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Implementing the balanced scorecard using the analytic hierarchy process & the analytic network process

Author

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  • L C Leung

    (The Chinese University of Hong Kong)

  • K C Lam

    (The Chinese University of Hong Kong)

  • D Cao

    (University of Quebec at Trois-Rivieres)

Abstract

The balanced scorecard (BSC) is a multi-attribute evaluation concept that highlights the importance of non-financial attributes. By incorporating a wider set of non-financial attributes into the measurement system of a firm, the BSC captures not only a firm's current performance, but also the drivers of its future performance. Although there is an abundance of literature on the BSC framework, there is a scarcity of literature on how the framework should be properly implemented. In this paper, we use the analytic hierarchy process (AHP) and its variant the analytic network process (ANP) to facilitate the implementation of the BSC. We show that the AHP and the ANP can be tailor-made for specific situations and can be used to overcome some of the traditional problems of BSC implementation, such as the dependency relationship between measures and the use of subjective versus objective measures. Numerical examples are included throughout.

Suggested Citation

  • L C Leung & K C Lam & D Cao, 2006. "Implementing the balanced scorecard using the analytic hierarchy process & the analytic network process," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 57(6), pages 682-691, June.
    • Handle: RePEc:pal:jorsoc:v:57:y:2006:i:6:d:10.1057_palgrave.jors.2602040
    DOI: 10.1057/palgrave.jors.2602040
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    2. 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.
    3. Fabio De Felice & Antonella Petrillo & Claudio Autorino, 2015. "Development of a Framework for Sustainable Outsourcing: Analytic Balanced Scorecard Method (A-BSC)," Sustainability, MDPI, vol. 7(7), pages 1-21, June.
    4. Jalali Naini, Seyed Gholamreza & Aliahmadi, Ali Reza & Jafari-Eskandari, Meisam, 2011. "Designing a mixed performance measurement system for environmental supply chain management using evolutionary game theory and balanced scorecard: A case study of an auto industry supply chain," Resources, Conservation & Recycling, Elsevier, vol. 55(6), pages 593-603.
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    6. Panitas Sureeyatanapas & Kanittha Yodprang & Viganda Varabuntoonvit, 2021. "Drivers, Barriers and Benefits of Product Carbon Footprinting: A State-of-the-Art Survey of Thai Manufacturers," Sustainability, MDPI, vol. 13(12), pages 1-19, June.
    7. A H I Lee & H H Chen & H-Y Kang, 2009. "Operations management of new project development: innovation, efficient, effective aspects," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 60(6), pages 797-809, June.
    8. Behrooz Noori, 2015. "Prioritizing strategic business units in the face of innovation performance: Combining fuzzy AHP and BSC," International Journal of Business and Management, International Institute of Social and Economic Sciences, vol. 3(1), pages 36-56, February.
    9. Quezada, Luis E. & López-Ospina, Héctor A., 2014. "A method for designing a strategy map using AHP and linear programming," International Journal of Production Economics, Elsevier, vol. 158(C), pages 244-255.
    10. A Ishizaka & D Balkenborg & T Kaplan, 2011. "Influence of aggregation and measurement scale on ranking a compromise alternative in AHP," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 62(4), pages 700-710, April.
    11. Aleksander Janeš & Armand Faganel, 2020. "Complementary Methods for Effective Decision Making," MIC 2020: The 20th Management International Conference,, University of Primorska Press.
    12. Verdecho, María-José & Alfaro-Saiz, Juan-Jose & Rodriguez-Rodriguez, Raul & Ortiz-Bas, Angel, 2012. "A multi-criteria approach for managing inter-enterprise collaborative relationships," Omega, Elsevier, vol. 40(3), pages 249-263.
    13. Quan Chen & Sang-Bing Tsai & Yuming Zhai & Jie Zhou & Jian Yu & Li-Chung Chang & Guodong Li & Yuxiang Zheng & Jiangtao Wang, 2018. "An Empirical Study on Low-Carbon: Human Resources Performance Evaluation," IJERPH, MDPI, vol. 15(1), pages 1-11, January.
    14. Mesut Kumru, 2010. "A balanced scorecard-based composite measuring approach to assessing the performance of a media outlet," The Service Industries Journal, Taylor & Francis Journals, vol. 32(5), pages 821-843, October.
    15. Varmazyar, Mohsen & Dehghanbaghi, Maryam & Afkhami, Mehdi, 2016. "A novel hybrid MCDM model for performance evaluation of research and technology organizations based on BSC approach," Evaluation and Program Planning, Elsevier, vol. 58(C), pages 125-140.
    16. Dinçer, Hasan & Hacıoğlu, Ümit & Yüksel, Serhat, 2017. "Balanced scorecard based performance measurement of European airlines using a hybrid multicriteria decision making approach under the fuzzy environment," Journal of Air Transport Management, Elsevier, vol. 63(C), pages 17-33.
    17. Behrooz Noori, 2014. "Prioritizing strategic business units in the face of innovation performance: Combining fuzzy AHP and BSC," Proceedings of International Academic Conferences 0802059, International Institute of Social and Economic Sciences.
    18. Grigoroudis, E. & Orfanoudaki, E. & Zopounidis, C., 2012. "Strategic performance measurement in a healthcare organisation: A multiple criteria approach based on balanced scorecard," Omega, Elsevier, vol. 40(1), pages 104-119, January.
    19. W-H Tsai & W-C Chou & W Hsu, 2009. "The sustainability balanced scorecard as a framework for selecting socially responsible investment: an effective MCDM model," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 60(10), pages 1396-1410, October.
    20. Yanbing Ju & Aihua Wang & Tianhui You, 2015. "Emergency alternative evaluation and selection based on ANP, DEMATEL, and TL-TOPSIS," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 75(2), pages 347-379, February.
    21. Yang, Hao-Wei & Chang, Kuei-Feng, 2012. "Combining means-end chain and fuzzy ANP to explore customers’ decision process in selecting bundles," International Journal of Information Management, Elsevier, vol. 32(4), pages 381-395.
    22. Youchao Tan & Yang Zhang & Roohollah Khodaverdi, 2017. "Service performance evaluation using data envelopment analysis and balance scorecard approach: an application to automotive industry," Annals of Operations Research, Springer, vol. 248(1), pages 449-470, January.

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