Question

Discuss how Fiji Hot Bread Kitchen can link the BSC to its reward system to award bonus payments to its employees

Answer 1

Balanced Scorecard

The Balanced Scorecard method developed by Robert Kaplan and David Norton in 1990 is a strategic approach and performance management system that enables organizations to transfer a company´s vision and
strategy into implementation. Use of the Balanced Scorecard stresses measuring the strategic performance of organizations to four perspectives: financial, internal business processes, customer satisfaction, learning and
growth.
Performance remuneration of employees  by the method of balance scorecard has two main advantages.
First is a clear communication of the company’s objectives, its transformation to indicators and reflection to performance criteria to each subdivision. Second is possibility to serve as balanced tool of remuneration
including financial objectives, and also other evaluation criteria.

Linking the Balanced Scorecard to award bonus payments to its employees

In most organizations a performance element of salary/wage depends on a greater number of criteria. Especially if managerial and specialized positions are in question then these criteria or aims are being derived from a Balanced score card (BSC) method. It is one of the most demanding type of remuneration systems, but at the same time it is one of the most transparent. The Balanced scorecard is a sophisticated instrument for tying compensation programs to performance as it clearly communicates divisional or departmental expectations without losing focus on their respective roles in overall company´s strategy and success. Variable remuneration through BSC requires stricter control of objective’s causality and its calibration. Creation of this system starts with the definition of strategic map, again based on mission, vision and company’s values. Strategic maps contain objectives for top management, which then cascade to lower level of management. Strategic aims and their indicators should correspond with a management level of the organization. Top managers' aims mostly relate to the growth of organization's turnover and profitability, quantitative and qualitative aims at lower levels should be determined in such way that they support higher management levels' aims.
The simplest method of tying balanced Scorecard performance to rewards is using the highest-level organizational Scorecard as the barometer of success and arbiter for bonuses. Under this scenario a certain percentage of incentive compensation is available to employees; the organization should achieve some or all of its goals. Each measure on the high-level Scorecard is assigned a weight, with total weights across the four perspectives summing to 100 percent. Even though there is a tendency to assign the highest weight to financial indicators their significance should not be so high and should not surpass other indicators. As results are tracked, percentage payouts are calculated and distributed