2009 International Symposium on Intelligent Ubiquitous Computing and Education

The application of Balanced Scorecard and Neural Network on the Performance

Evaluation for Enterprises
Yao Gu Lan Guo Qingyu Sun
School of Economy and Handan Polytechnic College The department of the Library
Management Handan, China Hehai University
Hebei University of Engineering e-mail: calfinliu@163.com Nanjing, China
Handan, China e-mail: 278307306@163.com
e-mail: guyao0310@126.com

Abstract—In China’s enterprises the purely evaluation with indicators to create a perspective that incorporates both
financial indicators is the main means of performance financial and non-financial aspects. BSC has proven a
evaluation. This traditional approach for evaluating the powerful evaluation tool for strategic planning and
performance has been unable to meet the needs of a modern communicating strategy that assists in strategy
enterprise. In this paper, we used the balanced scorecard implementation. According to the report [2], about 50% of
and neural network to evaluate the performance of the companies in North America and 40% to 45% of
enterprises. According to the actual situation of enterprises, companies in Europe were using the BSC. Inspired by its
we developed the indices system from the financial powerful evaluation ability, researchers try to copy the
perspective; customer perspective, internal business
success of BSC in other fields. Kaplan and Norton
processes perspective, learning and growth perspective, and
then developed the neural network on the basis of indices
describe the balanced scorecard as follows: The balanced
system to evaluate the performance of enterprises. Take a scorecard retains traditional financial measures. But
certain e-business enterprises as an example. After empirical financial measures tell the story of past events, an adequate
research with MATLAB7.0, it is had been proved that the story for industrial age companies for which investments
method is validity and practicality. in long-term capabilities and customer relationships were
not critical for success. These financial measures are
Keywords- balanced scorecard; performance evaluation; inadequate, however, for guiding and evaluating the
neural Network journey that information age companies must make to
create future value through investment in customers,
I. INTRODUCTION suppliers, employees, processes, technology, and
innovation.
With the rapid economic development, enterprises are
in the pursuit of the expansion, leading to the management
level and management scope increase. In this situation the
performance evaluation of enterprises is thought as the
important and effective method for enterprises’ control.
Thus, the study on the performance evaluation is a certain
degree of practical significance. Although the current
practice methods of enterprises’ performance evaluation
are so many, there are still some deficiencies. First, the
financial indices was only focused on in the evaluation
indices system, so the non-financial indices were neglected
which contributed to the performance a lot. Second, some
evaluation methods (such as expert evaluation method) are
too subjective to affects the accuracy of the results.
Artificial Neural Network (ANN) is a new emerging
technology of artificial intelligence, which has strong
power in self-study, self-accommodate, side-by-side
management and nonlinear transition. It is a perfect Figure 1. the balanced scorecard
estimation method that has been applied to many aspects
of supply chain management. In this paper, we combined A. The Learning & Growth Perspective
balanced scorecard (BSC) and neural network to improve
the traditional assessment methods of the performance. This perspective includes employee training and
Hereby, it can enhance the validity and reliability of the corporate cultural attitudes related to both individual and
result of the integrated estimation. corporate self-improvement. In a knowledge-worker
organization, people -- the only repository of knowledge --
II. THE BALANCED SCORECARD are the main resource. In the current climate of rapid
The concept of the balanced scorecard (BSC) was first technological change, it is becoming necessary for
introduced by Robert S. Kaplan and David P. Norton [1]. knowledge workers to be in a continuous learning mode.
Since then the widespread adoption and use of the BSC is Metrics can be put into place to guide managers in
well documented. BSC integrates key performance focusing training funds where they can help the most. In
any case, learning and growth constitute the essential

978-0-7695-3619-4/09 $25.00 © 2009 IEEE 105

DOI 10.1109/IUCE.2009.102
foundation for success of any knowledge-worker
organization. Kaplan and Norton emphasize that 'learning'
is more than 'training'; it also includes things like mentors
and tutors within the organization, as well as that ease of
communication among workers that allows them to readily
get help on a problem when it is needed. It also includes
technological tools; what the Baldrige criteria call “high
performance work systems.”
B. The internal business Process Perspective
This perspective refers to internal business processes.
Metrics based on this perspective allow the managers to
know how well their business is running, and whether its
products and services conform to customer requirements
(the mission). These metrics have to be carefully designed
by those who know these processes most intimately; with
our unique missions these are not something that can be
developed by outside consultants.
C. The Customer Perspective
Recent management philosophy has shown an
increasing realization of the importance of customer focus
and customer satisfaction in any business. These are
leading indicators: if customers are not satisfied, they will
eventually find other suppliers that will meet their needs.
Poor performance from this perspective is thus a leading
indicator of future decline, even though the current
financial picture may look good.
In developing metrics for satisfaction, customers
should be analyzed in terms of kinds of customers and the
kinds of processes for which we are providing a product or
service to those customer groups.
D. The Financial Perspective.
Kaplan and Norton do not disregard the traditional
need for financial data. Timely and accurate funding data
will always be a priority, and managers will do whatever
necessary to provide it. In fact, often there is more than
enough handling and processing of financial data. With the
implementation of a corporate database, it is hoped that
more of the processing can be centralized and automated.
But the point is that the current emphasis on financials
leads to the "unbalanced" situation with regard to other
perspectives. There is perhaps a need to include additional
financial-related data, such as risk assessment and cost-
benefit data, in this category.
III. THE MODEL OF PERFORMANCE EVALUATION
BASED ON BALANCED SCORECARD AND NEURAL
NETWORK (BSC-RBF)
A. The Indices System of balanced scorecard
The balanced scorecard focused on the financial,
customer, internal business processes, learning and growth
four aspects. According the actual situation and adopted
strategies of enterprises in the different stages of the life
cycle it designs the appropriate evaluation indices for
every aspect of the enterprises. Then a completed
performance evaluation indices system is shown in table 1.
[3]
TABLE I. THE INDICES SYSTEM OF PERFORMANCE EVALUATION
FOR ENTERPRISE
106
B. The performance evaluation of enterprises based on
RBF neural network
1) Introduction of RBF neural network:The Radial
Basis Function (RBF) method of multivariate
interpolation was proposed by Powell (1985)[4]. In 1988,
the RBF was applied to neural network design by
Broomhead and Lowe, who compared the Radial Basis
Function with the multilayer neural network and disclosed
the relation between them [5]. In 1989, a new face neural
network, the radial basis function neural network, was
proposed by Moody and Darken [6]. The uniform
approximation performance of the radial basis function
neural network to the nonlinear continuous function is
demonstrated in the same year by Jackon [7].
The RBF neural network is a three-layer forward
network comprised of an input layer, a hidden layer and an
output layer, wherein the RBF is used as the excitation
function in the hidden layer, and the RBF generally takes
form of the Gauss Function. The distance between the
q
weight vector w1i and the input vector X of every neure
in the hidden layer connected with the input layer is
multiplied by a threshold b1i to form the self input. The
input of the ith neure of the hidden layer is:
kiq = ∑ ( w1
j
ji − x qj ) × b1i (1)
and the output is:
⎡ q 2 ⎤ = exp ⎡ ∑ ( w1 − x q ) × b1 ⎤ = exp ⎡− w1 − X q × b1 2 ⎤ (2)
q
⎢⎣ ( )
ri = exp − ki
⎥⎦ ⎢⎣ j ji j i⎥
⎦
(
⎢⎣ i )
i ⎥
⎦
The input of the output layer is the weighted
summation of every hidden layer. Because the excitation
function is a pure linear function, the output is:
n
y q = ∑ ri × w2i (3)
i =1
The sensitivity of the function can be adjusted by the
threshold b1 of the RBF, but another parameter C, which
is called the expansion constant, is applied more often
during practice. In the neural network tool box of
MATLAB, the relation between b1 and C
0.8326
is: b1i = .
Ci
2) The structure of RBF neural network model: The
paper adopts three layers RBF neural network to develop
nonlinear system model. There are 13 indices in the BSC
indices system. So the number of input nodes is 13; the
number of hidden layer nodes for RBF network is 8 which
is determined by the formula h = m + n + a ( where “n”
is the number of neurons in input layer, “m” the number
Then put the data from the table 2 into matlab for
of neurons in output layer, “h” is the number of neurons
network training. In the experimental we set the rate of
for hidden layer, “a” is the constant between 1 to 10). learning is 0.9, the biggest training step is 2000, and error
Output indicator is the value of performance evaluation; accuracy is 0.01. The paper adopts the algorithm which
therefore the output layer has one node. This paper can amend the rate of learning self-adaptive. The true
established the structure of RBF network model is 13 × 8 value and errors of evaluation as shown in table 3. The
× 1. In order to train neural networks facilitatly, we use results of the performance evaluation are shown in the
neural network toolbox provided by MAT-LAB, which table 4. From the simulation results we can see the
contains many subroutines procedures can be called as simulation result of expert and neural network are basically
needed. In MATLAB can also use the function newff () to the consistent. So, we can get the conclusion that the
create neural network. model based on RBF neural network can be used in
3) Steps of evaluation for performance Based on RBF performance evaluation, and that is more effective.
Neural Network:
TABLE III. COMPARATIVE ANALYSIS OF THE SIMULATION RESULTS
(1) Confirm training samples. To every sample, input
G
vector X is composed of indexes system based on BSC.
The qualitative indexes are given by methods such as
experts grading, while quantitative indexes are obtained
after normalization. The expected y is based on
comprehensive analysis and quantization of sample
evaluation value by experts. TABLE IV. THE RESULT OF THE PERFORMANCE EVALUATION
(2) Build a RBF neural network by using the training
samples. One of the obvious features lies in the fact that
net's training process is achieved in its construction
process, not using previously-determined net precision,
hidden layer's node number, and initial weights.
(3) According to the index system, we quantize every
G
index, sort them and then make them as input vector X .
G
(4) Put the input vector X into the trained RBF neural
network and then we obtain y ' as output value.
(5) Determining the evaluation value of the
performance.
IV. THE APPLICATION OF BSC-RBF
In this paper, we selected 10 listed electronic V. CONCLUSION
enterprises as samples, where 5 ones were better corporate In this paper, we combined balanced scorecard and
earnings and others were poor business, in order to neural network to evaluate the performance of enterprises.
facilitate the comparative analysis of the results. The The balanced scorecard achieved the organic integration of
former 8 are training samples while the latter 2 are testing financial indices and non-financial indices. Through the
ones, which are used to simulate the evaluation whose establishment of a set of financial and non-financial
performance need to evaluate. Data linear normalized are indices with balanced scorecard, we could evaluate the
shown in table 2. [8] performance and competitiveness of enterprises
TABLE II. TRAINING AND TESTING SAMPLES AFTER LINEAR systematically. At the same time, this article adopted the
NORMALIZATION IN RBF NEURAL NETWORK RBF neural network intelligent algorithm to reduce the
influence of subjective factors. After simulation with
matlab 7.0, it had been proved that the method is effective
and feasible. The method will be good for the development
of performance evaluation of enterprises.
REFERENCES

107
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