Aligning Rewards and Recognition through Balanced Score cards

By rolling out individual score cards across an organization, employees are made accountable for their activities and results, creating a shared responsibility for achievement and ensuring employees’ on-the-job activities support the corporate strategy’s execution.

The right rewards and recognition systems enable an organization to reinforce behaviors through the use of personal balanced score cards. Most forms of rewards and recognition are connected to a successfully completed initiative or qualitative accomplishment, and they are tailored to a company’s culture and available resources.

Effective managers also work to discover the types of rewards and recognition their employees value most. For example, some employees might feel more motivated by a one-on-one expression of supervisory appreciation for their performance, and others thrive on public recognition.

Rewards are most commonly cash bonuses, but they can include prizes with cash value such as a trip or tickets to a sports event. Recognition can take numerous forms: a publicly presented award, a handwritten thank-you note, a celebratory lunch or an article in the company newsletter that praises an exceptional employee.

Other forms of reward might include a plum job assignment, promotion, introduction to a company officer to increase an employee’s visibility and other valued opportunities — many of which cost little or no money.

Incentive compensation, a component of total compensation packages, also can help companies drive performance. At organizations that use balanced score cards, incentive compensation can tie a percentage of an individual’s pay to a blend of personal score card performance and overall corporate performance.

The most effective incentive compensation plans identify one key measure from each score card perspective as a trigger for incentives. Even if financial measures are met or exceeded, employees should not receive a payout if performance on nonfinancial measures falls below target.

When should you link incentive compensation to the balanced score card? Timing is important, although there is no universal answer. Many companies phase in execution of their incentive compensation plans.

For example, during Phase 1, executive team members start earning variable pay based on their personal score card performance. This approach enables the company to test the soundness of measures and data (and the fairness of targets), as well as to ensure the score card is functioning properly.

Once measures have been refined, and executives feel confident they’re driving the right behaviors, the plan can be extended to the entire workforce. Starting with the executive team also demonstrates to the rest of the workforce that senior leaders are willing to put their own compensation on the line — thus modeling desired behavior.

A common regret executives express is waiting too long to tie compensation to balanced score card performance. Phasing in can be a powerful way to maintain momentum. Ideally, incentive compensation plans should be rolled out to the individual level by the end of the second year.

The HR processes described above offer a powerful array of levers for ensuring your employees deliver as promised on their personal score cards. By manipulating these levers skillfully, you can align every member of your workforce behind the company’s strategy.