An employee performance review often is an isolated evaluation of an individual based on that person’s specific functional roles and responsibilities, sometimes in context of department or divisional goals, but not always relating to the rest of the business.
Just imagine, then, how much more powerful that process could be if each employee’s work aligned with companywide objectives and if every employee understood both the company’s high-level strategy and how to contribute to its success. That’s the promise of a fact-based performance-management system. A balanced-scorecard approach, for example, ties each worker’s results to the mission, vision, and goals of the larger organization.
Balanced scorecards began gaining popularity in the mid-1990s, when management gurus Robert Kaplan and David Norton introduced the idea of balancing traditional performance measures with more progressive indicators, including customer satisfaction, internal business processes, and operational learning and growth. Leading companies quickly adopted balanced scorecards to assess cross-functional progress and build accountability for a shared set of goals. Today, balanced scorecards have expanded to integrate with employee performance-management systems at all sizes and types of organizations. This approach helps employees connect the dots between what they do every day and what their company
is striving for on a global level.
“One of the greatest advantages of a balanced-scorecard-based performance-management system is that it empowers employees to make decisions and prioritize their work in the best interest of the company, because they know what’s most important to the organization and how their actions contribute to those goals,” said Brian Lassiter, president of the Minnesota Council for Quality and a member of the Malcolm Baldrige National Quality Award Board of Examiners. “When employees understand how they can make a daily impact on their company’s success, it energizes their performance: it’s not just ‘What do I have to get done today?’ but ‘How can I do my job to best contribute to our overall success?’”
Building a balanced scorecard
The first step in building a balanced-scorecard performance-management system is for top leaders to define the most essential elements for organizational success. “In order for a balanced scorecard to be a meaningful tool, it has to broadly reflect the different dimensions of your business, not just financial or operational goals,” Lassiter said.
Company leaders need to take ownership of achieving these goals and be ready to implement them across their organizations, explained Lassiter. They also need to make balanced-scorecard goals accessible and meaningful—relevant indicators employees can see and measure in a systemic, repeatable way; that promote organizational learning; and that motivate and inspire employees.
Laura Ponticello, a national leadership advisor and president of 4 C Company, agrees. “Ultimately, a balanced scorecard is a communication vehicle that helps build accountability at all levels, translating a company’s mission and overarching strategy into team and individual goals,” she said.
From the top down, all members of an organization need to know what the performance targets are, why management selected these targets, and how the organization will meet, track and report performance, said Ponticello. The targets should be challenging but attainable, and employees should be able to see how—at a tactical level—they’re helping move the company forward. “You want your employees to start thinking like business owners, and freely sharing information is a key component of that,” she explained.
Lassiter cited the example of a midsized hospital that’s been especially effective in making balanced-scorecard indicators relevant to all employees. The hospital developed trifold wallet cards featuring the organization’s mission, vision, and values; its annual objectives; and each department’s goals for the year. The card included space for every employee to write how they, in their roles, would support those goals. “From the housekeepers to the doctors and nurses, everyone carries these cards with them every day,” said Lassiter. “That’s a very powerful testament to how employees can personally embrace this idea of organizational success.”
Performance system do’s and don’ts
Each organization must tailor its balanced scorecard to its unique goals and vision. However, some established best practices can help anyone build and implement this type of employee performance-management system. Ponticello offered the following performance-management do’s for company managers:
• Include a combination of factors that capture the complexity of your business.
• Make your scorecard targets simple and understandable.
• Create clear links from the top-line factors to departmental and individual objectives.
• Clearly communicate to employees the balanced-scorecard structure and include them in the process, especially in developing the goals that are “closest” to them and the work they do.
• Name a high-level internal champion with responsibility for promoting and implementing the balanced-scorecard system.
• Reward achievements through team bonuses or other incentives to reinforce collaboration and shared ownership for success.
Following are some of Ponticello’s top don’ts for a performance-management system:
• Choose targets you can’t easily or consistently measure.
• Implement the system before your executive team fully supports the approach.
• Pick goals that promote silos, but instead find cross-functional goals that build unity.
• Include so many factors that the scorecard becomes confusing or overwhelming.
• Spend too much time on the logistics of managing the scorecard and neglect employee communication, training, and education.
• Forget to celebrate success.
A mechanism for learning
Balanced scorecards are all about learning, both in terms of the employees who contribute to them and the organizations that grow from them, Lassiter said. “By aligning everyone’s efforts around shared goals, you have a rare opportunity to harness your collective energy and advance your organization in ways individuals can’t do alone,” he said. “Suddenly, you’re using data to make decisions and optimize performance in a way you couldn’t before. That means employees have new ways to excel at what they do and can take pride not only in their personal accomplishments, but in how all those accomplishments add up to a stronger, more successful organization.” IBI