HR Balanced Score Card

-SUBMITTED BY

Group 19
K.Dharani
Kavivarma R K
Sravya
EVOLUTION OF HR SCORE CARD

Since its inception in 1992 the Balanced Scorecard has changed and evolved.
This is important as Robert Kaplan and David Norton have managed to keep the
concept fresh and aligned with current management thinking. The downside of
this is that the understanding of the Balanced Scorecard concept varies widely
depending on when individuals learnt about the Balanced Scorecard.

The Changing Nature of the Balanced Scorecard:

The Balanced Scorecard was first introduced as a performance measurement

framework but was quickly positioned as a strategic performance management
tool. The Balanced Scorecard concept is much more than a collection of
performance indicators in four perspectives. Today, the HR Scorecard allows
organisations to translate their strategy into a set of interrelated objectives and
performance indicators. Most significantly the overall template has moved from
a four-box model to a Strategy Map view as an essential component of a
Balanced Scorecard.

In addition, the names and content of the four Balanced Scorecard perspectives
have changed over the years. Especially the Learning and Growth Perspective
has been developed and refined. In the past companies have struggled with this
perspective and have often renamed it into a Human Perspective to only focus
on staff satisfaction, training and turnover or into an innovation perspective to
focus on future developments. The danger is that companies miss out other
important enablers of future performance.

To address this problem, Kaplan and Norton have articulated what they consider
to be the principal components of the Learning and Growth perspective,
namely:
Balanced Scorecard Sub Section: Human Capital (Employees' skills, talent, and
knowledge)

Balanced Scorecard Sub Section: Information Capital (Databases, information

systems, networks, and technology infrastructure)

Balanced Scorecard Sub Section: Organisation Capital (Culture, leadership,

employee alignment, teamwork, and knowledge management.

WHAT IS BALANCED SCORE CARD?

A balanced scorecard is a performance metric used in strategic management to

identify and improve various internal functions of a business and their resulting
external outcomes. It is used to measure and provide feedback to organizations.
Data collection is crucial to providing quantitative results, as the information
gathered is interpreted by managers and executives, and used to make better
decisions for the organization.

Purpose Behind the Balanced Scorecard

The balanced scorecard is used to reinforce good behaviours in an organization

by isolating four separate areas that need to be analysed. These four areas, also
called legs, involve learning and growth, business processes, customers, and
finance. The balanced scorecard is used to attain objectives, measurements,
initiatives and goals that result from these four primary functions of a business.
Companies can easily identify factors hindering company performance and
outline strategic changes tracked by future scorecards. With the balanced
scorecard, they look at the company as a whole when viewing company
objectives. An organization may use the balanced scorecard to implement
strategy mapping to see where value is added within an organization. A
company also utilizes the balanced scorecard to develop strategic initiatives and
strategy objectives.
PERSPECTIVES OF BALANCED SCORE CARD

These four perspectives have been briefly discussed below:

1. Financial Perspective:

The balanced scorecard uses financial performance measures, such as net

income and return on investment, because all for-profit organisations use them.
Financial performance measures provide a common language for analysing and
comparing companies. People who provide funds to companies, such as
financial institutions and shareholders, rely heavily on financial performance
measures in deciding whether to lend or invest funds. Properly designed
financial measures can provide an aggregate view of an organisation’s success.
Financial measures by themselves do not provide incentives for success.
Financial measures tell a story about the past, but not the future; they have
importance, but will not guide performance in creating value.

According to Brown, a sound approach to financial measurement is to make

sure that your data base includes three types of information’s:

a. Historical Data:

How did we do last month, last week, this year, last year, and so on?

b. Current Data:

How are we doing right now, today?

c. Future Data:

How will we be doing in the next few months or years?

From a financial standpoint, the purpose of a business is to create wealth for its
owners. Output measures or historical financial measures help an organization
keep score of how well it is doing at creating wealth. These data are always
past-focused because they are based on events that have already occurred: our
net profit for the year versus last year, our sales revenue this year versus last
year, and our average stock price this month versus last month. These are all
measures of corporate performance that are based on history. Any financial
information that goes into a report to shareholders or other stakeholders would
typically fall into the category of historical data.

Another measure of today’s financial results is the amount of cash the business
has on hand or the total value of its assets as compared with its liabilities. This
is a good measure of an organization’s overall financial health. These types of
financial metrics should answer the question: How are we doing today?
The third type of financial data needed in a complete set of measures is used to
predict the company’s future financial performance. These forecasts are used to
plan for future workload and resource requirements. Another common future-
oriented financial statistic is the amounts invested in research and development
as a ratio to sales revenue or profit.

Organizations often cut back on these costs during tough times, which may
cause them to mortgage their future for the sake of short-term financial gains.
Growth in sales from a particular geographic region or a particular industry may
also be a future-oriented financial statistic if the company is looking to grow
into new or emerging markets.

2. Customer Perspective:

In the customer perspective of the Balanced Scorecard, managers identify the

customer and market segments in which the business unit will compete and the
measures of the business unit’s performance in these targeted segments. This
perspective typically includes several core or generic measures of the successful
outcomes from a well-formulated and implemented strategy.

The core outcome measures include customer satisfaction, customer retention,

new customer acquisition, customer profitability, and market share in targeted
segments. But the customer perspective should also include specific measures
of the value propositions that the company will deliver to customers in targeted
market segments.

The segment-specific drivers of core customer outcomes represent those factors

that are critical for customers to switch to or remain loyal to their suppliers. For
example, customers could value short lead times and on-time delivery. Or a
constant stream of innovative products and services. Or a supplier able to
anticipate their emerging needs and capable of developing new products and
approaches to satisfy those needs. The customer perspective enables business
unit managers to articulate the customer and market-based strategy that will
deliver superior future financial returns.

The core measurement group of customer outcomes is generic across all kinds
of organizations.

The core measurement group includes measures of:

a. Market share

b. Customer retention

c. Customer acquisition

d. Customer satisfaction

e. Customer profitability.

3.Internal-Business-Process Perspective:

In the internal-business-process perspective, managers identify the critical

internal processes in which the organization must excel.

These processes enable the business organizations to:

i. Deliver the value propositions that will attract and retain customers in targeted
market segments, and

ii. Satisfy shareholder expectations of excellent financial returns.

The key to excellence in any organization is control of its processes to produce

reliable and consistent products and services. Performing the right processes in
the right manner leads to consistent levels of product and service quality. The
difficulty lies in finding the right process variables to measure and setting the
standards appropriate to performance levels of each of the process measures.
Process and operational measures are leading-edge measures that are more
short-term-focused.
These are the measures that are typically monitored every day or at least every
week. Some process variables are even monitored continuously to ensure the
production and delivery of high-quality products and services. Achieving good
performance levels on process or operational measures leads to high-quality
products and services, which, in turn, lead to satisfied or delighted customers,
which lead to repeat business and promote an organization’s long-term survival
and success.

4.The Learning and Growth Perspective:

For incentive purposes, the learning and growth perspective focuses on the
capabilities of people. Managers would be responsible for developing employee
capabilities. Key measures for evaluating managers’ performance would be
employee satisfaction, employee retention, and employee productivity.

(a) Employee Satisfaction:

Employee satisfaction recognises the importance of employee morale for

improving productivity, quality, customer satisfaction and responsiveness to
situations. Managers can measure employee satisfaction by sending surveys,
interviewing employees, or observing employees at work.

(b) Employee Retention:

Firms committed to retaining employees recognise that employees develop

organisation-specific intellectual capital and provide a valuable non-financial
asset to the company. Furthermore, firms incur costs when they must find and
hire good talent to replace people who leave. Firms measure employee retention
as the inverse of employee turnover—the percent of people who leave each
year.

(c) Employee Productivity:

Employee productivity recognises the importance of output per employee.
Employees create physical output (i.e., miles driven, pages produced, or lawns
mowed), or financial output (i.e., revenue per employee or profits per
employee). The number of loans processed per loan officer per month would
provide a simple measure of productivity for loan officers at a bank.

Within this core, the employee satisfaction objective is generally considered the
driver of the other two measures, employee retention and employee productivity

The Four Perspectives Apply to Mission Driven As Well As Profit

Driven Organizations

Profit Driven

• What must we do to satisfy our shareholders?

• What do our customers expect from us?
• What internal processes must we excel at to satisfy our shareholder and
customer?
• How must our people learn and develop skills to respond to these and future
challenges?
Mission Driven

• What must we do to satisfy our financial contributors?

• What are our fiscal obligations?

• Who is our customer?

• What do our customers expect from us?

• What internal processes must we excel at to satisfy our fiscal obligations,

our customers and the requirements of our mission?

• How must our people learn and develop skills to respond to these and
future challenges?
Balanced score card strategy Mapping:

One of the most powerful elements in the BSC methodology is the use of
strategy mapping to visualize and communicate how value is created by the
organization. A strategy map is a simple graphic that shows a logical, cause-
and-effect connection between strategic objectives. Generally speaking,
improving performance in the objectives found in the Organizational Capacity
perspective enables the organization to improve its Internal Process
perspective, which, in turn, enables the organization to create desirable results
in the Customer and Financial perspectives .
EXAMPLE: STARBUCKS BSC

STARBUCKS SCORECARD MAP: