Performance management and evaluation is ideally an ongoing conversation between supervisors and employees to support and eventually accomplish strategic objectives of an organization. Many organizations struggle in this sector because they adopt an annual approach, conducting employee evaluations perennially instead of setting year-long objectives, analyzing the results and providing continuous feedback to the employees about their performance. Though, in the industrial era, the traditional financial performance measures operated well, these are obsolete in the present scenario, when compared to the skills and competencies that companies are trying to achieve today. Research reveals that organizations are more inclined in using a Balanced Scorecard to meet their strategic objectives.
Balanced Scorecard Definition
A balanced scorecard is a performance metric used to identify and develop various internal functions of a business to evaluate their resulting external outcomes. It is mainly used in strategic management for measuring and providing feedback to organizations. Managers monitor implementation of activities by employees and staff within their jurisdiction, through a semi-standard report supported by automation tools and design methods, as well as the consequences of these activities. Data collection is a crucial part of the process for providing quantitative results, as the managers and executives interpret the information gathered, to execute better decisions for the organization.
The balanced scorecard was first published in 1992 in a Harvard Business Review article, introduced by accounting academic Dr. Robert Kaplan and business executive and theorist Dr. David Norton, who took previous metric performance measures and adapted them to include nonfinancial information.
Functions of a Balanced Scorecard:
- Balancing financial and non-financial measures of an organization, including short-term and long-term measures.
- Balancing performance drivers (leading) with outcome measures (lagging).
- Aligning day-to-day work, prioritizing certain projects and services.
- Measuring and monitoring strategic focus and organizational alignment.
Performance Evaluation: Usage
- It Illustrates how an employee’s job contributes to the success of an organization by linking individual work efforts with company’s mission, vision and objectives.
- Focuses attention on setting clear performance expectations (results + actions & behaviors), by setting distinct employee objectives to strive towards success, setting career development goals as part of the process
- Provides a solid rationale for eliminating unnecessary work by using of targets, standards, and performance metrics of various departments.
- Enables employees to quickly identify problems and change course of project or work assignment through regular check-in discussions, which include status updates, coaching and feedback.
- Shifting focus from performance as an annual event by setting an ongoing process by basing performance evaluations on the summary of check-ins & status updates.
Balanced Scorecard Example
Various NPO’s, corporations and State Governments have successfully implemented Balanced Scorecard regarding Performance Evaluation. To know more, check THIS out.
Best Practices for Implementing Balanced Scorecard
- Adopting Balanced Scorecard across all key organizational functions
- A coordinated framework, including a common approach for all organizational performance measurement efforts.
- A common basis and ‘language’ to understand measurement results for all employees of the organization.
- A ‘big picture’ of the organization.
- Utilizing the Balanced Scorecard to yield objective data for business decisions
The data produced by the Balanced Scorecard can be used as a base for business decisions, like allocation of available resources and invoking future direction. This will further integrate the Balanced Scorecard into segregated forms, helping the organization to reach effective decisions.
For example, the Balanced Scorecard could be used as a common basis for supporting a business case for more resources.
- Ensuring commitment at all organizational levels, especially at the top
Superiors as well as subordinates should buy-in into the project. Research clearly portrays that efficient leadership is paramount in creating a positive working environment, nurturing further improvement on performance. Superior management must frequently review and analyze progress and results of improvement efforts. They should also regularly communicate with employees and managers, through formal and informal meetings to display their support and implement new initiatives.
- Focusing on employee training
Comprehensive training should be provided to help employees understand and implement Balanced Scorecard; how these measures are affecting organizational goals and strategy, how to strive for continuous improvement, etc. The training process should include dedicated project improvement teams, to work on exercising sound business judgement and process improvements.
- Aligning reward and recognition systems
Organizations should orient any reward and recognition system with performance improvement as measured through the Balanced Scorecard. Thus, employees will gain more motivation to improve productivity, reinforcing the organization’s drive to meet its objectives.
- Breaking down organizational barriers
Like any other improvement initiative, implementing Balanced Scorecard in an organization will bring about certain changes. These changes might provoke some resistance from different sectors, based on speculations about any perceived adverse effect regarding performance analysis and improvement. So, it’s important to maintain open communication between employees and managers to explain the uses, needs and benefits of implementing Balanced Scorecard, along with their roles. An alternate approach is to demonstrate “success stories” that display the non-threatening aspects of implementing Balanced Scorecard, displaying how organizations target areas that require most improvement, setting benchmark against best-in-class undertakings, etc.
- Balanced approach
Taking an aggressive approach may overwhelm employees, providing a negative effect, thus limiting the success ratio to some extent. However, a relaxed approach may fail to build necessary momentum to fulfill implementation of Balanced Scorecard. A successful Balanced Scorecard requires a balanced, well-planned and realistic framework for deployment.
- Shifting performance measurement to performance management
Incorporating performance evaluation into the existing management structure is important, rather than treating it as a separate entity. This will greatly improve the long-term viability of Balanced Scorecard.
Check out the Balanced Scorecard template below:
Measurement is not the end of the line, rather a tool for more effective management. The results of performance measurement will display what happened, not why it happened, or what to do about it. For an organization to effectively use the results of performance assessment, it must go through the transition from assessment to management. It must also anticipate changes needed for following the strategic direction of the organization, and a compact methodology in place for effecting strategic change. Accomplishment of these two tasks successfully will represent the foundation of good performance management, which can be greatly facilitated by use of the Balanced Scorecard. In other words, besides simply evaluating performance, a Balanced Scorecard yields a structured framework for performance management.
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