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Determining quantitative targets for performance measures in the balanced scorecard method using response surface methodology

Sorour Farokhi (Department of Industrial Engineering, Faculty of Engineering, Islamic Azad University Tehran North Branch, Tehran, Iran)
Emad Roghanian (Department of Industrial Engineering, K.N. Toosi University of Technology, Tehran, Iran)

Management Decision

ISSN: 0025-1747

Article publication date: 11 May 2018

Issue publication date: 10 September 2018

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Abstract

Purpose

The purpose of this paper is to propose a quantitative methodology for setting targets in the framework of Balanced Scorecard (BSC) in order to achieve vision and goals.

Design/methodology/approach

Response Surface Methodology is proposed to find the significant relationships that should be included in the strategy map and the optimal values of performance measures are assessed by using the desirability function-based approach of RSM. The proposed method was created by reviewing the existing literature, modeling the problem, and applying it in an oil company. In fact, RSM is used to execute the design matrix, analyze the collected data, extract models, analyze the results, and optimize the procedures that generate multiple responses.

Findings

By applying this methodological design, a clearer picture of the relationships between strategic objectives is obtained and the influence of strategic objectives on one another is determined. Afterward, optimal values for performance measures are determined.

Research limitations/implications

This paper proposes a framework for constructing a strategy map and setting quantitative targets to translate the goals and strategies into corresponding performance measures and targets. Also, this paper presents a case study to demonstrate the applicability and effectiveness of the proposed approach. However, RSM-based techniques require a greater amount of data to generate more accurate results. Although the advent of the Information Age has forced organizations’ decision makers to provide sufficient information and data for business analysis, the data requirements of RSM-based techniques are met.

Practical implications

In practice, the process of setting targets for performance measures can be challenging in terms of reaching a consensus between managers and decision makers. The findings of this paper can offer a new approach for performance evaluation based on the BSC which allows the organization’s decision makers to reach a more accurate picture of the relationship model between organization goals and those objectives within the BSC. It also demonstrates how decision makers can be guided in the process of defining performance target values in the BSC method.

Originality/value

Reviewing the literature on setting quantitative targets within the framework of the BSC showed no prior study in which RSM is used. This approach has two main contributions: the associations among strategic objectives are investigated and obtained in an effective way which analytically identifies the direction and degree of the relations among the performance measures. Considering the performance evaluation structure based on the BSC, quantitative targets have been determined to help in achieving the long-term goals of the organization. The application of the proposed method in a company showed that the contributions of this research are not only theoretical, but practical as well.

Keywords

Citation

Farokhi, S. and Roghanian, E. (2018), "Determining quantitative targets for performance measures in the balanced scorecard method using response surface methodology", Management Decision, Vol. 56 No. 9, pp. 2006-2037. https://doi.org/10.1108/MD-08-2017-0772

Publisher

:

Emerald Publishing Limited

Copyright © 2018, Emerald Publishing Limited

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