Advertisement

Operational Research

, 4:147 | Cite as

A proposed framework for integrating the balanced scorecard into the strategic management process

  • Nikolaos G. Theriou
  • Efstathios Demitriades
  • Prodromos Chatzoglou
Article

Abstract

The Balanced Scorecard (BSC) proposed by Kaplan and Norton has been accepted by the business world, worldwide, as a very promising tool for the performance measurement of an organization at the firm level. Later on, its founders described the way of using their model as an integrated system of the whole strategic planning process. However, what it still remains vaguely explained is the operational (practical) connection of the BSC model to the strategic planning and performance measurement process. The ambition of the present paper is to demonstrate a method that could easily connect directly the various performance measures (criteria) of a BSC with the stated goals and objectives of any firm. Specifically, it explains in great detail how the multicriteria method of Analytical Hierarchy Process (AHP) could practically facilitate this connection. It analyses how a firm could arrange the various performance criteria in such a way that could be capable of controlling its stated goals and objectives through the implementation of its strategy. This paper starts with a literature review concerning the two methods, BSC and AHP, and then proceeds to the formation of the proposed framework, which actually facilitates the formal and quantitative links between the firm’s stated performance criteria and its overall strategic planning and performance measurement process.

Keywords

Balanced Scorecard multicriteria method of AHP performance measurement 

References

  1. Albaum, G., (1997). The Likert scale revisited: An alternative version,Journal of the Market Research Society, vol. 39 (2), 331–348.Google Scholar
  2. Barney, J. B., (1991). Firm resources and sustained competitive advantage,Journal of Management, vol. 17, 99–120.CrossRefGoogle Scholar
  3. Barney, J. B., (1997).Gaining and Sustaining Competitive Advantage, Reading: Addison-Wesley Publishing Co.Google Scholar
  4. Campi, J. P. (1993). Breaking the Paradigm of Performance Measurement, in:Handbook for Productivity Measurement and Improvement, (Christopher, W. F. and Thor, C. G. ed), Portland, Oregon: Productivity Press, p. 8–45.Google Scholar
  5. Chen, T.L. and Pan, F.C., (2004). Analytic Hierarchy Process in an InnovativeIntegration of Balanced Scorecard and Activity-Based Costing,17 th International Conference on Multiple Criteria Decision Making (MCDM), August 6–11, Whistler, B. C., Canada.Google Scholar
  6. Christopher, W. F. and Thor, C. G. (1993).Handbook for Productivity Measurement and Improvement, Portland, Oregon: Productivity PressGoogle Scholar
  7. David, F. R. (1999).Strategic Management: Concepts and Cases-7/e, New Jersey: Prentice-Hall Inc.Google Scholar
  8. Doumpos, M. and Zopounidis, C., (2001).Multicriteria Classification Techniques, Athens: Klidarithmos Pub.Google Scholar
  9. Dyer, J. S., (1990). Remarks on the Analytic Hierarchy Process,Management Science, March 1990, 249–258.Google Scholar
  10. Expert Choice Inc., (2004).Expert Choice for Windows, Version 11.0, Pittsburgh, PA.Google Scholar
  11. Feigenbaum, A. V. (1993). Total Quality: An International Imperative, in:Handbook for Productivity Measurement and Improvement, (Christopher, W. F. and Thor, C. G. ed), Portland, Oregon: Productivity Press.Google Scholar
  12. Forman, E. H., (Fall, 1983). The Analytic Hierarchy Process as a Decision Support System,Proceedings of the IEEE Computer Society. Google Scholar
  13. Golden, B. L., Wasil, E. A., and Harker, P. T., (1989).The Analytic Hierarchy Process, New York: Springier-Verlag.Google Scholar
  14. Hafeez, K., Zhang, Y. B. and Malak, N., (2002), Determining key capabilities of a firm using analytic hierarchy process,International Journal of Production Economics, vol. 76, 39–51.CrossRefGoogle Scholar
  15. Harker, P. T. and Vargas, L. G., (1987). The Theory of Ratio Scale Estimation: Saaty’s Analytic Hierarchy Process,Management Science, November 1987, 1383–1404.Google Scholar
  16. Harker, P. T. and Vargas, L. G., (1990). Reply to “Remarks on the Analytic Hierarchy Process” by J. S. Dyer,Management Science, March 1990, 209–273.Google Scholar
  17. Itami, H., (1987).Mobilizing Invisible Assets, Cambridge, Massachusetts: Harvard University Press.Google Scholar
  18. Kaplan, R. S. and Norton, D. P. (1992). The Balanced Scorecard-Measures that Drive Performance,Harvard Business Review, Jan.–February 1992, 71–79.Google Scholar
  19. Kaplan, R. S. and Norton, D. P. (1993). Putting the Balanced Scorecard to Work,Harvard Business Review, Sept.–October 1993, 134–147.Google Scholar
  20. Kaplan, R. S. and Norton, D. P. (1996A). Using the Balanced Scorecard as a Strategic Management System,Harvard Business Review, Jan.–February 1996, 75–85.Google Scholar
  21. Kaplan, R. S. and Norton, D. P. (1996B). Linking the Balanced Scorecard to Strategy,California Management Review, vol. 39(1), 53–79.Google Scholar
  22. Kaplan, R. S. and Norton, D. P. (1993).The Balanced Scorecard, Boston, Massachusetts: Harvard Business School Press.Google Scholar
  23. Kaplan, R. S. and Norton, D. P. (2001).The Strategy-Focused Organization, Boston, Massachusetts: Harvard Business School Press.Google Scholar
  24. Khandwalla, P. N., (1972). Viable and effective organizational designs of firms,Academy of Management Journal, vol. 16, 275–285.Google Scholar
  25. Lawrence, P. and Lorsch, J., (1967).Organization and environment, Boston: Harvard University Press.Google Scholar
  26. Niven, P. R., (2002).Balanced Scorecard Step by Step:Maximizing Performance and Maintaining Results, New York: John Wiley and Sons Inc.Google Scholar
  27. Porter, M., (1980).Competitive Strategy, New York: Free Press.Google Scholar
  28. Sink, D. S. and Tuttle, T. C. (1989).Planning and Measurement in your organization of the future, Georgia: Industrial Engineering and Management Press, Institute of Industrial Engineers, Norcross.Google Scholar
  29. Saaty, T. L, (1980).The Analytic Hierarchy Process, New York: McGraw-Hill.Google Scholar
  30. Saaty, T. L., (1986). Axiomatic Foundation of the Analytic Hierarchy Process,Management Science, March 1986, 841–855.Google Scholar
  31. Saaty, T. L., (1990). An Exposition of the AHP in Reply to the Paper “Remarks onthe Analytic Hierarchy Process,Management Science, March 1990, 259–268.Google Scholar
  32. Saaty, T. L., (1996).The Analytic Hierarchy Process, Pittsburgh, PA: RWS Publications.Google Scholar
  33. Saaty, T. L. and Vargas, L.G., (1994).Decision making in economic, political, social and technological environments with the analytical hierarchy process, Pittsburgh, PA: RWS Publications.Google Scholar
  34. Sohn, M. H., You, T., Lee, S. L., and Lee, H., (2003). Corporate strategies,environmental forces, and performance measures: a weighting decision support system using thek-nearest neighbour technique,Expert Systems with Applications, vol. 25, 279–292.CrossRefGoogle Scholar
  35. Suwignjo, P., Bititci, U. S., and Carrie, A.S., (2000). Quantitative models for performance measurement system,International Journal of Production Economics, vol. 64, 231–241.CrossRefGoogle Scholar
  36. Wernerfeit, B., (1984). A Resource-Based View of the Firm,Strategic Management Journal, vol. 5, 171–180.CrossRefGoogle Scholar
  37. Zahedi, F., (1986). The Analytic Hierarchy Process-A Survey of the Method and ItsApplications, Interfaces, vol. 16(4), 96–108.CrossRefGoogle Scholar
  38. Zopounidis, C., and Doumpos, M., (1997). A multicriteria decision aid methodology for the assessment of country risk,European Research on Management and Business Economics, vol. 3(3), 13–33.Google Scholar
  39. Zopounidis, C., and Doumpos, M., (1998). Developing a multicriteria decision support system for financial classification problems: The FINCLAS system,Optimization Methods and Software, vol. 8, 277–304.CrossRefGoogle Scholar
  40. Zopounidis, C., and Doumpos, M., (1999A). Business failure prediction using UTADIS multicriteria analysis,Journal of the Operational Research Society, vol. 50(11), 1138–1148.CrossRefGoogle Scholar
  41. Zopounidis, C., and Doumpos, M., (1999B). A multicriteria decision aid methodology for sorting decision problems: The case of financial distress,Computational Economics, vol. 14(3), 197–218.CrossRefGoogle Scholar
  42. Zopounidis, C., and Doumpos, M., (2000A). PREFDIS: A multicriteria decision support system for sorting decision problems,Computers and Operations Research, vol. 27(7–8), 779–797.CrossRefGoogle Scholar
  43. Zopounidis, C., and Doumpos, M., (2000B).Intelligent Decision Aiding Systems Based on Multiple Criteria for Financial Engineering, Dordrecht: Kluwer Academic Publishers.Google Scholar

Copyright information

© Hellenic Operational Research Society 2004

Authors and Affiliations

  • Nikolaos G. Theriou
    • 1
  • Efstathios Demitriades
    • 1
  • Prodromos Chatzoglou
    • 1
    • 2
  1. 1.Department of Business Administration Agios LoukasT.E.I. of Kavala School of Business and EconomicsKavalaGreece
  2. 2.Production Management and Engineering DepartmentThe Democritus University of ThraceGreece

Personalised recommendations