Balanced Scorecard for Performance Management

Background
Employees are an organization’s most coveted assets and measurement of their performance is often a challenge. Organizations must realize the strategic importance of assets that create distinctive organizational capabilities which in turn are the basis for a competitive advantage. SWOT analysis is no longer sufficient. In addition, organizations have to understand their corporate competence and resource composition in order to evaluate these opportunities. Different firms develop different distinctive competencies and the question they have to ask themselves is: do we have the right competency to pursue certain opportunities?

HR and company methods operate in alignment. Today, organizations work towards facilitating and raising the performance of the staff by building a contributive work atmosphere and providing more opportunities to the staff for taking part in the decision making process. Most important activities of an organization are driven towards development of high performance leaders and fostering worker motivation. Thus, the role of an organization has evolved from just a performance appraiser to an enabler of performance.

The method of performance management starts from on-boarding and ends when an employee leaves the organization.

Performance management is a process by which the performance of an organization is improved by raising the performance of people among a team framework. It is a method for promoting superior performance by act expectations, shaping roles among a needed ability framework, and establishing possible benchmarks. Performance management also consists of setting the right goals, reviewing performance, communicating results and feedback, and rewarding achievements. For under performers, training is given for performance improvement. Training consists of implementation of worker development programs.

Performance management aims to manage and enhance an individual’s performance with an intention of raising the performance of the whole business. It consists of a cycle of the following activities:

  • Performance planning where goals and objectives are established.
  • Performance coaching where an employee is trained.
  • Performance monitoring where a manager provides feedback to adjust performance.
  • Performance evaluation.
  • Top performance is rewarded.
   

Challenges

  • Managers are frustrated with the appraisal system because they have to search through endless emails, notebooks, and spreadsheets to find relevant information to support employees’ performance reviews. 
  • With increasing workforce due to mergers and acquisitions, it is increasingly difficult for managers to keep track of the performance of their employees. With such a large organizational reporting structure many of managers skip the day to day interactions with employees that could help with performance measurement.
  • Budgetary constraints and company profit margins have put pressure on organizations to lower the cost of performance management teams.
  • Attributes and performance measures that are used to judge an employee are often misstated. Human assets: education, skills, employees, technical expertise, attitude, competence, commitment, motivation, problem-solving capabilities, creativity, and entrepreneurial spirit are a few of them. But how do you accurately measure these?
  • Employees are often accessed annually by HR. Managers and employees then spend countless hours completing performance appraisals only for the sake of appraisal with the forms locked up somewhere never to be opened again.
  • Employee performance expectations are a way too high and the employee may even achieve goals but the managers are not in a position to align themselves and their employees with the corporate objectives so corporate objectives do not seem to be achieved in spite of employee performance being good. Addressing this gap is a challenge.
  • Often the difference between performance management and performance appraisal is taken too lightly. Appraisal is just a part of performance management. Performance appraisal includes accessing the employees based on the skills and goals assigned to them and giving appraisals to employees. Performance management involves something that is often overlooked and that is developing the underperforming employees. Knowing the reason why employees have not performed to expected levels is also very important.

Solution
The solution to all these challenges could come from automating the process per the best business practices.

Developments in performance measurement software have improved the design of strategy maps. These applications have helped to make them a key part of understanding, communicating, and reviewing performance. They also allow the user to feed the maps with information about relationships and underlying measures. This enables automation of traffic lighting of performance.

Business Pointers’ Human Resource Management System (BP-HRMS) offers an intelligent 360 degree solution to the performance management process.


Balanced Scorecard (BSC)
The BSC is a strategic planning and management system that is used extensively in business, industry, government, and nonprofit organizations worldwide to align business activities to the vision and strategy of the organization, improving internal and external communications, and monitoring organizational performance against strategic goals.


The BSC views the organization from four perspectives:


  • The Learning and Growth Perspective: Can the firm continue to improve and create value?   The perspective also examines how an organization learns and grows.
  • The Business Process Perspective: How well does it manage the business’s operational processes?
  • The Customer Perspective: How do customers see the firm?
  • The Financial Perspective: How does the firm look to shareholders?
   

We must then develop metrics, collect data, and scrutinize it in relation to each of these perspectives.


Using Balanced Score Card for Employee Performance Management
BSC for employee performance tracking is an efficient approach of obtaining a complete idea on how each of the four perspectives is performing by evaluating the measures associated with it. Too often worker performance plans are measured by behaviors, actions, or processes while not conjointly measuring the results of the employees' work. By only measuring behaviors or actions in worker performance plans, a corporation may realize that the majority of its workers are apprised as outstanding even though the organization as a whole did not meet its objectives.

By using balanced measures at the executive level and by sharing the results with managers, teams, and, employees the company is providing the information needed to align employee performance plans with organizational goals. By mapping the measures for employee performance evaluation and the feedback the performance process is made easy and accurate.

The best advantage of the balanced scorecard management system is its remarkable versatility. By analyzing the relationship of the employee with the company from the four perspectives of BSC the company can see where the employee is fully contributing to its success and where he or she could improve.

The BSC is considered a strategy execution framework because it is about taking feedback and correcting the current results before it is too late.


How?
The balanced scorecard allows the management to impartially analyze the employee’s performance and his role in reaching the company goals. It prevents the problems associated with biased evaluation by providing concrete metrics that can be applied equally to every employee.

This helps the company in two ways. First, it ensures that the managers do not, intentionally or subconsciously, give more flattering evaluations to employees they have the benefit of working with. Second, it provides the company with provable data that can be used to defend against favoritism or unjust work practice lawsuits.

BSC also provides managers with a clearer view of each employee’s role in the company. The balanced scorecard allows the company to select criteria in each of the four key perspectives: financial, customer, internal processes, and learning and use these criteria to develop a practical view of employee contributions. Once employee requirements are considered from all the four perspectives, employee goals are created.

The basic objective of performance management is to determine how well the employee is helping the organization achieve its goals.
All employees have criteria where they excel and a few where they are below expectations. The company can use the results from the BSC to assign training to employees in areas where they need help.


Correct Measurements:

One must always design goals that are SMART.

  • S: Specific:Focuses employees' attention on what matters most to succeed.
  • M: Measureable: Allows measurement of the employee’s contribution.
  • A: Achievable: Provides a way to see if our strategy is working.
  • R: Realistic: Are valid to ensure measurement of the right criteria.
  • T: Timely: Are verifiable to ensure data collection accuracy.

It is very important to define the measures on which an employee will be evaluated.  Here in BP-HRMS, an employee is by default evaluated in the skills that are required for his or her designation level along with any newly created criteria for evaluation. An employee is more motivated to achieve goals they are allowed to define themselves.

Careful Evaluation:
The performance reviews that are gathered must be fair and the implementation of a 360 degree performance management system is necessary because includes the reviews of the line manager along with peers, customers, and self evaluations.


Handling Underperformance:
Linking the HRMS performance management to training automatically assigns the underperforming employees training in areas they receive low performance scores. This gives the employee an opportunity to improve those skills.


Appraisal System:
A wise and fair appraisal system needs to be incorporated to help motivate and retain employees. To do this a system needs to find a balance between individual and organizational objectives for achievement of excellence in performance.


BP-HRMS and the BSC.
The balanced scorecard philosophy should be applied at all levels of the organization. A balanced approach to employee performance appraisal in BP–HRMS is an effective way of getting a complete look at an employee's work performance.

By using BP–HRMS one can tie balanced measures to performance management. Then with the help of the feedback from supervisors, teams, and employees, managers review the results and align employee performance plans with organizational goals. By balancing the measures used in employee performance plans the performance picture becomes complete.


In BP-HRMS with each goal one can attach the following:

  • Title: A clear title that explains its importance.
  • Purpose: For example, measuring rate of improvement.
  • Relates to: Which business objective?
  • Target: Defining the level of improvement expected and the time frame.
  • Formula: Specifying the way performance is measured taking into account peoples’ behavior.
  • Frequency of measurement.
  • Frequency of review.
  • The person who measures.
  • Source of data for the measurement.
  • The person or team who should review the data.
  • Their rating on the employee’s performance.

The use of this software can help ensure that measurement stimulates improvement and issues and challenges are discussed.

 
Business Pointers, Incorporated
Address: 12020 Sunrise Valley Drive Suite 104 Reston, VA 20191, Tel: 1-(703)-723-9979