
11.
0.113
0.209 20.116
0.018
0.073
0.316
20.042
0.623
0.036
20.346 0.056
20.176 20.015
0.232
20.197 0.012
The first two columns report the internal composite reliability (ICR) and Cronbachs alpha. Bold-faced elements on the diagonal represent the square root of the average variance
extracted (AVE). Off-diagonal elements are Pearson correlations among variables. n 196.

Significant at 1% level (two-tailed).


291
exceeded 0.8, indicating satisfactory reliability of the constructs in the model

(Hulland, 1999). Additional support for reliability is provided by Cronbachs
alphas, with the minimum value at 0.67 for USPM. The average variance extracted
(AVE) by the latent constructs from their indicators exceeded the recommended
criterion of 0.50 for all variables (Fornell and Larcker, 1981). To assess whether
discriminant validity is sufficient, AVE should exceed the variance shared
between the construct and other constructs in the model (i.e. the squared correlation
between two constructs). For adequate discriminant validity, the diagonal elements
should thus be significantly greater than the off-diagonal elements in the corresponding rows and columns (Barclay et al., 1995). As reported in Table 2, this condition is satisfied. An examination of the cross-loading matrix (Table A4 in the
Appendix) shows additionally that no item loads more highly on another construct
than it does on the construct it is intended to measure. We therefore provide
evidence that the instruments used for this study to operationalize leadership
styles and performance measurement systems reliably and validly capture distinct
constructs, thereby enabling an interpretation of the structural model.
Table 2 displays no significant correlation between the two leadership styles,
suggesting independence of these two supervisory traits. Similarly, the two variables capturing reliance on objective versus subjective performance measures are
not significantly correlated. In line with prior research, it appears that the use of
objective performance measures is negatively associated with task uncertainty
and positively associated with environmental uncertainty (cf. Khandwalla,
1972; Simons, 1987). No significant correlations are found with regard to the
use of subjective performance measures. Goal clarity and evaluation fairness
show high levels of discriminant validity and are highly correlated with job
satisfaction, therefore confirming that these two work-related attitudes are significant predictors of subordinate satisfaction.
Structural Model
Since PLS makes no distributional assumptions in its parameter estimation,
traditional parameter-based techniques for significance testing and model evaluation are considered to be inappropriate (Chin, 1998). One consequence of the
comparison between covariance structure analysis modeling approaches (e.g.
LISREL) and PLS is that no proper overall goodness-of-fit measures exist for
models using the latter (Hulland, 1999). The structural model is evaluated examining the R2 values and the size of the structural path coefficients. Consistent with
Chin (1998), bootstrapping based on 500 runs is used to generate standard errors
and t-statistics. This allows us to assess the statistical significance of the path
coefficients. Table 3 reports the path coefficients, t-values observed with the
level of significance achieved and the proportion of explained variance of
the endogenous variables (R2) for the whole sample (n 196). Figure 3 shows
the significant path coefficients for the model (non-significant paths have been
omitted for presentation reasons).
292
F. Hartmann et al.
Table 3. PLS results
Paths to:
UOPM
USPM
Goal
clarity
Evaluation
fairness
Job
satisfaction
Adjusted R2 for endogenous variables

Paths from:
Initiating structure
Consideration
0.264
0.126
0.271
0.285
(4.249)
0.092
(1.519)
0.181
(2.356)
20.075
(0.083)
20.092
(1.077)
0.278
(3.827)
0.053
(0.849)
20.054
(0.830)
20.055
(0.751)
0.045
(0.766)
0.038
(0.424)
20.112
(1.541)
0.119
(1.420)
20.003
(0.028)
20.099
(1.539)
20.123
(1.814)
20.002
(0.127)
20.089
(0.860)
20.072
(0.793)
20.221
(2.478)
UOPM
USPM
0.434
0.400
0.036
(0.106)
0.202
(2.507)
0.285
(3.602)
0.048
(0.630)
0.065
(0.802)
0.599
(11.908)
0.154
(1.937)
0.088
(1.443)
20.001
(0.525)
0.186
(2.106)
0.074
(0.902)
0.002
(0.138)
0.250
(3.038)
0.201
(2.145)
20.258
(3.976)
20.064
(0.854)
0.136
(1.815)
0.088
(1.030)
0.088
(0.863)
20.004
(0.094)
0.025
(0.508)
20.050
(0.702)
0.117
(1.578)
20.105
(1.367)
0.161
(2.809)
0.047
(1.022)
20.033
(0.407)
0.028
(0.554)
0.057
(0.757)
0.106
(1.550)
20.021
(0.228)
20.102
(1.367)
0.090
(1.730)
0.049
(0.868)
0.021
(0.264)
0.002
(0.348)
0.015
(0.176)
20.319
(4.511)
Goal clarity
Evaluation
fairness
Control variables:
Task uncertainty
Environmental
uncertainty
Size
Span of control
Age
Tenure function
Tenure
organization
Public
organization
Each cell reports the path coefficient (t-value) obtained from PLS after 500 bootstrapping runs. Blank
cells indicate that the path was not hypothesized within the model. n 196.



The results of the structural model show that initiating structure leadership style
does not directly affect goal clarity (b 0.036, p . 0.10). As expected, initiating
structure behavior is positively associated with the use of objective performance
measures (b 0.285, p , 0.01), which in turn is positively linked to goal clarity
(b 0.285, p , 0.01). The results show a main effect between considerate
293
Figure 3. Partial Least Squares model: significant path coefficients.
leadership behavior and goal clarity (b 0.202, p , 0.05) and evaluation

fairness (b 0.599, p , 0.01). Contrary to our expectations, results also indicate
a significant path linking initiation of structure with the use of subjective
performance measures (b 0.181, p , 0.05), while a consideration leadership
style does not relate to both types of performance measures (b 0.092, p .
0.10 and b 20.075, p . 0.10, respectively). Interestingly, we found a
significant path between objective performance measures and evaluation fairness
(b 0.154, p , 0.10), while the use of subjective performance measures is not
associated with the work-related attitudes investigated in the model. Consistent
with expectations, job satisfaction, which we added as a control variable, is
positively and significantly associated with goal clarity (b 0.250, p , 0.01)
and evaluation fairness (b 0.201, p , 0.05).
We test the robustness of our findings by modeling the uncertainty variables in
interaction with the variables investigated rather than positing direct effects of
uncertainty variables only. For this purpose, we split the sample into two
subgroups partitioned at the mean score of respectively task and environmental
uncertainty and run the posited research model in PLS. This approach parallels
traditional moderated regression analysis by testing a model separately for
each subgroup (cf. Duxbury and Higgins, 1991) to verify whether the significance
of the paths changes in the presence of different situational variables. The
subgroup analyses confirm the results obtained with uncertainty introduced in
294
F. Hartmann et al.
the PLS model as control variables as direct effects only (data are not presented
here but are available from the authors). The results do not change also when a
three-groups test is performed that distinguishes low, medium and high level
of task and environmental uncertainty.5
5.
Discussion and Conclusions
In this paper we provide an explicit conceptualization of the supervisory style

construct to address a central concern about this literature and to extend the
narrow focus on the measure dimension of supervisory style in recent RAPM
literature (cf. Otley and Fakiolas, 2000). Our objective was to disentangle the
measure and the style dimensions underlying the supervisory style construct
because the implicit assumption that the use of certain performance measures
is related to general leadership traits has never been tested. Moreover, as the
style and measure dimensions have always been tested simultaneously, the
question remained what dimension of supervisory style caused what outcome.
Our results indicate that a combination of the style and measure dimensions
underlying supervisory style reflect two separate motivational mechanisms
between a leader and his subordinate (cf. Judge et al., 2004; Song et al.,
2009). The first mechanism involving initiating structure of a leader confirms
the central logic of path goal leadership theory. IS-leaders rely more on objective performance measures to increase personal payoffs to subordinates for work
goal attainment, by making the path to these payoffs clearer and by enhancing the
structure of the job environment (House, 1996; Yukl, 2005). The full mediation
occurring between initiation of structure and evaluation fairness (control path)
suggests that objective performance measurement systems enhance perceptions
of organizational justice. Thus, it seems that the positive effect of objectivity
on fairness dominates a potential negative effect that has been a central claim
in the supervisory style literature (Hartmann, 2000). By clearly communicating
expectations and setting objective standards in performance evaluation
procedures, IS-leaders are more effective in enhancing fairness among their
subordinates (cf. Van Knippenberg et al., 2007).
The second mechanism through which leader behavior affects work-related
attitudes focuses instead on socio-emotional aspects in leader subordinate
dyads. Supervisors high on consideration leadership style significantly affect
evaluation fairness directly, regardless of whether subjective or objective
performance measures are used in performance evaluation. A considerate
leader creates social exchange relationships (i.e. focused on trust and affective
commitment) with direct consequences on evaluation fairness (predicted main
effect), as well goal clarity (control path) (cf. Tyler and De Cremer, 2005;
Song et al., 2009).
Overall, our findings indicate that consideration style is more strongly related
to work-related attitudes, whereas initiating structure is more strongly correlated
with leader performance criteria. Based on our findings, we question the recent
295
claim of Marginson and Ogden (2005) that subordinates react to budget-based

performance measures irrespective of a supervisors leadership style. Indeed, leadership style and performance measure use are related. Moreover, our analysis
suggests that the use of specific performance measures may be less effective
because they are less compatible with specific leadership traits.
Further, our study extends the limited evidence available in accounting
research on the determinants and effects of subjective performance measures
(e.g. Ittner et al., 2003; Gibbs et al., 2004; Moers, 2005). Despite initiating
leaders appear to rely on subjective performance measures in performance
appraisals (control path), no significant paths are found that link the use of
subjective performance measures to work-related attitudes. This may be
explained by Moers (2005) finding that subjective performance measures result
in more lenient and compressed overall performance ratings, with potential
detrimental effects on goal setting and fairness. Another explanation is that supervisors may adjust objective performance measures either to compensate for
deficiencies in the performance measures (economic explanation) or because of
the social influences that result from the social context in subjective adjustments
occur (behavioral explanation). The interaction between objective and subjective
performance appraisal requires further investigation.
In sum, our path model addresses the inconclusive findings from earlier studies
on leadership style and supervisory style. In particular, the specification and validation of the constructs tested in our PLS model show that leadership behaviors
and the use of performance measures are related, yet distinct constructs. This
analysis thus helps to clarify the confusion around the concept of supervisory
style and therefore addresses a fundamental concern in the management accounting literature about the construct validity of the variables investigated (Bisbe
et al., 2007; Derfuss, 2009). Moreover, Hopwoods initial argument (1972)
that assumed a matching between measure and style dimension of supervisory
style remained largely unquestioned in previous studies. In this study, we explore
the separate and joint effects of leadership styles and the use of performance
measures in an integrated model that combines insights from the management
accounting (Hopwood, 1974; Merchant, 1985, 1990; Marginson and Ogden,
2005) and the general management literature (e.g. Judge et al., 2004; Rynes
et al., 2005). The study generally contributes to the literature in management
accounting that is seeking the managerial antecedents and consequences of
performance-based evaluation (cf. Luft and Shields, 2003). In addition, our findings have implications in the management literature since we attempt to introduce
insights from leadership, justice and goal-setting theories in the same study (cf.
Judge et al., 2004). Our mediating model adds to the debate on the relationship
between leadership style and RAPM and contributes to the discussion in an
area that is known for its modest use of theory (cf. Hartmann, 2000).
Some limitations of the current study should be noted. First, the study is not
immune to traditional weaknesses associated with the survey method used
regarding internal and external validity. However, we feel that the survey was
296
F. Hartmann et al.
the appropriate method given the constructs of interest. Moreover, the care taken
in the design of the empirical study, in obtaining the sample of respondents, in the
design and pretests of the questionnaire, and in the follow-up procedures may
have provided effective controls against many reliability and validity threats
normally associated with survey research (cf. Van der Stede et al., 2005).
Second, the fact that the sample has not been strictly randomly selected requires
care when drawing inferences from this studys results, although the sampling
method was carefully designed to eliminate any obvious bias. In addition,
sampling from multiple respondents in different organizations might have
introduced bias in the analysis, even though our tests of independence in the
observations were satisfactory. Third, the cross-sectional nature of the study
requires care when interpreting the statistical associations as causal relationships.
Given our results and the strengths and weaknesses of the current study, the
following directions for further research seem worth exploring. First, we
acknowledge that the conceptual model tested in this study is not exhaustive.
Additional explanatory and control variables could be investigated concerning
the effects of leadership style on managerial behavior. For instance, informal
aspects of control embedded in an organizational culture could be examined in
combination with formal performance measurement system to assess their
relationships with specific leadership traits and their effectiveness in eliciting
favorable subordinates reactions. The role of business strategy formulation
and implementation in shaping leaders evaluative criteria would also be
another fruitful avenue of research. Second, the effects of performance measurement were examined in terms of subordinates attitudes and responses. An
alternative level of analysis would be the superior, and a related question
would be whether superiors evaluative behaviors could be explained in terms
of context and leadership behavior. Third, in this paper we contrast the use of
objective performance measures with the use of subjective performance
measures, but alternative typologies of performance measures should be explored
(e.g. OConnor et al., 2007). Finally, future research may adopt alternative classifications of leadership behavior that capture elements of leadership theories not
addressed in this study (e.g. Schriesheim et al., 2006).
Acknowledgements
The authors would like to thank the participants at the 2nd AIMA World Conference on Management Accounting Research, Monterrey, California (May 2005),
the 3rd EIASM Conference on Performance Measurement and Management
Control, Nice (September 2005), the AAA Management Accounting Section
Midyear Meeting, Clearwater Beach, Florida (January 2006), the 31st EAA
Annual Congress, Rotterdam (April 2008), as well as the Editor, Salvador
Carmona, and two anonymous reviewers for their helpful comments and
suggestions on earlier versions of the paper.
Appendix
Study
Leadership style
dimension
DeCoster and Initiation

Fertakis
Consideration
(1968)
Hopwood
(1973,
Chap. 8;
1974)
Initiation
Consideration
Relation between leadership

style and supervisory
evaluative style (construct
used)
Research method and

sample
Supervisory evaluative style

(Budget Pressurea) as
determinant of leadership
style
Questionnaire survey in
eight firms
n 31 supervisors
completed the Budget
Leadership style as
determinant of supervisory
evaluative style (Budget
Constrained, Profit
Conscious, Non-accounting
Stylec)
Pressure Questionnaire
n 90 subordinates
completed the LBDQ
questionnaireb
Questionnaire survey and
case study in one firm
Empirical findings and statistical method

Spearman rank order correlation between
Initiation and Budget Pressure r 0.445 (p
, 0.01)
Spearman correlation between Consideration
and Budget Pressure r 0.367 (p , 0.02)
n 126 cost center

managers completed the
LBDQ and the BC, PC and Pairwise Mann Whitney U-test for Initiation:
NA style questionnaire for BC vs. NA p , 0.0; PC vs. NA p , 0.05
Pairwise MannWhitney U-test for
n 26 supervisorsc
Consideration:
BC vs. NA p , 0.05; PC vs. NA p , 0.05
297
(Continued)
Table A1. Summary of survey-based studies linking leadership style with supervisory evaluative style
Merchant
(1984)
Leadership style
dimension
Initiation
Consideration
Merchant
(1985)
Initiation
Consideration
Merchant
(1990)
Consideration
Leadership style as
Emphasis)
Research method and

sample
nineteen firms
N 170 profit center

managers
Leadership style as
one firm
evaluative style (Accounting N 54 profit center
Controls: Use of Net Income managers
Targets and Budget Expense
Targets on Discretionary
Program Decision-making)
Leadership style as
moderator of the relationship one firm
between supervisory
N 54 profit center
evaluative style (Accounting managersd
Controls: Use of Net Income
Targets and Budget Expense
Targets on Discretionary
Program Decision-making)d
and manipulative behavior
Empirical findings and statistical method

No significant relationship between
Consideration and Budget Emphasis
Spearman rank order correlations are all not

significant
Not significant interaction. High consideration

leaders do not lessen the tendency for budget
pressure to induce manipulative behavior
F. Hartmann et al.
Study
Relation between leadership

style and supervisory
evaluative style (construct
used)
298
Table A1. Summary of survey-based studies linking leadership style with supervisory evaluative style
High task Low

Leadership style as
consideration Low determinant of supervisory
task High
consideration
Commitment)
continuum
Kyj and
Consideration
Parker (2008)
Leadership style and

supervisory evaluative style
(Evaluative Use of Budgets)e
as independent antecedents
of budget participation
one firm
Pearson correlation between Leadership Style

and Budget Commitment r 0.25 (p , 0.01)
N 221 junior executives

with budget
responsibilities across five
business units
Questionnaire survey in 13
firms
N 71 middle or upper
level managers
Regression analysis with Budget Commitment

as dependent variable with three samples:
Leadership Style significant only when Role
Ambiguity is minimal/absent
Pearson correlation between Consideration
and Evaluative Use of Budgets r 0.198 (p
0.100)
Budget Pressure Questionnaire (BPQ).

Two supervisors were rated by five subordinates, two by four subordinates, 18 by three subordinates and nine by two subordinates (DeCoster and Fertakis, 1968,
p. 244). One composite subordinate score per supervisor was obtained by taking the average score.
c
BC Budget Constrained style, PC Profit Conscious style, NA Non-accounting style. One composite cost center head score per supervisor was obtained by
taking the average score.
d
Same variable and sample as Merchant (1985).
e
From Abernethy and Stoelwinder (1991).
b
Marginson
and Ogden
(2005)
299
300
F. Hartmann et al.
Table A2. Sample descriptives
Org.
Sector
A
B
C
D
E
Private
Private
Private
Private
Private
Industry
Sample
Usable
responses
Interview
hours
Production
Production
Retail
Production
Production
10
34
27
15
25
7 (70%)
29 (85%)
19 (70%)
11 (73%)
21 (88%)
7.5
6.5
5.5
3.5
9.0
Production
Production
Project
development
Governmental
services
Legal services
9
24
25
6 (67%)
17 (68%)
19 (76%)
6.0
5.0
4.5
15
12 (80%)
3.0
56
48 (86%)
3.5
10
7 (70%)
3.5
250
196 (78.4%)
57.5
Main activity
F
G
H
Chemicals
Consumer electronics
Consumer electronics
Automotive
Electronic office
equipment
Private Food and drink
Private Food and drink
Public City development
Public City administration
Public National
administration
Public National government Defense
K
Total
Table A3. Survey items. The instruments that were included in the questionnaire are
presented below. The items are presented in full, whereas the introductory questions are
presented in abbreviated form. Items that are reverse coded contain the symbol (R).
Items that were deleted to increase reliability and validity of the variables are labeled
with an asterisk
Variables (acronym)
1. Initiating structure leadership style (INI)
How frequently does your direct superior engage in the behavior described by the
following items?a
Your direct superior . . .
INI1
. . . takes care that everyone works at her/his best.
INI2
. . . pushes for the completion of work on time.
INI3
. . . asks that the employees follow standard rules.
INI4
. . . keeps the work moving at a fast pace.
INI5
. . . decides in detail what and how has to happen.
INI6
. . . requires her/his employees to act for the welfare of the whole department.
INI7
. . . needles her/his employees for greater effort.
INI8
. . . criticizes poor work.
2. Consideration leadership style (CON)

How frequently does your direct superior engage in the behavior described by the
following items?a
Your direct superior . . .
CON1 . . . makes you feel at ease when talking to her/him.
CON2 . . . is friendly and approachable.
CON3 . . . keeps her/his employees in good standing with higher authority.
CON4 . . . expresses her/his appreciation in case her/his people have worked well.
(Continued)
301
Table A3. Continued.

Variables (acronym)
CON5 . . . refuses to explain her/his actions. (R)
CON6 . . . criticizes the people in her/his group in presence of others. (R)
CON7 . . . changes the assigned work to her/his employees without consulting them. (R)
CON8 . . . treats all group members as her/his equals.
3. Use of objective performance measures (UOPM)
To what extent does your superior attach importance for your general evaluation to . . .b
UOPM1 . . . your performance expressed in quantitative numbers (like: indicators,
production numbers, budgetary numbers)?
UOPM2 . . . your performance expressed in financial numbers (like: costs, cost prices,
expenditures, profits, financial budgets)?
UOPM3 . . . your performance expressed in relation to earlier set goals or targets (like:
production targets, budget or other targets)?
To what extent does your superior attach importance for your financial rewards to . . .b
To what extent does your superior attach importance for your non-financial rewards to . . .b
4. Use of subjective performance measures (USPM)
To what extent does your superior attach importance for your general evaluation to . . .b
USPM1 . . . her/his personal and subjective appraisal about your performance (like: how
he/she sees you at work, her/his opinion about your commitment, motivation
and effort at work)?
To what extent does your superior attach importance for your financial rewards to . . .b
To what extent does your superior attach importance for your non-financial rewards to . . .b
5. Goal clarity (GC)
To what extent do you agree with the following statements?c
GC1
Clear, planned goals and objectives exist in my job.
GC2
My work objectives are very clear and specific.
GC3
I feel certain about how much authority I have.
GC4
I know exactly what is expected of me in this job.
GC5
I know how to divide my time over the different tasks in my job.
GC6
I understand fully which of my work objectives are more important than others; I
have a clear sense of priorities on these goals.
GC7
I think my work objectives are ambiguous and unclear. (R)
(Continued)
302
F. Hartmann et al.
Table A3. Continued.

Variables (acronym)
GC8
I know what my responsibilities are.
6. Evaluation fairness (EF)
EF1
The evaluation I receive is based on factors over which I have full control.
EF2
It often happens that my superior holds me accountable for certain (negative)
results that I really cannot help. (R)
EF3
The evaluation I receive is based on factors that I find relevant for my functioning.
EF4
When evaluating my functioning, my superior often emphasizes aspects of my
work which I think are irrelevant. (R)
EF5
The evaluation I receive is based on a complete picture of my true performance.
EF6
Certain achievements and actions which I think are important in my functioning are
overlooked by my superior when she/he evaluates me. (R)
EF7
In general, I think that my functioning and performance is evaluated in an honest
way.
EF8
In general, I think that the criteria my superior uses to evaluate me are fair.
EF9
I am very satisfied with the way in which I am evaluated.
7. Job satisfaction (JS)
JS1
I would rather have some other job (either inside or outside this organization). (R)
JS2
I have made a great deal of progress in this organization
JS3
My job gives me chance to do the things I am best of.
JS4
I would certainly advise a friend to come and work for this organization.
JS5
If I had the chance to do the same kind of work for the same pay, but in another
company, I would certainly stay here.
8. Task uncertainty (TU)
TU1
In general I would say that my work is fairly routine. (R)
TU2
People in this unit do about the same job in the same way most of the time. (R)
TU3
Basically, unit members perform repetitive activities in doing their jobs. (R)
TU4
My duties are repetitious. (R)
TU5
There is a clearly known way to do the major types of work I normally
encounter. (R)
TU6
There is a clearly defined body of knowledge of subject matter which can guide me
in doing my work. (R)
TU7
There is an understandable sequence of steps that can be followed in doing my
work. (R)
TU8
To do my work, I can rely on established procedures and practices. (R)
9. Environmental uncertainty (EU)
Can you indicate to what extent the following factors influence the functioning and the
performance of your unit?d
EU1
Behavior and/or buying patterns of customers.
EU2
Behavior and/or strategies of competitors.
EU3
Technological developments in your profession.
EU4
Behavior and/or strategies of your suppliers
EU5
Legal and/or political developments.
a
Scale from 1 (never) to 5 (always).

Scale from 1 (not important) to 5 (extremely important).
c
Scale from 1 (strongly disagree) to 5 (strongly agree).
d
Scale from 0 (factor is not influencing my function) to 5 (factor has a strong influence).
b
303
Table A4. Cross loadings

Variable
1. INI
Items
INI1
INI2
INI3
INI4
INI7
INI8
2.CON
CON1
CON2
CON3
CON7
CON8
3. UOPM UOPM1
UOPM2
UOPM3
UOPM4
UOPM5
UOPM6
UOPM7
UOPM8
UOPM9
4. USPM USPM1
USPM2
USPM3
5. GC
GC1
GC2
GC3
GC4
GC6
GC7
GC8
6. EF
EF2
EF3
EF4
EF5
EF6
EF7
EF8
EF9
7. JS
JS1
JS2
JS4
JS5
8. TU
TU1
TU2
TU3
TU4
TU5
TU6
TU7
TU8
9. EU
EU1
EU2
EU3
EU4
1.
2.
3.
4.
5.
6.
7.
8.
9.
0.704
0.857
0.682
0.680
0.764
0.689
20.056
20.163
0.038
20.025
20.070
0.273
0.182
0.311
0.275
0.259
0.280
0.199
0.254
0.224
0.151
0.155
0.084
0.205
0.102
0.155
0.125
0.110
0.069
0.053
20.137
0.074
20.076
0.136
20.042
0.141
0.048
0.110
0.035
0.150
0.132
0.059
20.003
20.060
20.115
20.068
20.149
20.175
20.049
20.167
0.109
0.094
0.041
0.082
0.098
20.079
20.069
20.193
0.045
20.154
0.783
0.778
0.719
0.593
0.708
0.054
0.073
0.159
0.027
0.013
0.096
0.065
0.066
0.104
0.001
0.039
20.080
0.027
0.027
0.202
0.230
0.109
0.278
0.282
0.505
0.356
0.367
0.378
0.452
0.476
0.534
0.449
0.228
0.314
0.334
0.234
0.033
0.076
0.113
0.048
20.068
20.077
0.026
20.118
0.018
0.023
0.103
0.082
0.197
0.289
0.314
0.173
0.249
0.245
0.099
20.034
0.124
0.056
0.107
0.765
0.668
0.597
0.797
0.786
0.607
0.810
0.803
0.703
20.207
0.017
0.017
0.376
0.299
0.182
0.283
0.284
0.201
0.214
20.113
0.187
0.054
0.254
20.027
0.182
0.224
0.162
0.122
0.307
0.208
0.189
0.021
20.046
20.032
20.039
20.167
20.207
20.160
20.125
0.288
0.327
0.174
0.232
0.056
0.095
0.183
0.146
0.143
0.118
0.057
0.049
20.091
20.013
0.001
20.232
20.265
20.018
0.098
0.109
0.249
20.146
20.111
0.007
0.684
0.880
0.723
20.105
20.078
0.040
0.054
0.009
20.054
0.048
0.029
0.098
20.044
20.003
0.044
0.009
0.014
0.151
20.154
0.088
0.105
0.076
0.049
0.087
0.063
0.088
0.099
0.063
0.052
20.022
20.095
0.085
0.022
0.067
0.055
0.141
0.195
0.029
0.116
0.105
0.168
0.163
0.240
0.134
0.122
0.329
0.349
0.277
0.185
0.232
0.193
0.225
0.273
0.304
20.090
0.009
0.034
0.715
0.721
0.650
0.837
0.654
0.755
0.674
0.167
0.193
0.110
0.316
0.170
0.198
0.295
0.235
0.255
0.357
0.317
0.371
20.014
20.221
20.130
20.120
20.247
20.263
20.260
20.215
0.027
0.163
0.079
0.109
0.179
0.118
20.035
20.102
0.071
20.009
0.466
0.457
0.406
0.415
0.375
0.113
0.065
0.288
0.093
0.077
0.190
0.027
0.025
0.206
0.025
0.068
0.008
0.087
0.100
0.213
0.248
0.223
0.272
0.295
0.578
0.751
0.599
0.752
0.684
0.846
0.876
0.816
0.268
0.346
0.308
0.259
0.152
0.160
0.171
0.219
0.036
0.029
0.042
20.024
20.053
20.033
0.105
0.042
0.112
0.134
0.083
0.003
0.147
0.049
0.287
0.194
0.359
0.230
0.238
0.220
0.217
0.177
0.205
0.218
0.218
0.158
0.197
0.208
20.018
0.104
0.006
0.221
0.189
0.359
0.443
0.303
0.301
0.339
0.134
0.249
0.130
0.329
0.292
0.328
0.401
0.370
0.564
0.814
0.784
0.811
0.049
20.025
0.044
20.055
20.113
20.148
20.059
20.123
0.051
0.173
0.043
0.029
20.083
20.022
20.317
0.000
20.127
20.032
20.088
0.016
20.036
0.032
0.044
20.204
20.205
20.047
20.097
20.076
0.018
20.194
20.177
20.107
0.123
0.060
0.026
20.335
20.367
20.079
20.200
20.157
20.195
20.167
0.095
0.056
0.209
20.014
0.126
0.094
0.044
0.083
0.042
20.101
20.096
20.121
0.558
0.705
0.716
0.730
0.784
0.801
0.636
0.724
20.112
20.024
20.004
20.095
0.026
0.084
0.086
0.156
0.084
0.093
20.013
0.055
0.084
0.036
0.082
0.291
0.333
0.163
0.312
0.308
0.213
0.303
0.291
0.164
20.063
0.078
0.023
0.180
0.086
20.087
0.143
0.105
0.154
0.102
20.124
0.059
20.055
0.055
0.014
0.009
0.002
0.036
0.011
0.188
0.085
0.057
0.004
0.075
0.020
20.134
20.051
20.014
20.173
20.119
0.760
0.833
0.541
0.718
304
F. Hartmann et al.
Notes
1
The original instrument by Hopwood (1972) consists of eight items reflecting eight performance
criteria that superiors can use in performance evaluation. The central feature of his instrument
was to construct a contrast between a rigid evaluation based on meeting budgetary targets
(budget constrained style), and a more flexible evaluation based on longer term factors associated with efficient operation (profit conscious style). In contrast to Hopwoods derivation of
three classes of supervisory style, others have used the scale to derive a dichotomous (e.g.
high/low) measure, based either on ranks (Brownell, 1982) or on the absolute scores (Harrison,
1992, 1993). This resulted in a proliferation of instruments and labels, such as reliance on
accounting performance measures or RAPM (i.e. the extent to which superiors rely on, and
emphasize those performance criteria which are quantified in accounting and financial terms,
and which are preset targets; Harrison, 1993, p. 319), budget emphasis (e.g. Brownell, 1982;
Brownell and Dunk, 1991) or supervisory evaluation style (e.g. Harrison, 1992). Otley and
Fakiolas (2000) have classified four groups of studies that developed an alternative instrument
compared to the original developed by Hopwood (1972). They conclude that the measures
used in each group are different in their scope and intention, and that they are in no sense
interchangeable (Otley and Fakiolas, 2000, p. 506).
2
These managers would be in charge of a distinct area of responsibility, would have at least one functional subordinate (cf. Hirst, 1983) and a separate budget, and would have experienced at least one
performance evaluation cycle. Although the selection by an official may have introduced some
selectors bias, we estimate that the chances for systematic bias across selectors are negligible.
3
Environmental uncertainty denotes the unpredictability in the actions of the customers, suppliers,
competitors and regulatory groups that comprise the external environment (Govindarajan, 1984,
p. 127). It was measured with five attributes about the respondents organizational environment.
These five attributes were derived from the scales used previously by Govindarajan (1984) and Merchant (1990), and relate to the behavior of (1) customers, (2) competitors and (3) suppliers, as well
as to (4) the existence of technological developments in the field of work and (5) the occurrence of
legal and political developments. Task uncertainty denotes the lack of repetitiveness and the lack of
programmability of tasks. It was measured with an instrument developed by Withey et al. (1983),
which combines items from several existing instruments originally designed to measure the variability and analyzability of tasks faced by a subject (e.g. Perrow, 1967; Thompson, 1967).
4
After each deletion of an indicator, the model was re-estimated. In this manner, we eventually
removed two items from the initiating structure leadership style scale, three items from the
consideration leadership scale and one item respectively from goal clarity, evaluation fairness,
job satisfaction and environmental uncertainty scale.
5
We additionally performed the PLS analysis by removing the dummy measuring private/nonprofit organizations and including instead a dummy for every single organization in our
sample. This analysis would reveal whether an organization may apply a performance evaluation
procedure that correlates all the observations from the same organizations, thereby violating the
assumption of independent observations. The significant paths of the PLS model with 10 dummy
variables are qualitatively the same as the one presented in the results above. Furthermore, we
computed with SPSS the intraclass correlation coefficient (ICC) and the within-group agreement
index (rwg) for the seven variables included in the conceptual model. The ICC represents the
amount of variance in the respondents scores that can be explained by membership to an organization. Bliese (2000, 2002) notes that the ICC is also defined as a measure of non-independence. The rwg agreement index represents the interchangeability of respondents (i.e. it
attempts to determine whether observations from respondents in one organization are basically
identical to observations from respondents in another organization; cf. James et al., 1984).
Results (not presented here) show that ICC and agreement index values are on average
comprised of between 26 and 46% for the measured latent variables. This evidence points at
satisfactory within-organization variance to perform a PLS model at the individual level of
analysis that treats each respondents observation as independent.
305
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European Accounting Review

Vol. 19, No. 2, 275 310, 2010

The Effects of Leadership Styles and

Department of Accounting, RSM Erasmus University, Rotterdam, the Netherlands and

(Received: October 2000; accepted July 2009)

Effects of Leadership Styles and Use of Performance Measures

dysfunctional behaviors (e.g. Otley, 1978), or explored whether the relationship

Effects of Leadership Styles and Use of Performance Measures

Effects of Leadership Styles and Use of Performance Measures

Use of performance measures. Concerning the measure dimension of

in organizational behavior confirms the central role of procedural justice in

IS-leadership style has a positive effect on goal clarity.

Pathgoal theory also emphasizes the use of performance measures as an important

Effects of Leadership Styles and Use of Performance Measures

Consideration Leadership, Subjective Performance Measures and Evaluation

C-leadership style has a positive effect on evaluation fairness.

Regarding C-leadership and evaluation fairness, Noeverman and Koene (2000)

Effects of Leadership Styles and Use of Performance Measures

H4: The positive effect of C-leadership style on evaluation fairness is

Figure 2. Research model and expected significant paths.

Effects of Leadership Styles and Use of Performance Measures

Table 1. Descriptive statistics

Initiating structure leadership style

Mean Std. dev.

use of performance targets for managerial performance evaluation. Sample items

Effects of Leadership Styles and Use of Performance Measures

Table 2. Reliability coefficients and correlation matrix

0.890 0.863 20.155 20.015

20.277 20.217 20.158

Effects of Leadership Styles and Use of Performance Measures

exceeded 0.8, indicating satisfactory reliability of the constructs in the model

Adjusted R2 for endogenous variables

Effects of Leadership Styles and Use of Performance Measures

Figure 3. Partial Least Squares model: significant path coefficients.

leadership behavior and goal clarity (b 0.202, p , 0.05) and evaluation

Discussion and Conclusions

In this paper we provide an explicit conceptualization of the supervisory style

Effects of Leadership Styles and Use of Performance Measures

claim of Marginson and Ogden (2005) that subordinates react to budget-based

DeCoster and Initiation

Relation between leadership

Research method and

Supervisory evaluative style

Empirical findings and statistical method

n 126 cost center

Effects of Leadership Styles and Use of Performance Measures

Research method and

N 170 profit center

Empirical findings and statistical method

Spearman rank order correlations are all not

Not significant interaction. High consideration

Relation between leadership

High task Low

Leadership style and

Pearson correlation between Leadership Style

N 221 junior executives

Regression analysis with Budget Commitment

Budget Pressure Questionnaire (BPQ).

Effects of Leadership Styles and Use of Performance Measures

Public City administration

2. Consideration leadership style (CON)

Effects of Leadership Styles and Use of Performance Measures

Table A3. Continued.