Performance Evaluation Metrics for Information Systems Development: A Principal-Agent Model.

Author List: Banker, Rajiv D.; Kemerer, Chris F.;
Information Systems Research, 1992, Volume 3, Issue 4, Page 379-400.
The information systems (IS) development activity in large organizations is a source of increasing cost and concern to management. IS development projects are often over-budget, late, costly to maintain, and not done to the satisfaction of the requesting user. These problems exist, in part, due to the organization of the IS development process, where information systems development is typically assigned by the user (principal) to a systems developer (agent). These two parties do not have perfectly congruent goals, and therefore a contract is developed to specify their relationship. An inability to directly monitor the agent requires the use of performance measures, or metrics, to represent the agent's actions to the principal. The use of multiple measures is necessary given the multi-dimensional nature of successful systems development. In practice such contracts are difficult to develop satisfactorily, due in part to an inability to specify appropriate metrics. This paper develops a principal-agent model that provides a set of decision criteria for the principal to use to develop an incentive compatible contract for the agent. These criteria include the precision and the sensitivity of the performance metric. After presenting the formal model, some current software development metrics are discussed to illustrate how the model can be used to provide a theoretical foundation and a formal vocabulary for performance metric analysis. The model is also used in a positive (descriptive) manner to explain why current practice emphasizes metrics that possess relatively high levels of sensitivity and precision. Finally, some suggestions are made for the improvement of current metrics based upon these criteria.
Keywords: software engineering;management of computing and information systems
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#191 0.140 model models process analysis paper management support used environment decision provides based develop use using help literature mathematical presented formulation
#70 0.117 contract contracts incentives incentive outsourcing hazard moral contracting agency contractual asymmetry incomplete set cost client parties examine effort structures double
#253 0.108 user involvement development users satisfaction systems relationship specific results successful process attitude participative implementation effective application authors suggested user's contingency
#114 0.100 performance firm measures metrics value relationship firms results objective relationships firm's organizational traffic measure market study improve accounting measuring aggregate
#125 0.094 framework model used conceptual proposed given particular general concept frameworks literature developed develop providing paper developing guidelines concepts appropriate set
#292 0.082 information research literature systems framework review paper theoretical based potential future implications practice discussed current concept propositions findings provided extant
#240 0.076 systems information management development presented function article discussed model personnel general organization described presents finally computer-based role examined functional components
#157 0.060 evaluation effectiveness assessment evaluating paper objectives terms process assessing criteria evaluations methodology provides impact literature potential important evaluated identifying multiple
#250 0.054 enterprise improvement organizations process applications metaphors packaged technology organization help knows extends improved overcoming package learning better evolution build lead