![]() Our findings suggest that, although forecast accuracy was deemed important for PowerCo, it was at the same time experienced as a somewhat problematic performance measure because of its limited degree of controllability and because of concerns with its goal congruence. We trace key events in the firm’s concern with forecast accuracy and highlight the challenges that the firm encountered in the course of using this performance measure. We draw upon an in-depth case study of a manufacturing organization (PowerCo 1) that started to systematically monitor sales forecast accuracy after having introduced a new planning and forecasting process. In this paper, we investigate the use of forecast accuracy indicators to incentivize more accurate forecasting inside the firm and across the firm’s boundaries. Chow, Hirst, & Shields, 1994 Church, Hannan, & Kuang, 2012 Davis & Mentzer, 2007 Fildes et al., 2003 Helms, Ettkin, & Chapman, 2000), but have not studied the use of such performance measures in practice. ![]() ![]() Scholars in accounting and operations research have repeatedly suggested forecast accuracy indicators as a remedy to the problem of inaccurate forecasts (e.g. However, compared to the literature on dynamic and interactive forms of planning, we have little knowledge on how firms actually use such performance indicators. Such incentives particularly exist for sales forecasts and they assume the form of performance measures for forecast accuracy. While dynamic and interactive forms of planning seek to increase planning quality by means of increasing the timeliness of information, an alternative (complementary) route to increasing the quality of plans is to incentivize actors to plan more accurately. Bourmistrov & Kaarbøe, 2013 Goretzki & Messner, 2016 Henttu-Aho & Järvinen, 2013 Østergren & Stensaker, 2010). The accounting literature provides several case studies which demonstrate the usefulness of such dynamic and interactive forms of planning to improve planning quality (e.g. Moreover, they often rely on frequent interaction between managers from different departments so as to integrate different functional views (Abernethy & Lillis, 1995). These feature rather short time intervals in order to incorporate upcoming information in a timely way (Lamoreaux, 2011 Morlidge & Player, 2010). To avoid such a loss of planning quality, it has been suggested that firms replace or complement static plans (such as annual budgets) with more ‘dynamic’ forms of planning such as rolling forecasts (Hope & Fraser, 2003). Plans may be more or less helpful for such decision-facilitation and concerns with the quality of plans in this respect exist among both practitioners and researchers.Įspecially in a context of high uncertainty, planning information can quickly become outdated. One role of plans is to facilitate operational decisions, for instance in the areas of production, inventory management, purchasing, or hiring. Planning is a key managerial task (Fayol, 1916 Koontz & O'Donnell, 1955 Taylor, 1911), and many firms invest quite some time and effort in establishing plans and monitoring their realization. Our empirical observations do not only shed light on the possibilities and challenges pertaining to the use of forecast accuracy as a performance measure they also improve our understanding of how specific qualities of performance measures apply to ‘truth-inducing’ indicators, and how the particular organizational and market context can shape the quality of performance measures more generally. We illustrate how organizational actors experienced these challenges and how they adapted their approach to forecast accuracy in response to them. Drawing from interviews, meeting observations and written documentation, we highlight two possible concerns with the use of forecast accuracy: concerns related to the limited degree of controllability of the performance measure and concerns with its goal congruence. We examine such challenges by means of an in-depth case study of a manufacturing firm that started to monitor sales forecast accuracy. Our study particularly explores the practical challenges that might emerge when firms use a performance measure for forecast accuracy. the use of forecast accuracy indicators as a results control mechanism. We complement this research by investigating an alternative (complementary) way to improve planning quality, i.e. Accounting studies have analyzed rolling forecasts and similar dynamic approaches to planning as a way to improve the quality of planning.
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