This paper aims to propose a method to assist organisations to develop their causal models, as well as to understand them, and to propose systems thinking as a method to achieve these objectives.
The paper starts with a review of the literature related to the concerns existing with respect to strategy maps and the interrelationships between measures. Then it explains the benefits of systems thinking and causal loop diagrams. Finally, the paper presents the results obtained from a group of 32 students who took a course in strategic control systems and used systems thinking to design a performance measurement system for their businesses.
The number of concepts included in students' causal loop diagrams averages 16, which are in line with the number of measures suggested in the Balanced Scorecard literature, but only 48 per cent of concepts were related to the four perspectives suggested in the Balanced Scorecard methodology. Few students acknowledged the existence of time delays in the interrelationships.
While the sample is statistically significant, it represents the results of one course.
The use of systems thinking and causal loops diagrams simplifies the design of a Balanced Scorecard and improves the alignment of the organisation with the performance measurement system.
While scholars have criticised the interrelationships between measures in the Balanced Scorecard, few have suggested solutions to this issue. The paper presents the application of a well‐known tool to improve the processes of designing and understanding the interrelationships between measures in the Balanced Scorecard.
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