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Is the Balanced Scorecard Approach better than other systems of Managing Performance?

Is the Balanced Scorecard Approach better than other systems of Managing Performance?

To those who have no knowledge of the balanced scorecard approach to performance management I encourage you to read my previous articles on the same subject. There has been debate in both the corporate world and academic circles on whether the balanced scorecard approach is better than other systems of managing performance. My answer to this question is yes and it’s based on several years of experience using the balanced scorecard approach both locally and regionally.

First, I must make it very clear that the Balanced Scorecard will yield the desired results provided certain conditions exist within the implementing organisation. Top among these conditions is that there must be unwavering support from both the Board of Directors and top executives. The second factor is that top management must be willing to use the balanced scorecard approach as a management tool and make it part of the culture of the organisation. Just like budgeting, the balanced scorecard must be used as one of the many tools in the management tool kit. The third factor is that the balanced scorecard must be used to recognise those adding more value to the organisation and they must be rewarded accordingly. Without recognising those achieving the desired results over and above the call of duty the balanced scorecard will fail.

When the above conditions have been met the balanced scorecard approach will yield good results for your organisation provided its implemented properly. The major reason why some scorecard initiatives fail is that many organisations fail to take advantage of one of the key advantages of the balanced scorecard which is the ability to bring out measurable goals. There has been confusion for decades on how to define performance. While others would want to take performance as the process used in achieving results, the more recent and more effective definition is the one that looks at performance as an output or result. Due to the confusion surrounding the definition of performance some organisations have focused on measuring behaviour or personality and calling that performance. The danger with such an approach is that both dimensions are very subjective and are often used by managers to settle scores with employees. This results in employees resenting performance management and more specifically performance appraisals.

One factor that is sure to derail the success of any performance management system is how performance is measured. In the majority of cases we have tended to focus on things that are not measurable and calling these performance. People often refer to action plans as goals when in fact action plans are activities undertaken in order to achieve a goal. With this wrong categorisation of goals some organisations end up rewarding people for engaging in activities that have no direct impact on the outcome. I already see this confusion in the government where there are very few tangible goals set but an avalanche of action plans with no direct link to any specific goal. The following example will help you understand why it’s necessary to distinguish between a goal and an action plan. There was a beekeeper with two sections: section A and section B. In both sections the management there were mandated to come up with the best way to measure the performance of the bees and reward them accordingly. In section A the bees were measured on the number of flowers visited and in section B on the amount of nectar collected. After a few months after the introduction of the of the system section B was far ahead in terms of producing honey than section A. In section A the bees were moving from one flower to the other in order to reach the target of visiting as many floors as possible. In the process of visiting as many flowers as possible they lost sight of the overriding goals of producing more honey for exports. I am sure if bees in section A were given a clear goal they would have produced a different result. Look at your organisation: how many people are visiting flowers and not collecting nectar because of the way goals are set and how the rewards are structured. The government might run the risk of visiting too many flowers without actually collecting the nectar because of how their goals have been structured.

Most of the items called goals are not goals but action plans. The majority of what are termed goals or objectives are not measureable at all. They suffer from the following problems: they are actions and not results, they are about planning to plan, they are made up of high sounding words such as: accountable, aligned, capacity, collaborative, commitment, ensure, promote, stabilise, enhanced, maintain, optimise, robust, sustainable etc. These are the words you find in documents that are not written in results language and they yield very little results if any at all. Most strategy documents suffer from this problem. When something is said to be measurable you must be able to: to count it, you must be able to observe it-to see it, hear it, touch it, detect it objectively and consistently. In order to observe something you must be able to describe it and separate it from other things so that you can recognise it.

How do you then structure the goals so that you can start collecting nectar? Goals must be structured in the following ways. Within the balanced scorecard approach a goal is made up of a: goal, measure, baseline target, stretch target and reporting frequency. The goal must always start with an action verb such as grow revenue, build a strong employer brand, reduce costs, create new jobs, increase capacity utilisation etc. Your measures are the indicators of performance. On the goal of growing revenue the measure will be “percentage growth in revenue”, on the goal of building a strong employer brand you could have the following measures; employee satisfaction index, percentage retention of competent staff, % of offer letters accepted by new recruits and % of new recruits who resign before completing probation . A target within the balanced scorecard framework is the desired level of performance. You should never have a date as the desired level of performance. There are two types of targets; the baseline target which represents the minimum performance required. The baseline target is that performance for which an employee is earning their basic salary and other fixed benefits. If they fail to achieve the baseline target even disciplinary action must be instituted. The other target is the stretch target which represents performance that deserves recognition. Within the balanced scorecard framework we have what is called the reporting frequency. This indicates the period within which the target will be assessed or tracked. This can be daily, weekly, monthly, quarterly or yearly. After coming up with the goals it is advisable that you start working on activities or action plans that will enable you to achieve the goals. Employees must remember that they will not be rewarded for auctioning action plans but for achieving the agreed goals and targets.

Setting goals in this format ensures that you do not pay people for “corridor mileage” or “visiting flowers”. I have no doubt that performance management failures are a failure of leadership. The lack of performance culture in any organisation should be placed squarely on the CEO of the organisation.

 

Memory Nguwi. Memory Nguwi is an Occupational Psychologist, Data Scientist, Speaker, & Managing Consultant- Industrial Psychology Consultants (Pvt) Ltd a management and human resources consulting firm. He is the president of the Zimbabwe Psychology Association. He hosts a radio program HR Perspective every Thursday at 1900hrs on Capitalk 100.4FM. https://www.linkedin.com/in/memorynguwi/ Phone 481946-48/481950/2900276/2900966 or cell number 077 2356 361 or email: mnguwi@ipcconsultants.com  or visit our website at www.ipcconsultants.com

 

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