Scorecard Best Practices

Linking Performance Measures to Compensation and Rewards

There is debate about the motivational effect of linking performance measures to compensation and rewards. Logically, it makes sense that compensating an employee for attaining a goal—especially monetary compensation—should motivate employees to act in accordance with the targets set. Many of the survey respondents agreed with this motivational technique. For example, one respondent stated: “The annual bonus system for all managers and professionals is calculated on the basis of achieved targets from a scorecard system.”

However, there are several caveats surrounding the use of monetary rewards for achieving targets. For example, according to the results of the SHAPs survey and research done by the Faculty of Economics and Business Administration at Ghent University, Belgium¹ , employees are motivated when:

Measures that are used to evaluate their performance are within their control and/or within their influence, and

Targets set for those measures are attainable.

When measures used to evaluate employees are not within their control or sphere of influence, then a contra‐reaction often occurs—it has a very de‐motivating effect. The same can be true with targets that are set for the purposes of evaluation. If the targets are too low, employees will not strive to improve. If they are too high, employees may decide not to try to attain them because they feel that they will only fail anyway.

When measures used to evaluate employees ...