Jamadar, Alpa: Information Technology (IT) Balanced Scorecard, Fachhochschule Offenburg, Offenburg 2004, pp. 66.

THEMES: Jamadar, Alpa
YEAR: 2004

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Motivation for the project

In many organizations (including IT), performance measurement has become a standard procedure nowadays. In the past most attention was directed at financial measurements. It was generally believed that organizations could only survive when their financial results (such as return on investments or cost center) were good, or at least better than the average in the line of business. Consequently, cost and efficiency were the factors that gained the most concern of the top management. Management accounting systems were developed that supported this financial focus and are still in use today. Kaplan, R.S. (1993), Measuring manufacturing performance: A new challenge for managerial accounting research, The Accounting Review, vol. 58, iss.4, pp. 686-704 & Kaplan, R. S. (1990), Measures for Manufacturing Excellence: A Summary. Journal of Cost Management for the Manufacturing Industry, vol.4,iss.3, pp.22-29

The financial focus on the performance of an organisation remained important, but got less attention as a result of two developments:

The rise of the new technologies and philosophies
The change from a sellers market to buyers market due to internet, which broke the physical geographical boundaries for doing business

Clearly, both developments have financial consequences for an IT organisation. The result of these two developments therefore was that IT organisations have to focus on costs, quality and timeliness simultaneously rather than cost only in order to remain competitive. For that reason, management has also to develop new performance measures that were non-financial by nature. Examples of these performance measures are: service quality, turn around time, service reliability, and employee flexibility. Actually, these kinds of performance measures were not new. The use of many of these performance measures were common already at the operational level for monitoring and controlling the IT flows. At this operational level, the use of financial measures has always been very limited, because these measures were not “recognized” as relevant; physical measures have always played the first fiddle because these kinds of measures were easy to use for planning and control purposes.

Performance measurement at the IT department level is required to monitor the actual performance or trends in the performance in order to foresee unwanted situation or to react in undesirable situations. The results of the performance measurements however, only give insight where the actual performance is worse then expected. They do not give insight in why the actual performance differs from the expected performance nor do they tell how one can improve the actual performance. An answer to the questions why there exists a performance deviation should give enough clues for finding ways to improve it. Such deviation functionality is available in the Balanced Scorecard tool. The study of an appropriate method / tool such as a Balanced Scorecard for performance evaluation purpose and for aligning IT to business needs forms the main motivation for the present study.