T.

DEEPIKA

II MBA ‘A’ SEC

2009PECMB005

HR BALANCE SCORE CARD

Definitions
The balanced scorecard is a strategic planning and
management system that is used extensively in business
and industry, government, and nonprofit organizations
worldwide to align business activities to the vision and
strategy of the organization, improve internal and
 external communications, and monitor organization
performance against strategic goals.

Business Definition For Balanced Scorecard

“A system that measures and manages an organization's
progress toward strategic objectives is balanced
scorecard”. The balanced scorecard incorporates not only
financial indicators but also three other perspectives:
customer, internal business, and learning/innovation. The
scorecard shows how these measures are interlinked and
affects each other, enabling an organization's past,
present, and potential performance to be tracked and
managed.

History

In 1992, Robert S. Kaplan and David P. Norton

introduced the Balanced Scorecard, a concept for
measuring whether the activities of a company are
meeting its objectives in terms of vision and strategy. By
focusing not only on financial outcomes but also on the
human issues, the balanced scorecard helps to provide a
more comprehensive view of a business which in turn
helps organizations to act in their best long-term
interests. The strategic management system helps
managers focus on performance metrics while balancing
financial objectives with customer, process and employee
perspectives. Measures are often indicators of future
performance.

Since the original concept was introduced, balanced

scorecards have become a fertile field of theory and
research, and many practitioners have diverted from the
 original Kaplan & Norton articles. Kaplan & Norton
themselves revisited the scorecard with the benefit of a
decade's experience since the original article.
Implementing the scorecard typically includes four
processes.

 The four processes are:-

 Translating the vision into operational goals.
 Communicate the vision and link it to individual
performance.
 Planning of Business.
 Feedback and learning and adjusting the strategy
accordingly.

 Innovation of the balanced scorecard

Kaplan and Norton describe the innovation of the
balanced scorecard as follows:
"The balanced scorecard retains traditional financial
measures. But financial measures tell the story of past
events, an adequate story for industrial age companies for
which investments in long-term capabilities and customer
relationships were not critical for success. These
financial measures are inadequate, however, for guiding
and evaluating the journey that information age
companies must make to create future value through
investment in customers, suppliers, employees,
processes, technology, and innovation."
 Adapted from the Balanced Scorecard by Kaplan
& Norton

 Perspectives
The balanced scorecard suggests that we view the
organization from four perspectives, and to develop
metrics, collect data and analyze it relative to each of
these perspectives:
1) The Learning & Growth Perspective
This perspective includes employee training and
corporate cultural attitudes related to both individual and
corporate self-improvement. In a knowledge-worker
organization, people -- the only repository of knowledge
-- are the main resource. In the current climate of rapid
technological change, it is becoming necessary for
knowledge workers to be in a continuous learning mode.
Metrics can be put into place to guide managers in
focusing training funds where they can help the most. In
any case, learning and growth constitute the essential
foundation for success of any knowledge-worker
organization.

Kaplan and Norton emphasize that 'learning' is more than

'training'; it also includes things like mentors and tutors
within the organization, as well as that ease of
communication among workers that allows them to
readily get help on a problem when it is needed. It also
includes technological tools; what the Baldrige criteria
call "high performance work systems."

2) The Business Process Perspective

This perspective refers to internal business processes.

Metrics based on this perspective allow the managers to
know how well their business is running, and whether its
products and services conform to customer requirements
(the mission). These metrics have to be carefully
designed by those who know these processes most
intimately; with our unique missions these are not
something that cans be developed by outside consultants.
3) The Customer Perspective
Recent management philosophy has shown an increasing
realization of the importance of customer focus and
customer satisfaction in any business. These are leading
indicators: if customers are not satisfied, they will
eventually find other suppliers that will meet their needs.
Poor performance from this perspective is thus a leading
indicator of future decline, even though the current
financial picture may look good.

In developing metrics for satisfaction, customers should

be analyzed in terms of kinds of customers and the kinds
of processes for which we are providing a product or
service to those customer groups.

4) The Financial Perspective

Kaplan and Norton do not disregard the traditional need
for financial data. Timely and accurate funding data will
always be a priority, and managers will do whatever
necessary to provide it. In fact, often there is more than
enough handling and processing of financial data. With
the implementation of a corporate database, it is hoped
that more of the processing can be centralized and
automated. But the point is that the current emphasis on
financials leads to the "unbalanced" situation with regard
to other perspectives. There is perhaps a need to include
additional financial-related data, such as risk assessment
and cost-benefit data, in this category.
 Balanced Scorecard Software
The balanced scorecard is not a piece of software.
Unfortunately, many people believe that implementing
software amounts to implementing a balanced
scorecard. Once a scorecard has been developed and
implemented, however, performance management
software can be used to get the right performance
information to the right people at the right time.
Automation adds structure and discipline to
implementing the Balanced Scorecard system, helps
transform disparate corporate data into information and
knowledge, and helps communicate performance
information

 Why Implement a Balanced Scorecard?

 Increase focus on strategy and results

 Improve organizational performance by measuring what
matters
 Align organization strategy with the work people do on a
day-to-day basis
 Focus on the drivers of future performance
 Improve communication of the organization’s Vision and
Strategy
 Prioritize Projects / Initiatives

 Business Definition for HR Scorecard

A tool for measuring the contribution of human resource

management practices to the financial performance of an
organization. The HR scorecard was developed by
academics Bryan E. Becker, Mark A. Huselid, and Dave
Ulrich and presented in their book The HR Scorecard:
 Linking People, Strategy, and Performance (Harvard
Business School Press, 2001). It was intended as a
supplementary tool to Kaplan and Norton's balanced
scorecard, which does not focus on HR practice. The HR
scorecard sees human resource management practices as
a strategic asset and provides a road map of six steps
designed to help organizations integrate human resource
systems with organizational strategy.

 Implementation of an HR Scorecard
The 10 Dimensions of Measurement Success are the
key to the successful implementation of an HR Scorecard
and Measurement System. The 10 Dimensions of
Successful Measurement are as follows.

i. Senior Management Champion

As is the case with any organization wide initiative that is

expected to have a lasting and material effect, there needs
to be a Champion from the ranks of senior management.
The role of the Champion is to insure that the
measurement process receives constant and regular
visibility, credibility, and priority. Through proactive
communication, consequence management, and
recognition, lead by the Champion, the measurement
initiative will provide a level of importance that all
employees can acknowledge.

ii. Alignment

The foundation for an HR Scorecard or Measurement

System is its alignment with the company’s overall
Strategic Plan. Each of the measures contained in the HR
 Scorecard must align with at least one initiative from the
Strategic Plan. This alignment will provide HR with
focus, prioritization, and an ability to demonstrate that it
is a Strategic Business Partner. At the point that HR
initiatives are seen as Business initiatives, HR can say
that they have not only aligned with the business
strategy, but they have achieved convergence within the
company strategy. Convergence is like a perfectly
complete jigsaw puzzle where every piece interlocks to
form the picture. Each piece of the organizational
measurement puzzle is essential to create the picture that
each employee must see to insure organizational success.

iii. Context
As alignment provides a clear and understandable
relationship of the HR Scorecard measures to
organizational performance, context provides insights
into the connection of the specific initiatives and
activities to the culture of the company. For example, a
company who’s Value Disciplines Operational
Excellence may design a compensation process that looks
very similar to that of a company whose Value Discipline
is Innovation. However, the measurements used to
determine process effectiveness will be very different.
Process effectiveness in the Operational Excellent
Company is cost as a percent of revenue, while process
effectiveness in the Innovation Company may be number
of new products. Adapting your measurement system to
the context of the organization is a critical component to
insuring measurement success and effectiveness.

iv. Accountability
 Who is responsible for the result? There are two types of
accountability embedded in an HR Scorecard and
Measurement System. The first and most important level
of accountability revolves around the successful
execution of the initiative. If retention of High Potential
employees is one of the measures, then who is in the best
position to achieve this result. In this case, it is the line
manager. HR has the accountability to implement a
policy, practice or procedure that has the highest
likelihood of Retaining the High Potential Employee, as
well as collecting the data to support the measure. The
line manager has the accountability to execute the policy,
practice, or procedure to ensure retention. The line
manager also has a responsibility to provide feedback to
HR on the policy, practice, and procedure and its
likelihood of producing the desired result. For the result
to be achieved there must be accountability.

v. Validity
Can the numbers be Trusted? The HR measurement
system must contain measures and metrics that are
clearly understood, meaningful to the initiative, and that
have been thoroughly examined. There is nothing that
will inhibit the successful implementation of an HR
Scorecard or Measurement System more than numbers
that cannot be verified. If the credibility of the measures
becomes questionable, then the trust in the measurement
system is broken. Broken trust results in failure.

vi. Measure Results

The HR Scorecard and Measurement System must focus

on results. Measuring the time to fill an open job simply
tells us the length of time it took to complete a search. It
 is a process measure. The more important measure is
productivity of the individual who filled the position.
This is a result measure. Result measures are the primary
way you will be able to determine if the company’s
Strategic Plan will be achieved. Result measures are what
senior managers use to determine if HR is contributing to
organizational success. Result measures will be a
determining factor in your ability to be seen as a
Strategic Business Partner. Result measures create the
convergence of HR to the organization.

vii. Lag and Lead Measures

Lag measures tell us what happened in the past. Year end

financial reports are lag measures. We learn the result of
our efforts. Lead measures are an indicator of what the
future result might be. Lead measures tell us either to
continue what we’re doing, or stop, because the result is
not what we want. It is very important that our HR
Measurement System contain a combination of Lag and
Lead measures. For example, the results of an Employee
Engagement Assessment may tell us that our employees
feel that to meet their career goals, they have to work in
another company. This is a Lead indicator of turnover.
Higher than expected turnover within a group of
employees who have been targeted as High Potentials, is
a Lag indictor that our retention efforts are not working.
It is very important that your HR Measurement System
contain a balance of Lag and Lead measures. It’s too late
to lock the barn door after the horse has already gotten
out.

viii. Actionable
 To quote Albert Einstein: “Everything counts, but
everything doesn’t need to be counted.” For an HR
Measurement System to be meaningful, it must contain
only those measures that are most important to the HR
Strategy and the Strategic Plan of the company. One of
the failures of many HR Scorecards and Measurement
Systems is the belief that more is better! In reality, the
vital few measures provide much greater insight and the
ability to take action. We all know what happens when
we try to address too many issues at one time: our efforts
lack focus, are not of the highest quality, and fall short of
expectation.

ix. Dynamic

Things change. Forces outside our control require us to

rethink our plans. The HR Measurement System must
contain the flexibility to be dynamic in an ever changing
world. The “bend but don’t break” defense is an excellent
model to deploy to insure the success of your HR
Measurement System.

x. Distributed

The HR Scorecard and Measurement System must be

communicated throughout the organization. Many of the
initiatives will be carried out and implemented by the line
organization. They must know how these initiatives are
going to be measured. Communication of the HR
Scorecard and Measurement System will also bring
valuable visibility to the HR function. Communicating
HR success, done in a positive way, will bring
credibility, respect, and trust to HR. Communication will
also go a long way in enabling HR to be seen as a
 Strategic Business Partner, providing additional
opportunities to bring convergence of HR to the business.

Evaluating your current measurement system against

these 10 Dimensions will enable you to diagnosis the
effectiveness of your current system. These dimensions
should be used as the cornerstone to build an HR
Scorecard, which will provide a strong, lasting
foundation. Whether you are just getting started, your HR
Scorecard is being used successfully, or your results have
been less than you excepted, assessing your efforts
against these dimensions will enable you to strengthen
your measurement initiative and exceed the expectation
of senior management. An effective and efficient HR
Scorecard and Measurement System is the surest way to
demonstrate HR Effectiveness.

 Distinguishing characteristics of HR Scorecard

The distinguishing characteristics of HR Scorecard are:

 An HR Scorecard is aligned with the Strategic Plan of the

Company.
 An HR Scorecard provides focus, accountability and
prioritization to all HR initiatives.
 An HR Scorecard is used to determine the individual
performance expectations of HR staff members and line
management.
 An HR Scorecard is used by the entire organization, not
just HR.
 An HR Scorecard identifies the role employees outside of
HR play to impact results.
  Creating the HR Scorecard reveals
The 'new' skills HR professionals must develop in order to become true
strategic assets to their organizations

 10 international best-practice case studies illustrating

how HR can play a critical role in shaping world-class
people strategies for their companies.
 An explanation of how the ROI of HR programmers can
be assessed and a detailed overview of how to conduct an
HR audit
 The demands placed on HR in the current climate and the
challenges involved in becoming a strategic partner
 Complete results, analysis and commentary from a
survey of over 200 leading organizations.
 HR Balanced Scorecard Screenshots

 Metrics for HR Measurement

This is the actual scorecard with HR Metrics and

performance indicators. The performance indicators
include: "Cost per Hire", "Turnover Cost", "Turnover
Rate", "Time to fill", "and Length of employ.