Scorecard Best Practices

An Eventual Link to Compensation and Reward Systems

The SHAPs study found that organizations with a strong link between the measures appearing on their scorecards and those used to set employee compensation and rewards achieve greater benefits from their scorecard system. Often, this causes a shift in behavior—previously the rewards may not have been based on measurable strategy supporting goals. Too often rewards and compensation were based on operational measures that may not directly support the organization's strategic goals (or worse, be based on a subjective assessment by a manager).

Aligning the strategic performance measures that appear on scorecards of managers and employees with those used to set compensation and rewards helps to foster a supportive environment. However, this is not without risk. The downside of doing so is that employees may focus on those measures that impact compensation and rewards, which may not be the ones that will help move strategy forward.

Take care in executing this step. Organizations should monitor compensation measures for a sufficient period of time to ensure that they truly motivate employees to act in line with the organization's strategy. In some cases, acting too hastily to link compensation to the scorecard system has resulted in outcomes counter to the organization's strategic goals.