Requirements of a Performance Management System

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Most differences between performance management systems can be explained by their initial definition. The initial definition determines who (stakeholders) are provided with what kind of information. This fact influences the design of processes and interfaces within a PMgS and highlights the need for a thorough requirements analysis that considers all intricacies and specifics for a performance management and measurement system. Many isolated literature sources can be found reporting on different requirements, which constitute possible complementary elements of performance measurement systems. In the following, we analyze the four most recent sources28that present requirement catalogues to get an understanding of the components that are crucial for a performance management and measurement system.
• A comprehensive performance measurement study by Klingebiel from 2000;
• A dissertation about performance measurement with a focus on IT-design by Wettstein from 2002;
• A study on performance measurement in R&D by Hauber from 2005;
• A study encompassing a holistic performance management approach by Krause from 2006.

Catalogue of requirements for a “Performance Measurement System” according to Klingebiel
The performance measurement structures
KLI01 Require a company-specific adaptation with a tight dependence on strategic direction to
fulfill the delivery of information
KLI02 Are an integral part of an aligned and self-consistent information supply of a company’s
different organizational units and levels based on performance indicators
KLI03 Enable the deduction of actions to improve the current performance situation (no
scoreboard) by means of the structure of performance indicators
KLI04 Are targeted at continuous improvement, which, in individual cases, could also be an
abrupt improvement, especially with regards to the elimination of non-value-added
KLI05 Are targeted at the coordinated balance of relevant stakeholders’ interests
KLI06 Build a system of performance indicators that are oriented according to specified areas of
KLI07 Consider the independent information needs of decentralized units
KLI08 Feature, in private sector companies, a system-oriented, enterprise value-oriented holistic
KLI09 Are targeted at strategic information demand according to value chain
KLI10 Incorporate constantly changing information needs in terms of lifecycle
KLI11 Have an evolutionary system focus
The selected performance indicators
KLI12 Focus on the most important aspects and, therefore, are few in number
KLI13 Build a consistent and complementary arrangement in terms of content with monetary/
non-monetary orientation
KLI14 Are primarily aimed at improving future performance (e.g. emphasis on innovation and
KLI15 Have an intentionally high stability throughout the reporting
KLI16 Derive the rhythm of their reporting mainly from the corporate level
KLI17 Support the evidence of recent methodological approaches’ success through a high
process orientation
KLI18 Are characterized by good communicability, which strengthen self-motivation
KLI19 Are coupled with a parallel system of incentives and support personal motivation
KLI20 Take into account the competitive requirements of cost, time and quality
KLI21 Represent the current/expected performance in the core competencies
KLI22 Also include, after critical examination, increasingly recent financial-oriented target
values (e.g. EVA,ashareholder value) and their value drivers
KLI23 Consider behavior-related aspects during the selection process of performance indicators

Requirements for a “Performance Measurement System” and for “IT-System for a Performance Measurement System” according to Wettstein

Performance indicators
WET01 Consideration of
• Financial and non-financial
• Leading and lagging
• Internal and external performance indicators
WET02 Structuring according to impact, execution and premise indicators
WET03 Indicators are operationalized goals
WET04 Set target (target value of a performance indicator)
WET05 Are operationalized by means of indicators
WET06 Are derived from the strategy
WET07 Only those goals are considered which have a stakeholder
Organization (embedding, structure, involved parties)
WET08 Goals are connected with organization and employees
WET09 Individual structure can be established
WET10 PMS can be integrated into existing management systems
WET11 Administration of performance relevant data is carried out centrally
WET12 For the creating of a PMS
WET13 For the acquisition of company internal and external data
WET14 Stakeholder communication of the performance relevant data
WET15 For the development of the ex ante causal relationships and for their ex post review
WET16 For the maintenance (review) of the PMS
Operating efficiency
WET17 Verifiability of the cost-benefit situation of a PMS
Considered entities
WET18 Performance indicators
WET19 Goals
WET20 Company organization structure
WET21 Employees
WET22 Stakeholder
WET23 Goal targets (required values) of performance indicators for a certain point in time or
WET24 Causal relationships
Functional requirements:
Data acquisition
WET25 Manual entry of data
WET26 Internal and external data sources
WET27 Appropriate mechanisms for the automatic generation of performance-relevant data
from operational systems
WET28 Coupling with external sources
Data storage
WET29 Centralized, uniform data structure
WET30 Storage of performance indicators at different granularity levels
WET31 Set goal targets
WET32 Long-term storage of performance data
WET33 Performance data should be available to other management systems within the company
Data analysis
WET34 Tools for analyzing the cause-effect chains
WET35 The system enables the calculation of trends
WET36 The information system calculates performance gaps between actual and target values
Data communication
WET37 Free navigation in the data structure
WET38 Stakeholder-oriented communication of performance-relevant data
WET39 Representation of the performance gap
Not functional requirements
WET40 Security concept, high data security
WET41 Based on a standardized technology (e.g. Internet)
WET42 Good response times
WET43 Good expandability and scalability
WET44 High availability and short recovery time
Other requirements
WET45 Far-reaching independence from the applied performance measurement approach

 Requirements for a “Performance Measurement System” according to Hauber
Purposes of performance measurement systems
HAU01 Creation of transparency
HAU02 Decision support
HAU03 Cybernetic model
HAU04 Motivation
Formal requirements
HAU05 Simplicity and operability
HAU06 Comparability
HAU07 Objectivity of performance indicators to influence the results, and not the behavior
HAU08 Reliability to avoid dysfunctional impact
HAU09 Acceptability by affected people
Contextual requirements
HAU10 Relevance, focus on KEY performance indicators, congruency with corporate goals
HAU11 Focus on the future in terms of planning effectiveness (enabling early-warning)
HAU12 Multiple dimensions, consideration of not just a single goal but rather a bundle of goals
of a department and their performance indicators
HAU13 Multiple levels, consideration of the corporate levels of a company

 Requirements for a “Performance Management Method” according to Krause
Overall concept
Holistic approach
Solution integration
Knowledge base
Represent content and structure of existing PMS
Provide existing techniques and templates
Indicator catalogue
Reference models
Procedure model
Task-related PMS development
Method to capture actual profile and to develop target profile
Method for cause and effect net transparency
Method for process-oriented indicator definition
Indicator data model
Creation of PMS triangular structure
User participation via reverse flow principle
Software support
Knowledge management in terms of experience backup
Knowledge use
Development of new PMS
Alignment of PMS content and structure
Analysis about PMS content and structure
Representation of the value chain

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