Karen Sedatole

Asa Griggs Candler Professor of Accounting Emory University, Goizueta Business School

  • Atlanta GA

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Emory University, Goizueta Business School

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Biography

A three-time recipient of the American Accounting Association’s Notable Contributions to Management Accounting Research Award and a winner of the 2020 Management Accounting Research David Solomons Prize, Sedatole brings a synthesis of business acumen and academic expertise to her role as Asa Griggs Candler Professor of Accounting. She previously served as the Interim John H. Harland Dean of Goizueta Business School from May 2020 through June 2022.

Karen’s pioneering research into the field of performance measurement and reward systems, the role of forecasting and budgetary systems within organizations, and control in interorganizational collaborations have added enormous value across academic and business spheres. In her research, she places emphasis on the role of trust, positive motivation, and systems thinking in the workplace. In tackling these issues, she has partnered across industries – health care, tech, automotive, and more – generating business-relevant research and earning her the Impact on Management Accounting Practice Award twice. Karen’s research has merited grants from the PwC Charitable Foundation, the American Institute of Certified Public Accountants, the Institute of Internal Auditors Research Foundation, the Chartered Institute of Management Accountants, and the Institute of Management Accountants. She has also demonstrated her commitment to Goizueta’s core value of principled leadership, serving as Faculty Director for Emory Executive Education’s Executive Women’s Leadership Forum.

Prior to joining the Emory faculty in 2017, Karen was the Russell E. Palmer Endowed Professor of Accounting at Michigan State University. She has also held academic appointments at the University of Texas at Austin and the Stephen F. Austin State University.

She has presented her research at numerous national and international conferences. Her effective forecasting and performance measurement articles have been published in a number of leading journals, including The Journal of Accounting Research, The Accounting Review, and the Harvard Business Review. Karen previously served as senior editor of the Journal of Management Accounting Research.

Karen holds a PhD in business administration from the University of Michigan, a masters of business administration from the University of Texas at Austin, and a bachelor of science in engineering from Baylor University.

Education

University of Michigan

PhD

Business Administration

2000

University of Texas at Austin

MBA

Business Administration

1989

Baylor University

BS

Engineering

1987

Areas of Expertise

Executive Compensation
Performance Evaluation
Reward Systems
Performance Measures
Interorganizational Collaboration
Forecasting
Compensation and Rewards
Calibration Committees

Publications

The immunization effect of internal control system transparency following a supplier’s violation of buyer trust

2024 Journal of Management Accounting Research

Cianci, A., B. Reichert, K. L. Sedatole, and G. Tsakumis

In this study, we show that a supplier’s internal controls (IC) that lead to either falling short of or to exceeding buyer expectations play an important role in the trust a buyer has in its supplier. In a 12-round repeated trust game, we examine the impact of supplier ICs and the transparency of those ICs to the buyer on buyer trusting behavior across three phases of the buyer-supplier relationship: (1) trust formation, (2) trust violation, and (3) trust repair. We find that, while a supplier’s trust violation reduces buyer trusting behavior, the least amount of damage to trusting behavior occurs for suppliers whose ICs led to supplier actions that fell marginally short of buyer expectations prior to the violation and when the IC was transparent to the buyer. We refer to this as the IC transparency “immunization effect.” We show suppliers can benefit from making IC choices known to partners.

Making the most of supplier industry competition through incentive contracting

2021 Journal of Accounting and Economics 71 (2-3).

Carter, M. E., J. Choi, and K. L. Sedatole

We examine how supplier industry competition affects CEO incentive intensity in procuring firms. Using Bureau of Economic Analysis data to compute a weighted supplier industry competition measure, we predict and find that higher supplier competition is associated with stronger CEO pay-for-performance incentive intensity. This effect is incremental to that of the firm's own industry competition previously documented and is robust to alternative measures of supplier competition and to exogenous shocks to competition. Importantly, we show that performance risk and product margin act as mediating variables in the relation between supplier competition and CEO incentive intensity providing support for the theory underpinning our finding. We document that CEO compensation contracts are used as a mechanism to exploit the market dynamics of upstream industries to a firm's benefit. Our findings are economically important as suppliers provide, on average, 45 percent of the value delivered by procuring firms to the market (BEA, 2016).

The folly of forecasting: The effects of a disaggregated demand forecasting system on forecast error, forecast positive bias, and inventory levels

2021 The Accounting Review 96 (2): 127–152

Bruggen, A., I. Grabner, and K. L. Sedatole

Periodic demand forecasts are the primary planning and coordination mechanism within organizations. Because most demand forecasts incorporate human judgment, they are subject to both unintentional error and intentional opportunistic bias. We examine whether a disaggregation of the forecast into various sources of demand reduces forecast error and bias. Using proprietary data from a manufacturing organization, we find that absolute demand forecast error declines following the implementation of a disaggregated forecast system. We also find a favorable effect of forecast disaggregation on finished goods inventory without a corresponding increase in costly production plan changes. We further document a decline in positive forecast bias, except for products whose production is limited owing to scarce production resources. This implies that disaggregation alone is not sufficient to overcome heightened incentives of self-interested sales managers to positively bias the forecast for the very products that an organization would like to avoid tying up in inventory.

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Research Spotlight

3 min

More than just money – what corporate America needs to do to motivate today’s workforce

In a modern workplace no longer characterized by rigid hierarchies and where power is more diffused, traditional methods of motivation may no longer be enough. We have come to understand the value of providing people with ‘intrinsic motivation’ – a sense of purpose, the importance of creative, interesting work, and maintaining work-life balance. We have naturally moved away from a sole dependence on monetary incentives. However, in a New York Times opinion piece, management author Alfie Kohn asserts that “science has confirmed” that monetary rewards amount to “bribes” that don’t work. Somehow this doesn’t ring true. Has science really confirmed this? Would businesses continue to incentivize performance with monetary rewards if they did not work? And aren’t we all, at least to some extent, motivated by money? To understand if Kohn is right, or if there is a more nuanced answer, Karen Sedatole, Professor of Accounting at Emory University’s Goizueta Business School says we need to look at patterns of human behavior. The classical economic theory, which gave us ‘homo economicus,’ assumes people always behave in a rational way and, as with Gordon Gekko in the ‘Wall Street’ movies, selfishness predominates. Findings from psychology and particularly behavioral economics have started to show this to be incorrect. In fact, people tend to make illogical choices contrary to self-interest. Our capacity to think – via a mix of deep reflective thinking and rapid automatic thinking – can lead us to what economists might consider to be irrational behaviors – albeit with the cognitive biases behind our thinking staying mostly predictable. Do monetary incentives work? We all value money, but our perception of its value is influenced by the importance that we also place on reciprocity and fairness, social norms, trust, and trustworthiness. When it comes to monetary rewards for performance the results will also greatly depend on the quality of the performance measures, along with the type of task being rewarded, and the type of reward. Contrary to Kohn’s assertion, Sedatole points out there are many real-world examples that show monetary incentives can deliver big performance and productivity improvements. In fact, if uncontrolled, bonus incentives can be too powerful a motivator, causing damage – as the UK’s PPI and the Wells Fargo mis-selling scandals both firmly attest. There is also strong academic evidence that monetary rewards can have a positive effect, and equally strong evidence that, when over-used, they can elicit bad behavior. Based on relevant academic research in this area, Sedatole identifies four core principles for the use of monetary incentives: Payment for performance can certainly lead to people making a greater effort than when they are rewarded by salary alone, but only if these core principles are followed: 1. Performance targets – Performance targets should be difficult to hit but not too difficult. 2. Performance metrics – The way performance is measured should be sensitive to the employees’ perceptions and sense of control. Employees should believe that their increased effort improves performance, improved performance leads to greater reward, and reward is valued. Metrics must be precise and not prejudiced by external factors. And, from the organization’s perspective, metrics should be set to meet its objectives. 3. Fairness and social norms – Monetary rewards must be seen to be fair and to comply across organizations. They should also conform to social norms. 4. Characteristics of the task – The efficacy of monetary incentives can depend on the nature of the task and to what extent the task provides intrinsic incentives. Here Alfie Kohn has a point; in some cases, monetary rewards tend to undermine intrinsic incentives. ‘Boring’ tasks have little or no intrinsic motivation, whereas creative tasks – the work of a physician, designer, scientist, etc. – are intrinsically motivating. Where there is intrinsic motivation money can be less relevant and in extreme cases can be seen to devalue the intrinsic factors. Professor Sedatole’s recent webinar: ‘Irrational but Predictable! When to Use Monetary Incentives to Motivate Employees’ explains her findings in further details: simply visit it to view and watch for here: If you are journalist covering this topic – Professor Sedatole is available to speak with reporters – simply click on her icon today to arrange an interview.

Karen Sedatole

2 min

Forecasting demand and supply? Our experts can help explain how industry is trying to weather the storm of COVID-19.

Forecasting demand of any product for industry, manufacturing and even retail is already a difficult task. And now, amid a global pandemic that has seen some industries grind to a halt while others ramp up to keep up means that measuring expectations about demand is key to corporate survival during these trying times. We have not experienced a global pandemic like the coronavirus in last 100 years. The sheer increase in demand for everyday necessities like toilet paper, sanitary wipes and bottled water is putting undo stress on a lean global supply chain. It is testing the agility of many retailers and consumer packaged goods (CPG) companies as they attempt to ramp up manufacturing facilities and logistical operations while struggling to keep up with consumer demand.  Business executives are looking to data, analytics, and technology for answers on how to predict and plan for the surge and, ultimately, the decline in consumer demand. It is significantly easier to shut down facilities than it is to quickly boost production and capacity. The biggest unknown is whether there will be a delayed economic recovery or a prolonged contraction. Regardless of the outcome, retailers and their CPG suppliers will need to think ahead and be prepared to act quickly. March 25 – RIS News There are so many angles and aspects of our daily life that need to be covered during the COVID-19 outbreak – and if you are a journalist looking at how business and industry are adapting during this crisis, the let our experts help. Dr. Karen Sedatole is the Goizueta Advisory Board Term Professor of Accounting. She has conducted extensive research on forecasting and capacity management that can shed light on the challenges of responding to the current uncertain environment. Karen is available to speak with media – simply click on her icon to arrange an interview today.

Karen Sedatole

1 min

Is there a silver bullet for performance ratings?

Yes and no, said Goizueta Professor of Accounting Karen Sedatole. She and colleagues from University of Missouri and College of William and Mary have published a study looking at the role of calibration committees in performance evaluation system. The first major analysis of its kind, Sedatole’s research sets out to put a number of hypotheses to the test; primary among them, the notion that calibration committees deliver a raft of benefits to organizations. Source:

Karen Sedatole

In the News

How to Conduct Motivating Performance Reviews When Business Is Down

Harvard Business Review  online

2023-12-20

As the manager, your job is to rally your team members and inspire them for the year ahead. But what if your business isn’t doing well? How can you objectively assess individual performance? And how can you balance realistic expectations for the future while also fostering a sense of leaderly optimism? In this article, the author outlines strategies for how to conduct a motivating performance review when business is down. Preparation is paramount regardless of the state of the economy, but in tougher times, providing accurate and insightful feedback becomes all the more crucial.

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Expert weighs in on Georgia's ability to claim unborn children as dependents on taxes

Fox 5 Atlanta  tv

2022-08-02

"The new rules allow for an exemption on the state tax return for unborn children as soon as the heart beat is detected," said Karen Sedatole, an accounting professor at the Goizueta Business School at Emory University.

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Women who are pregnant in Georgia can now claim unborn child on taxes

CBS46 Atlanta  tv

2022-08-02

The Georgia Department of Revenue says that families who are expecting a child or children can now claim the unborn child on their taxes.

The new guidance was released on their website on Monday. It says the tax change is due to the Supreme Court’s ruling related to Roe v Wade and the Court of Appeal’s decision to allow Georgia’s “Heartbeat Law” to go into effect.

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