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.
Similar content being viewed by others
References
Johnson HT and Kaplan RS (1986). Relevance Lost: The Rise and Fall of Management Accounting. Harvard Business School Press: Boston.
Kaplan RS and Norton DP (1992). The balanced scorecard: measures that drive performance. Harvard Business Review 70: 71–79.
Kaplan RS and Norton DP (1996). The Balanced Scorecard: Translating Strategy into Action. Harvard Business School Press: Boston.
Kaplan RS and Norton DP (2001). Leading change with the balanced scorecard. Financial Executive 17: 64–66.
Dinesh D and Palmer E (1998). Management by objectives and the Balanced Scorecard: will Rome fall again? Management Decision 36: 363–369.
Neely A, Gregory M and Platts K (1995). Performance measurement system design: A literature review and research agenda. International Journal of Operations and Production Management 14: 80–116.
Bourne M et al (2000). Designing, implementing and updating performance measurement systems. Int J Opns Prod Mngt 20: 754–771.
Martinsons M, Davison R and Tse D (1999). The balanced scorecard: a foundation for the strategic management of information systems. Decision Support Systems 25: 71–88.
Hill T (1989). Manufacturing Strategy. The Strategic Management of the Manufacturing Function. Macmillan: London.
Ackoff RL (1981). Creating the Corporate Future. Plan or be Planned for. Wiley: Chichester.
Forrester JW (1992). Policies, decisions and information sources for modelling. Eur J Opl Res 59: 42–63.
Kaplan RS and Norton DP (2000). Having trouble with your strategy? Then map it. Harvard Business Rev 78(5): 167–178.
Kaplan RS and Norton DP (2004). Strategy Maps. Converting Intangible Assets into Tangible Outcomes. Harvard Business School Press: Boston.
Senge P (1990). The Fifth Discipline. The Art and Practice of the Learning Organisation. Doubleday Currency: New York.
Vennix JAM (1996). Group Model Building. Facilitating Team Learning Using System Dynamics. Wiley: Chichester.
Sterman JS (2000). Business Dynamics. Systems Thinking and Modelling for a Complex World. McGraw-Hill: New York.
Haas M de (2000). Strategic Dialogue: In Search of Goal Coherence. PhD thesis, Eindhoven University of Technology.
Neely A (1998). Measuring Business Performance. Profile Books Ltd: London.
Hepworth P (1998). Weighing it up—a literature review for the balanced scorecard. J Mngt Dev 17: 559–563.
Malmi T (2001). Balanced scorecards in Finnish companies: a research note. Mngt Account Res 12: 207–220.
Wisniewski M and Dickson A (2001). Measuring performance in Dumfries and Galloway Constabulary with the Balanced Scorecard. J Opl Res Soc 52: 1057–1066.
Newing R (1994). Benefits of a balanced scorecard. Accountancy 114: 52–53.
Nørreklit H (2000). The balance on the balanced scorecard—a critical analysis of some of its assumptions. Mngt Account Res 11: 65–88.
Flapper SD, Fortuin L and Stoop PPM (1996). Towards consistent performance management systems. Int J Opns Prod Mngt 16(7): 27–37.
Kleijnen JPC and Smits MT (2003). Performance metrics in supply chain management. J Opl Res Soc 54: 507–514.
Mooraj S, Oyon D and Hostettler D (1999). The balanced scorecard: a necessary good or an unnecessary evil. Eur Mngt J 17: 481–491.
Hudson M, Smart A and Bourne M (2001). Theory and practice in SME performance measurement systems. Int J Opns Prod Mngt 21: 1096–1115.
Tan KH, Platts K and Noble J (2004). Building performance through in-process measurement: toward an ‘indicative’ scorecard for business excellence. Int J Prod Perform Mngt 53(3): 233–244.
Lane DC (1992). Modelling as learning: a consultancy methodology for enhancing learning in management teams. Eur J Opl Res 59: 64–84.
Winch GW (1993). Consensus building in the planning process: benefits from a ‘hard’ modelling approach. System Dynamics Rev 9: 287–300.
Akkermans HA (2001). Renga: a systems approach to facilitating inter-organisational network development. System Dynamics Rev 17: 179–194.
Rosenhead J (ed) (1989). Rational Analysis for a Problematic World: Problem Structuring Methods for Complexity, Uncertainty and Conflict. Wiley: Chichester.
Pidd M (1996). Tools for Thinking. Modelling in Management Science. Wiley: Chichester.
Eden C (1989). Using cognitive mapping for strategic options development and analysis (SODA). In: Rosenhead (ed). Rational Analysis for a Problematic World. Wiley, Chichester, UK, pp 21–42.
Checkland P (1981). Systems Thinking, Systems Practice. Wiley: Chichester.
Eden C (1994). Cognitive mapping and problem structuring for system dynamics model building. System Dynamics Rev 10: 257–276.
Eden C, Wiliams T, Ackermann F and Howick S (2000). On the nature of disruption and delay (D&D) in major projects. J Opl Res Soc 51: 291–300.
Howick S (2003). Using system dynamics to analyse disruption and delay in complex projects for litigation: can the modelling purposes be met? J Opl Res Soc 54(3): 222–229.
Santos SP, Belton V and Howick S (2002). Adding value to performance measurement by using system dynamics and multicriteria analysis. Int J Opns Prod Mngt 22(11): 1246–1272.
Warren K (2002). Competitive Strategy Dynamics. Wiley: Chichester.
Warren K (2003). The Critical Path. Building Strategic Performance Through Time. Vola Press: London.
Wernerfelt B (1984). A resource-based view of the firm. Strategic Mngt J 5(2): 171–180.
Dierickx I and Cool K (1989). Asset stock accumulation and sustainability of competitive advantage. Mngt Sci 35(12): 1504–1511.
Flood RL and Jackson MC (1991). Creative Problem Solving: Total Systems Intervention. Wiley: Chichester.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Akkermans, H., van Oorschot, K. Relevance assumed: a case study of balanced scorecard development using system dynamics. J Oper Res Soc 56, 931–941 (2005). https://doi.org/10.1057/palgrave.jors.2601923
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1057/palgrave.jors.2601923