Page 74 - DMGT517_PERFORMANCE_MANAGEMENT_SYSTEM

Unit 6: Methods of Performance Appraisal

4. Learning and growth perspective: This perspective captures the ability of employees, Notes
information systems, and organizational alignment to manage the business and adapt
to change. Processes will only succeed if adequately skilled and motivated employees,
supplied with accurate and timely information, are driving them. In order to meet
changing requirements and customer expectations, employees are being asked to take on
dramatically new responsibilities that may require skills, capabilities, technologies, and
organizational designs that were not available before. It measures the company’s learning
curve for example, number of employee suggestions or total hours spent on staff training.
Objectives, Measures, Targets and Initiatives

Within each of the balanced scorecard financial customer, internal process, and learning
perspectives, the organisation must define the following:

1. Strategic objectives – the strategy for achieving that perspective
2. Measures – how progress for that particular objective will be measured
3. Targets – the target value sought for each measure
4. Initiatives – what will be done to facilitate reaching out the target.
The balanced scorecard provides an interconnected model for measuring performance and

revolves around four distinct perspectives – financial, customer, internal processes, and
innovation and learning. Each of these perspectives is stated in terms of the organisation’s
objectives, performance measures, targets, and initiatives, and all are harnessed to implement
corporate vision and strategy.
The name also reflects the balance between the short and long-term objectives, between fi nancial

and non-fi nancial measures, between lagging and leading indicators and between external and
internal performance perspectives.

Under the balance scorecard system, financial measures are the outcome, but do not give a good
indication of what is or will be going on in the organization. Measures of customer satisfaction,
growth and retention is the current indicator of company performance, and internal operations

(efficiency, speed, reducing non-value added work, minimizing quality problems) and human
resource systems and development are leading indicators of company performance.
Robert S Kaplan and David P Norton, the architects of the balanced scorecard approach,
recognized early that long-term improvement in overall performance was unlikely to happen
through technology only and hence placed greater emphasis on organizational learning and
growth. These, in turn, consist of the integrated development of employees, information, and
systems capabilities.

How to enhance Performance through Balance Scorecard?

In such constantly shifting environments, managements must learn to continuously adapt to new
strategies that can emerge from capitalizing on opportunities or countering threats. A properly
constructed balanced scorecard can provide management with the ideal tool in reacting to the
turbulent environment and helping the organisation to correct the course to success.
Scorecard provides managers with feedback, thus, enabling them to monitor and adjust the
implementation of their strategy – even to the extent of changing the strategy itself. In today’s
information age, organisations operate in very turbulent environments. Planned strategy, though
initiated with the best of intentions and with the best available information at the time of planning
may no longer be appropriate or valid for contemporary conditions.
As companies have applied the balanced scorecard, they have begun to recognize that the
scorecard represents a fundamental change in the underlying assumptions about performance
measurement.

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