Who do scorecards help more—senior management or the workers? The answer is a moot point if there is a win-win result for both groups. Management and em- ployees equally benefit from scorecards. But a note of caution: There are organi- zational obstacles that can hamper a successful application of strategy maps and scorecards. For example, is the intent that it be a scorecard or a report card? Will it be used for punishment, or for remedy and root cause analysis and corrective action collectively?
Regardless of which particular KPI measurements are selected, the resulting tool should be a scorecard, not a report card. There is a distinction. Scorecards are not about accounting police work. They are not about who has been good and who has been bad. Scorecard systems are about uniting the organizational mus- cle to get much more traction. It is true that responsibility and accountability are important. However, for many employee teams, much of what they strive for is influenced by the priorities and performance of their coworkers. Therefore, as was described in Step 5 in Chapter 7, executive teams should allow their man- agers and employee teams to select their own measures that support the strategic objectives. They should try less to simply monitor performance with the sole purpose of making harsh judgments, but rather monitor performance to generate feedback communications about what needs to be adjusted. In other words, man- agers and employee teams should contribute to the selection of the measures.
They usually know their surroundings better than anyone else does.
An online survey by Pepperdine University1from scorecard teams who vol- unteered information has helped in understanding differences between success- ful and unsuccessful scorecard implementations. A prominent differentiator is the attitude of senior management. Once again, will KPI scores be used by exec- utive management for punishment or to foster remedies? Will management view its benefit from a scorecard system as a return of power over employees and a chance to reclaim the command-and-control style of management from the past?
Or will it view the scorecard as a tool to benefit employee teams and collectively aid in improving the organization’s direction, traction, and speed?
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Will it be a scorecard or a report card? What is the difference?
Ascorecardis an individual’s personal resource for monitoring his or her own performance.
Areport cardis a measure of someone else’s standard imposed on others.
What emotional response did you just feel when you read those descriptions?
Many readers might revert back to grade school memories of anxiously awaiting their grades—the teacher’s assessment of their classroom performance. Fear and anxiety prevail with report cards. If management can wisely introduce score- cards as an instrument for navigating direction and priorities rather than as a search for the guilty, then a scorecard system will be more effective.
The difference between a scorecard and a report card can be seen by consider- ing the differences between a scorecard and a scoreboard at a baseball game.
Think of the scoreboard as the report card. With a scoreboard we only view the outcome—which team has more runs. Similar to a report card, a scoreboard tells very little as to why the results occurred. With a scorecard, every play is recorded, which enables one to go back and analyze what events influenced the outcome. Should the batter have bunted to advance an on-base runner, or was it wiser to allow the batter to swing away? Scorecard users can review these events with an eye to potentially do things differently in the future. Some baseball fans record substantial detail in their scorecard, including the number of balls and strikes for each batter’s trip to home plate. The level of detail depends on what will be useful for interpreting and analyzing the results. The lesson here is to measure what matters for relevance in the context of improving things.
THE HUMAN SIDE OF COLLABORATION 73
Role of Consequences and Financial Incentives
A counterview advocating scoreboard thinking suggests that reporting actual scores be not simply for the pleasure and curiosity of workers and managers.
A key principle must be considered: Measurements without consequences won’t impact behavior.aWhat should be the reaction when actual KPI scores significantly deviate from KPI target levels or amounts? An altruistic view would be that the organization should quickly shift its focus to the under- achieved strategic objectives—the red traffic lights—and marshal its energies to identify and remedy the problems.
The counterview, which considers the nuances of human behavior, is that (Continued) ccc_cokins_08_68-74.qxd 1/14/04 10:25 AM Page 73
NOTE
1. Bill Stratton and Raef Lawson, “The Use and Adoption of Scorecarding in North America: Who Is Doing What?” preliminary findings; presentation to Consortium for Advanced Manufacturing International, Portland, Ore- gon, September 10, 2002.
74 STRATEGY MAPS AND BALANCED SCORECARDS
Role of Consequences and Financial Incentives (Continued) a single individual (or at least a small number of employees) should own the strategic objective and its measures, and be held accountable for its perfor- mance. The consequence from a reported unfavorable score variance does not automatically mean some form of adverse judgment or punishment should be made. Rewards can be applied for positive reinforcement to encourage good performance, rather than discouraging workers with penalties. But some form of consequence should periodically happen when KPI scores are reported.
Does this mean we should link scorecard performance with employee compensation? Has “pay for performance” finally discovered a truly valid and equitable method with scorecarding for effectively managing a variable com- pensation incentive program? I have yet to take a position on this, but there seem to be two schools of thought:
1. Do not mix scorecards and pay. This opinion holds that a formal link- age of scorecards and salary adjustments (up or down) is the fastest way to ruin the sustained use of a scorecard system.
2. Financial rewards are the most effective way to focus employee ener- gies. People with this opinion believe that adding financial rewards creates the fine gear wheels to assure essential organizational traction for the scorecard system, aligning people’s work and accomplishments with the strategic objectives, vision, and mission.
Both positions have strong supporting arguments. What may be true is that simply rewarding pay raises based only on the most lagging high-level (and likely financial) KPIs, such as profits and return on equity (ROE), merely adds costs to the detriment of shareholders! The levers that contribute to profits are beyond the influence and control of the vast majority of employees. If an or- ganization were to apply a pay-for-performance compensation program, the pay should be linked to the employee’s scorecard, not to the scorecards of others, or some weighted combination should be considered.
aBill Abernathy, Abernathy & Associates, Memphis, Tennessee at a CPA Manufacturing Services Association (MSA) workshop, January 8, 1998.
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