A “system dynamics‐based Balanced Scorecard” to support strategic decision making

Abstract

Purpose This paper aims to focus on the development of a “dynamic Balanced Scorecard” and to demonstrate that matching the traditional Balanced Scorecard (BSC) architecture with system dynamics principles offers better support for strategic management decisions. Design/methodology/approach The paper is based on a case study related to a service‐based business. The maps, the mathematical model and the BSC developed according to system dynamics modelling principles are discussed. Findings A system dynamics‐based BSC, particularly if embedded into a management flight simulator, would allow exploration and understanding of features of complexity and dynamics, consideration of feedback loops rather than unidirectional causality, the use of mapping tools for a more comprehensive design of the strategy maps, the facilitation of a process of organisational learning; and support for policy design and strategic analysis performed by managers. Originality/value The value of this paper is two‐fold: first, it shows that by using system dynamics modelling principles it is possible to overcome positively some limitations of the original BSC framework; second, the paper provides information and suggestions that are helpful for companies that are interested in developing strategic management systems based on both BSC architecture and on system dynamics principles and simulation tools (e.g. the management flight simulator).

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