The information age measurement paradox: Collecting too much data

Abstract

Information overload is one of the major challenges of management in the information age. Usu-ally, the emphasis in the literature is on incoming information, whereas the creation of informa-tion or data is rarely discussed. This paper presents the measurement paradox and demonstrates how managerial decisions, or monitoring conventions, cause collection of tremendous amounts of unnecessary data. The measurement paradox is observed when advanced technologies, such as Enterprise Resource Planning (ERP) systems, which are intended to improve control and provide managers with better information, collect ample data, most of which are unnecessary. The paper illustrates the measurement paradox by developing a model for estimating the amount of data required for a cost accounting system. It analyzes the amount of data necessary for tradi-tional cost accounting systems, which are usually based on one cost driver, mostly direct labor hours, versus the amount of data used by activity-based costing (ABC) systems, which use multi-ple cost drivers. It shows that the amount of data depends mainly on the number of measure-ments, and in order to improve managerial accounting systems and eliminate non-value adding activities, one should reduce the number of measurements.