Using The HR Balanced Scorecard

The HR Balanced Scorecard is a framework developed by Kaplan and Norton in Harvard USA which balances the value of strategic inputs (“leading indicators”) with financial outputs (“lagging indicators”) to enable an organisation to improve the way it plans, measures and communicates success.
It is now being applied by hundreds of successful organisations, in the public and private sectors, to align people, strategy and performance.

Why has it worked?

It is a flexible, not a prescriptive model, allowing different organisations to identify key performance indicators that support their strategy.
These KPIs usually relate to customers (eg loyalty), internal processes (eg. productivity), learning and growth (eg people skills and innovation). It highlights the few essential components of success, which can then be translated into team and individual objectives.
This enables people at all levels to understand their organisation’s strategy and focus on the levers that create most value. It also helps the senior management team track the value of activities (eg human resource development) which previously had not been audited effectively and had not been regarded as contributors to the bottom line.

How does it work?

An example is Sears, Roebuck & Co. They articulated an inspiring vision: To be a compelling place for investors they must become a compelling place to shop, and therefore a compelling place to work.
Sears used hard data to measure themselves in each area, e.g. assessing support for ideas and innovation. They then linked employee competencies with behavioural objectives to align job specifications, recruitment, promotion, appraisal and reward systems.
This holistic alignment of processes created a new direction for people, and subsequently changed the climate and culture over a period of time.

Which common hr measures can be applied?

There are many benchmarks which can be selected to assess HR effectiveness:
  • Applications per vacancy
  • Internal promotions
  • Hours training
  • Peer group reviewing
  • Cross-functional projects
  • Knowledge sharing
  • Employee turnover
  • Sales per employee
  • Cost per hire
  • Customer retention
  • Employee satisfaction etc.
Benchmarks of high performance measures are readily available through public domains, and organisations can maintain these statistics with tailored comparisons inside and outside their markets. It is becoming increasingly important to measure these more regularly due to the speed of competitive change. What is certain is that if the HR function is unable to create measures of its performance it risks being outsourced.

Who should be involved?

The broader and deeper the participation, the more accurate the outcome.
The process needs to be driven top-down led by strategic priorities. This therefore requires effectively structured communication channels that can also provide two-way feedback so that top managers recognise when and where message dilution and misunderstanding exists.
The process needs to be visibly championed by the Chief Executive, and be supported by line managers who should own and measure the outcomes. The role of HR should be to facilitate rather than dictate the deliverables.

What is needed to implement it?

Leadership should comprise sponsors from HR and operations management. The business case needs line management input. Outcomes require defining and tracking. The process and benefits should be explained to all stakeholders early on to win commitment, with incentives to apply it. A project plan is vital, identifying resources, success signposts and regular reviews to evolve measures over time.
Above all HR professionals must keep the scorecard simple enough for people to understand and apply it, with relevance to their strategic priorities. If it is not seen to be fully integrated with the business imperatives of the Chief Executive it will not be given the attention it deserves by operational managers.
Posted in Briefing Papers, HR Management