Incentive compensation for employees, such as bonuses, should be tied to balanced scorecard performance measures only if managers are confident that the performance measures are easily manipulated by those being evaluated.

Incentive Compensation

A form of performance-based pay where employees receive additional compensation for meeting or exceeding targets or metrics.

Balanced Scorecard

A strategic planning and management system used for aligning business activities to the vision and strategy of the organization, improving internal and external communications, and monitoring organizational performance against strategic goals.