A quantitative target-setting model using Monte Carlo simulation method: mapping in strategic management and balanced scorecard (BSC) context

Abstract

Simply defining a measure tells us how we will measure performance, but it does not communicate the expected level of improvement. Target-setting is a strategic process to establish performance goals for organizations. This paper helps to appropriately quantify the strategy map via determining the interactions among the strategic objectives in different layers of the strategic map -weak or strong- and setting an achievable target per measure. To achieve this, a comprehensive model based on Monte Carlo simulation is presented. The proposed model contributes to setting objectives as well as quantifying the strategy map with a focus on targeted strategic objectives of the lower to the upper layers of the strategy map. The latter leads to the formulation of controllable action plans. This model also helps develop, correct and/or complete the strategy map in its different layers. The resulting objective performance goals can enhance managers’ more subjective judgements about future situations.