A new framework for dynamic sustainability balanced scorecard in order to strategic decision making in a turbulent environment

Document Type : Research Paper

Authors

1 Department of Industrial Management, Management and Accounting Faculty, Shahid Beheshti University, G.C., Tehran, Iran

2 School of Industrial Engineering, Iran University of Science and Technology, Tehran, Iran

Abstract

The purpose of this paper is to develop a new framework for strategic decision making in a turbulent environment via a dynamic sustainability balanced scorecard (BSC). Environmental factors are selected by fuzzy TOPSIS method and added to a dynamic model of BSC for a company. The decision-making model is proposed in three main scenarios: Optimistic (economic growth scenario), Realistic (average long term economic situation) and Pessimistic (continuity of current sanctions situation scenario) and two internal policies: Production maximization is the first internal policy and Productivity maximization is the second internal policy.
The model is separately simulated in each scenario and policy, with the dynamic BSC model and every main aspect of the organization is analyzed with the majority of profit-making and its sustainability. The results show that a different policy is preferred in each scenario, which can help strategic managers for the decision-making process in uncertain and turbulent environments. Due to the increasing complexity of organizations in the competitive environment, it is necessary to propose performance evaluation models. The Balanced Scorecard (BSC) model is one of the most commonly used models for enterprise performance assessment that can be significantly adapted to environmental conditions. This research is novel because the environmental factors are added to a dynamic model of BSC for a company that has been encompassed with a turbulent economic, political and social environment within last years.

Keywords

Main Subjects


Ahmad, S., R. M., Tahar, F., Muhammad-Suhhi, A. B., Munir, and R. A., Rahim. (2016). “Application of system dynamics approach in electricity sector modelling: A review.” Renewable and Sustainable Energy Reviews 56: 29-37.
 
Agrawal, S., R. K., Singhx, and Q. Murtaza. (2016). “Outsourcing decisions in reverse logistics: Sustainable balanced scorecard and graph theoretic approach.” Resources, Conservation and Recycling 108: 41-53.
 
Barlas, Y. (1996) ‘Formal aspects of model validity and validation in system dynamics’, System Dynamics Review, Vol. 12, No. 3, pp.183–210.
 
Barnabè, F., and C. Busco. (2012). “The causal relationships between performance drivers and outcomes: Reinforcing balanced scorecards' implementation through system dynamics models.” Journal of Accounting and Organizational Change 8 (4): 528-538.
 
Barnabè, F. (2011). “A “system dynamics‐based Balanced Scorecard” to support strategic decision making: Insights from a case study.” International Journal of Productivity and Performance Management 60 (5): 446-473.
 
Bianchi, C., and G. B. Montemaggiore. (2008). “Enhancing strategy design and planning in public utilities through ‘dynamic’ balanced scorecards: insights from a project in a city water company.” System Dynamics Review 24 (2): 175-213.
 
Chai, J., and E.W.T. Ngai. (2015). “Multi-perspective strategic supplier selection in uncertain environments.” International Journal of Production Economics 166: 215-225.
 
De Salles, D.C., A. C. G., Neto, and L. G. Marujo. (2016). “Using fuzzy logic to implement decision policies in system dynamics models.” Expert Systems with Applications 55:172-183.
 
 Figge, F., T., Hahn, S., Schaltegger, and M. Wagner. (2002). “The sustainability balanced scorecard linking sustainability management to business strategy.” Business Strategy and the Environment 11: 269-284.
 
Forrester, J. (1961). Industrial dynamics. Productivity press: Cambridge (MA).
 
Funtowicz, S. O., and J. R. Ravetz. (1990). Uncertainty and quality in science for policy. Dor-drecht, Netherlands: Kluwer Academic Publishers.
 
Ghosh, D., and L. Olsen. (2009). “Environmental uncertainty and managers’ use of discretionary accruals.” Accounting, Organizations and Society 34,188–205.
 
Hoque, Z. (2014). “20 years of studies on the balanced scorecard: Trends, accomplishments, gaps and opportunities for future research.” The British Accounting Review 46 (1): 33-59.
 
Hsu, C. W., A. H., Hu, C.Y., Chiou, and T.C. Chen. 2011. “Using the FDM and ANP to construct a sustainability balanced scorecard for the semiconductor industry.” Expert Systems with Applications 38 (10): 12891-12899. doi:10.1016/j.eswa.2011.04.082.
 
Junior, A. N., de Oliveira, M. C., &Helleno, A. L. (2018). Sustainability evaluation model for manufacturing systems based on the correlation between triple bottom line dimensions and balanced scorecard perspectives. Journal of Cleaner Production, 190, 84-93.
 
Kang, J.S., Chiang, C.F., Huangthanapan, K. and Downing, S., (2015). Corporate social responsibility and sustainability balanced scorecard: The case study of family-owned hotels. International Journal of Hospitality Management48, pp.124-134.
 
Kaplan, R., and D. Norton. (1996). The balanced scorecard. Harvard Business Press.
Kaplan, R., and D. Norton. 2004. Strategy Maps: Converting Intangible Assets into Tangible Outcomes. Boston, MA: Harvard Business School Press.
 
Khakbaz, S. B., and N. Hajiheydari. (2015). “Proposing a basic methodology for developing balanced scorecard by system dynamics approach.” Kybernetes 44 (6-7): 1049-1066. doi:10.1108/K-12-2014-0287.
 
Koul S., O. A., Falebita, J. F. K., Akinbami, and J. B. Akarakiri. (2016). “System dynamics, uncertainty and hydrocarbon resources modeling.” A systematic review. Renewable and Sustainable Energy Reviews 59,199–205.
 
Lu, M. T., Hsu, C. C., Liou, J. J. H., & Lo, H. W. (2018). A hybrid MCDM and sustainability-balanced scorecard model to establish sustainable performance evaluation for international airports. Journal of Air Transport Management, 71, 9-19.
 
Nielsen, S., and E. H. Nielsen. (2008). “System dynamics modelling for a balanced scorecard: Computing the influence of skills, customers, and work in process on the return on capital employed.” Management Research News 31 (3): 169-188. doi:10.1108/01409170810851276.
 
Nikolaou, I., K., Evangelinos, and W. L. Filho. (2015). “A system dynamic approach for exploring the effects of climate change risks on firms' economic performance.” Journal of Cleaner Production 103: 499-506.
 
Nikolaou, I.E. and Tsalis, T.A., (2013). Development of a sustainable balanced scorecard framework. Ecological Indicators34, pp.76-86.
 
Ozcan-Deniz, G., and Y. Zhu. (2016). “A system dynamics model for construction method selection with sustainability considerations.” Journal of Cleaner Production 121: 33-44.
 
Poles R. (2013). “System Dynamics modelling of a production and inventory system for remanufacturing to evaluate system improvement strategies.” International Journal of Production Economics 144: 189-199.
 
Rabbani, A., M. Zamani, A., Yazdani-Chamzini, and E. Kazimieras Zavadskas. (2015). “Proposing a new integrated model based on sustainability balanced scorecard (SBSC) and MCDM approaches by using linguistic variables for the performance evaluation of oil producing companies.” Expert Systems with Applications 41 (16): 7316-7327.
 
Sterman, J., (2000). Business Dynamics: Systems Thinking and Modeling for a Complex World. Irwin McGraw-Hill, New York (NY).
 
Sekhar Pedamallu, C., L., Ozdamar, H., Akar, G. W., Weber, and A. Özsoy. (2012). “Investigating academic performance of migrant students: A system dynamics perspective with an application to Turkey.” International Journal of Production Economics 139 (2): 422-430.
 
Supino, E., Barnabè, F., Giorgino, M.C. and Busco, C., (2019). Strategic scenario analysis combining dynamic balanced scorecards and statistics. International Journal of Productivity and Performance Management.
 
Tang, O., and J. Rehme. (2017). “An investigation of renewable certificates policy in Swedish electricity industry using an integrated system dynamics model.” International Journal of Production Economics. Advance online publication. doi:10.1016/j.ijpe.2017.03.012.
 
Vanegas, C.A.L., Cordeiro, G.A., de Paula, C.P., Ordoñez, R.E.C. and Anholon, R., (2018). Analysis of the utilization of tools and sustainability approaches in the product development process in Brazilian industry. Sustainable Production and Consumption16, pp. 249-262.
 
Vecchiato, R. (2012). “Environmental uncertainty, foresight and strategic decision making: An integrated study.” Technological Forecasting and Social Change 79: 436–447.
 
Walker, W. E., P., Harremoes, J., Rotmans, J. P., Van Der Sluijs, M. B. A., Van Asselt, P., Janssen, and M. P. Krayer Von Krauss. (2003). “Defining uncertainty-a conceptual basis for uncertainty management in model-based decision support.” Integrated Assessment 4 (1): 5-17. doi:10.1076/iaij.4.1.5.16466.
 
Wieteska, G. (2015). “Environmental uncertainty accompanying purchases in the B2B Market.” 20th International Scientific Conference Economics and Management-2015 (ICEM-2015). Procedia- Social and Behavioral Sciences 213: 911-917.
 
Zhang, T., and L. Gao. (2008). “Study on the Application of Dynamic Balanced Scorecard in the Service Industry.” 2008 International Conference on Intelligent Computation Technology and Automation.
 
Zhang, T. (2012). “An Overview of Dynamic Balanced Scorecard.” In: Deng W. (eds) Future Control and Automation. Lecture Notes in Electrical Engineering 173. Springer, Berlin, Heidelberg.
 
Zhao H., and N. Li. (2015). “Evaluating the performance of thermal power enterprises using sustainability balanced scorecard, fuzzy Delphic and hybrid multi-criteria decision making approaches for sustainability.” Journal of Cleaner Production 108: 569-582.