Addressing Balanced Scorecard Trade-off Issues Between Performance Metrics Using Multi-Attribute Utility Theory

Abstract

:A performance measurement system serves as a useful tool for managers monitoring productivity and performance within an organization. However, in many circumstances conflict exists on how to give some performance metrics higher importance than others when analyzing a system's overall performance. This article describes a quantitative technique to evaluate trade-off issues between performance metrics on a balanced scorecard. Multi-attribute Utility Theory will be used to identify different utility functions for changing states of nature. A case study application demonstrates contributions on the effect of dynamic weighting factors for performance measures due to changing missions of an organization, and provides a means for situation-dependent utility functions to be incorporated into a performance measurement system.