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The Essence Of A Performance Scorecard

May 9, 2008
An employee performance scorecard addresses the fact that every employee needs to be driven. Some may be driven through financial incentives, and some may be looking for something that is intangible, such as self-worth. Others may aspire to become supervisors or business leaders one day. All this will be determined through a systematized and organized performance scorecard that gives employees visibility on how management measures and evaluates their performance.

Employees need to know how they stand in the company and they need to be informed of their strengths and the areas they need to improve on. It will be unjust if they will just be told what to do from time to time. A company needs to set standards on what needs to be achieved to align an employee's goals to organizational goals. These standards are then translated into Key Performance Indicators or KPIs. Many companies measure their employees on a monthly or weekly basis through coaching and documentation of errors and achievements. As a result, action plans are then incorporated in the employee's activities, to ensure that the employee is properly guided and that targets are met.

The most common targets or metrics set in line are productivity, attendance, and behavior. Behavior may seemingly be very subjective, as each company has a different cultural background and social norms. These behavioral indicators need to be discussed carefully during coaching sessions so employees know what is expected of them. It is very important that an employee's expectations are set correctly at the onset of employments, so misunderstanding will not occur. It is also very important for management to be aware of what employees expect or demand from them, so adjustment on policies may be made. These adjustments should contribute to the welfare of the business and its employees as well.

A performance scorecard and how it works should also be transparent. Employees should not be baffled at how their managers come up with the numbers seen in the metrics. For example, attendance and how it is measured should be clear. An employee needs to know how his performance is translated into percentages and how it affects the output of the company as well. It is now very common to see a 5-point scale in measuring performance in many companies. This means that an employee is rated from 1-5, 1 being the lowest and 5 the highest. For example, one absence in one month may be equivalent to a rating of 4. Two absences may be equivalent to a rating of 3. The rating is then multiplied by the percentage equivalent of the performance metric. Supposing that attendance is 30% of the total performance, 3 multiplied by 30% is equivalent to 0.9.

This is then added to other existing Key Performance Indicators, such as tardiness, productivity, core values, etc. Once these are summed, the total equivalent should be higher than five. In some companies, the passing or acceptable score is 2.5. Some require 3. Majority, though, will only regularize an employee if the employee hit 2.5; but as far as bonuses and salary increase is concerned, companies may break down the financial incentives for each bracket of the summed scores. For example, a 10% salary increase will be given to those who have a score between 3.01-4.00, 20% to those who have 4.01 to 5.00, and so on. In summation, the performance scorecard is the document used to determine whether an employee is worth keeping or not.
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