Relationship between information systems sophistication and performance measurement
| Pages | 993-1017 |
| Published date | 24 August 2010 |
| DOI | https://doi.org/10.1108/02635571011069077 |
| Date | 24 August 2010 |
| Author | Noor Akma Mohd Salleh,Ruzita Jusoh,Che Ruhana Isa |
| Subject Matter | Economics,Information & knowledge management,Management science & operations |
Relationship between information
systems sophistication and
performance measurement
Noor Akma Mohd Salleh, Ruzita Jusoh and Che Ruhana Isa
Faculty of Business and Accountancy, The University of Malaya,
Kuala Lumpur, Malaysia
Abstract
Purpose â Studies in performance measurement systems (PMS) seem to receive little attention in the
information system (IS) literature. The purpose of this paper, therefore, is to contribute to the stream of
research in the ïŹelds of performance measurement and ISs.
Design/methodology/approach â The paper examines how IS sophistication is linked to PMSs by
investigating the use of performance measures in the Malaysian ïŹnancial services industry. Data were
collected from 140 ïŹnancial institutions through self-administered questionnaire survey of top-level
executives. A component-based structural equation modelling, partial least squares, was used to test
the research model.
Findings â The results indicate that IS sophistication is a determinant of performance measures. The
results also indicate that different dimensions of IS sophistication affect different dimensions of
performance measures usage.
Originality/value â The paper signiïŹcantly extends prior research on performance measures by
establishing IS sophistication links to the different types of performance measures. Further, the
ïŹndings clarify the distinct and important roles of each IS dimensionâs inïŹuence on performance
measures.
Keywords Malaysia, Financial services, Performance measures, Information systems
Paper type Research paper
Introduction
Contemporary information system (IS) researchers have increasingly directed interest
and attention towards the link between IS investment and organisation performance.
Many IS research have focused on the relationship between IS sophistication
(i.e. diversity and complexity of use in IS) and organisational performance and found
that IS sophistication have positive impact on organisational performance (de Bu
ÂŽrca etal. ,
2006; Heine et al., 2003; Raymond and Pare
ÂŽ, 1992). However, there is no sufïŹcient
research focused on information technology (IT)-enabled performance measurement
systems (PMSs) that provide up-to-date and accurate information on markets and
customers, customer service performance, competitive position, operational
performance, ïŹnancial performance and so on (Bititci et al., 2002). Such PMSs are
very essential in todayâs business competitive environment as they would promote
proactive management style and greater conïŹdence in management decisions. Such
PMSs are, however, still uncommon due to technical, technological and people issues
concerning dynamics of PMSs (Bititci et al., 2002). Bititci et al. (2000) argue that dynamic
PMSs would ensure that an organisationâs PMSs remains integrated, efïŹcien t and
effective at all times and sensitive to changes in the internal as well as external
environment of the organisation.
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/0263-5577.htm
IS and
performance
measurement
993
Received 22 January 2010
Revised 19 March 2010
Accepted 8 April 2010
Industrial Management & Data
Systems
Vol. 110 No. 7, 2010
pp. 993-1017
qEmerald Group Publishing Limited
0263-5577
DOI 10.1108/02635571011069077
PMSs are actually IS that transform performance data into assessments of
organisational and individual performance (Burney and Matherly, 2007). Burney
and Matherly (2007) argued that PMSs represent a logical intersection between
management accounting and IS since these functions are directly involved with PMSs
design implementation, use, and maintenance. However, studies on both managem ent
accounting and IS are still limited. While management accounting researchers
are actively involved in studying PMS, such studies have received only limited attention
in the IS literature (Burney and Matherly, 2007; Church and Smith, 2007;
Martinsons et al., 1999).
As the purpose of measurement is to guide, support, and improve performance,
providing feedback to individuals in the form of performance measures is essential.
In so doing, no doubt that IS will play a major role in a PMS in gathering, storing,
processing perform ance-relevant data , and disseminatin g performance-relev ant
information. A good PMS should focus not only on the ïŹnancial aspect of measures
(e.g. proïŹtability, return of investment return on equity, earnings-per-share) but also on
the non-ïŹnancial aspect of measures such as customer, quality, people, systems and
processes. Demand on non-ïŹnancial measures such as high-quality low-cost product,
lead-time and delivery time reduction, product and process innovation, continuou s
improvement and product and process ïŹexibility is escalating in todayâs business
organisations. Thus, performance measures are no longer unidimensional whic h is
essentially ïŹnancial, but now span into a multidimensional manner that is more
âbalancedâ with operational, employees, and customer dimensions (Kaplan and
Norton, 1992, 1996; Fitzgerald et al., 1991). According to Garengo et al. (2005), a PMS
must have the capacity to evaluate the organisations in its entirety and to integrate all
functions/dimensions in balance with the importance given to each.
Prior studies have attempted to link IS/IT and PMS (Bititci et al., 1997, 2002;
Kueng et al., 2001). Most of these studies were done using case studies approach.
For example, Bititci et al. (2002) studied the management implications of IT supported
PMSs. Based on a single case study, they found that appropriately designed PMSs, if
supported through appropriate IT platforms and appropriately implemented will
improve visibility, communications, teamwork, decision making and in turn lead to a
more proactive management style. In light of this advances, there is a need to understand
the inïŹuence of IS on PMSs that support organisational and managerial development in
organisations (Marchand and Raymond, 2008; Garengo et al., 2005). Building on this
contribution, this paper investigates how IS sophistication is linked to PMSs by way of
use/utilisation of performance measures in the ïŹnancial services industry. For the
purpose of this study, IS sophistication refers to the extent and intensity of use, and
integration of IS to support business processes and activities (Wang et al., 2004;
Raymond et al., 1995; Bowman and Hurry, 1993).
Hence, the objective of this study is to empirically examine and predict the
relationships between IS sophistication factors and PMSs through the use of
performance measures, both ïŹnancial and non-ïŹnancial measures in the ïŹnancial
services industry. While a few efforts have been made to establish links between IS and
PMS, to the best of our knowledge, there is no attempt yet to study PMS on the basis of
their types of performance measures and their relation to IS sophistication. For the
purpose of this study, IS sophistication refers to the extent, intensity, and integration to
which an organisation has diffused key IS into its base foundation for supporting
IMDS
110,7
994
To continue reading
Request your trial