Adapted Balanced Scorecard Framework

22 Feb

Introduction 

For our framework, we decided to base our idea on the well established and highly successful Balanced Scorecard framework. After conducting research for our individual blogs we found that the Balanced Scorecard was very prevalent among academics and professionals involved in the performance measurement field. However, we have made an alteration to the framework in order to focus it more towards the IS investment performance. Our framework consists of five different parts which we feel are vital to any company trying to establish the contribution of their IS investments to business performance. These five parts are: Financial, Users, Quality, Internal Business Processes and Transformation.

Framework: Adapted Balanced Scorecard

i

(1) Financial

As aplusk22 has mentioned, the financial element is a crucial part of effectively measuring the business performance of an IS investment. Ultimately, the goal of any company is to make a profit. This can be achieved through IS investment but the only way to determine this is through the process of measurement. Financial ratios are a simple, yet effective way of measuring the business performance of an investment in Information Systems. Perhaps the most relevant ratio is the Return On Investment (ROI). Simply put, the ROI establishes the revenue earned against the initial cost of the investment. A high ROI shows that investment gains compare favourably to the investment costs. If the detailed information is available, a comparison against competitors provides a useful way for management to assess relative performance with regard to IS investment.  It’s important to consider the following: information systems are intended to provide relevant information for decision-making which ultimately contributes to better decisions and as a result increases the return on investment [1]. Evaluation of the information systems is a multi-dimensional and multi-criteria task. ROI is a financial measure and does not provide information about efficiency or effectiveness of the information systems themselves [1]. We must also remember that the Financial element will play a part in each of the other four elements of our framework.

(2) Users

Customer service and satisfaction are becoming increasingly more important to businesses today. The concerns of users and their satisfaction are now incorporated into many companies’ mission plans. Therefore the user’s perspective of how a company is performing has become a main priority for management in many firms. It is for this reason we feel is it important to include the area of the customer in our framework for measuring IS business performance. To implement this framework, companies must articulate goals according to their mission and vision for their company, and then translate these goals into specific measures. An identification of measures that answer how a customer perceives a company is of vital importance to any company, and they seek to develop an ongoing relationship with the user from evaluating the results of these measures. These measures can include – customer retention rate, customer satisfaction rate, delivery performance to customer, quality performance to customer and customer percentage of market.  The main concerns of users generally fall into the four main categories of time, quality, performance and service and cost. Many IS investments provide intangible benefits, which resist traditional measurement techniques, and so the full potential of them is not always realised. IS customer measures measure the quality and cost effectiveness of IS products and services. As cdat2 mentioned in her blogs, when attempting to assess the impact of these information systems on business performance the following questions should be considered:
1) How well are business unit and IT staff integrated into IT systems development and acquisition projects?
2) Are customers satisfied with the IT products and services being
delivered?
3) Are IT resources being used to support major process improvement efforts requiring information management strategies?

(3) Quality

Although the measurement of quality is a feature in many business performance frameworks, we believe it is of such importance that it should be an entire section of its own. We believe that the quality of the information systems impacts greatly on a company’s performance and so it is an important part of our framework. In IS quality can be grouped into different metrics such as system quality, software quality, Information quality, and service quality. Of these, system quality and software quality are closely related as both relate to the technical aspects of a software system. [2]

Information Quality: This relates to the desirable characteristics of the system outputs including: relevance, understandability, accuracy, conciseness, completeness, understandability, currency, timeliness, and usability. A way to measure this would be using the “User Information Satisfaction (UIS)” this method has been used for a variety of information systems quality measures. The User Information Satisfaction (UIS) is a seventeen-item questionnaire, which employs the use of scales to assess the user’s level of satisfaction with an information system it includes thirteen specific items, broken into three factors of Information Systems Personnel, Information Product Quality and Knowledge and Involvement.
System Quality/Software quality: The desirable characteristics of an information system, such as: ease of use, system flexibility, system reliability, and ease of learning, as well as system features of intuitiveness, sophistication, flexibility, and response times, ways of measuring the effectiveness are:
•          Completeness: Which part of the needed features are actually implemented
•          Asking users: What is the feeling of typical users about the software?
•          Metrics: Some metrics can give you a good idea about the quality of the code
•          Process: The use (or not) of certain processes is a good hint about the quality of a development process. Bug tracking, automated tests, versioning tools… [3]

Service Quality: The quality of the support that system users receive from the IS department and IT support personnel, such as: responsiveness, accuracy, reliability, technical competence. This can be measured using the SERVQUAL method, this consists of two section, both containing 22 questions. The first section measures service expectations of companies within a certain industry. The second section measures the customers’ perception about a particular company in that industry. [4]

(4) Internal Business Processes

As le1008 mentioned in her blog, an organisation’s internal business processes are a very important part when measuring the performance of IS investments in a company. These processes are critical for satisfying both the customers and shareholders of a company. IS investments can contribute greatly to the improvement of business processes within a company and this in turn leads to a company achieving its objectives. It is therefore important to include this aspect in our framework. The business processes of a company is an area where measurement takes place on things managers know and manage on a daily basis. Business processes include measures such as cost, throughput and quality. These are for business processes such as production and order fulfilment. Activities in which the company excels and also in what it must excel in the future should be identified. Metrics for measuring business processes have to be carefully designed by management in order to measure performance. These could include a reduction in unit costs, reduced waste, improvements in morale within the company and increased productivity.

(5) Transformation

As cdat2 previously mentioned an IT performance management system should consist of a diverse set of measures, which in turn need to be assessed in varying manners. To critically view the transformation the firm has undergone it is vital to clearly map out the firms state before implementation, the goals set out and the actual results attained. Comparing the three sets of figures will clearly display to executives the effectiveness of the IT investment. Positive figures will act as motivators for the firm to reach their maximum capabilities and less optimistic ones will enable firms to alter methods and drive the company to reach their potential abilities.

The most effective way to measure the firms’ transformation and progression is through simple performance measures such as input measures (number of IT workers, number of computers), output measures (number of projects completed, helpline call duration), outcome measures (customer satisfaction, cycle time reduction) and also a combination of single measures. Combinations of single measures combine output, outcome, and/or input measures into measures designed to demonstrate improvements in efficiency or effectiveness. Efficiency IT metrics measure the performance of the IT system itself including throughput, speed, and availability. Effectiveness IT metrics measure the impact IT has on business processes and activities including customer satisfaction, conversion rates, and sell-through increases. Wide ranges of measures provide a balance for different decision maker needs. The key point is that the right measure is used at the right time and for the right reason. [5]
Input and output measures are absolutely vital for measuring how well a process to deliver IT products and services is performing.

Conclusion –

Having factored in the usefulness of the Balanced Scorecard, we felt our adaptation of the framework is more suited and geared toward assessing the impact of IS investments on the overall business performance of an organisation. It is our belief that the framework should consist of five parts and each part is of equal importance in terms of contributing to the impact of IS investments on business performance. We believe that keeping the framework simple and easy to understand is of paramount importance.

References:

[1] http://sprouts.aisnet.org/11-1/

[2] www.informationr.net/ir/1-2/paper5.html

[3]  http://pm.stackexchange.com/questions/1539/how-to-measure-quality-in-a-software-development-project

[4] An Examination of Information Systems Service Quality Measurement: Texas A&M University( 2005)

[5] Daniels, H. C. (1993) Information Technology: The Management Challenge, Addison- Wesley Longman Publishing Co., Inc.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: