Metrics, Scorecard, KPIs

The benefits scorecard is a tool that many companies use to ensure that the compensation and benefits packages offered to employees are mutually beneficial to both the management and to the labor force.

The scorecard approach hinges on the Balanced Scorecard performance system that had been developed by R. Kaplan and D. Norton while they studied in the Harvard Business School back in the early 1990s. Widely accepted by many companies all over the world, this performance system is also often called as a “pay for performance system.” The scorecard is categorized into four important categories namely, learning and growth, internal operations and processes, financial, and client development and satisfaction. The Balanced Scorecard approach became extremely popular because it was deemed by many as a better alternative to the traditional approach that tend to overly focus only on financial measures in evaluating company performance. With the scorecard approach, managers would be able to monitor and assess financial results and at the same time, check and determine how the other capabilities and intangible assets of the company are performing.

The Balanced Scorecard is an effective tool of measuring company performance because it encompasses the financial and non-financial aspects of operations. Moreover, it has also been lately realized that it could be very important in the strategic management process. It can assist in aligning the efforts of the organization and its individual members. In addition, the Balanced Scorecard has also been proven to be helpful in corporate restructuring and in the investment appraisal process. In the same way, the scorecard could also function as a linkage between the compensation system and the attainment of targets for each scorecard perspective.

It is undeniable that in business organizations, everything that could affect how employees are paid gets the attention of employees. For the scorecard approach to be considered important by employees, managers should be able to impress the latter that the scorecard will significantly affect how much they are being paid. At present, this is applied by incorporating a portion of senior management’s compensation to the achievement of certain financial targets, like cash flow, added economic value, and profitability. In the same way, the compensation of junior management is dependent on the attainment of desired operation measures under the internal business and customer perspectives. When common goals for every department are achieved, all team members are given a bonus incentive. The scorecard program also requires junior and senior managers to work with their subordinates in setting performance goals based on individual skills and interests. Employee performance of subordinates are then rated or evaluated based on the achievement of the pre-set goals.

The successful integration of the Balanced Scorecard performance system and benefits scorecard would require a lot of focus and commitment from all members of the organization. While the scorecard concept may be very simple, its implementation may not be as easy. Several business organizations that operated under the misconception that the implementation of the scorecard approach was a no-brainer unfortunately paid a high price for this mistake.

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