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Capsim and the Balanced Scorecard (BSC)

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Contents
What is the purpose of the Balanced Scorecard?
How to get the BSC right

Hello. Welcome to the third part of my blog series on the Capsim simulation that begins with Capsim: How to Win. This part addresses the scoring metric in the game — the Balanced Scorecard (BSC).

The BSC is similar to what industry now uses to measure company performance. Firms realized that financial gains (profits and stock price) were not the complete measure of their work. Other metrics, such as innovation, customer acceptance and employee attitude also should  be considered when looking at long-term success. To provide meaningful integration of the many issues that are important when evaluating a firm's performance, Dr. Robert S. Kaplan and Dr. David P. Norton developed the Balanced Scorecard (The Balanced Scorecard — Measures that Drive Performance, Harvard Business Review, January- ebruary 1992).

balanced scorecard capsim


What is the purpose of the Balanced Scorecard?

The BSC provides managers with a fast but comprehensive view of the business. It includes financial measures that reflect the results of actions already taken. It also includes measures of customer satisfaction, internal processes, innovation (new products) and operational standards that drive future performance.

To incorporate realism in the simulation, Capsim adopted the BSC as the metric to determine firm performance. This scoring metric measures performance across four categories:

  • Financial – includes profitability, leverage and stock price;
  • Internal Business Process – ranks, among other measures, contribution margin, plant utilization and days of working capital;
  • Customer – examines the company’s product line, including how well it satisfies buying criteria and awareness/accessibility levels; and
  • Learning and Growth– evaluates employee productivity.

How to get the BSC right

By using the BSC, Capsim can rate your team’s performance as well as the performances of the hundreds of other student teams around the world that are currently playing the game. To score well, teams must use all the parameters available in the game.

  1. From the very start, you should try to be profitable and have a contribution margin of over 30%. However, you also must consider the long-term growth of your firm and begin developing new products and capacity.
  2. To get points in the other parts of the BSC, you should invest in Human Resources (HR) and Total Quality Management (TQM). These advanced modules have tutorials and quizzes that become available in later rounds of the game.

Additional information is available on the Capsim website on Resource Page in the article What Is a Balanced Scorecard? 

I hope you found this blog useful. Don’t forget to subscribe to JSOM Perspectives for more content just like this. See you soon. 

Larry Chasteen

Larry Chasteen

Dr. Larry Chasteen teaches both graduate and undergraduate courses in strategy and entrepreneurship and uses simulations to bring a practical emphasis to these courses. His research concerns evolving technical communities and online education. He was a Fulbright Professor to Germany in 2006 and served as a Science and Engineering Advisor at the US State Department in 2008. He also worked in the defense industry for Texas Instruments and Raytheon specializing in radar and smart weapons. Read more articles

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