In order to reach the strategic goal, enterprises top management usually set up the action schemes and the performance measurement indicators. Through this process, they hope to manage and trace the progress of achieving the strategic goal and monitor the performance of corporation. However, is this straightforward idea, especially in this modern environment, a perfect one? From the view point of the system thinking, referred to the Fifth Discipline (Peter Senge, 1990), is there any better interactive mechanism between the strategic goals and performance measurement indicators?
1.1 Research and Motivation 1.1.1 Background
Under the environment of complicated and dynamic competition nowadays, no matter what sector in the world, all need to face the challenge that change fast in the science and technology, economy, society or organization. How enterprises quickly response to these challenge has become an important topic.
Balanced scorecard, developed by Kaplan and Norton, have been widely quoted by the business sectors Since 1990, It has not only been evaluated by " Harvard
Business Review ", hosted by Harvard Business School, as one of the most influential management model in the past 75 years, but also been adopted and implemented by the majority of the global famous enterprises. Over half of the North American
enterprises, and many corporations and NPO in rest of the world, including Taiwan, adopt it and take it as “strategy implementing “and “performance assessment” tool.
Although many enterprises are implementing the balanced scorecard, one question has arisen, that enterprise's causality is much complicated than they expected. The performance of one department often can't be controlled by itself. For example, some enterprises only establish the key performance Indicator (KPI) for every department directly, regarding the balanced scorecard as the performance assessment tool. But they neglect the interrelationship among all departments. The KPI of each department must to be linked to the whole enterprise goal. Even part of departments reached their goals, but the whole operation performances of enterprises have not been improved, let alone the corporation strategic goal. Therefore, Kaplan and Norton proposed the importance of the strategy map, use the causality among the strategic goal and some items derived from the four perspectives of the balanced scorecard and describe their interrelationship more clearly, known as “ the strategy map “. A
good strategy map must have better explanation of the causality of the strategy, After enterprises establish the appropriate goals according to the four perspectives of the balanced scorecard, and then join all goals with the arrow sign, In order to show the causality among them. (Kaplan and Norton, 2003)
The so-called perfect strategy map, even though it can turn the balanced scorecard from the performance measurement tool into the strategy carrying out tool, and let the enterprise's strategy become a concrete action. However, these two tools not only lack of the dynamic method, but also fail to simulate and analyze the relation among the strategic goals and performance indices. It is common that when they finished the planning of strategy map and balanced scorecard and put it into practice, they meet the change of the external environment. And then they have to revise it from the beginning. In this way, they can not conduct the analysis and revision right after they found the problem. Although the strategy map is not unalterable, the function of the strategy map should include tracking, carrying out , explaining , stating of the strategy, and need to react fast with the change of the external environment at any time.
So we need a dynamic and revisable method to simulate and analyze the process and outcome of conducting the strategy map and target planning. Also, by way of launching the balanced scorecard, we can measure the performance indicators and construct the frame of model. Following the modeling procedure, we can trace the changes of the external environment and analyze the simulation results. Using these outcomes, we may take it as a reference basis to assist enterprise to carry out their strategic goal and assess their performances.
1.1.2 Motivation
More and more organizations and enterprises adopt the strategy map and BSC. But, could they really reach the strategy goal and do they have a complete method to assess their performances? When they finish contructing their strategy map and lauching the balanced scorecard, they may face the same problems, such as how to sucessfully implement strategy? How to effectively set up KPI? How to apply the limited resources into the most important strategy? If we can find out and analyze the interactive machenism between enterprise’s strategic goal and performance
measurement, then we may help them improve the their whole operation performance and competitiveness.
1.2 Research Purpose
The purpose of this study is to research the interaction relationship between strategic goals planning and performance measurement indices when enterprises carry out the Balanced Scorecard. Most of the enterprises use the way of bottom up to determine whether their departments or employee could achieve the corporation’s strategic goal.
However, the balanced scorecard use the way of top down to plan the strategic goal and try to find the KPI among those causal relationship. In this way, there are some side effect and unintended consequence happening in the implementing process of strategic goal planning and performance measurement indices constructing. Then, it ends up with “counterintuitive behavior”.
This study utilizes System Dynamics to simulate the complex and dynamics problems that happened in the real world and incorporate the four perspectives balanced scorecard into this model. Also try to offer the company that is going to evaluate their performance in an effective way.
Enterprises usually neglect the causality that influences each other among the systems while they are pursuing the strategic goal and department's performance.
The simulation result of the target company's model in this study shows that the employee's work efficiency improves, then drive the rising of the reliability and declining of the maintainability. The improvement of readiness rate causes the customer satisfaction to be relatively higher, and also increase the utilization rate of airplanes. Increase the utilization rate of airplanes, lead to the scheduled
maintenance hours come earlier than regular flight using way, and cause the fatigue of spare parts of airplanes and raise the failure rate. It end up with the increasing in total man-hour of maintenance, then the work loading of the employees is overweight.
The overtime expenses rise obviously as well and staff satisfaction declines too, Since the income of the target company in this study is collected in fix firm price, the main strategic goal for the target company is to minimize the operating cost and maximize the profit rate. In this way, it is unable to reach this goal if staff's satisfaction drops and the turnover rate rises. Therefore, we can see that the side effect of
improving employee's work efficiency reversely causes the employee's work efficiency even worse than the original situation eventually. The target company should be aware that if maintainability and employee's work loading have not been taken care appropriately, then even tremendously improve employee's work
efficiency, it will turn out to be even worse than the original situation eventually.
Therefore, the maintainability and employee's work loading of the target company become their leading indices, must put more efforts on them.
1.3 Research Flow and Framework
The framework of this thesis is based on the following procedure, Figure 1.1. ,and set up a basic model. Also take practical instances as the reference basis while
constructing the scenario. With the simulation software of systematic dynamics available for now, then apply the data collected from the specific target company into the model, Here, this study ran 5 years simulation, and then implement data analysis according to the results of simulation.
Figure 1.1 Research Flow 1. Preface and Introduction
Describe the background, motivation, and purpose of this research. State the
structure of this thesis and its scope and restrictions of the procedure and research.
2. literature Review
Review and extract the relevant documents and reports of System Dynamics, Strategy Maps and Balanced Scorecard, GOCO, and Airplane Fleet Maintenance Management.
3. The design and description of the dynamic method to launch the Balanced Scorecard from Strategy Maps.
State the process and way of constructing the Strategy Maps and Balanced Scorecard. And describe the procedure and way of setting-up, testing, analyzing and adjusting of the systematic dynamics model of this research.
4. Case Study
Take the target company as an example to research how did its balanced scorecard work and achieve the strategic goal. And then adapt to the system dynamics model, verify the validity and analyze the test result of the model.
5. Conclusion and Suggestion
State the discovered phenomenon and conclusion of this research. Consider the contribution on managerial real meaning and practice, and state the restriction of this research and suggestion of follow-up study.
1.4 Research Scope and Limitations
(1) The historical data of the target company in this research are limited. Therefore, the application of many parameters and effects, which are unable to properly quantified, must resort to the Table Function, that relate the input data and output data in a way of positive or negative correlation. The assumptions in this study are made in accordance with the validity test of system dynamics, and then they will be revised and feedback to Table Function again to make the model more reliable.
(2) The target company in this research is assumed that mainly focus on the maintenance management. Therefore, the logistics issues and supplies acquisition are put aside temporarily. If there is a relevant article or research based on that, then it may combine with that research to make this study more complete.
(3) In order to avoid involving the sensitive information, all of the data in this research have been replaced with the fictitious ones.
(4) Only one type of aircraft has been discussed in this study for simplicity of modeling.