Balanced Scorecard HR Score Card Balanced Score Card

Balanced Scorecard & HR Score. Card

Balanced Score Card • The Balanced Scorecard is a Strategic Planning and Management System that is used in business & industry, government, and nonprofit organizations worldwide to align business activities to the vision and strategy of the organization. • It was originated by Drs. Robert Kaplan and David Norton as a performance measurement framework that added strategic non-financial performance measures to traditional financial metrics to give managers and executives a more 'balanced' view of organizational performance.

Cntd. • The Balanced Scorecard was found to be the sixth most widely used management tool across the globe which also had one of the highest overall satisfaction ratings. • In its simplest form the Balanced Scorecard breaks performance monitoring into four interconnected perspectives: Financial, Customer, Internal Processes and Learning & Growth.

Balanced Scorecard Perspectives • The Financial Perspective covers the financial objectives of an organisation and allows managers to track financial success and shareholder value • The Customer Perspective covers the customer objectives such as customer satisfaction, market share goals as well as product and service attributes. • The Internal Process Perspective covers internal operational goals and outlines the key processes necessary to deliver the customer objectives. • The Learning and Growth Perspective covers the intangible drivers of future success such as human capital, organisational capital and information capital including skills, training, organisational culture, leadership, systems and databases.

Designing of BSC This is illustrated well by the four steps required to design a balanced scorecard: • Translating the vision into operational goals; • Communicating the vision and link it to individual performance • Business planning • Feedback and learning, and adjusting the strategy accordingly.

Considerations • To embark on the Balanced Scorecard path an organization first must know (and understand) the following: • The company's mission statement • The company's strategic plan/vision • The financial status of the organization • How the organization is currently structured and operating • The level of expertise of their employees • Customer satisfaction level

Balanced Scorecard implementation • Implementing the Balanced Scorecard system company-wide should be the key to the successful realisation of the strategic plan/vision. A Balanced Scorecard should result in: • Improved processes • Motivated/educated employees • Enhanced information systems • Monitored progress • Greater customer satisfaction • Increased financial usage

How many companies use the Balanced Scorecard? • More than half of major companies in the US, Europe and Asia are using Balanced Scorecard approaches. • Balanced Scorecard is one of the top-ten most widely used management tools around the world. • The widest use of the BSC approach has traditionally been in the US, the UK and Northern Europe, but there is very strong growth in Balanced Scorecard adoption in South America, the Middle East and Asia.

Key Benefits of Balanced Scorecards • Better Strategic Planning –The business model is visualised in a Strategy Map which forces managers to think about cause-and-effect relationships. • Improved Strategy Communication & Execution – The fact that the strategy with all its interrelated objectives is mapped on one piece of paper allows companies to easily communicate strategy internally and externally.

Cntd. • Better Management Information: BSC approach tend to report higher quality management information and gain increasing benefits from the way this information is used to guide management and decision making. • Improved Performance Reporting – companies using a Balanced Scorecard approach tend to produce better performance reports than organisations without such a structured approach to performance management.

Cntd. • Better Strategic Alignment: . In order to execute a plan well, organisations need to ensure that all business and support units are working towards the same goals. • Better Organisational Alignment: – well implemented Balanced Scorecards also help to align organisational processes such as budgeting, risk management and analytics with the strategic priorities.

The HR scorecard - should be looked at as a strategic asset • It is a measurement as well as an evaluation system for redefining the role of HR as a strategic partner. • It is based on the Balanced Scorecard framework developed by Kaplan and Norton and is set to revolutionize the way business perceives HR.

HR Score Card • A scorecard for HR provides management a set of metrics with which to benchmark performance of an HR department and to show its value as a whole. The scorecard helps to present an HR department as a strategic asset and establish it as a partner in the organization. • It also provides a basis for defining what functions the HR department does and does not do, as well as provide cost savings by optimizing solutions and balancing duties within the department. Having a measurement system in place helps an organization to define HR strategically and organizationally.

• Economic paradigm - speed, innovation, quality and customer satisfaction • competitive advantage has shifted from tangible assets to intangible ones • The focus is now on human capital and its effective alignment with the overall strategy of organizations • Human capital is an intangible asset and HR’s influence on firm performance is difficult to measure

• The standard elements of a firm’s resource architecture that are measured include total compensation, employee turnover, cost per hire, and percentage of employee satisfaction etc.

• Implementing effective measurement systems for intangible assets is a very difficult task and demands the existence of a unified framework to guide the HR managers • managers tend to avoid dealing with intangible assets as far as possible • managers cannot foresee the consequences of their investments in intangible human assets in a well-defined measurable manner and they are not willing to take the risk

Solution • most effective way to change this mindset is obvious – to build a framework just like the Balanced scorecard, which has sound measurement strategies and is able to link HR functions, activity and investment with the overall business strategy

What is HR Score Card Strategic HR Performance Drivers HR SCORECARD HR’s “internal” efficiency and effectiveness

Steps to develop HR Scorecard • There are seven steps required to develop HR score card , so that the result are statistically measure • Define business strategy • Outline company value chain • Identify business required organizational outcomes strategy • Identify required workforce • Identify relevant HR system • Design of HR score card for measurement purpose

Cntd. You can’t achieve this type of strategic alignment and performance improvement without: • Fully understanding how value is created in your business • Then designing a measurement system based on that story.

HR Value Chain Strategic Objective HR Deliverables HR Efficiency HR System Alignment High Performance Work System

Structure of HR Score. Card • Financial Outcome Perspective : HR Deliverables 1. Skills 2. Motivation 3. Work Environment HR Efficiency 1. Relative Cost 2. Timeliness

• Customer Perspective : HR Alignment 1. Internal alignment (Fit) among HR Mgt practices 2. External alignment (Fit) with line manager’s strategic goals

Internal Business Perspective : • High performance work system : • 1. Selection and promotion linked to competency model • 2. Development and promotion linked to needs of business • 3. Performance Management and compensation systems to attract and select and motivate employees

Learning and Growth • HR Manager Competencies: 1. Personal Credibility 2. Change Management 3. Culture Management 4. Delivery of HR Basics 5. Knowledge of the business Strategic performance management

High Performance Work System • The HR policies, processes and practices • Each element is designed to maximize the overall • quality of human capital throughout the organisation • Focused on implementing strategy through the HR • Deliverables Typical elements are: • Appraisal process • Recruitment • Incentive rewards and recognition • Training and development • Employee communication and feedback system

HR System Alignment • Two perspectives: • Alignment between the HR system that produces the HR deliverables and the organisation’s strategic implementation system • Alignment between the expectations of the HR function and the individual competences required to deliver

HR Deliverables • It means by which the HR system generates value in your organisation • The points of intersection between the organisation’s strategic implementation plan and HR • The drivers of future performance – lead measures • The HR enablers that reinforce the core performance drivers

HR Efficiency • Consider two aspects: • Core efficiency measures that make no direct contribution to the organisation’s strategy implementation • Strategic efficiency measures that assess the HR activities and process design to produce the HR deliverables

Examples • Strategic Objective • Lower R&D • HR Deliverables • Ensure R&D employees have require technical competencies • Low staff turnover amongst high-performing R&D specialists • HR Efficiency • Minimise recruitment costs

Cntd. • HR System Alignment: • Internal & external selection process based on competency model • Recruitment process to ensure high-quality recruits • Retention policies developed and Implemented • High Performance Work System: • Establish competency model as basis for recruiting, managing and rewarding R&D employees • Extend appraisals to provide 360 • Establish career development process

Functional HR Scorecard • Strategic Talent Capability Performance Based Culture Organisational Integration Leadership • Internal Process Align HR planning with Business Strategy Provide proactive workforce solutions Develop and enhance world-class programmes Optimise service delivery through streamlined processes

Contd. • Financial Contribute to share holder value Maximize human Capital Minimize HR Costs • Customer Business Partner (Strategic Support) Organisational Health and Competitive Capability Skills, competencies and leadership Low cost provider

PERSPECTIVE Customer Perspective Financial Perspective Internal Perspective Organization Learning "If we succeed, how will we provide value for our customers - the HR deliverables? ” “How will we add customer value whilst managing our costs? ” "To satisfy my customer and financial objectives, at which HR processes must we excel and align? ” “To achieve the business strategy, how must we learn and improve our HR strategic competencie s? ”

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