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 should be tied to balanced scorecard performance measures if the measures are appropriately aligned with organizational goals and capture key aspects of performance. The concern about manipulation highlights the importance of designing measures that discourage inappropriate behaviors and ensure alignment with overall strategic objectives. Managers should also monitor and audit performance measures to detect and prevent any potential manipulation.