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Relevance assumed: a case study of balanced scorecard development using system dynamics

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  • H A Akkermans

    (Minase)

  • K E van Oorschot

    (Minase)

Abstract

The balanced scorecard (BSC) has become a popular concept for performance measurement. It focuses attention of management on only a few performance measures and bridges different functional areas as it includes both financial and non-financial measures. However, doubts frequently arise regarding the quality of the BSCs developed as well as the quality of the process in which this development takes place. This article describes a case study in which system dynamics (SD) modelling and simulation was used to overcome both kinds of problems. In a two-stage modelling process (qualitative causal loop diagramming followed by quantitative simulation), a BSC was developed for management of one organizational unit of a leading Dutch insurer. This research illustrates how, through their involvement in this development process, management came to understand that seemingly contradictory goals such as customer satisfaction, employee satisfaction and employee productivity were, in fact, better seen as mutually reinforcing. Also, analysis of the SD model showed how, contrary to ex ante management intuition, performance would first have to drop further before significant improvements could be realized. Finally, the quantitative modelling process also helped to evaluate several improvement initiatives that were under consideration at the time, proving some of them to have unclear benefits, others to be very promising indeed.

Suggested Citation

  • H A Akkermans & K E van Oorschot, 2005. "Relevance assumed: a case study of balanced scorecard development using system dynamics," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 56(8), pages 931-941, August.
    • Handle: RePEc:pal:jorsoc:v:56:y:2005:i:8:d:10.1057_palgrave.jors.2601923
    DOI: 10.1057/palgrave.jors.2601923
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    Cited by:

    1. Bentes, Alexandre Veronese & Carneiro, Jorge & da Silva, Jorge Ferreira & Kimura, Herbert, 2012. "Multidimensional assessment of organizational performance: Integrating BSC and AHP," Journal of Business Research, Elsevier, vol. 65(12), pages 1790-1799.
    2. Mudhafar Alefari & Mohammed Almanei & Konstantinos Salonitis, 2020. "A System Dynamics Model of Employees’ Performance," Sustainability, MDPI, vol. 12(16), pages 1-31, August.
    3. Khalife, Joe J. & Abbas, Mohammad Al & Saab, Samer S., 2020. "Formation of policies guided by multivariable control theory," Operations Research Perspectives, Elsevier, vol. 7(C).
    4. Pietro Lovaglio, 2011. "Model building and estimation strategies for implementing the Balanced Scorecard in Health sector," Quality & Quantity: International Journal of Methodology, Springer, vol. 45(1), pages 199-212, January.
    5. Patel, Brijesh & Chaussalet, Thierry & Millard, Peter, 2008. "Balancing the NHS balanced scorecard!," European Journal of Operational Research, Elsevier, vol. 185(3), pages 905-914, March.
    6. S P Santos & V Belton & S Howick, 2008. "Enhanced performance measurement using OR: a case study," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 59(6), pages 762-775, June.
    7. Wolfgang Ossadnik & Ralf H. Kaspar & Stefanie Schinke, 2013. "Constructing a Tailor-made Performance Management System Supported by Knowledge Elicitation Tools and Dynamic Modeling," International Journal of Business Research and Management (IJBRM), Computer Science Journals (CSC Journals), vol. 4(4), pages 75-98, November.
    8. Akkermans, Henk, 2016. "Walking the thin line : Reflections of a professional modeller," Other publications TiSEM 3023298f-db6e-4e61-a44b-4, Tilburg University, School of Economics and Management.
    9. Daniela Vidal Flores & Rogerio Domenge Muñoz, 2017. "Simulador de vuelo ejecutivo como medio de aprendizaje en la planeación de recursos de nuevas empresas bajo el enfoque del marcador balanceado," Contaduría y Administración, Accounting and Management, vol. 62(2), pages 24-25, Abril-Jun.
    10. Jahangirian, Mohsen & Eldabi, Tillal & Naseer, Aisha & Stergioulas, Lampros K. & Young, Terry, 2010. "Simulation in manufacturing and business: A review," European Journal of Operational Research, Elsevier, vol. 203(1), pages 1-13, May.
    11. Marek Barowicz, 2022. "Zrównoważona karta wyników w procesie kryzysowego zarządzania bankiem w dobie pandemii COVID-19," Bank i Kredyt, Narodowy Bank Polski, vol. 53(1), pages 107-148.
    12. Federico Cosenz & Guido Noto, 2016. "Applying System Dynamics Modelling to Strategic Management: A Literature Review," Systems Research and Behavioral Science, Wiley Blackwell, vol. 33(6), pages 703-741, November.
    13. Yael Perlman, 2013. "Causal Relationships in the Balanced Scorecard: A Path Analysis Approach," Journal of Management and Strategy, Journal of Management and Strategy, Sciedu Press, vol. 4(1), pages 70-79, February.
    14. Hoque, Zahirul, 2014. "20 years of studies on the balanced scorecard: Trends, accomplishments, gaps and opportunities for future research," The British Accounting Review, Elsevier, vol. 46(1), pages 33-59.
    15. Lucia Clara Banchieri & Fernando Campa Planas & Maria Victoria Sanchez Rebull, 2011. "What has been said, and what remains to be said, about the balanced scorecard?," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 29(1), pages 155-192.
    16. Daniela Vidal Flores & Rogerio Domenge Muñoz, 2017. "Executive flight simulator as a learning tool in new companies’ resource planning based on the balanced scorecard," Contaduría y Administración, Accounting and Management, vol. 62(2), pages 26-27, Abril-Jun.
    17. Maria Cleofe Giorgino & Federico Barnabè & Martin Kunc, 2020. "Integrating qualitative system dynamics with accounting practices: The case of integrated reporting and resource mapping," Systems Research and Behavioral Science, Wiley Blackwell, vol. 37(1), pages 97-118, January.
    18. Levandivskyi Omelian & Shpykuliak Oleksandr & Balaniuk Ivan & Svynous Ivan & Shelenko Diana, 2022. "Modeling of Added Value as a Financial Indicator of Activity of Agricultural Enterprises in the Regions of Ukraine," Management Theory and Studies for Rural Business and Infrastructure Development, Sciendo, vol. 44(3), pages 288-301, September.

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