Employees Appraisal with Balanced Scorecard

One of the great advantages of the Balanced Scorecard management system is its tremendous versatility. It is easily adapted to any aspect of business management, and employee evaluation is no exception.

By analyzing the employee’s relationship with the company from each of the four key perspectives, you can see where the employee is fully contributing to your success and where he or she could improve.

Employees’ evaluation with Balanced Scorecard. Download a free Employees Evaluation Guide

Download Forms and BSC Examples: Employees Appraisal with Balanced Scorecard

Balanced Scorecard in Employees Appraisal

The Balanced Scorecard allows supervisors and managers to objectively analyze the employee’s performance and contribution to the company. It prevents the problems associated with subjective evaluation by providing concrete metrics that can be applied equally to every employee.

This protects the company in two ways. First, it ensures that supervisors do not, deliberately or unconsciously, give more favorable evaluations to employees they enjoy working with. Second, it provides the company with demonstrable data that can be used to defend against discrimination or unfair labor practice lawsuits.

Download the employee appraisal forms in PDF format.

Download Forms and Examples

The Balanced Scorecard also provides managers with a more rounded view of each employee’s role in the company.

  • For example, how does one effectively evaluate a salesperson who is popular with his clients, but consistently far over budget in expenses?
  • Likewise, how does one determine the business value of a department leader who is outstandingly efficient, but whose taskmaster mentality leads to a high employee turnover?

Realistic view of employee contribution

The Balanced Scorecard allows you to select criteria in each of the four key perspectives – Financial, Customer, Internal Process, and Learning and Growth – to develop a realistic view of employee contribution. You will consider your employee requirements from each of the four business perspectives:

Employees Appraisal Strategy Map

Fundamentally, your purpose is to determine whether the employee is doing everything possible to help the company succeed. Each of the perspectives evaluates how well the employee is doing in achieving that purpose in specific areas. Here are some commonly used examples of evaluation criteria and suggested measurements for each.

Financial:

  • Good steward of financial resources: Percentage of projects completed within budget or the number of months their department operated within budget
  • Appropriate compensation for responsibility level: Variance from company’s historical salary for comparable position or variance from industry standard for comparable position

Customer:

  • Successful relationships with internal customers (coworkers, subordinates, superiors): Number of complaints received or number of positive responses on employee satisfaction surveys
  • Successful relationships with external customers (clients, vendors, business associates): Number of positive responses in satisfaction surveys for those customers employee interacts with

Internal Processes:

  • Completes tasks effectively: Percentage of projects completed by deadline or number of days operating without failure or injury
  • Uses resources efficiently: Waste-to-production ratio in department or by assigned project

Learning and Growth:

  • Makes continual effort to improve skills and knowledge: Number of training opportunities participated in
  • Actively looks for ways to promote company growth: Number of suggestions given to supervisor

Once you’ve obtained the data for each of these four areas, you can objectively analyze the employee’s strengths and weaknesses. Each employee will have areas of excellence and areas where they could improve. For example, the taskmaster will have high scores in Internal Process criteria, but low scores in Customer criteria. You can then recommend actions that this employee should take as an objective activity rather than as a personal criticism. This increases the chance that the suggestion will be acted upon. It is the difference between telling the employee, “Your subordinates think you’re too hard on them,” and “Your Customer perspective isn’t performing as well as it should.”

Weight of the performance indicator

Weighting is especially helpful for employee evaluation because it allows you to customize the same scorecard to various positions within your company.

Change KPI weight according to the role of employee

  • For example, positive relationships with external customers should carry extra weight in your sales team’s evaluations, but completing tasks on time and without injury would be more heavily weighted in your logistics team.

By applying weights accordingly, you can build your scorecard to encourage expertise in the areas essential to each employee’s work requirements. Learn more about weighting in BSC Designer.

One of the most important principles of balanced scorecard use is open communication both up the company hierarchy and down.

You should also use the four perspectives to give your employee the opportunity to evaluate his relationship with the company.

Employee’s perception

The employee’s perception plays a significant role in the level of effort he or she will readily commit to. You can increase the possibility that the employee will take decisive action to improve his scores if you take time to ensure the employee’s concerns are acknowledged and where possible, addressed. Employee perceptions can typically be obtained using a simple survey as part of the evaluation process.

Financial:

  • Compensation: Does the employee feel his or her compensation is appropriate for the amount of work required?
  • Access to financial resources: Does the employee feel his or her budget is realistic?

Customer:

  • Relationship with internal customers: Does the employee feel he or she has a good relationship with coworkers, subordinates and supervisors?
  • Relationship with external customers: Does the employee feel he or she has a good relationship with external customers?

Internal Processes:

  • Workload: Does the employee feel the number of tasks assigned is reasonable for his normal work schedule? (i.e. 40 hours)
  • Process participation: Does the employee feel he has enough control over the processes involved in the tasks required for his job?
  • Resource availability: Does the employee feel the company is providing the resources needed to effectively do the work required?

Learning and Growth:

  • Personal Growth Opportunities: Does the employee feel he has opportunities to increase his skills and advance in the company?
  • Company Growth Involvement: Does the employee feel he directly contributes to the company’s success and that his or her suggestions are taken seriously?

By applying the Balanced Scorecard to employee evaluations, you can objectively analyze whether each employee is making consistent progress toward becoming an essential part of your company. You will have the data you need to improve your employees’ performance and ultimately, ensure your success.

Automation with KPI software

Let’s review an example of how this appraisal can be automated with BSC Designer software.  In the appraisal form we have:

  • Current pay: $40,000
  • Standard pay: $39,500
  • Variance (current / standard) = 1.01

Making raw calculations in the software

The first approach (not the best one) is to copy the calculation model that we have in the appraisal form to the software.

  • I’m creating “Compensation Level Variance” indicator, and add inside two more indicators “Current pay” with the value $40,000 and “Standard pay” with the value $39,5000.
  • Then I’m changing the container’s value to the “self-standing,” and selecting to use “Formula” as a data source, and using the this formula: [Current pay] /  [Standard pay].

Manual calculation of the compensation variance indicator

Now the calculated value of the container is 1.01 (101%). You can find it in the “Financial Perspective -> Alternative 1 – Raw Data” in the sample project.

Using performance calculation functions

The example above is not the best way to use the software, instead we can create an indicator: “Compensation Level Variance” and simply put “39,500” in the target field, and 40,000 in the value field.

Calculate compensation variance automatically

The software will automatically calculate your current performance as 101%. In the sample project you’ll find it in “Financial Perspective > “Alternative 2 – KPI”

Appraisal data series automation

Another aspect where automation software can help is working with a data series. Let’s say you have created your own appraisal scorecard that looks like this:

Employees' appraisal scorecard

Now, let’s select “Financial Performance” and change its data source to “Data series.”

Data series is now a source of data for an indicator

We’ll create a new appraisal group (for example “Office A”). I’ll need an average performance figures, so I’m choosing “average” as a grouping type. To finalize setup process I’ll add there several data series (one for each of the employees).

Adding new appraisal group in BSC Designer

Data series panel will be displayed in the software. It allows you to enter performance data for each employee. I’m selecting in the list an employee and entering his/her performance data.

Entering performance data into the selected data series

Some users prefer to enter data directly into the data table:

Entering performance data into the selected data series

The program keeps all the data and calculates the average performance for the “Office A.” In the same way we can fill in the data for other indicators.

The scorecard that we have in the end:

  • Contains appraisal data for each employee
  • Average performance figures for each appraisal indicator used
  • The total performance index
Download the project of BSC Designer that was discussed in this article. To open the project you will need to download BSC Designer PRO.
Download .BSC Project

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