Scorecards are important in every organization because they benefit both employees and management. Scorecards are management tools that help managers in business planning, communication of the companys operations to departments and in translating the vision and strategies into operational steps (Warren, Reeve & Duchac, 2016). For the employees, personal scorecards are used to translate the organizations scorecards into tangible objectives for all employees. According to Carpenter et al. (2010) scorecards are personalized to each employees strengths and roles, thus ensuring that there are specialization and cooperation among the workers.
Balanced scorecards can be used for employees remuneration. According to Abyad (2017) scorecards when used for human resource management acts as an evaluation tool that creates performance remuneration in the form of bonuses. The evaluation criteria used ensures that employees increase their overall performance. The performance indicators used include quality, customer satisfaction, employee turnover and cost among others. Though the scorecards can be effective organizations encounter problems in the implementation. Some of the problems an organization might encounter include lack of formal performance review structures, poorly defined performance metrics, and lack of a proper improvement methodology (Bedford et al., 2008).
Segment performance is used by human resources managers for remuneration purposes. Segment performance is mostly used on segment managers as a way of compensation. According to a study done by Gong, Li & Shin (2011), segment performance is not the best form of compensation for senior segment managers. Performance measures used in this form of compensation include profit, turnover, and return on capital employed (Warren, Reeve & Duchac, 2016).
Evidently, the responsibilities of each segment manager are different, and this means that the performance measures for evaluating segment managers ought to be different. This means that they should be consistent with the responsibilities that come with each segment. Therefore, assigning sales or revenues targets as a performance measure to a cost segment manager would not be sensible. It is for this reason that scorecards are considered the best form of performance indicators for remuneration purposes (Mihai, Bajan & Cretju, 2017). This is because of its simplicity, it is a respected integrated approach to performance management, and it is also the most transparent system of remuneration.
Abyad, A. (2017). The balanced scorecard and EVA. Middle East Journal of Business, 12(2), 20-22
Bedford, D., Brown, D. A., Malmi, T., & Sivabalan, P. (2008). Balanced Scorecard design and performance impacts: some Australian evidence. Journal of Applied Management Accounting Research, 6(2), 17.
Carpenter, M. A., Bauer, T., Erdogan, B., & Short, J. (2010). Principles of management. flatworld Knowledge.
Gong, G., Li, L. Y., & Shin, J. Y. (2011). Relative performance evaluation and related peer groups in executive compensation contracts. The Accounting Review, 86(3), 1007-1043.
Mihai, R., Bajan, I. F., & Cretju, A. (2017). Performance management in the context of globalization. Theoretical & Applied Economics, 24(1), 203-208.
Warren, C. S., Reeve, J. M., & Duchac, J. (2016). Managerial accounting (13th ed.). Boston, MA: Cengage Learning. ISBN 9781285868806
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