Memo

Memo

TO: Mr. Alexander Cook

FROM: Mr. John Austin

DATE: 8th December, 2012

SUBJECT: Tying Compensation with Performance Measures.

As our company has adopted the Balanced Scorecard technique for proper measurement of performance against compensation, it is important to understand the concept of Balanced Scorecard, first. The balanced scorecard is a performance management tool that helps in knowing as to whether the design and the implementation tools that are being utilized are working efficiently or not. This helps the managers in knowing as to whether they should compensate the employee or not. This means that this helps the managers in knowing whether they are adopting the right strategy. The managers adopt this strategy to make sure if their work is up to the mark or not.

The concept of Balanced Scorecard was presented by Norton and Kaplan which supports the process of strategic management. Balanced scoredcard is useful for our company as it will help the management in knowing as to which employee should be compensated and how he or she should be compensated. Tying compensation with performance means that the managers will have to stress on the performance of the employees so that their compensation can be decided. Strategies will have to be formulated for compensation purposes. Our company's management should be able to learn as to how they should take steps to improve the performance of the employees and then relate it with compensation. The Balanced Scorecard (BSC) is a system of balanced performance measurement:

Between financial and non-financial

Between short term and long term goals;

Between intermediate indicators and outcome measures.

There are four areas that are known as indicators for the assessment of the performance of the company by means of balanced scorecard; they are internal processes, financial performance, organizational learning and internal processes. These areas are interlinked as there is a cause and effect relation between them (Parmenter, 2007, pp. 46). The main aim of the company is to ensure that the employees take the initiative to work in an efficient manner and improe their performance so that they can work in the best manner. The departments of the company and the enterprise are able to identify the new processes so that the expectations of the customers increase and they are satisfied with the process of the company. New steps and strategies are implemented so that the company does not suffer in terms of profits. The following perspectives and aspects should be kept in mind.

The first is the financial perspective that should be kept in mind while implementing the balanced scorecard. It is important for the company to know what financial implications this implementation will bring (Norreklit, 2003, pp. 591).

Next, is the customer perspective. Our company should make sure that the implementation and adoption of the balanced scorecard technique does not impact the overall image of the company in the eyes of the consumers.

3.The internal processes should also be considered while the balanced scorecard technique is implemented.

The effectiveness of the balanced scorecard technique should be evaluated so that ...