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May 20, 2002 Issue

Use a Balanced Scorecard Job Evaluation System to Link Job Value to Strategic Objectives

Despite recent media press, the balanced scorecard is not limited to short-term incentive applications. Organizations that have successfully introduced the balanced scorecard approach incorporate the process in all human resource programs. For example, it is helpful in the design of job content evaluation programs. While job content evaluation programs may have lost popularity in recent years, the lack of solid, reliable survey data has sparked renewed interest in internal equity driven systems.

The balanced scorecard is a process of translating an organization's values into measures that can be objectively rated. Successful scorecard implementation requires answers to five basic questions:

To succeed financially, how should we appear to our stakeholders?
To achieve our vision and carry out our mission, how should we appear to our customers and / or community?
To satisfy our stakeholders and customers, in what services must we excel?
To achieve employee satisfaction, what human resource programs do we provide and in which do we excel?
To achieve our vision, how do we sustain our ability to change, grow, and improve?

Each of these questions is answered by setting clear and measurable objectives, targets, and initiatives.

This concept can be translated into performance measures and used in performance management systems. With the return of job content evaluation systems, balanced scorecard organizations find the need to reinvent the traditional job evaluation process. Like the simplified, two-page performance system discussed previously, a simplified, five factor job content evaluation process is possible.

This system breaks away from traditional job evaluation plans by giving no value to the skills required to perform the job, working conditions in which the job is found, or the physical efforts required to perform the job. While these components are important, and need to be incorporated in the formal job description for Americans with Disabilities Act (ADA) and Equal Pay Act considerations, their importance in valuing the job for the purpose of setting pay rates is reduced.

In designing a five factor, balanced scorecard plan, a matrix approach for the evaluation tool becomes essential. Following are the seven steps in designing and utilizing such a tool.

Understand and define each of the scorecard elements as it applies to your organization. Link each of the elements back to the organization's strategic objectives. What are the short- and long-term financial, customer, quality, human resource, and growth objectives of the organization?
Within each scorecard element, determine what is important to the organization and what needs to be measured.
- Financial Accountability: Measure direct and indirect accountability. Determine what is to be measured, such as expenses, revenues, or net income.
- Customer Accountability: Measure direct or indirect accountability. Determine if internal as well as external customers are to be included.
- Quality Accountability: Measure direct or indirect accountability. Determine if process is as important as outcome measures.
- Human Resource Accountability: Measure direct and indirect accountability. Determine if both individual and team impacts are to be measured.
- Growth Accountability: Measure direct or indirect accountability. Determine the importance of internal, process growth versus external, new product / service growth.
Weigh the factors. Some organizations take the "balanced" concept to heart and set equal, 20% weights for each factor. In a 1,000-point plan, for example, 200 points are awarded to each factor. Others decide that, based on organizational strategic objectives, there is a need to value each factor differently.
Develop the appropriate levels or degrees to be evaluated within each factor. Attempt to keep this simple, with no more than five impact levels within each factor:
- No discernable impact at all.
- Minor degree of indirect impact.
- Solid indirect impact, minor direct impact.
- Major indirect and solid direct impact.
- Both major indirect and direct impact.
Assign appropriate points to each degree in the factor.
Evaluate positions.
Correlate with the market to develop grades and pay ranges.

Successful, balanced scorecard organizations find this process addresses the issue of inconsistent and illogical job placement in the organization's pay grade system.

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ISSN Number 1549-0467