Performance Evaluation Metrics for Information Systems Development: A Principal-Agent Model
Authors: Banker, Rajiv D.; Kemerer, Chris F.
Journal: Information Systems Research (1992)
DOI: 10.1287/isre.3.4.379
<jats:p> 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…