Designing and Utilising Business Indicator Systems within Enterprise Models-Outline of a Method

The design of effective indicators and indicator systems requires a profound understanding of the relevant business context. Numerous relations and dependencies within an indicator system exist, which need to be analysed thoroughly: Many relations are based on implicit assumptions or sometimes not known by the management at all. This is of particular relevance for business success, since improperly used indicator systems may lead to ‘dysfunctional effects’ like opportunistic behaviour. This paper outlines a method for designing and utilising indicator systems. It fosters a convenient and consistent definition and interpretation of indicator systems. Furthermore, it serves as a conceptual foundation for related performance management systems, such as dashboard systems. 1. Motivation and Scope In recent years, there has been an increasing demand for indicators to guide and justify management decisions. These business indicators – often referred to as Key Performance Indicators (KPI) – promise to reduce complexity and to promote a focus on relevant goals. Therefore, they are regarded by some as a key instrument of professional management, especially with regard to supporting, measuring, and monitoring decisions ([Si90], p. 12). For instance, in the field of Performance Measurement (PM) indicators are supposed to reflect aspects that are pivotal for certain decisions; therefore, strategies and goals are repeatedly refined and put in more concrete terms until they become measureable by KPIs. As a result, managers receive a set of various indicators that aim at the measurement of an enterprise’s performance (called ‘indicator system’). Well-known examples of indicator systems are ZVEI [ZE89] and the RL indicator system [Re06] for the financial domain as well as the Performance Pyramid [LC91] or the Balanced Scorecard [KN92] for the PM domain. Indicators are generally understood as quantitative measures that are specified using several mathematical constructs (e.g., ordinal or cardinal scale) for different types of reference objects and on various levels of abstractions in the enterprise (e.g., resources, processes, or business units; [Gr02] pp. 98ff.). By using indicator systems managers can define expected target values – e.g., by referring to benchmarks –, continuously monitor them and, in case of discrepancies, intervene into the enterprise’s process execution.