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An employee performance review often is an isolated evaluation of an individual based on that person’s specific functional roles and responsibilities, sometimes in context of department or divisional goals, but not always relating to the rest of the business.

Just imagine, then, how much more powerful that process could be if each employee’s work aligned with company wide objectives and if every employee understood both the company’s high-level strategy and how to contribute to its success. That’s the promise of a fact-based performance-management system. A balanced-scorecard approach, for example, ties each worker’s results to the mission, vision and goals of the larger organization.

Balanced scorecards began gaining popularity in the mid-1990s, when management gurus Robert Kaplan and David Norton introduced the idea of balancing traditional performance measures with more progressive indicators, including customer satisfaction, internal business processes, and operational learning and growth. Leading companies quickly adopted balanced scorecards to assess cross-functional progress and build accountability for a shared set of goals.

Today, balanced scorecards have expanded to integrate with employee performance-management systems at all sizes and types of organizations. This approach helps employees connect the dots between what they do every day and what their company is striving for on a global level.

"One of the greatest advantages of a balanced-scorecard-based performance- management system is that item powers employees to make decisions and prioritize their work in the best interest of the company, because they know what’s most important to the organization and how their actions contribute to those goals,"says Brian Lassiter, president of the Minnesota Council for Quality and a member of the Malcolm Baldrige National Quality Award Board of Examiners. "When employees understand how they can make a daily impact on their company’s success, it energizes their performance: It’s not just ’What do I have to get done today?’ but ’How can I do my job to best contribute to our overall success?’"

Building a balanced scorecard
The first step in building a balanced-scorecard performance-management system is for top leaders to define the most essential elements for organizational success.

"In order for a balanced scorecard to be a meaningful tool, it has to broadly reflect the different dimensions of your business, not just financial or operational goals," Lassiter says. Company leaders need to take ownership of achieving these goals and be ready to implement them across their organizations, Lassiter says. They also need to make balanced-scorecard goals accessible and meaningful — relevant indicators that employees can see and measure in a systemic, repeatable way; that promote organizational learning; and that motivate and inspire employees.

Laura L. Ponticello, a national leadership advisor and president of 4 C Company, agrees.

"Ultimately,a balanced scorecard is a communication vehicle that helps build accountability at all levels, translating a company’s mission and overarching strategy into team and individual goals," Ponticello says.

From the top down, all members of an organization need to know what the performance targets are, why management selected these targets, and how the organization will meet, track and report performance, Ponticello says. The targets should be challenging but attainable, and employees should be able to see how, at a tactical level, they are helping to move the company forward.

"You want your employees to start thinking like business owners, and freely sharing information is a key component of that," Ponticello says.

Lassiter cites the example of a midsized hospital that has been especially effective in making balanced-scorecard indicators relevant to all employees. The hospital developed trifold wallet cards that feature the organization’s mission,vision and values; its annual objectives; and each department’s goals for the year. The card included space for every employee to write how they, in their roles, would support those goals.

"From the housekeepers to the doctors and nurses, everyone carries these cards with them every day," Lassiter says. "That’s a very powerful testament to how employees can personally embrace this idea of organizational success."

Performance system "dos and don’ts"
Each organization must tailor its balanced scorecard to its unique goals and vision. However, some established best practices can help anyone build and implement this type of employee performance-management system.

Ponticello offers the following performance-management "dos" for company managers. Do:

• Include a combination of factors that capture the complexity of your business.
• Make your scorecard targets simple and understandable.
• Create clear links from the top-line factors to departmental and individual objectives.
• Clearly communicate to employees the balanced-scorecard structure and include them in the process, especially in developing the goals that are"closest" to them and the work they do.
• Name a high-level internal champion with responsibility for promoting and implementing the balanced-scorecard system.
• Reward achievements through team-based bonuses or other incentives to reinforce collaboration and shared ownership for success.

Following are some of Ponticello’s top "don’ts" for a performance-management system. Don’t:

• Choose targets you can’t easily or consistently measure.
• Implement the system before your executive team fully supports the approach.
• Pick goals that promote silos, but find cross-functional goals that build unity.
• Include so many factors that the scorecard becomes confusing or overwhelming.
• Spend so much time on the logistics of managing the scorecard that you neglect employee communication, training and education.
• Forget to celebrate success.

A mechanism for learning
Balanced scorecards are all about learning, both in terms of the employees who contribute to them and the organizations that grow from them, Lassiter says.

"By aligning everyone’s efforts around shared goals, you have a rare opportunity to harness your collective energy and advance your organization in ways individuals can’t do alone," he says. "Suddenly, you’re using data to make decisions and optimize performancein a way you couldn’t before. That means that employees have new ways to excel at what they do and can take pride not only in their personal accomplishments but in how all those accomplishments add up to a stronger, more successful organization."