Properties of performance indicators in operations management: A reference framework

The purpose of this paper is to attempt to provide a reference framework for the major properties of performance indicators, using the formalism of the Representation Theory.

Performance indicators shown are commonly used in many different areas of operations management in order to analyse process evolution. However, in practical applications many questions arise: “How many indicators should be used for representing a given process?”, “Is there an optimal set?”, “How to check whether the indicators used suitably represent the system investigated?”, etc. In the literature these questions have been addressed in relation to a number of different application fields. This has led to a maze of classifications and properties, which may create confusion in both the academic and the practitioner communities. In a previous work, the paper carried out an analysis of the existing literature, examining and comparing different approaches. This present work identifies and analyses the major properties which effective indicators should exhibit, and suggests an operational methodology to choose the “best” set of indicators.

The findings in this paper produce a detailed analysis of the properties of indicators and establish a schematic methodology facilitating the selection and verification of indicators. To make the process clearer, properties are explained by the use of practical examples.

Indicators are utilized in many different contexts for a variety of purposes (for example, logistics, business management, manufacturing, sports competitions, etc.). The paper provides a general analysis of the most important properties of indicators, without entering into specific application contexts.

The paper proposes an operational methodology to support the selection and testing of the best indicators for a given process. This methodology may also be used for integrating other existing approaches.

Properties of indicators are examined from a mathematical/symbolic point of view, using the formalism of the Representation Theory.