Steering Models And Management Information

Management Information is required in order to make decisions. To manage the organization and to make proper decisions the senior manager needs aggregated, current and reliable information. This information is analyzed and modeled during the phase of information analysis for example by establishing interviews and end-user sessions. The information requested by end-users is in our business often recorded in multi-dimensional- and/or Balanced Scorecard-models.

Meta information for the user interface design

Multi-dimensional models are exploited with development projects that take place lower in the organization. It includes often not any meta-information that can be used for the design of the user interface. In those models the desired information is only modeled in terms of measures and dimensions. They are presented and depicted as cubes.

The Balanced Scorecard model

The other model, the Business Balanced Scorecard-model (Kaplan and Norton, 1998) is more extended than the multi-dimensional model and is used at the higher level of the organization. A BSC-model consists of 4 perspectives: financial, customer, internal and innovation. Those perspectives are altogether related to the mission and objectives of the organization. Non-financial perspectives are finally linked to financial goals. Causal relations reflect whether and how measures or indicators influence others (in relation to the objectives an organization wants to accomplish).

Both models should be available for senior managers

Both models should be part of a business intelligence system proposed for senior managers. If they are linked together, they give the senior manager the possibility to link performance results with the processes, which drive those results. Furthermore, it supports the general task model of the manager.

Scanning behavior is important at the top of the model while analyzing requires the availability of different dimensions (the lower region of the model). Both models can be combined to an overall steering model of the organization. The figure above gives an overview of such combined steering model. In one of my next blogs, both models will be united to a detailed domain model appropriate to feed a knowledge-based system with the discovered variations.

One-to-many relationships

These elements are piece by piece discussed in the next paragraphs. The tiny, black closed circle at the end of the line indicates a one-to-many relationship between the parent and the child. A particular strategy can have one or more belonging objectives and a key performance indicator can be subdivided into several measures (for example the KPI Sales can be tracked by measuring the quantity of orders or the total value of orders). For each child in a 1:n relation one can weight each particular child in order to indicate which child has the most impact or influence on the parent.

A lot of confusion about the KPI

Because there is a lot of confusion about the terms ‘key performance indicator’ and ‘critical success factor’, I define both types of items here. A key performance indicator (KPI) is measuring the performance (e.g. the actual outcome) of the organization. A critical success factor (CSF) will measure those critical issues that can influence the performance in negative or positive sense. In the table below, I clarify this distinction by using an example.

A combined steering model

The combined steering model is similar to the model that is necessary to steer organizations mentioned earlier on this website. If there no model of the system exists, steering makes no sense. A shortcoming of such models is that they do not contain important meta-information to enable effective and circumstantial communication with the manager. In this paragraph, we shall discover many meaningful first class properties (which can be linked to measures, dimensions and so on) for the proposed knowledge-based system to reason about. To make clear what each element of the combined steering model proposes, I shall clarify it by using an example: the mission is to improve the world’s situation for everyone.

Table: Example of a combined steering model

Possible strategy 1: give everyone a bible Objective 1: press as many bibles as possible Objective 2: translate scripture for all languages Key performance indicator: bibles Key performance indicator: average life conditions Measure 1: bibles in currency Measure 2: average income Dimensions: region, country Norm 1: equals amount of peoples in the world Norm 2: standard per region

Critical Success Factor 1: democracy Critical Success Factor 2: illiteracy Critical Success Factor 3: quality of bibles Measure 1: number of total democracies Measure 2: number of illiterates in the world Measure 3: quality of translation Norm 1: cannot be influenced Norm 2: can be a sub-objective Norm 3: medium to high

Both internal and external information

The above model reveals that as well as internal as external information is involved. Key performance indicators originate from within the organization and critical success factors can be both internal as external. Balanced Scorecards do have originally 4 perspectives: financial, customer, internal and learning/innovation. At first glance, external information cannot be assigned to one of the perspectives because where should indicators like the labor market situation be situated?

I prefer the solution to integrate external information with the critical success factors when it can be linked together. For instance to generate business (a KPI) the organization should employ and recruit qualified employees (CSF). A measure that is related to for instance the measure ‘number of employees’ is the labor market situation and should therefore be situated at the internal perspective. If external information does not make any sense in relation to any indicator of the four perspectives, I suggest making a distinct perspective external information.

Shortcoming of the BSC model

Another significant shortcoming is that BSC-models will link all indicators towards the financial perspective by means of causal relations. I believe that this is true. All perspectives will ultimately have an impact on the financial result. However, this will not say that all organizations will have the primary focus to increase financial results. This is for instance not the case with organizations like the army, police and other non-profit organizations. Often the BSC-model of profit-organizations situates the financial perspective at the top of the screen, which is less convenient for non-profit organizations.