Aligning the Balanced Scorecard and a Firm’s Strategy Using the Analytic Hierarchy Process
VOL.5 NO.4
Summer
2004
Aligning the Balanced Scorecard and a Firm’s Strategy Using the Analytic Hierarchy Process
B Y D E WAY N E L . S E A R C Y, C M A , C PA , C I A
IS USED TO PROVIDE INSIGHTS TO SIX
THE ANALYTIC HIERARCHY PROCESS (AHP)
COMPANIES TO DETERMINE IF EACH COMPANY’S PERFORMANCE SYSTEM IS ALIGNED WITH ITS STRATEGIC OBJECTIVES OF IMPLEMENTING LEAN ENTERPRISE POLICIES.
A
STEP-BY STEP PROCESS FOR USING -
EXCEL
IN
AHP APPLICATIONS
IS DESCRIBED.
I
n the Spring 2002 issue of Management Accounting Quarterly, B. Douglas Clinton, Sally A. Webber, and John M. Hassell illustrated the use of the Analytic Hierarchy Process (AHP) in implementing a balanced scorecard. Their article demonstrated the power of the AHP in resolving multicriteria decisions such as developing a balanced scorecard. They mentioned that the first level of a balanced scorecard hierarchy contains the four balanced scorecard (performance) categories, while the second level of the hierarchy contains the metrics used within each category. The authors demonstrated how the AHP can be used to help select the metrics of a balanced scorecard as well as to help understand the relative importance of each
metric for a firm’s management. The purpose of this article is to investigate the use of the AHP at the first level of the balanced scorecard hierarchy with data from six firms. Using the AHP to determine the relative weight of the performance categories may give some insight into the alignment between the balanced scorecard and a company’s strategic initiatives. In addition, the article will demonstrate the use of Excel in AHP applications.
T H E C O M PA N I E S
The six companies involved were part of an overall assessment project aimed at measuring the extent that lean enterprise tools are implemented successfully.1
M A N A G E M E N T A C C O U N T I N G Q U A R T E R LY
1
SUMMER 2004, VOL.5, NO.4
The common thread among all six companies was
Summer
2004
Aligning the Balanced Scorecard and a Firm’s Strategy Using the Analytic Hierarchy Process
B Y D E WAY N E L . S E A R C Y, C M A , C PA , C I A
IS USED TO PROVIDE INSIGHTS TO SIX
THE ANALYTIC HIERARCHY PROCESS (AHP)
COMPANIES TO DETERMINE IF EACH COMPANY’S PERFORMANCE SYSTEM IS ALIGNED WITH ITS STRATEGIC OBJECTIVES OF IMPLEMENTING LEAN ENTERPRISE POLICIES.
A
STEP-BY STEP PROCESS FOR USING -
EXCEL
IN
AHP APPLICATIONS
IS DESCRIBED.
I
n the Spring 2002 issue of Management Accounting Quarterly, B. Douglas Clinton, Sally A. Webber, and John M. Hassell illustrated the use of the Analytic Hierarchy Process (AHP) in implementing a balanced scorecard. Their article demonstrated the power of the AHP in resolving multicriteria decisions such as developing a balanced scorecard. They mentioned that the first level of a balanced scorecard hierarchy contains the four balanced scorecard (performance) categories, while the second level of the hierarchy contains the metrics used within each category. The authors demonstrated how the AHP can be used to help select the metrics of a balanced scorecard as well as to help understand the relative importance of each
metric for a firm’s management. The purpose of this article is to investigate the use of the AHP at the first level of the balanced scorecard hierarchy with data from six firms. Using the AHP to determine the relative weight of the performance categories may give some insight into the alignment between the balanced scorecard and a company’s strategic initiatives. In addition, the article will demonstrate the use of Excel in AHP applications.
T H E C O M PA N I E S
The six companies involved were part of an overall assessment project aimed at measuring the extent that lean enterprise tools are implemented successfully.1
M A N A G E M E N T A C C O U N T I N G Q U A R T E R LY
1
SUMMER 2004, VOL.5, NO.4
The common thread among all six companies was