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How To Implement An HR Scorecard In A Business Organization

How To Implement An HR Scorecard In A Business Organization

An HR scorecard is a technique for the Human Resource department to implement itself as the strategic planning partner of the executives in an organization. This indicates how Human Resource affects the profitability of the organization by developing and analyzing the metrics to increase the effectiveness and efficiency of the organization. However, in some organizations, Human Resource still struggles to find a leadership position. HR can become a partner of the strategic team by showing value, determination and developing HR tools to integrate them into the overall business strategy. Not only is developing an efficient Human Resource department essential for the organization to succeed but also tracking and monitoring its functions is necessary to maintain its effectiveness. An effective entrepreneur has the right business acumen and understands the need for HR analytics to run his business well. However, for the HR to prove itself effective, it must be in knowledge of the competitive advantage of the business and the goals of the business. An effective HR must have in place HR imperatives and analytics i.e. talent spotting, cost-benefit analysis, leadership qualities, succession planning, HR analytical procedures, creating talent pools, building an engaged workforce and creating an agile organization which will greatly help the entrepreneur flourish his business cost-effectively.HR functions can be checked and tracked by using a scorecard which may be in the form of a spreadsheet of data or in the form of HR IT tool. The scorecard mainly indicates the key performance indicators (KPIs) asserting the performance of the organization at every level. The KPIs may also include variance analyses i.e. assessing the benefit costs as a percentage of the operating expenses; The scorecard is a cluster of data that helps the managers critically analyze the effective HR strategies represent a competitive advantage due to cost savings or cost avoidance. Therefore, by linking the Human Resource objectives with the company’s business goals, the HR department is ensured that it will be recognized for tits HR functions and will deliver effective service. The process mainly involves:

  1. Conducting a cost-benefit analysis of activities that might provide the deliverables for the Human Resource in order to conduct the Human Resource Analytics
  2. Defining the Human Resource activities that will be responsible to provide the critical analytical deliverables such as efficient hiring and retention of employees etc.
  3. Identifying and analyzing the critical deliverables of Human Resource
  4. Identifying Human Resource customers for the deliverables

Effective HR analytical tools may have an outstanding impact on organizational performance if the managers utilize their effective leadership qualities as well. If the managers guide the employees accordingly based on the results of the HR analytical tools, effective change will be implemented in professional and cultural ways leading to a broad impact on the organization as a whole. This shall result in establishing a clear vision, communicating it and resolving the immediate conflicts among the employees facing the organization along with developing a strategic business succession plan for the organization. Organization’s embrace business partnering because of HR’s desire to be an active participant in the running of the business, which is, clearly demonstrated with the HR scorecard results. HR scorecard can be implemented in the business strategy as an HR management function by:

  1. Defining your business strategy by considering the Human Resource function

It is because the human resource officials establish specific, measurable, achievable, realistic, and timely objectives. Effective Strategic Human Resource Management is the comprehensive of managerial activities for efficiently guiding organizational goal achievement while considering that team member skills are essential to produce the desired productivity i.e. helping the management in devising appropriate management policies. Since it is an aspect of management, it is necessary to establish that the management is well equipped with leadership skills as well. Human Resource analytical procedures need to be strategic, proactive, customized and business driven. Organization performance can be increased when there is a greater influence of strategic contribution. Strategic policies are better designed with the help of an effective HR business partner. Hence, integrating the component parts of HR scorecard is crucial to the organization. It is important to understand the essence of it. Change can be introduced when the HR analytics implements it effectively by considering all metrics. Coaching and development provide the framework for the employees to contribute to the company strategy and achievement of goals while maintaining the company values. Organizational values can be instructed by effective HR planning.

Andy Hedge, Head of Learning and Development, BDO Stoy Hayward says, “Frankly, one can observe some management teams that are quite unready for business partnering. It’s not just about improving HR.” These values which need to be in place may be accountability, focusing on details, making a difference, delivering quality, healthy workplace environment, honesty, reliability and positivity, helping others, meeting deadlines, respecting company policy and rules and showing tolerance and respect among each other.

  1. Identifying business indicators

This includes HR analytics that helps us analyze the competitive advantage of the organization including the market competition. Customer statistics, market analytics, and SWOT analysis can be incorporated as part of the scorecard data. This data helps to configure the economic condition of the business. Human resource officials are now started to be seen as business partners enabling the hiring and developing of critical personnel, promoting training, developing the employees and arranging appropriate compensation for employees according to their skills. According to Celia Baxter, Group HR Director, Bunzl, “There’s not much difference between a Human Resource Business Partner and a Human Resource Generalist. The title is not important. What matters is their attitude and interest in the business–and being able to use Human Resource expertise to shape advice for that business.” Effective Human Resource scorecard data can influence the organizational success factors by reinforcing accountability, motivating the employees, making a vision plan for the culture and values and by coaching the co-workers. There is an increase in demand for Human Resource to devote more resource to manage talent, performance and change imperatives i.e. work in the strategic planning of the business.

  1. Creating a measurement system for the Human Resource scorecard

HR professionals need to show the results of their HR analytics and the results basically demonstrate how they control costs of the organization by eliminating inefficiencies. HR professionals strive to minimize employee turnover for which certain measures need to be in place. HR analytics especially the HR scorecard helps the management recognize the success factors of the business. Human Resource must invest in longer-term resource and talent management planning and focus on organizational and people capability building. This can be done by gathering intelligence of good leaders among the business. According to Roffey Park survey, organizations without HR Business Partners were less than successful. An effective HR business partner must be decisive, skilled influencer, driven to deliver, collaborative, personally credible, curious, role model and should have the courage to challenge and induce change when it is necessary. A firm grasp of measurement and evaluation is essential for business partnering – using business success, not HR, metrics. Crucially, HR must also be able to measure HR BP performance and contributions. Expertise in reviews and surveying and employee engagement, for instance, is a skill in demand. They occur in ‘customer’ relations, internal reporting, power struggles, resources, and role clarification, to name but five areas.

After studying these with proper leadership skills applied, values of the organization can be instilled among these co-workers. This can be done by friendly interpersonal communication, seminars, formal dinners and training. This can further be evaluated by having a personal connection with your co-workers in order to understand what drives them. Using Maslow’s hierarchy of needs, by assessing the interest of the employees critically and analytically, positive change can be inscribed within the organization. Further according to Herzberg theory, the hygiene factors (causing dissatisfaction) and motivator factors (factors causing satisfaction) for the employees can be studied through survey or communication.

  1. Conduct regular meetings to review the progress of Human Resource by analyzing the deliverables

Reviewing the scorecard on a regular basis can help the management and the sponsors and other leaders in the organization realize the company’s strategic position on a regular basis. When deficiencies occur, HR professionals can easily identify the performance gaps and this can help the management dedicate its efforts to the performance gaps. This can help employees feel confident and important within the organization. Therefore, reassuring them that their actions will have an impact on the organization itself. These steps taken by effective leadership, are necessary to achieve company priorities by maintaining organizational values in connection with the vision of the organization

Human Resource professionals help organizations attract and retain the most talented employees to help fulfill strategic goals of the business. Human Resource scorecard can be implemented by the following seven-step model:

  1. Clarifying the business strategy
  2. Developing Human Resource architecture
  3. Creating a strategy map of the firm i.e. business indicators and the results
  4. Identifying Human Resource deliverables in the map
  5. Aligning Human Resource architecture with the HR deliverables
  6. Designing the Human Resource scorecard
  7. Execution and implementation of the HR scorecard and the analytics

5. Quantitatively demonstrate HR’s contribution to firms financial results and profitability

The development of a Human Resource scorecard must be done by keeping in view the following perspectives:

  1. A financial perspective to address the strategies that satisfy the customers
  2. A customer perspective that asks what the customer wants
  3. HR executives can implement steps to align Human Resource goals with the overall company mission, vision, and business objectives
  4. An internal perspective that addresses the stated desires of customers and design processes consistent with those desire learning perspective that taken into account

A Balanced scorecard is performance management framework used by the management to make the right decisions about their businesses. Communication with employees on the organization’s purpose, the image that needs to be maintained and the amount of productivity that is required of them can bring a huge impact on the perspective of organization values among the employees. This may not only increase productivity but also give a chance to emotionally connect with all the co-workers. Vision is the foundation for goal achievement within the organization. Awareness of the organizational vision provides a directional compass for each contributor within the organization to follow in terms of efficiency and work environment. Effective leadership is responsible for articulating the vision. The real measure of HR effectiveness is service deliveries and the extent to which it helps meet business objectives. Cost reduction is also one of the key factors. Speaking more about the value of the work and the company and not compromising on quality and ethics can bring the right impact within the organization. Moreover, aligning the employees to work as a team to operational strategies by making them realize their importance.

  1. Understanding significance of a balanced Human Resource scorecard framework

Most organizations develop their HR Business Partner capabilities in knowledge, experience, and personal characteristics. The right caliber of HR Business Partner has as much to do with personality and orientation as business and professional skills. Good judgment of people and situations is essential. Effective HR business partner should hold himself accountable for his action and introduce the culture of accountability within the organization. Accountability is one of the key ways for leaders to influence the culture of the organization. The employees need to see that all the internal processes, controls and systems, and cultural elements are in place for a reason. Further taking necessary actions in case of discrepancies and other fall-outs will be necessary to bring order and eliminate conflicts within the organizational culture. This can be done when HR processes are well documented and the data is analyzed. Therefore, HR scorecard needs to be in place as HR management function to serve as a success factor by analyzing the key performance indicators of the organization as a whole. Further, a balanced scorecard framework has the following impacts, mainly:

  1. Financial: To succeed financially, how should we appear to our shareholders?
  2. Internal Business: To satisfy our shareholders and customers, what business process must we excel at?
  3. Learning and growth: To achieve our vision, how will we sustain our ability to change and improve?
  4. Customer: to achieve our vision, how should we appear to our customers?
  5. Balanced scorecard of Walmart

Walmart has a fame for maintaining a balanced scorecard. Walmart balanced scorecard integrated the following aspects:

  1. Financial aspects

According to the annual reports:

  • The three objectives are increased revenue/total assets; increased revenue/employee and increased return on investment
  • The strategy of Wal-Mart is cost leadership; increasing revenues/total assets is a strong indicator of cost reduction. Further, increasing revenues/employee will also help maintain its cost leadership
  • Increase return on investment will be possible only if Wal-Mart controls its costs. Each of the financial objectives is related to the strategy of Wal-Mart.

2. Customer Service Perspective

  • The three objectives are increasing customer size of Wal-Mart, increasing customer rating of Wal-Mart, and reducing the number of customer complaints.
  • The Mission is to help save money so that they can live better. If Wal-Mart helps customers save money, the customers will buy more from Wal-Mart.
  • If Wal-Mart helps customers live better, they will give an improved rating to Wal-Mart. If the customer save money and live better, then there will be fewer complaints against Wal-Mart

3. Internal Process Perspective

  • The three objectives are reducing administrative expense/ total revenues, reducing lead-time from online orders to delivery at Wal-Mart, and reducing waiting time for customers at counters.
  • The strategy of Wal-Mart is cost leadership; reducing administrative expense/ total revenues will help Wal-Mart reduce costs
  • If Wal-Mart helps customers live better, it must make faster deliveries and reduce waiting time for customers
  • Reducing waiting time for customers enabling them to live better

4. Learning and growth perspective

  • The three objectives are to increase training hours per employee at Wal-Mart; reduce employee turnover rate at Wal-Mart, and increase use of employee’s views.
  • The strategy of Wal-Mart is cost leadership and reducing employee turnover rate will lead to cost reduction
  • Increasing training hours per employee will make employees more efficient and so will lead to cost reduction and better prices to customers
  • Increased use of employee’s views will provide greater initiative from employees to reduce costs
  • Empowered employees will be motivated employees and will help Wal-Mart control its costs.

HR Business Partners are important and implementing HR scorecard as an HR management function is essential to analyze the HR functions. However, they must also increase the effectiveness of their work. Karl Chapman, Chief Executive of advice plus Business Solutions says that “We see lots of Business Partners who are still doing the same job as when they were called HR managers,” Effective Human Resource Business Partners (HR BPs) can therefore immensely influence the values of an organization provided that they are well-equipped with professional and leadership qualities and at implementing the Human Resource functions.

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Asma Niaz is an Academic writer at Zoe Talent Solutions who loves to write stellar content on various educational topics, programs, trainings and courses. Zoetalentsolutions is the world’s premium place, which offers a highly professional HR courses to excel at your workplace.

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