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Personal Scorecards: Aligning Individual Performance with Strategic Objectives

Personal Scorecards: Aligning Individual Performance with Strategic Objectives.

Principle three of the five principles of the strategy-focused organization, as described by Drs Robert Kaplan and David Norton, is ‘make strategy, everyone’s job’. Key sub-components of this principle are ‘balanced paychecks’ (i.e. align employees compensation to strategic goals via the Balanced Scorecard) and ‘personal scorecards’ (create scorecards at the individual employee level).

We discuss compensation and the Balanced Scorecard system elsewhere in this section. In this article we focus on personal scorecards.

The Final Step in an Ideal Scorecard Cascade

In an ideal scorecard cascade, personal scorecards serve as the final step in the process from corporate, divisional, business unit, functional, team and individual levels – or however the organization is structured. The belief is that cascading the scorecard to the deepest level of the organization fully aligns the individual’s objectives to those of the enterprise.

Moreover, the argument goes that such a family of cascaded scorecards enables a degree of transparency into organizational performance that would typically have been impossible to achieve previously. And at the individual level, the scorecard should impose the same discipline around performance as do higher level scorecards. Simply, the personal scorecard should serve as the only appraisal system used within the organization.

The Balanced Scorecard Manager at a large India-based telecommunications company comments: “Within my organization an individual scorecard typically includes specific objectives, measures, targets and initiatives. The individual scorecards serve as the organization’s performance appraisal process. No other performance frameworks exist apart from the individual scorecards. The alignment of the performance management system with the Balanced Scorecard, and the simultaneous scrapping of the earlier performance appraisal system, sent a powerful message as to the seriousness with which the senior management team took the scorecard concept.”

Arguments Against Personal Scorecards

Yet despite the apparently unarguable advantages of creating personal scorecards, they are still little used in organizations. Personal scorecards are often avoided due to the difficulty in ensuring that they are both aligned to higher level scorecards and are meaningful to the individual employee. One consultant comments:

“When it comes to cascading the scorecard I can see the value of devolving to the team level. Team scorecards can be broken down into objectives for the individual, but I don’t like the idea of a personal scorecard at the lowest levels of the organizations with four perspectives full of objectives and measures,” he says. “Creating a four perspectives scorecard that individuals can personally influence is extraordinarily difficult, and usually as demotivating as it is unhelpful.”

This comment highlights a very useful learning. Too many lower-level scorecards comprise objectives and measures that are beyond the control of staff. For example, if a teller in a branch is to be measured against a customer satisfaction score, and this is an aggregate of the speed of service and satisfaction with personal attention, then there is little they can do to influence this scorecard if the regional office has cut teller numbers, so forcing irritated customers to spend longer in queues. Simply, personal scorecards can only be effective when the employee can personally influence the measures.

Mobil Oil Case Example

In saying that, one of the much-celebrated pioneers of the Balanced Scorecard movement, Mobil Oil’s North American Marketing and Refining Division’s Lubricants Business Unit, created individual scorecards that comprised all four perspectives. The unit’s scorecard team asked employees to develop individual personal scorecards using the following rules:

- The scorecard should have at least one objective and measure per perspective.
- There must not be more than 15 measures.
- The individual scorecard must support the supervisor/manager’s scorecard.
- The scorecard must include a mix of lead and lag indicators.
- Every supervisor/manager must have an objective and measure related to coaching, counseling or employee development.
- The scorecard must include an objective and measure that supports another part of the business.
- Any change must be agreed by both the supervisor and employee.

However, the simple fact that fully 13 years after Mobil Oil’s scorecard was put in place we still need to cite this as a best practice example itself tells a powerful story of the rarity of four perspective personal scorecards.

Truncated Personal Scorecards

More commonly, many companies create personal scorecards that comprise only the perspectives that the individual can influence. For instance, Indonesia-based property developer Summarecon first came to the scorecard when seeking a way to better motivate employees and align their performance with the goals of the enterprise. This alignment was made through personal scorecards. On these scorecards, employees have accountability statements that have objectives and measures set against perspectives that they most impact, thus enabling line of sight from individual performance up to unit and corporate scorecard performance.

Scotiabank Case Example

As a further example, consider the Toronto, Ontario, Canada headquartered banking giant, Scotiabank, which has fully integrated the performance management system with the Balanced Scorecard. Within Scotiabank, scorecards were purposefully developed to achieve consistency in performance focus and measurement across the enterprise. For instance, throughout Canada, the scorecards of the branch managers are identical in that they will consist of the four perspectives of financial, customer, operations and employee, and will be subjected to a common measurement process. For example, a branch manager’s scorecard includes a measure of satisfaction/engagement of branch employees. However, the goals and targets may change from region to region and perhaps branch to branch, depending on local requirements.

Similar scorecards have been created for other levels, such as customer service managers and cashiers. For example, the scorecard for customer service managers, who are responsible for the operations of the branch, includes the objective from the ‘operational’ perspective of ‘effective facilities management’. A measure of this could be the management of ATM down times. Personal banking officer will have a measure of the number of contacts with key customers.

Competency Development

Importantly, managers within Scotiabank have objectives and measures around the coaching and development of their direct reports (as was the case at Mobil Oil all those years ago). This signals another key learning about personal scorecards. As well as objectives, measures and targets, they should focus on personal competency development, which will be captured in the initiative component of the scorecard. One consultant provides this overview of the importance of competency development.

“A key determinant of whether true alignment can be achieved is the extent to which the organization has the appropriate capability to deliver its results. It is important to put in place a system that not only helps individuals understand the targets that they need to achieve but also the capability that they need to demonstrate. I have found this to be extremely rewarding for the organization and the individual.”

He continues that the individual is not only shown ‘what’ they must achieve, but also ‘how’ they can achieve this. “The ‘what’ comes from the creation of an individual scorecard or the selection of key measures/targets from a team scorecard,” he says. “The ‘how’ is provided by the identification of a set of competencies that are found to be related to the demonstration of ‘excellent’ performance. Encouraging the individual to develop these competencies will also help to improve the organization’s capability, which will over time increase its ability to achieve its strategic objectives.”

Personal Scorecards for the Senior Team

Although it is difficult to create personal scorecards at the deepest level of organizations, this is not the case with regards to senior managers. Naturally, the higher up the organization a person sits the greater their ability to influence performance – and against all four perspectives. For instance, the commissioner of the 23,000 employee-strong Royal Canadian Mounted Police (a BSCol Hall of Fame Inductee) Guiliano Zaccaredelli, the top ranking police officer, has a scorecard which is part of his performance agreement with the government minister to whom he reports. Creating personal scorecards for the CEO (or alternative) is a powerful way to improve corporate governance as it enables the non-executive board greater transparency into the performance of the organization’s top ranking officers.

Conclusion

To conclude, personal scorecards, comprising four perspectives (or however many there are in the enterprise level scorecard), should certainly be created at the highest level. But as personal scorecards are devolved deeper into the organization they might be truncated so that they enable the employees to effectively use the scorecard as a mechanism for improving their own performance and seeing how their efforts impact scorecards higher up the organization; consequently, perspectives might drop from the personal scorecard if it is overly challenging to demonstrate the impact of the individual. In the final analysis, keep in mind that the goal should be to improve performance by using the Balanced Scorecard, not to create a text-book perfect scorecard cascade.

Additional Info

  • Summary:

    The article begins with what is the ultimate objective of a strategic performance management initiative like the Balanced Scorecard – ‘to make strategy everyone’s job.’ To do so, organizations need to align individual performance with the strategic objectives. In this endeavor,
    personal Scorecards assume significance as a central tool.    

    In an ideal scorecard cascade, personal scorecards serve as the final step in the process, starting from corporate, divisional, business unit, functional, and team to individual levels. The underlying belief is that cascading the scorecard to the deepest level of the organization fully aligns the individual’s objectives to the organization’s objectives.

    Personal scorecards also introduce a high degree of transparency into organizational performance and also serve as the only appraisal system within the organization.

    The article also presents the arguments against personal scorecards – such as the difficulties encountered in aligning personal scorecards to higher level scorecards, and making a personal scorecard meaningful for the employee.

    An important lesson emerging from this analysis is that personal scorecards can only be effective when the employee can personally influence the measures.   

    Moving on, the article presents the experience of Mobil Oil in developing personal scorecards that incorporate all four strategic perspectives of the Balanced Scorecard. The article also cautions that a four-perspective personal scorecard is an exception rather than the norm and discusses the development of truncated personal scorecards (using examples drawn from Scotiabank and the Royal Canadian Mounted Police), to ensure that they remain meaningful and manageable.