Discussing Feedback System Thinking in Relation to a Balanced Scorecard, Inspired by an Actual Case

Abstract

Since the emergence of the Balanced Scorecard at the beginning of the 1990s, only few articles have proposed a framework of translating BSC into an analytical numerical model. This paper addresses two research themes: (1) a discussion of the cause-and-effect modeling within the BSC and (2), how may the feedback systems thinking and causal loop reasoning be conducted within BSC. In contrast to previous literature on BSC this paper focuses on a System Dynamics Modeling approach to transform a static BSC into a dynamic and analytical closed loop management model by incorporating both time-lags and cause-and-effect schemes. Our main result shows that SDM is a relevant and possible approach for building a BSC. The SDM model adds additional benefit to the BSC by (1) providing a translation of the strategy into operational terms and (2) offering possibilities for the decision maker to simulate scenarios for planning, learning and feedback. In addition the model shows how both structural and direct action settings impact significantly on the solution paths.