Ranking of Strategic Plans in Balanced Scorecard by using Electre Method. Javad Dodangh, Majid Mojahed, Vahid NasehifarAbstract- In a growing competitive business environment, many organizations have taken by adoption the strategic planning approach to an effort for business excellence. Implementation of proper strategies plays a vital role for organizations' success. Balanced scorecard is a suitable tool for designing operational strategies. However, one of the balanced scorecard problems is the selection in strategic plans' performance. In this paper, was settled a model for selection of strategic plans in Balanced Scorecard using Electre method. So first using the consensus of organization's managers and experts' opinions, measures of four perspectives and general objectives are determined in BSC. And then using experts' opinions and taking the relative importance of decision makers' opinions into consideration, by using Electre [1] , the performances of strategic plans are selected in BSC model. The results are shown that the introduced method is more reliable and acceptable and the experts were verified the model for selecting of strategic plans in BSC in operation.
The introduced method was used in a study and extracted results from it were analyzed from different points of view. In this article Initiative is called strategic plans.
Index Terms- Balanced Scorecard, Initiatives, MCDM, ELECTRE.
INTRODUCTION
Organizations have always found it hard to balance pressing operational concerns with long-term strategic priorities. The tension is critical: World-class processes won't lead to success without the right strategic direction, and the best strategy in the world will get nowhere without strong operations to execute it [2]. Considering the importance of strategic planning in organizations and creating the competitive advantage in them and indeed, today the organization is moving in a competitive, and complex environment and there is a transaction among them. The senior managers and all those seeking a comprehensive picture of pa present situation of the company and a clear understanding of pa present situation of the company and a clear understanding of its future image needs some information more than just Standards in financial operation to assess a strategic operation and long-term view of the company and also to achieve operational strategies.
Miscellaneous kinds of tools are offered for this process, Balanced Scorecard is a suitable tool for evaluating and designing of operational strategies. This tool was introduced by Kaplan and Norton in 1992, for the first time [1, 3, 4].BSC is a conceptual frame work and its function is to translate strategic objectives of a company into a set of operational attributes. These indices are usually selected from four financial, customer, internal processes and learning and development perspectives [3, 5]. Many attributes were used for the advancement of the company in the direction of its perspective. Some other attributes are used for evaluation of company development in accessing to long-term objectives. Furthermore, BSC helps the managers to identify the lagging and leading attributes in their company. The framework of balances evaluation model is shown in the figure 1[3].
FIGURE 1.Balanced Scorecard model, Source: [1]
DECISION MAKING METHODS
People generally use one of two following methods for making decision:
Trial & Error method
Modeling method
In a trial & error method decision maker face the reality, so he chooses one of the alternatives and witness the results. If decision errors are great and cause some problems, he changes the decision and selects other alternatives.
In modeling method decision maker models the real problem and specifies elements and their effect on each other and gets through model analysis and prediction of a real problem [6].
3. Multiple attribute decision making
Hwong & Yoon describe multiple decisions making as follows: multiple decision making is applied to preferable decisions (such as assessment, making priority and choice) between available classified alternatives by multiple attribute (and usually opposite) [7].
Deciding group face the common factors, especially in MADM:
Alternatives
Multiple attributes
Dimensionless units
Attributes weight
Attributes quality
Relative importance of decision makers' opinions.
MADM methods are classified as to following groups:
1) Compensatory methods: If a production has high expenditure but good quality, in this case high expenditure is compensated by high quality [8]. These models are: ELECTRE, MDS, MRS, TOPSIS, SAW, LINEAR ASSIGNMENT and etc.
2) Non compensatory methods: When the attributes are separated e.g. for taking driving license tree non compensative important factors are brought up. These are: normal eye test, driving rule test and practical driving examination, which one's strength in one of the tests doesn't compensate the others. [9] These models are: DOMINANCE, LEXICOGRAPH, ELIMINATION, PERMUTATION and etc.
Methodology
Every MADM problem has some attributes that should be recognize in problem by decision maker in due courses. All MADM methods require information that should be gained based on relative importance of the attribute. This information usually has serial or main scale. Attribute weights can be allocated to criteria directly by decision maker group or by scientific methods. These weights specify relative importance of every attribute.
Usually groups are classified based on their different levels in social status, knowledge and work experience. So every factors in special subject that cause increase or decrease of idea weight should be considered. In this regard allocating different weight to person's opinions regarding to their knowledge and experience in relation with that subject seems necessary.[9, 10]
This paper is designed to select and consider suitable four criteria and sixteen alternatives respectively. The way of data collection that is applied for this phase is Delphi method. By using Comparison Matrix, the weights of criteria have been computed. After computing weights of criteria, Consistency must be specified. If the Consistency is less than 0.1, then we can apply ELECTRE method and rank alternatives. Otherwise, revision of pair wise comparison must be done. Ranking of strategic plans in balanced is shown in following algorithm.[11]
Algorithm of strategic plans priority model in BSC
Using Delphi method for collecting data collecting data
Selecting suitable criteria for ranking of strategic plans
Considering some
Strategic plans
Using ELECTRE method for ranking of strategic plans
Computing weights of criteria
No
Yes
Is Consistency true?
Revision of pair wise comparison
Determining strategic plans' rank and selecting the best one
End
Start
Modeling BSC by using data and
Information
Case Study
A case study was conducted in electronic and computer research center of the university which is active in the field of producing industrial high capacity monitoring systems. Four experts consist of director manager, commercial manager, financial manager and production manager were selected and their opinions of four BSC's perspectives and four strategic objectives were taken for each perspective and the result were as follows:[12]
By using expert's opinion we form the framework from BSC model like TABLE I.
So by using the consensus of expert's opinion, obtain the importance of BSC's perspectives and objectives which are related to each perspective. [13]
Then by using the geometrical average the final weight, is calculated (financial, customer, internal process and human resources) perspectives: [14]
TABLE I
Financial
Objectives
Measures
Target
Initiatives
Income increasing
0.797
0.817
I1-Marketing Research
Profit increasing
0.133
0.153
I2- Marketing
Maximize of Investment Utilization
0.004
0.004
I3- Inventory Control
Cost decreasing
0.066
0.026
I4- ABC
Customer
Increasing of customer satisfaction
0.27
0.236
I5-After sales Services
Increasing of Market share
0.027
0.024
I6- Marketing Research
Customer Supporting
0.541
0.505
I7-CRM
Increasing of added value for customers
0.162
0.236
I8-Value Engineering
TABLE I (continue of TABLE I)
Internal Processes
Objectives
Measures
Target
Initiatives
On time delivery
0.07
0.06
I9- Time & Motion Study
Product development
0.873
0.886
I10- QFD
Products Quality
0.004
0.001
I11- ISO 9000
Continues improvement
0.052
0.054
I12- TQM
Learning & Growth
Increasing of employees satisfaction
0.209
0.244
I13- increasing of personnel's' salary
Increasing of employees productivity
0.049
0.031
I14- personnel's' evaluation system
Personnel's Motivation
0.697
0.698
I15- Reward System
Increasing of informational skills
0.045
0.028
I16- MIS
STEPS OF ELECTRE METHOD:
Step 1: Calculate the normalized decision matrix.
= ; i=1, 2… 16 ; j=1, 2… 4
Importance
Gap
Cost
Time
I1
0.260572074
0.631037292
0.18430245
0.36148514
I2
0.263369306
0.157759323
0.25802342
0.210866332
I3
0.254446034
0.236638984
0.11058147
0.18074257
I4
0.24574423
0.078879661
0.07372098
0.240990093
I5
0.263333186
0.031551865
0.14744196
0.18074257
I6
0.262176076
0.315518646
0.18430245
0.36148514
I7
0.255968714
0.078879661
0.07372098
0.150618808
I8
0.258370517
0.063103729
0.11058147
0.210866332
I9
0.252550812
0.236638984
0.14744196
0.271113855
I10
0.244471461
0.063103729
0.11058147
0.150618808
I11
0.245666789
0.063103729
0.11058147
0.18074257
I12
0.242892778
0.394398307
0.36860489
0.36148514
I13
0.240208184
0.063103729
0.73720978
0.18074257
I14
0.23998819
0.315518646
0.14744196
0.240990093
I15
0.235113204
0.157759323
0.11058147
0.150618808
I16
0.231905203
0.236638984
0.22116293
0.36148514
Step 2: Calculate the weighted normalized decision matrix.
,
We assumed that "W" is a diagonal matrix which values of its main diameter are W= {0.001389, 0.497898, 0.409504, 0.091207} and the rest values are zero.
Importance
Gap
Cost
Time
I1
0.000362081
0.314192473
0.075472638
0.032970243
I2
0.000365968
0.078548118
0.105661694
0.019232642
I3
0.000353568
0.117822177
0.045283583
0.016485122
I4
0.000341477
0.039274059
0.030189055
0.021980162
I5
0.000365918
0.015709624
0.060378111
0.016485122
I6
0.00036431
0.157096237
0.075472638
0.032970243
I7
0.000355684
0.039274059
0.030189055
0.013737601
I8
0.000359022
0.031419247
0.045283583
0.019232642
I9
0.000350935
0.117822177
0.060378111
0.024727683
I10
0.000339708
0.031419247
0.045283583
0.013737601
I11
0.000341369
0.031419247
0.045283583
0.016485122
I12
0.000337514
0.196370296
0.150945277
0.032970243
I13
0.000333784
0.031419247
0.301890553
0.016485122
I14
0.000333478
0.157096237
0.060378111
0.021980162
I15
0.000326704
0.078548118
0.045283583
0.013737601
I16
0.000322246
0.117822177
0.090567166
0.032970243
J1
J2
J3
J4
J5
J6
J7
J8
-
0.907
0.499
0.499
0.498
0.999
0.499
0.499
0.093
-
0.001
0.590
0.499
0.093
0.499
0.590
0.501
0.999
-
1.000
0.999
0.501
0.498
0.999
0.501
0.410
0.410
-
0.907
0.501
0.907
0.907
0.502
0.501
0.093
0.093
-
0.502
0.001
0.093
0.502
0.907
0.499
0.499
0.498
-
0.499
0.499
0.501
0.501
0.502
1.000
0.999
0.501
-
0.999
0.501
0.501
0.502
0.093
0.907
0.501
0.093
-
0.501
0.907
0.498
0.499
0.907
0.501
0.498
0.498
0.501
0.501
0.501
0.091
0.999
0.501
0.091
0.999
0.501
0.501
0.501
0.091
0.999
0.501
0.000
0.999
0.091
0.498
0.498
0.498
0.498
0.589
0.498
0.498
0.091
0.091
0.091
0.091
0.589
0.091
0.000
0.589
0.501
0.907
0.498
0.589
0.907
0.999
0.498
0.498
0.501
0.999
0.501
1.498
0.999
0.501
0.589
0.999
0.091
0.907
0.498
0.498
0.498
0.091
0.498
0.498Step 3: Determine the concordance and discordance set. = {J|} ; ( =1, 2, 3, 4, 16;) ,
When this condition is true then we put "1" in its place.
And also we will apply for discordance set as followed:
; ( =1, 2, 3, 4, 16;) ,
For instance, we determined S1l, D1l, S16l, and D16l as a sample.
J=1
J=2
J=3
J=4
S1,2
-
1
1
-
D1,2
1,4
S1,3
1
1
-
-
D1,3
3,4
S1,4
1
1
-
-
D1,4
3,4
S1,5
-
1
-
-
D1,5
1,3,4
S1,6
-
1
1
1
D1,6
1
S1,7
1
1
-
-
D1,7
3,4
S1,8
1
1
-
-
D1,8
3,4
S1,9
1
1
-
-
D1,9
3,4
S1,10
1
1
-
-
D1,10
3,4
S1,11
1
1
-
-
D1,11
3,4
S1,12
1
1
1
1
D1,12
0
S1,13
1
1
1
-
D1,13
4
S1,14
1
1
-
-
D1,14
3,4
S1,15
1
1
-
-
D1,15
3,4
S1,16
1
1
1
1
D1,16
0
J=1
J=2
J=3
J=4
S16,1
-
-
-
1
D16,1
1,2,3
S16,2
-
1
1
-
D16,2
1,4
S16,3
-
1
-
-
D16,3
1,3,4
S16,4
-
1
-
-
D16,4
1,3,4
S16,5
-
1
-
-
D16,5
1,3,4
S16,6
-
-
-
1
D16,6
1,2,3
S16,7
-
1
-
-
D16,7
1,3,4
S16,8
-
1
-
-
D16,8
1,3,4
S16,9
-
1
-
-
D16,9
1,3,4
S16,10
-
1
-
-
D16,10
1,3,4
S16,11
-
1
-
-
D16,11
1,3,4
S16,12
-
-
1
1
D16,12
1,2
S16,13
-
1
1
-
D16,13
1,4
S16,14
-
-
-
-
D16,14
1,2,3,4
S16,15
-
1
-
-
D16,15
1,3,4
Step 4: Calculate the concordance matrix.
,
J9
J10
J11
J12
J13
J14
J15
J16
0.499
0.499
0.499
1.000
0.909
0.499
0.499
1.000
0.093
0.499
0.499
0.502
0.909
0.093
0.499
0.093
1.000
0.909
1.000
0.502
1.000
0.502
0.909
1.000
0.501
0.909
0.909
0.502
0.909
0.502
0.411
0.502
0.502
0.001
0.093
0.502
0.502
0.502
0.001
0.502
0.499
0.499
0.499
0.502
0.909
0.499
0.499
1.000
0.502
1.000
1.000
0.502
1.000
0.502
0.502
0.502
0.502
0.909
0.909
0.502
0.909
0.502
0.502
0.502
-
0.499
0.499
0.502
0.909
0.411
0.499
1.000
0.501
-
0.999
0.502
1.000
0.502
0.502
0.502
0.501
0.909
-
0.502
1.000
0.502
0.411
0.502
0.498
0.498
0.498
-
0.909
0.499
0.499
0.590
0.091
0.498
0.589
0.091
-
0.093
0.001
0.093
0.999
0.498
0.498
0.501
0.907
-
0.499
1.000
0.501
0.999
0.999
0.501
0.999
0.501
-
0.502
0.498
0.498
0.498
0.501
0.907
0.000
0.498
-
Step 5: Calculate the discordance matrix.
,
J1
J2
J3
J4
J5
J6
J7
J8
-
0.058
0.128
0.192
0.070
0.000
0.192
0.128
1.000
-
0.256
0.320
0.192
0.333
0.320
0.256
1.000
0.000
-
0.000
0.000
0.200
0.077
0.000
0.000
0.000
0.000
-
0.000
0.000
0.000
0.000
1.000
0.211
0.342
0.101
-
0.474
0.101
0.053
1.000
0.087
0.192
0.288
0.105
-
0.288
0.192
1.000
0.143
0.286
0.000
0.000
0.429
-
0.000
1.000
0.306
0.028
0.053
0.010
0.028
0.053
-
1.000
0.200
0.077
0.400
0.042
0.400
0.077
0.077
1.000
0.167
0.306
0.053
0.000
0.444
0.053
0.000
1.000
0.167
0.306
0.053
0.000
0.444
0.053
0.000
1.000
0.384
0.897
1.025
0.769
0.641
1.025
0.897
1.000
0.694
0.907
0.961
0.854
0.801
0.961
0.907
1.000
0.017
0.096
0.192
0.035
0.000
0.192
0.096
1.000
0.000
0.167
0.064
0.000
0.333
0.064
0.000
1.000
0.070
0.231
0.307
0.154
0.200
0.307
0.231
J9
J10
J11
J12
J13
J14
J15
J16
0.064
0.128
0.128
0.000
0.070
0.064
0.128
0.000
0.192
0.256
0.256
0.500
0.012
0.333
0.256
0.167
0.000
0.014
0.000
0.400
0.000
0.200
0.014
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.342
0.053
0.053
0.605
0.053
0.474
0.211
0.342
0.096
0.192
0.192
0.250
1.441
0.096
0.192
0.000
0.286
0.000
0.000
0.571
0.000
0.429
0.143
0.286
0.306
0.019
0.010
0.583
0.010
0.444
0.167
0.306
-
0.077
0.077
0.400
0.042
0.200
0.077
0.000
0.306
-
0.000
0.583
0.000
0.444
0.167
0.306
0.306
0.010
-
0.583
0.000
0.444
0.167
0.306
0.769
0.897
0.897
-
0.140
0.769
0.897
0.512
0.854
0.907
0.907
0.583
-
0.854
0.907
0.747
0.000
0.096
0.096
0.250
0.035
-
0.096
0.000
0.167
0.000
0.000
0.500
0.000
0.333
-
0.167
0.154
0.231
0.231
0.400
0.084
0.200
0.231
-
Step 6: Determine the concordance dominance matrix
So we calculate matrix of I.
= ; (m=16, is dimension of matrix),
,
,
Step 7: Determine the discordance dominance matrix
So we calculate matrix of G.
N=,
,
Step 8: Determine the aggregate dominance matrix
We also compute matrix of H. "P is means personnel"
A1
A2
A3
A4
A5
A6
A7
A8
A9
A10
A11
A12
A13
A14
A15
A16
A1
0
1
0
0
0
1
0
0
0
0
0
1
1
0
0
1
A2
0
0
0
0
0
0
0
1
0
0
0
0
1
0
0
0
A3
0
1
0
1
1
0
0
1
1
1
1
0
1
0
1
1
A4
0
0
0
0
1
0
1
1
0
1
1
0
1
0
0
0
A5
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
A6
0
1
0
0
0
0
0
0
0
0
0
0
0
0
0
1
A7
0
0
0
1
1
0
0
1
0
1
1
0
1
0
0
0
A8
0
0
0
0
1
0
0
0
0
1
1
0
1
0
0
0
A9
0
1
0
0
1
0
0
0
0
0
0
0
1
0
0
1
A10
0
0
0
0
1
0
0
1
0
0
1
0
1
0
0
0
A11
0
0
0
0
1
0
0
1
0
1
0
0
1
0
0
0
A12
0
0
0
0
0
0
0
0
0
0
0
0
1
0
0
0
A13
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
A14
0
1
0
1
1
1
0
0
1
0
0
0
1
0
0
1
A15
0
1
0
1
1
0
1
1
0
1
1
0
1
0
0
0
A16
0
1
0
0
0
0
0
0
0
0
0
0
1
0
0
0
Step 9: Eliminate the less favorable alternative and rank them.
Finally in ELECTRE method, the bests are A1, A3, A14 (in equal level) and they were followed by A12, A15 (in equal level), A6, A7, A9 (in equal level), A4 and A16, A10, A11 (in equal level), A2, A8 (in equal level) and finally A5 and A13.
So the result is:
Strategic plans
Rank
I1
1
I3
1
I14
1
I12
2
I15
2
I6
3
I7
3
I9
3
I4
4
I16
5
I10
6
I11
6
I2
7
I8
7
I5
8
I13
9
Conclusion
The trust of the matter is one of the BSC problems in execution to choose the strategic plans (Initiatives) by considering the limitations of budget and time to achieve the Strategic objectives. Since there is no proper method of selecting the strategic plan in the performance of BSC, the model presented solves this problem by using Electre method. Whereas BSC is a conceptual model, using mathematical models and multi-criteria decision making models (MCDM) can present better results for selecting strategic plans. As the relative importance of decision maker's opinions (people who evaluate) is not considered, the presented model solves this problem by considering the relative importance of decision maker's opinions and the produced result is more accepted. (Tables and calculations have been presented in detail in [15].
Acknowledgment
We are grateful to Department of Industrial Engineering, Islamic Azad University, Qazvin Branch, Qazvin, Iran and electronic and computer research center of the university for their kind cooperation and support to carry out this work.
