Measuring Business Excellence

Emerald Article: An experiment in the usefulness of a strategy map Nopadol Rompho

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To cite this document: Nopadol Rompho, (2012),"An experiment in the usefulness of a strategy map", Measuring Business Excellence, Vol. 16 Iss: 2 pp. 55 - 69 Permanent link to this document: http://dx.doi.org/10.1108/13683041211230320 Downloaded on: 15-10-2012 References: This document contains references to 100 other documents To copy this document: permissions@emeraldinsight.com

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Olve et al. Kaplan and Norton. Each participant completed two rounds of the experiment covering 24 decisions using a simulation game. Performance measurement systems. DOI 10.. Research limitations/implications – This research employs the laboratory experimental design. A total of 24 participants were randomly assigned into two groups – a control group and a treatment group. Neely et al. many organizations fail to realize the benefit gained by employing these tools (Meyer and Gupta. ISSN 1368-3047 j MEASURING BUSINESS EXCELLENCE j PAGE 55 . Originality/value – This study tests the cause and effect relationship between using a strategy map and the results of decisions made. 2000. Bititci et al. Thammasat University. Keywords Strategy map. Faculty of Commerce and Accountancy. results from this experiment suggest that a simple strategy map alone does not improve the quality of decision making.1108/13683041211230320 VOL. 2000. This finding can thus be valuable to managers who are considering using a strategy map as a management tool. Thailand. 1992. Despite the effort spent to set up these frameworks.. Unahabhokha et al.. 1996. Summary Purpose – The objective of this study is to investigate the effect of a strategy map on the quality of decision making. Design/methodology/approach – An experimental design is used in this study. Avella et al. Over the last two decades. Experimentation. Findings – The results show that strategy maps do not affect the performance of participants’ decision making. The interest in this topic has increased significantly in the last 20 years (Taticchi. 16 NO.. 2001. 55-69. Practical implications – Results obtained from this research suggest that a strategy map alone is not an effective tool to help managers make better decisions. Business performance Paper type Research paper 1. 1990. 2008) and it is attracting increasing attention in business and management literature (Neely.. 1998). 1993.An experiment in the usefulness of a strategy map Nopadol Rompho Nopadol Rompho is Assistant Professor in the Department of Operations Management. Introduction It is widely accepted that a performance measurement and management framework plays a very important role in managing an organization and can improve business performance (Sharma et al. Balanced scorecard. Q Emerald Group Publishing Limited. such as a correlation between strategic measures in the strategy map or guidelines for the use of the map. Thammasat University. substantial effort has been put into the design and implementation of performance measurement systems (Eccles and Pyburn. could help make a strategy map more useful. The author received a research grant from the Faculty of Commerce and Accountancy. 1996. More details.. Decision making. 2005). pp. Unlike many studies that employ the survey method in which confounding variables cannot be controlled. The multiple regression technique is used as the analysis tool in this study. 1999) and the assessment of its uses (Dixon et al.. Bangkok. 2 2012. Both for-profit and nonprofit organizations have invested substantially in the attempt to set up a framework that will over the course of time lead to successful management of the organization. 1999. 2006). Thus the external validity (the generalizability) is limited.

e. Kaplan et al. Finally. Bourne et al. It is suggested that the graphic presentation of the strategy map may contribute to rapid adoption and implementation of the balanced scorecard through its flexibility. 2003. 1998. 2000. value is created through internal business processes. 46 percent in the US.. Speckbacher et al. This is the numerical value that is set up as a guideline to judge the level of success of each objective. It is also reported that over 40 percent of organizations worldwide (57 percent in the UK. strategy is based on a differentiated customer value proposition. and 5. 2000. Bourguignon et al. A study found that 44 percent of organizations in North America (Rigby. i.. 2001). 2 2012 j j . 1992). the project or activity that should be performed to help the organization achieve its objective. the measure of each objective (the second component) must then be proposed. 1998. Thus it can be argued that the balanced scorecard can translate strategy (strategic objectives) into action (initiatives). 1998. 2004a. 2008).. Norton in 1992. A strategy map is a logical and comprehensive tool for describing strategy by identifying the critical elements and their linkages within an organization’s strategy (Kaplan and Norton. 2001) and 35 percent of large US firms (Marr et al. 1997. which will have a direct effect on the organization’s internal processes and lead to customer satisfaction. and learning and growth (Kaplan and Norton. 2011). 2001b). which is the outcome the manager expects in that particular perspective if the strategy is implemented successfully. For a for-profit organization. rationalizing management processes and empowering management action (Free and Qu. In a more recent work. The third component is a target value. Strategy maps The strategy map is the tool Kaplan and Norton proposed to help make strategy more explicit than a vague presentation in some passage (Kaplan and Norton. 2000). Kaplan and Dr David P. 1999. This cause and effect linkage is made explicit by the illustration of a strategy map. strategic initiatives must be proposed (the fourth component). The first component is ‘‘strategic objective’’. This concept is generally accepted to be useful for strategy implementation. The balanced scorecard is not a method of categorizing measures into four perspectives.000 companies used the balanced scorecard in 2007 (Thompson and Mathys. Those measures must be related to organization strategy and related to each other (Hoque and James. Copeland et al. 1999. 2.1994. proposed that an organization should pay attention to both financial and non-financial performance from four perspectives: financial. 2. Lewy and Du Mee.. 4. (2004) also found that the balanced scorecard is most cited performance measurement system. a good financial outcome will follow. According to Kaplan and Norton (2004b). strategic alignment determines the value of intangible assets. and 28 percent in Germany and Austria) have adopted this tool (Rigby. it has also been reported that 40 percent of Fortune magazine’s top 1. 1995. 2003). The strategic objective for each perspective must show a cause and effect relationship. internal processes. 16 NO. Schneiderman.. 2003) The balanced scorecard has been found to be the most popular performance and management framework (Silk. 2004). regardless of whether or not the balanced scorecard is used (Eccles. 2004) use the Balanced Scorecard.b. PAGE 56 MEASURING BUSINESS EXCELLENCE VOL. strategy balances contradictory forces. Townley et al. complementary themes. which is one of the strongest points of the balanced scorecard (Norreklit.. 2001). Once strategic objectives are identified. Bierbusse and Siesfeld. 2001. 1991. McCunn. it starts at the learning and growth perspective. This framework. 1996. Meekings. originating in research conducted by Professor Dr Robert S. a strategy map is based on five principles: 1. Gomes et al. customer. strategy consists of simultaneous. Malmi. Once customers are satisfied. 2003a. Each perspective in the balanced scorecard has four main components that need to be clarified. Young and O’Byrne. 2010).. 3. 2001a. 2002.

A strategy map not only makes strategy more explicit. the proposed methodology does not indicate whether the decision makers gain benefit by using the strategy maps. Lipe and Salterio (2000) found that decision makers tend to compare the measures that are common across different units and ignore the measures that are unique to individual business units. 16 NO. This is essentially an operational control loop that can assist managers to focus on the real issue and not blame everything on unrelated factors. it can also be used as a tool to help managers review their organization’s performance. 2001a. it was found that companies with scorecards and strategy maps outperformed other companies. For example. For instance. Thus a strategy map is a ‘‘double-loop learning’’ tool (Kaplan and Norton. 2003). 2001).b). At the end of the year (or the period each organization uses as its review period). Still. It was found that the performance evaluators are more influenced by strategically linked measures than non-linked measures only when details about strategy. Kunc. 2008).. Quezada et al. 2001) also note that the company consists of a bundle of resources in which the different assets depend on each other to create value and thus the valuation of intangible assets on a stand-alone basis is impossible (Lev. so every step has to be done subjectively (Abrain and Buglioni. Anderson et al. Although a number of studies show a positive relationship between strategic performance measures and a firm’s financial performance (Anderson et al. There have been attempts to suggest a way to create a strategy map. none of these findings prove a causal linkage between use of a strategy map and performance since there are number of uncontrollable factors. (2004) in which an experiment was conducted to test the judgmental effects of performance measures linked to strategy.. 2001. Barney. (2009) proposed a simple tool that helps in the creation of the strategy map. 2007. 1997. designed to show only a unidirectional cause and effect linkage. 1994. indicating that firms using a causal model had better performance than those that did not use it. Kaplan and Norton (2000) emphasized that the better employees understand strategy. The map will explicitly illustrate the cause and effect linkage.. Despite the use of strategy map as previously described and the belief that strategy maps can be use as a double-loop learning tool. This finding was supported by the work of Marr (2005). Banker et al. 1993. 2 2012 MEASURING BUSINESS EXCELLENCE PAGE 57 j j . Barney et al. 2000.. even if a clear explanation is not demonstrated. and lacking a feedback loop (Norreklit. Other scholars who support the resources-based view of a company (Grant. These results were confirmed by the study of Banker et al. Banker et al. Lucianetti (2010) also found that employees in companies that use strategy maps perceive more benefit from the balanced scorecard than those who do not have a strategy map. This use of strategy map is a ‘‘strategic learning loop’’.but again. In a more recent work. 1998a. 2009). It also does not provide a concrete technique to consolidate individual perspective. Ittner and Larcker. they do not provide concrete evidence to support that claim.. In the work of Wilkes (2005). not considering time lag effect among measures. these findings could be interpreted in another way as showing that successful companies have the luxury of time and thus tend to pay more attention to a strategy map than unsuccessful companies that are fighting for survival and might not have time for this tool. If one area is found to be underperforming. a strategy map could stimulate managers to ascertain whether the current strategy is applicable to the current situation and eventually lead to a revision of current strategy. the better they can implement strategies and they thus claim that strategy maps are a tool to help employees better understand strategy . However. including the strategy map. too simple and difficult to validate. is then not conceptually correct. 2003. These findings indicate a strategy map does have an effect on evaluator decision-making. managers can review the organization’s performance against the strategy map. are given to evaluators. Some studies addressed the effect of performance measures and strategy maps on decision making. 1996. 2001. This means that the strategy map.. De Geuser et al. VOL. 1993. Many times.. those studies do not directly address the issue of whether the use of strategy maps contribute to the success. 2000. Malina et al. it has been criticized as not discriminating among logical and causal linkages. 1991. Petergraf. Ahn. also. the cause can be easily identified. These arguments have raised serious doubts as to the usefulness of a strategy map.

Grade point average was used to indicate the business knowledge that MBA students gained during the time of the experiment and the final grade for BA701 (performance management and value creation) represents knowledge of performance measurement systems in general. Note PAGE 58 MEASURING BUSINESS EXCELLENCE VOL. Research methodology This study employs the experimental research design as it aims to prove the causal relationship between using a strategy map and the results of making decisions. 2 2012 j j . and grade in BA 701 (the course that is related to performance measurement).There are very few studies. Random assignment was employed to ensure that the two groups were similar in age. 2009). Anderson. 2004).e. 16 NO. if any. Of the participants. Gladstein and Reilly. no one knows exactly how long since the achievement of one objective will have an effect on the achievement of the other objective. The unused bankroll could not be carried over to another quarter. any investment would immediately be deducted as expense in that quarter. US$30 million for quarters 5-8. To answer this research question. The effect of each investment would be for that quarter only. spent more time viewing and reviewing less information than younger people (Johnson. These measures are considered to be equally important in the experiment. Thus this study tries to close the gap by testing the effect of strategy maps on the quality of decision-making. very few studies examine whether it has any effect on decisions made by managers and eventually leads to the correct decision. each participant needed to decide in which strategic initiative(s) he/she wants to invest. 3. Risk-taking has also been shown to diminish as age increases (Deakin et al. This game is specifically designed by the researcher for the purpose of this research. 1975): older people used less information. 1990). 2005. This might be due to the fact that it is very difficult to test the cause and effect of each strategic objective in the map taking into account the time lag effect. it becomes more difficult to test the cause and effect relationship between the usage of strategy map and the result of decision making in a real-life scenario compared to a simulated setting. These measures were selected to include both leading and lagging indicators among perspectives in the balanced scorecard (see also in Figure 1). can it help managers make better decisions?’’ The methodology of study is presented in the following section. Participants in both the control and treatment groups attended a session at which the researcher explained the research methodology. This game ran for 12 quarters. It has been found in literature for many years (see for example. Each participant was told to use this bankroll to invest in any initiative in any amount or to not invest at all. thus. It is even harder to test this cause and effect linkage if the situation is constantly changing and nothing can be controlled. In each quarter. and US$60 million for quarters 9-12). Random assignment in this study was used to reduce selection bias. The idea of using the simulation game. 1981. Anderson and Morrice. Capelo and Dias. 2009. they are equally weighted. that address a linkage between the use of strategy maps and decision-making leading to successful performance. instead of a real-life scenario. 24 MBA students were recruited to participate in the experiment. Even if a strategy map is assumed to be valid. Studies have shown that age was found to influence decision-making (Taylor. Hogarth and Makridakis. In each quarter each participant has a specified bankroll for investment (US$10 million for quarters 1-4. to test the performance of decision making is not new. 12 were randomly assigned as the control group and the other 12 as the treatment group. However this study does not address how to test the validity of a strategy map in an organization: it is aimed only at answering the question ‘‘if the strategy map is valid.. The reason to use the simulation game instead of a real-life scenario is that in a real-life setting. there can be a significant amount of uncontrollable factors that can influence the outcome. 2000. Table I shows the list of initiatives and performance measures. In this study. grade point average. 1985. Each quarter. Cantor and Macdonald. These three factors were controlled in the belief they may have an effect on decision-making. Thus. i. researcher constructed a simulation game called ‘‘Managing through measures (MTM)’’ and used this as a tool for the experiment. Each participant was able to see the performance result of their decisions at the end of each quarter.

For example. and percent of defects in production process Lagging indicator for employee satisfaction index Advertising campaign Percent market share Promotion campaign Number of new customers/total number of customers Number of repeat customers/total number of customers Percent on-time delivery Value customer project Six sigma project Total quality management project Percent of defects in production process Number of new products developed per quarter Reputation score Innovation project Public relations campaign Bonus bank project Training Employee satisfaction index Employee capability index Figure 1 Strategy map used in the experiment Profit Revenue Expense Financial Customer Market Share Customer Acquisition Customer Retention Customer Satisfaction Organizational Reputation New Product Development On time delivery Quality of Product Internal Process Employee Satisfaction Employee Capabilities Learning & Growth that. At the same time. 2 2012 MEASURING BUSINESS EXCELLENCE PAGE 59 j j . Each participant was also informed that each performance measure would be affected by investment in a particular initiative as shown in Table I.Table I List of initiatives and performance measures Initiative Customer relationship management project Performance measure Customer satisfaction index Type of measure Leading indicator for number of repeat customers/total number of customers Lagging indicator for percent of defects in production process and percent on-time delivery Leading indicator for total revenue Lagging indicator for number of new customers/total number of customers and number of repeat customers/total number of customers Leading indicator for percent market share Lagging indicator for number of new products developed per quarter Leading indicator for percent market share Lagging indicator for customer satisfaction index Leading indicator for customer satisfaction index and reputation score Lagging indicator for employee capability index Leading indicator for customer satisfaction index and reputation score Lagging indicator for employee capability index Leading indicator for number of new customers/total number of customers Lagging indicator for employee capability index Leading indicator for number of new customers/total number of customers Lagging indicator for employee satisfaction index and percent of defects in production process Leading indicator for reputation score and employee capability index Leading indicator for number of new products developed per quarter. if the participant invested in the customer relationship management project. the customer satisfaction index would be improved. the type of measure (leading/lagging indicator) as presented in Table I was not shown to the participants during the experiment. percent on-time delivery. the customer satisfaction index can be changed by VOL. 16 NO.

total expenses and net profit. including net profit. the simulation game was tested for validity and reliability. For a validity test. a number ranging from 0. The reason to introduce the strategy map in the second round of the experiment is to ensure that both control and treatment groups have similar abilities. Each participant’s objective was to maximize accumulated profit (the sum of profit over all 12 quarters). Each quarter. the reliability of the game was confirmed. three additional measures were also reported: total revenue. only those in the treatment group were given additional information. This index is the constant number input by the researcher in each quarter. the desired outcome. Once the second round experiment finished. The strategy map given to those in the treatment group is shown in Figure 1. participants in the test will only have to focus on one thing. This condition was expressed by an economic index. In the first round. The profit. its validity was confirmed. the simulation game was run by the researcher and the result of the performance measures. These results were not shown in the four perspectives in the balanced scorecard format.7-1. then the difference of the performance of both groups in the first round should be minimal. the researcher debriefed the participants and showed them the results. As a result. in both the control and treatment groups. Its reliability was also tested for every initiative. the profit and other performance measures were found to be exactly the same. only as a list of thirteen separate measures. the participant was only told the mechanism of the game as previously indicated. The reason to set profit as a single objective is that the aim of this study is to test the quality of decision making with or without the strategy map. from a smaller investment than when the economic index was lower. For example even if a participant did not invest in the customer relationship management project. when those two groups had the same information.2. In the second round. the customer satisfaction index would improve if other performance measures are improved. If the same amount of investment was input into the same initiative in the same situation (economic index). which finally lead to profit – the desired outcome of the game. All of these performance measures are linked with each other and also have an effect on either total revenue or total expense. This strategy map was created based on the relationship that the researcher created in the simulation game. This is thus not a hypothesized strategy map but a true cause and effect relationship. When including more than one objective it becomes more difficult to measure how good participant’s decisions are and can lead to inconclusive results. Once the decision was made. There were two rounds in this experiment. If the abilities of both groups are at the same level. A higher economic index meant that the participant could get a better result. as it can be observed in the difference of performance of both groups in the first round. It was tested successfully. i. The participants in the control group were given nothing and all conditions and rules in the second round were the same as in the first. The economic conditions set for each quarter also differed. was asked to make decisions each quarter. was reported to participant immediately. 2 2012 j j .other factors. by using only one dependent variable. the game was used as a tool to teach students enrolled in an undergraduate level performance management course. the strategy map. The game was also reviewed by two experts in this field. Note that each Table II The design of the experiment Group Control Treatment First round (pre-test) O1 O3 Strategy map (X) Second round (post-test) O2 O4 X PAGE 60 MEASURING BUSINESS EXCELLENCE VOL. reflected the right decisions. Before used. as observed via the performance measures.e. However the cause and effect relationship is not made explicit at the beginning of the experiment. Thus. Thus. 16 NO. which resulted from the analysis of the performance measures. every participant.

933 28.333 0. the difference between O4 and O3 (O4 – O3) must be larger than the difference between O2 and O1 (O2 – O1).21 3. 0. Thus it might affect D Profit.58 3. or in other words (O4 – O3) – (O2 – O1) must be positive.54 3. O1 – O4 in Table II refers to net profit that results after the participant makes a decision.768 0. the average D Profit is US$3. investment bankroll and economic index.333. Treatment ¼ 0 for control group and 1 for treatment group. the value of (O4 – O3) and (O2 – O1) were calculated for each quarter (from quarter 1 to 12) for each participant.764.115 27.077 2. Before being used. These figures (O2 – O1) and (O4 – O3) are termed D Profit and are treated as a dependent variable. all assumptions for multiple regression analysis were tested and the results showed that all assumptions are met. If a strategy map is a tool that helps improve decision-making.583.29 20. 2 2012 MEASURING BUSINESS EXCELLENCE PAGE 61 j j .16 Treatment (treatment ¼ 1) Standard Average deviation 3. The design of the experiment is summarized in Table II. The control variables included in the analysis are age.333. each participant’s grade for BA701.467). thus confirming that the abilities of participants in those two groups were at the same level. BA701 ¼ participant grade for BA701.333 0.16 0.16 0.117.15 0.736 1.117.17 3.117. This was not surprising.768 0. profit in the second round of the experiment was better than in the first round.16 Variable D Profit (US$) Age GPA BA 701 Investment (US$) Economic VOL. The latter two controlled variables are included because both varied from quarter to quarter in the simulation game. it was also found that the difference of profit between control group and treatment group in the first round was insignificant (t-score ¼ 0. and 1 ¼ error in estimation.333. X refers to the existence of a strategy map in the experiment (only participants in treatment group were given the strategy map).951.25 3.participant was given approximately ten minutes to make a decision each quarter. Multiple regression technique was employed as the tool for analysis of this study. Economic ¼ economic index for each quarter. GPA ¼ grade point average of participant.750 29.983 Standard deviation 6.333 0. 16 NO.983 6. The regression equation is as follows: DProfit ¼ a þ b1 Treatment þ b2 Age þ b3 GPA þ b4 BA701 þ b5 Investment þ b6 Economic þ 1 Where D Profit¼ (O2 – O1) for control group or (O4 – O3) for treatment group.933. as for each quarter. Thus the two rounds of 12 quarters each took approximately four hours. The independent variable in this experiment is the group of participants.01). there were one hundred and forty-four (O2 – O1) and 144 (O4 – O3). p-value ¼ 0. As there were 12 participants in the control group and 12 participants in the treatment group.814 0. when the game is new. This finding could be due to the greater experience and knowledge for each participant when making decisions in the second round than in the first round.67 33.16 Total Average 3. Investment ¼ investment bankroll (US$10 million for Q1-Q4. Table III Descriptive statistics for variables in the study Control (treatment ¼ 0) Standard Average deviation 3. which is statistically greater than 0 (t-score ¼ 8.56 3.30 20.83 33.26 20.728. Age ¼ age of participant.32.360.118.619.30 0.669 2. a ¼ constant.98 0. 4. p-value .49 0. US$30 million for Q5-Q8 and US$60 million for Q9-Q12). Results and discussion For the 24 participants.76 33. When no strategy map was presented to either group.983 5. which is treated as a dummy variable (0 ¼ control group and 1 ¼ treatment group). Since the conditions in each quarter are different (economic index and investment bankroll).619. GPA.

in which half of the companies adopting balanced scorecard did not develop a causal model of their strategies and a study by Davis and Albright (2004) that found that 77 per cent of the companies adopting the Table IV Results from the regression analysis Standardized coefficients (Constant) Treatment Age GPA Grade in BA 701 Investment Economic Index t 1. and US$60 million according to the rules of the simulation game. 2001. participants might not be very clear about the definition of each performance measure used in this study. 1974.128 2 0. Ittner and Larcker. This means that strategy map (treatment) had no effect on the results of the decision-making.538). Lipe and Salterio. Glenberg and Langston. Additionally.027 PAGE 62 MEASURING BUSINESS EXCELLENCE VOL. (2003). Malmi.021 1. has performance measures that are not clearly defined. 1998.039 and p-value for the overall model ¼ 0. 1992). Participants in the treatment group in this study who were given a strategy map might see each measure as independent and as not mirroring the cause and effect logic. the findings in this study indicate that a strategy map does not have any relationship with performances resulting from decisions made. In order to ascertain the variables that could explain the change in profit. Table III shows the descriptive statistics for the variables in this study.309 0.666 2 0. since the economic index was set in the simulation game and not changed for the second.However the improvement in profit on average is similar between the treatment group and the control group.615 2 0. 2 2012 j j . Thus. 1998b.064 2 0. Table IV shows the results of the regression analysis. This number supports the study of Speckbacher et al. They may simply ignore the strategy map when making decisions.540 0. Kourilsky and Wittrock.073 2 0. This revealed that none of the independent and control variables used in this study could be used to explain the variance of D Profit (the regression model r 2¼ 0.043 2 0... further analysis was performed via multiple regression and treating D Profit as a dependent variable. Finally. This can be explained by the fact that the strategy map used in this study. 1987. Although a strategy map is said to be a visual representation of the cause and effect relationships within a company’s critical objective (Kaplan and Norton.686 0. while GPA and final grade for BA701 are greater for the treatment group than for the control group. the average of the index is identical for both the control and treatment groups.116 0. participants did not test the causal effect in the strategy map quantitatively. This possible explanation was also confirmed by interviewing all participants in the treatment group. This result is consistent with the findings obtained from many scholars that highlighted the inadequate definition and utilization of the performance indicators as a main drawback of the balanced scorecard (Lingle and Schiemann. the information in the strategy map provided to them did not help them make better decisions. 2000.462 2 0.760 2 0. It is interesting to note that the average age of the participants in the control group is greater than that of the treatment group. As a result. not the linkage in the strategy map.148 0. Speckbacher et al.306 p-value 0. The average of the investment bankroll is the simple average of the US$10. 1996. 16 NO. This phenomenon is consistent with the findings of Ittner and Larcker (1998b) who reported that only 23 per cent of the 157 organizations survey tested the causal model of strategy maps. Some participants even stated that they did not believe that the strategy map actually helped them make better decisions and that the only information they needed to make decisions was the result of each performance measure.146 0.506 0. Stivers et al. which is similar to those used in many organizations. 2003).405 2 1. 2004a) and might help users better understand strategy because a graphical presentation makes it easier to identify relationships and produces better comprehension (Wittrock. US$30.455 2 0.

Mathieu et al. The final possible explanation of what was found in this study is due to the quality of feedback. By then.. such as correlation between each measure in the map and a detailed explanation of how to interpret the map. 1996.. resulting in the insignificant difference between the performances of the two groups. it can be implied that a strategy map alone does not improve decision-making. every participant received feedback in terms of performance measures. explain and predict a system’s behavior (Craik. managers may ignore the map on the grounds that the map provides them with nothing more than a graphical representation of organizational strategies. 1995. In this study. The second possible explanation for this finding is mental model of the participant. A simple cause and effect relationship is thus not sufficient to provide understanding of complex relationships (Voelpel et al. Managers make decisions and learn about their decisions in the context of feedback loops (Forrester. Conclusion Based on the findings of this study.. taking into account that the participants in this study are middle managers who are currently studying for their MBA degrees. Stout et al. it is possible that the participants in the control group. 1961). 1943. it even confirms that the strategy map does not provide any additional information. They will make better decisions if their mental models are similar to reality (Rowe and Cooke. 2000. were able to build a mental model that closely aligns to a strategy map. After managers discover the results of their decisions. a strategy map must provide information that managers cannot obtain simply by using their own mental model. Steps must be taken to convince managers that strategy maps provide useful information and can be a very powerful tool that helps them make better decisions. They then do not need a documented strategy map to help them make decisions. (2004). Johnson-Laird. In every simulation game quarter. managers in both groups would have already known the linkage between one initiative and another. as evidenced in the study of Ittner et al. In the end. people use a mental model to describe.balanced scorecard fail to develop the casual model of their strategies. Managers can learn from their own mental models without using a strategy map at all. 16 NO. managers should be given more details. it is interesting to note that the strategy map used in this study can be too simplistic to influence the decision makers. without the map. A more detailed strategy map illustrating the exhaustive relationships among the different measures can also yield different results as it is more difficult for a manager to make a decision without the help of the map. 2009). Quality of feedback has been found to definitely affect the quality of the decision-making process (Sterman. in addition to the strategy map. Nevertheless. This could explain why the results of their decisions are not statistically different than for the participants in treatment group. This feedback may have had a high enough quality to help them make better decisions without using the strategy map. Davis and Yi. who did not have a strategy map when making decisions. This includes the training of what a strategy map is and how to use it effectively. In the decision-making process. 2005). 1976). As a result. Only the results of performance measures reported after decision-making would seem to be adequate if this was the case. Otherwise. VOL. they use that feedback to modify their mental model (Argyris. managers can imagine that higher customer satisfaction can lead to higher customer retention or more market share can cause more revenue. These findings explain why many organizations that use a balanced scorecard fail to improve their performance. 2000). 5. 2 2012 MEASURING BUSINESS EXCELLENCE PAGE 63 j j . For example. Managers also build their mental models as they engage in business decisions (Capelo and Dias. A strategy map is simple enough that managers can build their own mental model similar to the map. Wyman and Randel. 1998. Thus in our case. there are twelve decisions to be made in each of the two rounds. The successful case studies can also be good examples for managers to demonstrate how to use a strategy map. 2004. (2003) and Hendricks et al. 2006). If this argument is true. 1983). It can be argued that the decision to introduce the strategy map for the treatment group in the second round might have influenced the findings of the experiment.

pp. C. C. this was not tested in this experiment. Subordinates and peers of other divisions could well see how they contribute to the performance or achievements of an organization as a whole.e. and profitability: findings from Sweden’’. (2003). 129-45. In order to enhance the external validity by conducting the experiment in a natural setting. L. E. However. and Lehman.J. the assumption of time lag between measures needs to be considered. (1976). W. Argyris. D.R. ‘‘Applying the balanced scorecard concept: an experience report’’. Avella. The experiment in this study was also designed to test the use of a strategy map at one level of management. pp.G. 2 2012 j j . This limits the external validity (generalizability) of this study. 16. Vol. Journal of Marketing Research. Vol. 9. ‘‘Analysis of manufacturing strategy as an explanatory factor of competitiveness in the large Spanish industrial firm’’. Vol. Anderson. 53-66. pp. and Vazquez. ‘‘A simulation game for teaching service-oriented supply chain management: does information sharing help managers with service capacity decisions?’’. However. 339-49. Long Range Planning.J. A strategy map with detailed guidelines and correlation between each measure could thus be tested as to whether it has an effect on a manager’s decision making. is not in a natural setting. 441-61. More research on this topic is clearly needed. Then. 85-90. and Buglioni. a strategy map must be reviewed consistently. A. (2001). (2000). For example. Vol. The strategy map could diagrammatically show how one strategy leads to outcomes. E. 2. 4. R. 16 NO. This study is not without limitations. pp. the effect of using a strategy map can be tested empirically in a real-life setting. L. it is interesting to include more independent variables and test whether the strategy map will have a relationship with the performance of decision making. E. and profitability: differences between goods and services’’. Since the research approach employed in this study is a laboratory experiment. It should be updated when strategies are changed or every time that performance is reviewed. 40-55.. 34. 58. one of the strengths of the use of a strategy map is its ability to communicate articulated strategies to subordinates in a hierarchy or to peers of other units. International Journal of Production Economics. Vol. Marketing Science. market share. (2005). D. Fomell. which. Thus. ‘‘The relationship between student perceptions of team dynamics and simulation game outcomes: an individual-level analysis’’. 72. Fernandez. This step will ensure that the strategy map is valid and up-to-date and can be used to help managers make better decisions. and Morrice. Fomell. Once there is enough data for each performance measure. Wiley. Finally the characteristics of ‘‘successful’’ strategy maps can be identified in order to help managers create the right strategy map for their organizations. (1994). Advances in Engineering Software... 34 No. NY. ‘‘A multidimensional performance model for consolidating balanced scorecards’’. E.Additionally. (1997). References Abrain. (2001). productivity. H. ‘‘Customer satisfaction. New York. It has also been observed in this study that none of independent variables used in this study can be used to explain the variance of improvement in profit. Anderson. 139-57. and Rust. J. Anderson. PAGE 64 MEASURING BUSINESS EXCELLENCE VOL. which is the result of decision making. the manager himself making the decision leading to results. Increasing Leadership Effectiveness. The usefulness of the strategy map and a method of using it can be investigated based on managers’ perception. Therefore the decision-making process may vary from real life situations. Anderson. W. pp. pp. i. Vol. Journal of Education for Business. the time between enhancing customer satisfaction until it reflects the improvement of customer retention should be estimated. Vol. ‘‘Customer satisfaction. a strategy map should be statistically tested for validity. Ahn. 81 No. Production and Operations Management. pp. A field experiment could be employed by asking managers to make decisions with and without a strategy map in a real work setting. while it yields high internal validity (proof of the cause and effect relationship).

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2 2012 MEASURING BUSINESS EXCELLENCE PAGE 69 j j . 16 NO.emeraldinsight. Further reading Ittner. About the author Dr Nopadol Rompho joined Thammasat Business School in 2003. UK in 2006. (2001). and Doctor of Philosophy from University of Glasgow. Young. C. pp. Master of Science in Chemical Engineering from Oregon State University. November. S.Wyman. Thailand in 2001. Vol. and Larcker. and Randel. Harvard Business Review.com Or visit our web site for further details: www. Nopadol Rompho can be contacted at: nrompho@tu. McGraw-Hill. Applied Cognitive Psychology. (2003). He obtained a Bachelor’s degree in Chemical Engineering (2nd Class Honors) from Chulalongkorn University. USA in 1997. Before joining the university. EVA and Value-Based Management. 88-95.com/reprints VOL. (1998). B. Thailand in 1995. ‘‘The relation of knowledge organization to performance of a complex cognitive task’’.th To purchase reprints of this article please e-mail: reprints@emeraldinsight. pp. 251-64. he worked in oil and gas companies as an engineer and business analyst. J. Master of Business Administration from Thammasat University. His primary research interest is in the area of performance measurement and operations management. NY.ac. S. and O’Byrne. New York. 12. D. ‘‘Coming up short on non-financial performance measurement’’.

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