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CHAPTER 4

KEY PERFORMANCE INDICATORS

4. Key Performance Indicators

73

As the study was focused on Key Performance Indicators of Information

Systems in banking industry, the researcher would evaluate whether the IS

implemented in bank was integrated and working effectively as per Key

Performance Indicators (KPIs). But before that the researcher should identify

the performance indicators. These performance indicators were identified

through review of existing literature and in consultation with academicians and

practitioners. Once certain performance indicators are identified, then they

were tested on the respondents through the main survey in the form of a

structured questionnaire. These performance indicators were also called

parameters interchangeably for convenience. These parameters once tested

and applied through a proposed model formed the Key Performance

Indicators for studying the other objectives further. The parameters would

form the indicators on basis of which we could evaluate the effectiveness of

Information System in the bank. These parameters have been drawn on the

basis of exhaustive feedback from the industry and academia. Initially 71

parameters were identified for measuring the performance of Information

System in post implementation scenario in banking industry. These are listed

as given below:

1. Availability of documented procedures for all activities to be carried.

2. Availability of user manuals for each item of application software.

3. Availability of all information in electronic form properly indexed,

labeled and readily retrievable.

4. Improved house-keeping after IS implementation.


74

5. Management of data security by proper use of login and password

policy for authentication.

6. Management of data administration.

7. Maintenance of user groups.

8. Proper granting of access rights at individual and group levels.

9. Clear authorization limits for data entry, verification, cancel, reverse,

view, etc.

10. Proper handling of temporary users in the system.

11. Proper security to the database.

12. Accessibility of database only to the authorized users on authorized

terminals.

13. Security of data against crashes.

14. Proper precautions against viruses.

15. Protection to bank’s network and server infrastructure against

intrusions and malfunctioning.

16. Prevention of hacking after implementation of IS.

17. No wrong transactions in customer accounts after IS implementation.

18. No frauds or irregularities due to malfunction of IS.

19. System for identifying abnormal transactions in IS.

20. Secure communication channels established for remote access of

system applications.

21. Proper record maintenance of changes made, date of change, person

who authorized the same, person who made the change, table

readings before and after the change.

22. Policy for backup of data.


75

23. Maintenance & monitoring of the back-up logs.

24. Handling of sensitive information during transmission.

25. Proper logging of all user activities.

26. Capturing and logging of all changes to master information.

27. Maintaining consistency and integrity of data during migration of data.

28. Testing of IS before putting into operations.

29. Mechanism to manage back date entries.

30. All entries in IS in bank as per accounting standards used.

31. Proper business continuity plan for bank in case of IS crisis.

32. High uptime for IS applications.

33. Replication of databases to cover the risk of data loss.

34. Proper contingency plan in case of server crash.

35. Reduction in time per transaction or overall process time.

36. Removal of redundancy and saving of time.

37. Simplified work processes leading to reduced workload and paperwork.

38. Reduced physical movements.

39. Greater accuracy and minimal error in operational data.

40. Proper handling of adjustments and corrections by the system.

41. Increase in level of customer satisfaction, hence increase in satisfied

customer base.

42. Existing customers of the bank opting for new products and services.

43. Positive feedback of customers for IS of the bank.

44. Reporting to senior authority becoming quicker and easier.

45. Efficient flow of information internally and externally.

46. Employee getting all relevant information timely.


76

47. Better communication among the functional areas and various

branches.

48. Increased flexibility and multiple options for handling data and

evaluating information.

49. Adaptability to the changes in business dynamics in the internal &

external environment.

50. Reduced the cost per transaction.

51. High levels of efficiency gains and cost cutting.

52. Increase in profits of the bank.

53. Helps in optimal utilization of resources.

54. Increase in efficiency and effectiveness of bank.

55. Increased Return on Investment on IS with time.

56. Percentage of online transactions increased as compared to branch

transactions.

57. Helps banks to become high quality and low cost producer.

58. Productivity of employees increased after the implementation of IS.

59. Helps in increased products and services innovation.

60. Availability of internet banking facilities.

61. Helps in creating new opportunities for cross-selling and targeting

products.

62. Easier and increased trade on global level with banks of other nations.

63. Improved monitoring and reporting.

64. Managing of Information in required format and hence helps in quick

decision-making.

65. Improved decision-making by providing explicit and clear reports.


77

66. Getting more precise and timely information for coordination of daily

operations of the business.

67. Supports long term planning activities of the bank.

68. Easier to tap the right customer at the right time.

69. Helps in reshaping jobs and workflows, hence rightsizing the

workforce.

70. Easier and quicker to do the performance appraisal of the employee.

71. Helps in better segregation of duties and delegation of authority and

responsibility.

Initially, these 71 parameters were identified on the basis of literature and

consultations with academicians and experts in the area of IS, after proper

brainstorming and rigorous discussions, for measuring the performance of

Information System in banking industry. For more clarity and focus these 71

parameters were classified into 19 broad categories. These 71 parameters

were putted into a questionnaire in assertive statement form. These

statements are measured on a Likert scale of Strongly Agree (5), Agree (4),

Neutral (3), Disagree (4), Strongly Disagree (1). A pilot survey was conducted

on these 71 parameters classified in to 19 categories. The main findings and

feedback from that pilot survey were:

a) The questionnaire covers almost all the aspects of evaluating IS in

post-implementation scenario.

b) Certain parameters were overlapping with each other.

c) There was a problem of fatigue while filling of questionnaire by the

respondent.


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d) Certain questions could be converted in to quantifiable statements or

categories instead of assertive statements on Likert scale.

After getting feedback from the pilot survey and doing necessary mergers, the

numbers of parameters were brought down to 40. These 40 parameters or

variables are listed below:

1. Availability of documented procedures and user manuals for all

activities.

2. Availability of all information in electronic form properly indexed,

labeled and readily retrievable.

3. Management of data security by proper use of login and password

policy.

4. Management of data administration by giving access rights for data

entry, verification, cancel, reverse, view, etc.

5. Providing security to database against viruses.

6. Protection to Bank’s network and server infrastructure against

intrusions and malfunctioning.

7. System for identifying abnormal transactions in IS.

8. Establishment of secure communication channels for remote access of

system applications.

9. Reduced chances of error or irregularities in transactions of customer

accounts.

10. Maintenance and monitoring of back-up logs as per data backup policy.

11. Proper system for capturing and logging changes to master

information.


79

12. Maintenance of consistency and integrity of data during migration of

data.

13. Proper mechanism to manage back date entries.

14. Following banking standards for managing all entries.

15. Proper business continuity plan in case of contingencies like server

crash, etc.

16. Low downtime for IS applications.

17. Reduced time per transaction or overall process time.

18. Removal of redundancy or duplication of work.

19. Simplified work processes leading to reduced workload and paperwork

and physical movements.

20. Proper handling of adjustments and corrections.

21. Increase in data accuracy levels.

22. Increase in level of customer satisfaction, hence increase in satisfied

customer base.

23. Increased percentage of existing customers of the bank opting for new

products and services of bank.

24. Efficient flow of information inward or outward of the organization..

25. Enabling better communication among the employees of various

functional areas and various branches.

26. Increased flexibility and given multiple options for handling data and

evaluating information.

27. Adaptable to changes in business dynamics in the internal & external

environment.

28. Reduced cost per transaction.


80

29. Helps in optimal utilization of IT resources.

30. Increase in Return on Investment on IS.

31. Increase in percentage of online transactions.

32. Availability of internet banking facilities.

33. Helps in creating new opportunities for cross-selling and targeting

products.

34. Easier trade with banks of other nations.

35. Increased products and services innovation.

36. Improved decision-making by providing explicit and clear reports in

required format.

37. Supports long term planning activities of the bank.

38. Easier to tap the right customer at the right time.

39. Helps in reshaping jobs and workflows, hence rightsizing the

workforce.

40. Easier and quicker to do performance appraisal of the employees.

These 40 selected parameters were framed in the final questionnaire and

categorized into 18 goals. The main questionnaire contains most of the

statements in assertive form. These statements have been evaluated on 5-

point Likert scale by the respondents. Certain questions were converted in to

quantifiable statements or categories instead of assertive statements on Likert

scale.

The foremost objective of the research was to identify the Key Performance

Indicators of IS. Once main survey was conducted, these 40 parameters


81

helped us to draw certain factors through factor analysis of data collected.

The data collected through the questionnaire provided inputs for the factor

analysis. The factor analysis is a data reduction technique that can help the

researcher to reduce the number of variables or parameters to a manageable

number. The factor analysis was required as 40 parameters identified could

not be easily manageable from the perspective of a banker who wants to

evaluate the working of a bank on the basis of Key Performance Indicators.

The factor analysis ideally will reduce the number of variables to about one-

third of its actual variables.

4.1 Application of Factor Analysis

Table 10 : KMO and Bartlett’s Test values

KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .811

Approx. Chi-Square 2.464E3

df 780

Bartlett's Test of Sphericity

Sig. .000

High values of KMO (between 0.5 and 1.0) indicate factor analysis is

appropriate. Values below 0.5 imply that factor analysis may not be

appropriate. In this research, the KMO measure of sampling adequacy gives

value of 0.811, which is more than enough for applying factor analysis

technique.


82

The population correlation matrix was an identity matrix; each variable

correlates perfectly with itself (r=1) but had no correlation with the other

variables (r=0). A large value of Chi-square favoured the rejection of null

hypothesis. It showed that variables were correlated in population. So factor

analysis was appropriate.

Table 11 : Total Variance explained during Factor Analysis

Total Variance Explained

Initial Eigenvalues Extraction Sums of Squared Loadings

Rotation Sums of Squared Loadings

Com

pone

nt Total

% of

Variance

Cumulative

% Total

% of

Varian

ce

Cumulative

% Total

% of

Variance

Cumulative

%

1 9.377 23.441 23.441 9.377 23.441 23.441 3.279 8.198 8.198

2 2.516 6.291 29.732 2.516 6.291 29.732 2.927 7.317 15.515

3 1.893 4.733 34.466 1.893 4.733 34.466 2.543 6.357 21.872

4 1.720 4.299 38.765 1.720 4.299 38.765 2.437 6.093 27.965

5 1.591 3.977 42.742 1.591 3.977 42.742 2.212 5.531 33.495

6 1.502 3.756 46.498 1.502 3.756 46.498 2.178 5.444 38.940

7 1.502 3.754 50.252 1.502 3.754 50.252 2.019 5.049 43.988

8 1.291 3.227 53.478 1.291 3.227 53.478 1.997 4.992 48.980

9 1.243 3.109 56.587 1.243 3.109 56.587 1.696 4.239 53.219

10 1.169 2.922 59.509 1.169 2.922 59.509 1.670 4.176 57.395

11 1.097 2.742 62.251 1.097 2.742 62.251 1.617 4.042 61.437

12 1.066 2.664 64.916 1.066 2.664 64.916 1.391 3.478 64.916

13 .966 2.416 67.332

14 .933 2.333 69.665

15 .865 2.163 71.828


83

16 .831 2.077 73.905

17 .805 2.012 75.917

18 .758 1.894 77.812

19 .733 1.832 79.644

20 .666 1.664 81.308

21 .647 1.617 82.925

22 .613 1.532 84.457

23 .593 1.482 85.939

24 .529 1.323 87.262

25 .486 1.215 88.477

26 .456 1.139 89.616

27 .435 1.089 90.705

28 .434 1.086 91.791

29 .392 .980 92.771

30 .355 .887 93.658

31 .341 .851 94.510

32 .313 .782 95.292

33 .297 .743 96.035

34 .282 .705 96.740

35 .277 .693 97.433

36 .256 .640 98.072

37 .224 .560 98.632

38 .197 .492 99.124

39 .189 .472 99.596

40 .161 .404 100.000

Extraction Method: Principal Component Analysis.


84

Table 12 : Rotated Component Matrix with Varimax method

Rotated Component Matrixa

Component

1 2 3 4 5 6 7 8 9 10 11 12

Ques1 .191 -.043 .031 .068 .232 -.151 .119 .472 .435 .056 .329 .083

Ques2 .214 -.022 .131 .137 .123 -.010 .004 .082 .768 .087 .025 -.030

Ques3 .637 -.084 -.045 .087 .344 -.055 .083 .196 .021 -.059 .067 -.103

Ques4 .257 .167 .010 .044 .659 .014 -.006 .033 .229 .016 .020 .046

Ques5 .703 .049 .087 .012 .084 .156 .215 -.001 .218 -.074 .056 -.022

Ques6 .485 .047 .254 .121 -.006 .119 .050 -.293 .267 .276 .216 .202

Ques7 .292 .174 -.033 .606 .154 -.044 .056 -.147 .285 .190 .058 .089

Ques8 .412 .118 .027 .220 .380 .402 -.050 .097 .272 .143 -.138 -.046

Ques9 .091 -.056 .097 .098 .667 .185 .133 -.002 .030 .196 .114 .055

Ques10 .117 .063 .308 .390 .269 .049 -.200 .105 .122 .063 .407 -.192

Ques11 .471 .094 .365 .253 .366 .095 -.078 .299 .011 .025 .111 -.147

Ques12 .512 .096 .283 .283 .091 .181 -.018 .089 .290 .193 .215 -.011

Ques13 .467 .198 -.124 -.022 .068 -.069 .050 .463 -.079 .070 .418 .112

Ques14 .426 .156 -.097 .043 .111 -.004 .151 .208 .006 .537 .185 .030

Ques15 .611 .140 .195 .172 .071 .249 -.168 .059 -.090 .200 -.010 .235

Ques16 -.037 -.052 .168 .047 .109 .186 -.049 .009 .163 .729 .013 -.035

Ques17 .119 .136 .678 -.073 .183 .094 .012 .162 .060 .134 .150 .108

Ques18 .178 .069 .159 .075 .083 .114 .225 -.074 .101 .055 .733 -.068

Ques19 -.014 .040 .696 .079 -.157 .076 .034 -.053 .102 .088 .072 .048

Ques20 .289 .144 .606 .192 .112 .101 .183 .053 -.046 -.229 -.148 -.217

Ques21 .092 -.122 .166 .199 .093 .419 .311 .163 -.211 .332 .189 -.157

Ques22 -.087 .198 .462 .021 .301 -.132 .212 .280 -.054 .141 .171 .255


85

Ques23 .028 .022 .049 .037 .090 .041 -.040 .039 -.026 -.034 -.055 .869

Ques24 .123 .144 .139 -.015 -.024 .314 .117 .749 .120 .031 -.067 .074

Ques25 .067 .268 .190 .359 .019 .075 .221 .533 .068 .111 -.168 -.125

Ques26 .023 .400 .121 .004 .205 .644 .139 .048 -.004 .075 .264 -.074

Ques27 .217 .126 .119 .158 .068 .755 .074 .136 .077 .089 -.064 .116

Ques28 .011 -.059 .072 .016 .011 .187 .721 .270 .045 .005 .155 .048

Ques29 -.075 .419 -.008 .089 .060 .290 .275 .090 .490 .024 .104 -.080

Ques30 .056 .299 -.002 .188 .250 -.007 .543 -.029 .072 .121 .095 -.148

Ques31 .225 .404 .265 .041 -.202 .028 .413 -.086 -.002 -.199 .189 .135

Ques32 .211 .341 -.200 .025 .454 .392 .060 -.122 -.221 .047 .166 .230

Ques33 .200 .052 .168 .500 .357 .076 .242 .095 .040 -.024 -.136 .189

Ques34 .066 .660 .127 .048 -.022 .098 .073 .091 .116 .012 -.037 .254

Ques35 .107 .468 .066 .061 .102 -.034 .356 -.003 -.089 .486 -.090 -.007

Ques36 .222 .263 .402 .061 .091 .087 .434 .107 .154 .175 -.245 -.072

Ques37 .132 .662 .193 .195 .171 .081 .062 .045 -.026 .024 .061 -.118

Ques38 -.034 .750 .018 .251 .019 .128 -.053 .153 .004 .012 .053 -.047

Ques39 .131 .142 .117 .580 -.038 .348 .240 .270 .063 .090 -.039 .101

Ques40 .003 .255 .005 .801 .019 .077 -.014 .007 .020 -.032 .139 -.062

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.

a. Rotation converged in 22 iterations.

Hence factors with a variance greater than 1.0 were included. In this research

there have been 12 factors which had eigenvalue greater than 1.0.

In research it was recommended that the factors extracted should account for

at least 60 percent of the variance. In this research the factors extracted

account for 65 percent of the variance.


86

4.2 Factors Identified after Factor Analysis

After following the various approaches mentioned above for determining the

number of factors, it was concluded that 12 factors were fulfilling the broad

requirements of factor determination. These 12 factors would act as Key

Performance Indicators (KPIs) of Information Systems. These 12 factors are

based on the consolidation of 40 variables that are put into assertive

statement form on 5-point Likert scale.

The variables and the converted factors are mentioned below:

Table 13 : Factors and the list of variables covered under each factor

Factor No.

Factor List of variables covered under each factor

1 Data Integrity &

Network Security • Management of data security by proper use of

login and password policy.

• Providing security to database against viruses.

• Protection to Bank’s network and server

infrastructure against intrusions and

malfunctioning.

• Establishment of secure communication

channels for remote access of system

applications.

• Proper system for capturing and logging

changes to master information.

• Maintenance of consistency and integrity of data

during migration of data.

• Proper mechanism to manage back date entries.

• Proper business continuity plan in case of

contingencies like server crash, etc.

2 Long Term

Planning • Easier trade with banks of other nations.

• Supports long term planning activities of the

bank.

• Easier to tap the right customer at the right


87

time.

3 Transactional

Effectiveness

• Reduced time per transaction or overall process

time.

• Simplified work processes leading to reduced

workload and paperwork and physical

movements.

• Proper handling of adjustments and corrections.

• Increase in level of customer satisfaction, hence

increase in satisfied customer base.

4 Resource

Utilization

• System for identifying abnormal transactions in

IS.

• Helps in creating new opportunities for cross-

selling and targeting products.

• Helps in reshaping jobs and workflows, hence

rightsizing the workforce.

• Easier and quicker to do performance appraisal

of the employees.

5 Data Management • Management of data administration by giving

access rights for data entry, verification, cancel,

reverse, view, etc.

• Reduced chances of error or irregularities in

transactions of customer accounts.

• Availability of internet banking facilities.

6 Flexibility for Data

Handling

• Increased flexibility and given multiple options for

handling data and evaluating information.


88

• Adaptable to changes in business dynamics in the

internal & external environment.

7 Cost Control

Management

• Reduced cost per transaction.

• Increase in Return on Investment on IS.

• Increase in percentage of online transactions.

• Improved decision-making by providing explicit

and clear reports in required format.

8 Flow of Information • Availability of documented procedures and user

manuals for all activities.

• Efficient flow of information inward or outward of

the organization.

• Enabling better communication among the

employees of various functional areas and

various branches.

9 E-Documentation • Availability of all information in electronic form

properly indexed, labeled and readily retrievable.

• Helps in optimal utilization of IT resources.

10 System Efficiency • Following banking standards for managing all entries

• Low downtime for IS applications.

• Removal of redundancy or duplication of work.

• Increase in data accuracy levels.

• Increased products and services innovation.

11 Backup Policy • Maintenance and monitoring of back-up logs per

data backup policy.


89

12 Customer

Satisfaction Level

• Increased percentage of existing customers of

the bank opting for new products and services

of bank.

So the 12 factors mentioned above will act as Key Performance Indicators of

IS. These 12 factors are ranked by the statistical tool as per the variance they

offer. These 12 factors or KPIs are listed in the rank of their importance as

mentioned below:

1. Data Integrity & Network Security

2. Long Term Planning

3. Transactional Effectiveness

4. Resource Utilization

5. Data Management

6. Flexibility for Data Handling

7. Cost Control Management

8. Flow of Information

9. E-Documentation

10. Information System Efficiency

11. Backup Policy

12. Customer Satisfaction Level

In banking there are varied factors that affect Information System

performance inclusive of factors mentioned above. The effectiveness of IS

could be proved only if it satisfies the needs of various stakeholders of


90

Table 14 : Factors and the list of statements covered under each factor

Factor No. Factor List of Statements covering each factor

1 Data Integrity &

Network Security

Statements No. 3, 5, 6, 8,11, 12, 13, 15

2 Long Term

Planning

Statements No. 34, 37, 38

3 Transactional

Effectiveness

Statements No. 17, 19, 20, 22

4 Resource

Utilization


5 Data Management Statements No. 4, 9, 32

6 Flexibility for Data

Handling

Statements No. 26, 27

7 Cost Control

Management


8 Flow of Information Statements No. 1, 24, 25

9 E-Documentation Statements No. 2, 29

10 System Efficiency Statements No. 14, 16, 18, 21, 35

11 Backup Policy Statement No. 10

12 Customer

Satisfaction Level

Statement No. 23

Information System in banks, i.e., Investor of IS, Developer of IS, Strategic

User of IS, the employee who is End user of IS, and Customer of bank who is


91

directly or indirectly affected by working of IS in bank. The Information System

used should be fully integrated in the functioning of bank. Whether the IS

implemented in bank is integrated and working effectively, it should be

performing on 3 fundamental areas. If the persons working in bank are

satisfied on it then it is fulfilling the needs of bank. These three questions will

also lead us toward categorizing Key Performance Indicators of IS in bank.

The questions are:

1. Whether the IS is technologically integrated?

(It means that whether technologically, the IS implemented in bank is

properly embedded in working of bank and meeting its all requirement of data

based transactions like size, speed, security and service.)

2. Whether the IS is functionally integrated?

(It means that whether the IS implemented in bank improves the

functionality of bank.)

3. Whether the IS is strategically integrated?

(It means that whether implementation of IS give strategic advantage to

bank anyway.)

If the Information System applied in the bank is meeting these three

specifications broadly, then it is effective for bank. For meeting these

specifications the KPIs identified above should be mapped into these three

categories of Technical, Functional and Strategic integration, and form the

basis on which the researcher can evaluate the effectiveness of Information

System in bank in post implementation scenario.


92

On the basis of literature review and discussion with academia and experts of

this domain, the categorization or classification of KPIs identified is mentioned

below:

Table 15 : Factors or KPIs as per contribution to broad category

S.No Category / Classification Key Performance Indicator(s)

1 Strategic Integration • Long Term Planning

• Resource Utilization

• Flexibility for Data Handling

• Cost Control Management

• Customer Satisfaction Level

2 Functional Integration • Transactional Effectiveness

• Data Management

• Flow of Information

• System Efficiency

3 Technical Integration • Data Integrity & Network Security

• E-Documentation

• Backup Policy

On the basis of above categorization a model had been proposed to evaluate

the performance of Information System in bank. The proposed model had

been explained in next chapter.

This chapter discusses that initially 71 parameters have been listed for

measuring the performance of Information System in post implementation


93

scenario in banking industry. Further it has been shown that through the pilot

survey and after doing necessary mergers, number of parameters has been

reduced to 40. After completion of main survey, factor analysis was applied. It

was found that there were 12 factors that could act as Key Performance

Indicators for evaluation of Information System in banking sector. These

factors were further classified in to 3 categories of Strategic Integration,

Functional Integration and Technical Integration.

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