UNIVERSITY OF DAR ES SALAAM
SUBJECT:
IS621 STRATEGY MANAGEMENT OF IT
NAME:
REGISTRATION NUMBER:
WILFRED ADOLPH
2022-06-01699
balanced scorecard: a foundation for the strategic management of
information systems
By
Maris MartinsonsRobert Davison Dennis Tse
As intellectual and financial capital is invested in information systems (IS), managers are increasingly
asking questions about the value of their investments. The productivity paradox has become a
contentious issue among economists and the IS community, as studies show that IT investment is not
correlated to productivity or profitability. This has led many to believe that IT applications are a black
hole, and managers have found it difficult to demonstrate tangible returns on the resources expended
to plan, develop, implement, and operate computer-based IS. This may be due to the fact that recentlyimplemented, computer-based IS enhance value in ways that are not captured by conventional inputoutput accounting methods. The productivity paradox may stem from the tendency to automate
existing ways of doing work, and few organizations have redesigned their business processes to realize
the full potential of modern IT.
Traditional methods to evaluate investments in IT and IS include return on investment (ROI), net
present value (NPV), internal rate of return (IRR), and payback period. However, the fundamental issue
of measuring and evaluating IT applications and IS activities remains unresolved. Kaplan and Norton
have introduced the Balanced Scorecard (BSC) concept in their Harare Business Review articles. They
argue that traditional financial accounting measures, such as ROI and payback periods, provide an
incomplete picture of business performance and hinder the creation of future business value. They
suggest supplementing financial measures with additional ones that reflect customer satisfaction,
internal business processes, and the ability to learn and grow. The BSC aims to maintain a balance
between short- and long-term objectives, financial and non-financial measures, lagging and leading
indicators, and internal and external performance perspectives. Management attention to such a
broad set of performance measures should ensure good short-term financial results and guide a
business as it seeks to achieve its strategic goals.
BPR, or business process re-engineering, is a concept that focuses on the role of quantitative goals and
measures to guide the development and implementation of a new business model. Kaplan and Norton
have progressively expanded the range of potential benefits of BSC, including developing and
maintaining customer relationships, supplier relationships, strategic alliances, and identifying products
and services desired by different market segments. They have also proposed the BSC as a tool for
clarifying and addressing the challenges that come from using their concept. A strategic management
system focuses on future-oriented, process-based metrics to drive performance improvement and
enable top management to make informed decisions. This system should include a mission, vision,
strategic objectives, and performance measures. The Balanced Scorecard (BSC) concept can be applied
to evaluate business functions, departments, and projects, and can even be used to assess individual
project performance. The BSC-for-IS framework is structurally similar to the BSC framework at the
corporate management level but has made modifications due to the IS department being an internal
service supplier and projects being carried out for the benefit of both end-users and the organization
as a whole. A balanced IS scorecard is proposed, considering four perspectives: user orientation,
business value, internal processes, and future readiness. The framework refocuses on efficiency, while
operational effectiveness is more suited to user orientation. The perspective is translated into
corresponding metrics and measures reflecting strategic goals and objectives. The balanced IS
scorecard extends these approaches by adding a future readiness perspective and proposing ongoing
monitoring and control of key measures. The measures included in a given BSC should be tracked and
traced over time, and integrated explicitly into the strategic IS management process. This approach
helps organizations evaluate the value and contribution of information systems (IS) to their businesses.
In order to ensure the future readiness of the Information Systems (IS) department, it is crucial to
continuously improve the skills of IS specialists, regularly update the applications portfolio, and
research emerging technologies. This preparation can establish an organizational vision for the
assimilation and application of new technologies, such as knowledge-based systems or enterprise
modeling systems. The ability of IS to deliver quality services and lead new technology assimilation
efforts depends on the preparations made today and tomorrow. IS managers must assess future trends
and anticipate them, while training and developing internal people can help in-house when specific
expertise is needed. Innovation and learning efforts can raise competence levels, ultimately improving
business performance. . A balanced scorecard should reflect cause-and-effect relationships in a
company's vision and strategy. This includes factors like staff skills, internal operations, user
orientation, and core business processes. A well-built balanced scorecard should include a mix of
outcome measures and performance drivers. Outcome measures, such as programmers' productivity,
should be generic, while performance drivers are company-specific and based on the strategy being
pursued. Without outcome measures, it's difficult for IS management to determine the effectiveness
of its strategy. The balanced scorecard concept is non-prescriptive, as organizations are unique and
management will weigh different measures accordingly during decision-making. However, a balanced
scorecard can be implemented as an Executive Information System, allowing managers to drill down
on goals or measures relevant to those goals. This approach requires sophisticated tools and mutually
reinforcing practices, as organizational uniqueness influences output format and usage. Some
pioneering organizations have applied the balanced scorecard concept to their information systems,
but their performance objectives were sub-optimal and modest. To enhance the effectiveness of a
balanced scorecard for IS, stretch goals that require significant improvements in key areas should be
included. Performance drivers for user satisfaction include system availability, responsiveness to user
requests, and timely delivery of new IT applications. To improve performance, explicit cause-and-effect
relationships should be identified before implementing a balanced IS scorecard, and performance
drivers should be related to performance measures in each key area.
Conclusively writing, The balanced scorecard concept has been proposed to measure and evaluate IT
application projects and the IS department or functional area as a whole. The framework consists of
four evaluation perspectives: business value, user orientation, internal processes, and future
readiness. The balanced IS scorecard allows managers to see the positive and negative impacts of IT
applications and activities on important factors for the organization. It can be used to coordinate
various IS management processes, such as individual and team goal-setting, performance appraisal,
resource allocation, and feedback-based learning. The management of both IS people and projects is
likely to benefit from a systematic framework based on goals and measures agreed upon in advance.
The balanced IS scorecard builds upon a literature from Hamilton and Chervany, which defined the
primary IS goal as the development and maintenance of information systems that support corporate
goals. The framework integrates efficiency and effectiveness, with efficiency addressed by the internal
processes perspective and effectiveness by the business value and user orientation perspectives. The
future readiness perspective adds a dynamic and strategic dimension to earlier IS evaluation models
by recognizing the importance of innovation and learning.