Designing an Information Systems Performance Management System: The Case of an Insurance Corporation

Introduction

Performance evaluation is critical for all business functional departments (accounting, marketing and operations etc.); each department is involved in performance measurement and must demonstrate its contributions to the firm (Otley, 1999, Bourne et al. 2003, Ferreira & Otley, 2009, Kaplan, 2009). In particular, the control and governance of internal services such as information systems (IS) has become quite critical in organizations due to the large degree of expenditure and investment. IS managers face mounting pressure to measure IS department performance, justify the appreciable investment they require to operate, and evaluate IS in terms of tangible business value and return on investment (ROI).

In the light of the depicted scenario, IS performance management systems (PMS) should help IS departments to evaluate the outcomes of activities, practices and processes at all levels of the IS organization. They should also help IS departments to face a serious credibility problem due to lack of management practices that can provide real benefits in business operations. Therefore, IS PMS seem to be the right solution for the CIO and IS department’s problems, but they are not so widespread in companies and implementations often fail to achieve full benefits (Miranda, 2004, Ariyachandra & Frolick, 2008, Aho, 2009). Presently, a robust and complete model with which to evaluate IS Performance that practitioners can apply in their companies does not exist (Gable et al., 2008). As scholars’ research has been able to define quantitative and perceptual measures to assess the efficiency of IS, the issue of evaluating IS effectiveness remains unresolved.

A good summary of the current state of the art of research on IS business value is provided by Kohli and Grover (2008) who, on the basis of an extensive literature review, affirm that:

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  IT does create value: a consistent mass of studies demonstrate that there is a relationship between IT and some aspect of firm value;

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  IT creates value under certain conditions: to produce value, IT must be part of a business value creation process where it interacts with other IT and organizational resources;

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  IT-based value manifests itself in many ways: studies have shown so far that IT value can reveal itself in several ways, like productivity improvements, business processes improvements, profitability, consumer surplus, or advantages in the supply chain;

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  IT-based value could be latent: there exists a difference between creating value and creating differential value;

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  There are numerous factors mediating IT and value: there might be latencies in the manifestation of IT value;

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  Causality for IT value is elusive: it is difficult to fully capture and properly attribute the value generated by IT investments.

Therefore, research in the IS business value field is far to a conclusion. There is the need of studies that propose practically applicable framework and methodologies, something that has also been identified as a limitation of several previous studies (Leem et al., 2004, Petter, 2008). This lack of knowledge increases the difficulties companies face in the evaluation of IS performance. In addition, according to research in both PMS (Ferreira & Otley, 2009) and management control systems (Otley, 1999), the difficulty in implementing this type of system has been determined by internal factors such as the culture and organizational tensions.