It is important in the management of any organization to keep track of the performance of employees and the organization at large. This has led to performance management. This is simply defined as the collaboration between employers and employees with an aim to monitor, plan and review the objectives and input of the employees in the organization. Contrary to an annual assessment whereby the functioning of an organization is assessed on an annual basis, performance management is continuous involving the setting up of objectives, review of the progress and provision of supplementary services such as feedback to ensure that progress is in order. The main objective of this system is thus to ensure that employees are functioning effectively. It is thus important to have a human resource management team to boost the performance evaluation process. In this essay we are going to cover all about the balanced scorecard, its definition, how it can be used to manage performance, and its advantages in effectively evaluating an organization’s performance.
General Overview of Performance Management Tools
Besides the functions of the human resource team towards performance evaluation, the system has to have certain characteristics that maintains efficient service delivery. Some of the characteristics include job specification, accordance with values and cultures of the organization, clear picture of the work done by an employee, the measurement of results, be able to provide performance improvement solutions, determination of areas and their performance. Supportive on decision making, identify clear routes for communication between superiors and their subordinates among others. These ensure an up to date management tool.
It is therefore necessary to identify some of the performance management tools that conform to most of the stated attributes. A survey conducted indicated that the key performance indicator is the widely used tool followed by the performance appraisal tool which has a usage of 60%, compared to the former which has 75% usage. The third most widely used tool is the mission and vision statements with usage of about 50% followed by management dashboards at fourth place. The fifth most effective performance management tool is the balanced scorecard (Marr, 2014).
The Balanced Scorecard
The idea behind balanced scorecards was derived from the Early-metric-driven-incentives. These were systems that were meant to increase the productivity of the company on the financial front by either reducing the costs or increasing the productivity. These systems later evolved to the balanced scorecards as devised by Robert .S. Kaplan and David. Norton (Kaplan & Norton, 2007). A balanced scorecard id therefore a management plan system that is used to coordinate the business activities within the statement of the company. On a lemans language, the scorecard puts the mission statement of the company into an applicable approach. It is therefore important for any organization willing to use a scorecard in performance evaluation to be well conversant with the mission statement of the company and the strategic plan (Jackson , 2017).
Approaches Of a balanced Scorecard
The perspectives behind a balance scorecard are four and are intertwined meaning that success in one department may lead to loss in the other (Caule, 2008). To begin with is the financial perspective of a scorecard. Simply put, this refers to the financial vision and approaches of any organisation.It may entail capital returns, the financial returns and the cash flow of the company’s liquid assets. In this perspective, the balanced scorecard is used to determine and understand the financial performance of the company.
The second perspective is the customer. The customer is regarded as part of an organization and hence there are some areas that the scorecard has to consider. Some of these areas include the rate at which the customers are satisfied, the ability of an organization to retain customers, the rate of performance delivery by the organization to the customer, the percentage of the customers in the market and the quality performance towards customers.
The ability of the organization to learn and grow is the fourth perspective of a balanced scorecard. In this perspective, all factors that may limit the growth of the company are critically observed and analyzed. Some of these factors may include: the expertise level in the organization, the rate of employee turnover, ability to educate and offer training to the employees and the job satisfaction within the organizational. All these are factors which may limit the growth of an organization. With the information from the scorecard, the employees can empower themselves into having a competitive edge in the market.
The final perspective considers the functioning of the business on an inner side. It considers many aspects of the business functioning such as processes involving functional activities, bottlenecks, relationships between departments among others. This is an evaluation to determine how effective the manufacturing process is and to provide measures for a smoother operation
Advantages of a Balanced Scorecard
In achieving the good morals of any organization, the four perspectives of an organiosation need to be considered. These four perspectives may limit the growth of the company and by using a scorecard to separate them, there is an efficient system that tracks the business in terms of development and growth. More to that, the objectives and targets of the organization are kept in plain sight enabling and fostering growth. It is therefore worthwhile to note that a properly designed balanced scorecard should result in: an improvement in the processes, reinvigorated employees, proper communication channels, well monitored employee’s progress, an increase in customer satisfaction and increased financial management and usage (Niven, 2006).
The balanced scorecard is a way in which the performance of the company can be monitored on a continuous basis. With proper implementation to reduce some redundant processes, the end result is an effective organisation.More to that, the scorecard enables the organization to monitor the market and customers resulting in effective service delivery. Therefore, regardless of a company’s stature, there should be a performance management tool.
Caule, S. (2008). The Balanced Scorecard:A security Tool in Implementing Homeland Security Strategies. HOMELA AND SECURITY AFFAIRS.
Jackson , T. (2017, April 25). The 9 Most Popular Balanced Scorecard Aricles On the ClearPoint Blog. Retrieved from clearpoint strategy: www.clearpointstrategy.com/ 9-Most-Popular-Balanced-Scorecard-Aricles-On-the-ClearPoint Blog
Kaplan, R. S., & Norton, D. P. (2007). using the balance scorecard as a strategic management system. Harvard business review.
Marr, B. (2014, May 22). performance management tools:good news and cautionary tales. Retrieved from linkedin: linkedin.com/pulse/20140522054403-the-5-most-popular-tools-to-manage-performance
Niven, P. R. (2006). Balanced Scorecard Step-by-Step:Maximizing Performance and maintaining Results.