I have encountered this question a few times regarding the Balanced Scorecard framework. Using EPM Suite, customers can place a status gauge on the scorecard as a whole, or they can display the “scores” of various KPIs or scorecards. A few customers use very elaborate rules-based algorithms to determine scores, and link manager performance incentives to the scores. Anything is possible. Should you be using scores?
In my opinion, if you are not already using a scoring system, then don’t start. One of the compelling aspects of the red/amber/green approach is that it offers absolute clarity into performance. Some customers even skip the amber indicators and run a binary red/green set of indicators, so there is little left to interpretation. Scores, however, create all sorts of nuances and “shades of grey.” For example, what is the real difference between a score of 87 and 91? How much of a range do you want in a threshold of acceptable results? 10% variance? 30%? What are the motivational considerations? What are your points of reference? How do you covert a ratings-based quality measure on a scale of 1-5 to a 1 – 100 points system?
In setting up a scoring system, all sorts of game theory issues and motivational psychology can quickly muddy the waters and create a demotivating environment. For example, not all business units are created equal. In a production environment, some sites may have much newer equipment or better facilities that entice a more engaged workforce. If you attempt to weigh all the variables to level the playing field to account for such differences, you may quickly find that your “rules” become so difficult to understand that the entire system starts to lose its transparency. On the other hand, the red/yellow/green system, combined with well-thought-out targets, results in a system that is clearly defined and is easy to understand. And finally, the colors themselves remove the “data” from the system, giving the users a very clear visual understanding of performance— rather than requiring focusing on an abstraction of the real data, the point system itself.
