Professor: James S. Dyer Time: Tuesday, 3:00-6:00

Office: CBA 3.218 Place: UTC 4.120

Office hours: TT 1:30-3:00

Mailbox: CBA 5.202

Phone: 471-5278

E-Mail: j.dyer@mail.utexas.edu

The TA for this class will be announced at the beginning of the semester
 
 

This course will be a seminar focused on some of the theories that either do or should relate to the concept and implementation of the Balanced Scorecard (BC). The BC is an attractive concept for measuring and managing corporate performance that was popularized through a series of articles by Kaplan and Norton. While these articles demonstrate a great deal of insight and creativity, they are not grounded on relevant theories that exist in the literature. Furthermore, we do not believe that many of the companies currently involved in implementing the BC are aware of these theories that seem clearly related, and that should be the starting point for serious research on this important topic.

The ideas that will be discussed and related to the BC will include those listed below:

• Multiple criteria decision making: We will read the relevant sections of the book Value Focused Thinking by Keeney, and supplement his treatment with portions of the classic book Decisions with Multiple Objectives by Keeney and Raiffa. In addition, we will review some more recent articles on developing hierarchies of objectives that have appeared in the literature, and related approaches including the Analytic Hierarchy Process (AHP).
• Means-ends analysis: Several modeling approaches have been proposed for "structuring" complex problems. An important aspect of the BC effort is the identification of "drivers" of corporate performance measures. Methodologies and theories that relate to these ideas include the means-ends diagrams or networks, and influence diagrams from decision theory.
• Statistical methods for determining cause and effect: What does it really mean to say that A causes B? There are some rather deep philosophical issues related to this notion, but we will try to highlight the important research that attempts to distinguish between correlation and causation in mathematical models. This work is related to the means-ends analysis so critical to the BC approach. Some of these ideas may also be related to data mining.
• System dynamics: The means-ends models described above are essentially "static models" of cause and effect. In addition, we may be interested in developing models that will aid our understanding of how organizations evolve over time. These dynamic simulation models can now be developed using software available on PCs. We will consider the current state of the art in systems dynamics, and its relationship to the BC.
• Links to ERP systems: ERP systems provide the data that facilitate organizational modeling. How are BC systems linked to ERP systems, and what are the challenges associated with these implementations? We will look at some of the software available to support these systems, and consider discussions with invited speakers from major consulting firms.

 

Date	Topic	Text Chapters and Sections	Additional Assignments
Tuesday, January 18	Introduction: The basic ideas of the balanced scorecard		R. Kaplan and D. Norton, "The Balanced Scorecard—Measures that Drive Performance, HBR, Jan-Feb, 1992 Kaplan and Norton, "Putting the Balanced Scorecard to Work", HBR, Sept-Oct, 1993 Kaplan and Norton, "Using the Balanced Scorecard as a Strategic Management System," HBR, Jan-Feb, 1996
Tuesday, January 25	Objectives hierarchies vs. means-ends hierarchies	Keeney, Value-Focused Thinking, Ch. 1&2 (scan), Ch. 3, Ch. 4
Tuesday,  February 1	Multi-attribute utility theory	Keeney, VFT, Ch. 5 R. Clemen, Making Hard Decisions, Ch. 13 (review of utility theory)	R. Keeney and T. McDaniels, "Identifying and Structuring Values to Guide Integrated Resource Planning at BC Gas", Operations Research, Vol. 47, No. 5, Sept-Oct, 1999, 651-662.
Tuesday, February 8	Multi-attribute utility theory (continued)	Keeney, VFT, Ch. 6 R. Keeney and H. Raiffa, Decisions with Multiple Objectives, Ch. 5, Sec. 1-10, Ch. 6, Sec. 1-9 (optional)	Dyer, J., Butler, J., Edmunds, T., and Jia, J., "A Methodology for the Evaluation of Alternatives for the Disposition of Weapons-Grade Plutonium," Operations Research, Vol. 46, No. 6, 1998.  Dyer, J.S. and Sarin, R., "Measurable  Multiattribute Value Functions,"  Operations Research, 27, 4, 810-822 (1979). (optional)
Tuesday, February 15	Influence diagrams and problem structuring	Clemen, Ch. 3 DPL 4, an introduction	Dyer, J.S., and Larsen, J., "Using Multiple Objectives to Approximate Normative Models," in Thrall and Thompson (eds.), Normative Models in Economic Theory, 1985. R. Howard and J. Matheson, "Influence Diagrams", In R. Howard and J. Matheson, (eds.) The Principles and Practices of Decision Analysis, Vol. II, pp. 719-762, Strategic Decisions Group, Palo Alto, CA, 1984
Tuesday, February 22	Influence diagrams	DPL 4, Ch. 8	Dyer, J.S. and Lund, R.N.,"Tinker Toys and Christmas Trees: Opening a New Merchandising Package for Amoco Oil Company," Interfaces, 12, 6, 38-52 (1982). R. Shachter, "Evaluating Influence Diagrams", Operations Research, Vol. 34, 871-882. J. Smith, S. Holtzman, and J. Matheson, "Structuring Conditional Relationships in Influence Diagrams", Operations Research, Vol, 41, No. 2, 280-297
Tuesday, February 29	Other network models for problem structuring	DPL 4, Ch. 8	P. Shenoy, "Valuation-Based Systems for Bayesian Decision Analysis", Operations Research, Vol. 40, 463-484 Z. Covaliu and R. Oliver, "Representation and Solution of Decision Problems Using Sequential Decision Networks", Management Science, Vol. 41, No. 12, 1995, 1860-1881.
Tuesday, March 7	Cause and effect	To be determined	http://www.phil.cmu.edu:8080/jcourse/csr/core/core1frames.html
Tuesday, March 21	Cause and effect		Wright, M.K., Stokes, L., and Dyer, J.S., "Reliability and Coherence of  Causal, Diagnostic, and Joint Subjective Probabilities," Decision Sciences, Vol. 25, No. 516,  September-December 1994.
Tuesday,  March 28	Cause and effect
Tuesday, April 4	Dynamics of cause and effect Speaker: Jim RD on GRASP	Schrage, M. "Spreadsheets: Bulking up on data," An Introduction to Systems Thinking, Hanover, NH: HPS. Ch.1 and 2. An Introduction to Systems Thinking.	Radzicki, M. 1992. Dyadic processes, tempestuous relationships, and system dynamics. System Dynamics Review 9 (1):79-94. Howard et al.1998. "Panel Discussion: Downstream Decisions (Options) and Dynamic Modeling" Informs. Ritchie-Dunham, J. 1999. Evaluating Epidemic Intervention Policies with Systems Thinking: A Case Study of Dengue Fever in Mexico. System Dynamics Review 15 (2):119-138.
Tuesday April 11	System dynamics Speaker: Jim RD on BSC Telco model	Forrester, J. 1958. Industrial Dynamics. Harvard Business Review 26 (4):37-66. Optional:  Ritchie-Dunham, J. and H. Rabbino. forthcoming. Strategic Clarity. New York: Wiley. Ch. 1-5.	Forrester, J. 1975. The Impact of Feedback Control Concepts on the Management Sciences. In Collected Papers of Jay W. Forrester. Forrester, J. 1964. Common Foundations Underlying Engineering and Management. IEEE Spectrum 1 (9):66-67. Forrester, J. 1992. Policies, Decisions, and Information Sources for Modeling. European Journal of Operations Research 59 (1):42-63.
Tuesday, April 18	System dynamics Speaker: Hal Rabbino on issues in applying SD and BSC	BSC LE 2.0, Harvard Business School Press. Moxnes, E. 1998. "Not Only the Tragedy of the Commons: Misperceptions of Bioeconomics," Management Science, 44(9), 1234-1248.	Sterman, J. 1991. A Skeptic's Guide to Computer Models. In Managing a Nation. Sterman, J. 1994. Learning in and about Complex Systems. System Dynamics Review 10 (2/3):291-330.
Tuesday,  April 25	ERP systems and the balanced scorecard Speaker: SAP on SEM and BSC	http://www.sap.com/solutions/bi/sem/index.htm	Morecroft, J. 1983. "Concepts, Theory, and Techniques: A Systems Perspective on Materials Requirement Planning." Decision Sciences 14 (1):1-18 .
Tuesday, May 2	ERP systems and the balanced scorecard