Is the Balanced Scorecard approach better any other systems of managing performance?

Implemented correctly, it is still one of the most effective ways to drive performance.

There has been much 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 the 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. A major reason why some scorecard initiatives fail is that many organisations fail to take advantage of the ability to set and affect measurable goals. 

There has been confusion for decades on how to define performance. While some understand performance as the process for achieving results, the more recent and more effective definition is the one that looks at performance as the actual output or result itself. Due to this confusion around the definition, some organisations have focused on behaviours and/or personality traits as measures of 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 performance appraisals in particular.

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. 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 required outcomes. 

This is a phenomenon that is all too common within many African government structures where there are very few tangible goals in comparison to the avalanche of action plans put in place to achieve them. 

Desirable behaviours and actions ore not goals

The majority of things that are general referred to as goals or objectives within a performance management context are often not measurable 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  words like ‘accountable’, ‘aligned’, ‘capacity’, ‘collaborative’, ‘commitment’, ‘ensure’, ‘promote’, ‘stabilise’, ‘enhanced’, ‘maintain’, ‘optimise’, ‘robust’, ‘sustainable’ - you catch my drift.  

These are the words you find in documents that are not written in results language and often 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 count it, see it, hear it, touch it, and detect it both 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.

Within the Balanced Scorecard approach, a goal is made up of five elements - 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. If your goal is to grow revenue, for instance, the measure will be ‘percentage growth in revenue.’ For the goal of building a strong employer brand you could have the following measures; 'employee satisfaction index', percentage retention of competent staff', 'percentage of offer letters accepted by new recruits' and 'percentage of new recruits who resign before completing probation.' 

Setting targets

The target within any Balanced Scorecard framework should always be to achieve a desired level of performance and that shouldn't ever have a deadline attached to it. There are two types of targets: the baseline target, which represents the minimum performance which an employee is earning their basic salary and other fixed benefits whereby failure to achieve the baseline target can result in a disciplinary process; and the stretch target, which represents performance that deserves recognition.

Instead of a deadline for achieving a target, it is better to refer to reporting frequency, which 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 executing the action plans but rather for achieving the agreed goals and targets.