Assigning Rewards
For any performance management system to be successful, the reward system must be
linked to the performance measures. The activity- and strategic-based systems both use
the same financial instruments to provide compensation to those who achieve targeted
performance goals. A key difference for both systems from the traditional control system
is the fact that rewards are based on much more than financial measures. In the
case of the Balanced Scorecard, four dimensions of performance must be considered instead
of the two in an activity-based performance system. It is very unlikely that an organization
can secure the needed support for a Balanced Scorecard of measures unless
compensation is tied to the scorecard measures. Both systems must also face the thorny
problem of team-based rewards.