2004 Annual Wisconsin SHRM State Conference

Measuring Human
Resources
Developing an HR Scorecard/Dashboard for
Assessing and Reporting HR’s Impact on
Bottom Line Results

Jeffrey L. Russell Lee Wiersma

Co-Director VP of Human Resources
Russell Consulting, Inc. UW Credit Union
 Our Objectives . . .
„ Introduce the idea of leading indicators as a
way to measure HR effectiveness
„ Describe the power of the HR Scorecard
„ Explore the application/use of the HR
Scorecard/Dashboard at UWCU
„ Share the tracking results of the UWCU HR
Dashboard
„ Answer your questions . . .

© 2004, UW Credit Union and Russell Consulting, Inc.

 The Failure of HR Strategy
In a 2002 industry survey by SHRM . . .
„ Only 34% of executives view HR as a strategic partner
„ Only 44% of respondents indicated that their organization
communicates its strategy well
„ Only 22% indicated that general employees understand
company’s strategy
„ 21% indicated that HR only deals with operational issues
vs. strategic ones
„ Only 23% indicated that HR strategy was tightly integrated
with company strategy
„ Only 25% of HR departments use a balanced scorecard on
HR’s contribution to strategy
[SHRM Research, N=1310, Aligning HR with Organization Strategy Survey]

© 2004, UW Credit Union and Russell Consulting, Inc.

What is the Value
of Tracking HR
Effectiveness?

How are you

currently
measuring HR
effectiveness?

© 2004, UW Credit Union and Russell Consulting, Inc.

 Why Track HR Effectiveness?

„ To guide decision making — It helps HR

staff in how best to manage the HR
system to support the company.

„ To evaluate program/department
effectiveness — It constitutes a “report
card” to guide improvement efforts.

© 2004, UW Credit Union and Russell Consulting, Inc.

 To Be Most Effective . . .
The most effective measures of HR:
1. Identify a clear, consistent, and compelling
connection between the company’s strategy
and the work of each employee.
2. Zero in on the critical few measures that
have the greatest impact on the company’s
bottom line.
3. Document the effects of HR on company
performance in credible ways that
employees, line supervisors, and managers
can understand.
© 2004, UW Credit Union and Russell Consulting, Inc.
 The HR Deliverables

„ HR Performance
Drivers Results

„ HR Performance
Enablers Reinforcing
the Drivers

© 2004, UW Credit Union and Russell Consulting, Inc.

Measuring HR Results . . .
„ How do you know if your HR
efforts are successful?
„ How do you measure the
effects or results of these HR,
training, and OD efforts?
„ How will you know that your
efforts and initiatives have
paid off?

© 2004, UW Credit Union and Russell Consulting, Inc.

Measuring Human Health
„ What are the key signs of
human health?

„ How do you know if you

are healthy or unhealthy?

„ Which of your “vital

signs” might you chart
over time?

„ What might happen if you

ignore these vital signs?

© 2004, UW Credit Union and Russell Consulting, Inc.

Measuring Health After the Fact
„ Tracking your “vital signs” along the way
can give you an early warning of
emerging health concerns.
„ Failing to measure these vital signs — or
ignoring the signs — can lead to . . .

© 2004, UW Credit Union and Russell Consulting, Inc.

 Lagging Indicators
Lagging indicators are outcome
measures that help you gauge
your HR progress by examining
the final end result or outcomes Characteristics

of your collective efforts. • Outcome measure.

• Indicates the end
Use of the “lagging” term reflects result of the system.
the delay or gap between your • Tells you what
actions and a change in the final happened, not what is
happening.
end result.
• Less effective at
measuring the effects
of specific changes
made to the system.

© 2004, UW Credit Union and Russell Consulting, Inc.

 Lagging Indicator Examples
Non-HR Examples . . .
„ Health — heart attack, liver failure, stroke, death!
„ Automobile — arrived safely at destination (or not), engine
failure, blown tire, citation from traffic enforcement, etc.
„ Economy — GNP growth, national debt, unemployment
rate, etc.
HR Examples . . .
Lagging indicators have a
„ Employee retention. direct bearing on a company’s
„ Employee performance. bottom line. There is a
„ Organizational performance. business interest in and a
„ Customer retention. direct financial benefit from
improvement in these areas.
„ Employee productivity.
„ ?
© 2004, UW Credit Union and Russell Consulting, Inc.
 Leading Indicators
Leading indicators are process
measures that help you gauge Characteristics

incremental progress you are • Process measure.

making toward key HR outcome • Immediate feedback to

the system.
(lagging) measures. • Tells you what is
‰ Since leading indicators measure the happening now.
results from your processes, there is • Can be tracked over
less of a delay between your actions time.
and a change in the system. • Provides an “early
warning” of emerging
‰ They are the performance drivers — the results.
key factors that enable the overall end
result (outcome) you want to achieve. • Very responsive to
changes in the system

© 2004, UW Credit Union and Russell Consulting, Inc.

 Leading Indicator Examples
Non-HR Examples . . .
„ Health — Heartbeat, body temperature, blood sugar levels,
cholesterol levels, blood pressure, etc.
„ Automobile — gas gauge, engine temperature,
speedometer, odometer, oil level, indicator lights, rumble
strips on the roadway, GPS coordinates, etc.
„ Economy — home starts, capital equipment purchases,
layoffs, stock market value, public confidence, exchange
rates, etc.
HR Examples . . . Increasing retention
„ A reduction in absenteeism
Leading indicators have an
in key positions. indirect bearing on a company’s
„ % increase in internal people bottom line. While there is a
expressing interest in position business interest in improvement
„ Number of positive comments in these areas, there may not be
from customers an immediate financial benefit to
the company.
„ ?
© 2004, UW Credit Union and Russell Consulting, Inc.
The HR Scorecard
1. Focuses on leading indicators.
2. Identifies the differences between HR doables and
HR deliverables.
3. Demonstrates HR’s contribution to strategy
implementation and to the company’s bottom line.
4. Helps HR managers focus on and manage their
strategic responsibilities.
5. Encourages HR flexibility and change.
6. Encourages “Customers” of HR to become more
self-sufficient.
7. Provides focus for HR and OD staff.

© 2004, UW Credit Union and Russell Consulting, Inc.

The HR Dashboard

© 2004, UW Credit Union and Russell Consulting, Inc.

 HR and the UWCU Scorecard
HR Scorecard UWCU Fundamental Goals

Superior
HR Systems Financial
Strength

HR HR Strategic HR Core Business Value for the

Competencies Focus Deliverables Strategy Members

Operational
HR Practices
Excellence

© 2004, UW Credit Union and Russell Consulting, Inc.

UW Credit Union

© 2004, Russell Consulting, Inc.

Strategic Objectives
Be the Financial Superior Financial
Institution of Choice Strength

Increase Operational
QualityGrowth
Assets Excellence
Manage loan
Financials

portfolios

Offerabove
Reduce bad m arketrates Increas e return
loans ratio on as s ets

Value for the

Mem bers
Expand
m em bership
Fundamental
Develop Goals
m em ber s elf-
Members

Identify product s ervice Increas e online

and service Increas e banking
Offer divers e
differentiators member Cros s -s ell
financial products products
retention

Manage m em ber Innovative

relationships Develop s ales Practices
Ens ure Develop s pecialized
reliability tools for FSSs
financial products
Operations

Increase
Stream line efficiencies
proces s es
Develop targeted Develop Conduct Reduce
m arketing program m arketing com petitive
Develop s uperior trans action
s ervice capability program analys is Autom ate cos ts
proces s es
HR Deliverables
HR Deliverables

High levels of High levels of Low turnover in the Staff Engagem ent
Highly com petent
em ployee job internal custom er Financial Services (w ith their Jobs and
FSS staff
satisfaction satisfaction Specialist position Credit Union Strategy)

[Leading] © [Leading]
2004, UW Credit Union and Russell Consulting,
[Lagging] [Lagging]Inc. [Leading]
High levels of High levels of Low turnover in the Staff Engagem ent
Highly com petent
em ployee job internal custom er Financial Services (w ith their Jobs and
FSS staff
satisfaction satisfaction Specialist position Credit Union Strategy)

[Leadi ng] [Leadi ng] [Laggi ng] [Laggi ng] [Leading]

Succession planning
Differentiating HR
Change agent T raining and development services to match the
needs ofdifferent
Communication UWCU departments

Strategyexecution Internal customer satisfaction

M atching HR strategy to
Effective work design
the UWCU culture
Employee relations/ Labor/management relations
advocacy
Performance measurement
and evaluation HR system alignment
with UWCU strategy
High Performance Work
System Compensation and benefits

Selection
Internal HR system
Operationalefficiency Recruitment alignment

Staff competency model

HR Competencies HR Practices HR Systems

 The HR Scorecard
Balancing value creation
with cost controls and HR Systems

efficiencies

HR HR Strategic HR
Competencies Focus Deliverables

Involves identifying both

performance drivers and HR Practices
enablers to support the
company’s strategic priorities

© 2004, UW Credit Union and Russell Consulting, Inc.

 HR Systems

HR Competencies HR
Competencies
HR Strategic
Focus
HR
Deliverables

HR HR Practices

Competencies

• Change agent
• Strategy execution
• Employee relations/advocacy
• Best practices in HR
• Operational efficiency

© 2004, UW Credit Union and Russell Consulting, Inc.

 HR Systems

HR Practices HR
Competencies
HR Strategic
Focus
HR
Deliverables

HR Practices
HR Practices

• Succession planning • Labor-management relations

• Training and development
• Communication
• Internal customer
satisfaction
• Effective work design
• Performance measurement
• Compensation and benefits
• Employee orientation
• Recruitment and selection
• Staff competency model

© 2004, UW Credit Union and Russell Consulting, Inc.

 HR Systems

HR Systems HR
Competencies
HR Strategic
Focus
HR
Deliverables

HR Systems HR Practices

• Differentiating HR services to match the different needs of

different UWCU departments units

• Matching HR strategy to the UWCU culture

• HR alignment with UWCU strategy

• Internal HR alignment

© 2004, UW Credit Union and Russell Consulting, Inc.

 Creating Measures of UWCU
HR System Alignment
„ Assessing staff perceptions of the internal alignment
of our HR practices — Are they internally consistent
with one another?
„ Assessing staff perceptions of the external alignment
of our HR practices:
¾ To what extent do our HR deliverables enable the
credit union’s performance drivers and strategic
objectives?
¾ To what extent do our HR practices
enable/support our HR deliverables?

© 2004, UW Credit Union and Russell Consulting, Inc.

 Assessing Our Internal “Fit”
HR Recruitment & Training & Performance Compensation Benefits HR Cost HR Value
Selection Development Management Administration Administration Control Creation
Practices

Recruitment &
Selection +24.4 +20.0 +29.2 +42.2 +25.2 +45.2

Training &
Development +18.6 +9.0 +9.8 +18.3 +39.6

Performance
Management +34.8 +19.8 +16.1 +36.7

Compensation
Administration +49.0 +34.8 +42.4

Benefits
Administration +33.5 +52.3

© 2004, UW Credit Union and Russell Consulting, Inc.

 Assessing HR Systems Support of
Our HR Deliverables
High Level of High Level of Low Turnover in Highly Competent Staff Engagement
Employee Job Internal Customer Financial Services Financial Services (with Job and CU
Satisfaction Satisfaction Specialist Position Specialist Staff Strategy)

Recruitment &
Selection +38.8 +34.6 +31.3 +34.2 +17.2

Training &
Development +30.2 +29.8 +27.7 +33.1 +27.0

Performance
Management +37.9 +31.5 +36.1 +33.7 +32.3

Compensation
Administration +52.2 +39.8 +47.5 +29.4 +17.4

Benefits
Administration +54.8 +37.9 +44.2 +21.4 +9.5
 Assessing HR Deliverables Support of
UWCU Fundamental Goals
Superior Premium Innovative
Value for the Quality Operational
Financial Quality Business
Members Growth Excellence
Strength Service Practices

High Level of
Employee Job
Satisfaction
+44.9 +61.0 +55.0 +43.4 +43.3 +50.2

High Level of
Internal Customer
Satisfaction
+38.8 +51.1 +45.8 +38.4 +41.3 +46.2

Low Turnover in
Financial Services
Specialist Position
+37.6 +57.4 +62.0 +46.0 +36.0 +48.0

Highly Competent
Financial Services
Specialist Staff
+50.4 +56.3 +61.8 +50.8 +43.8 +55.8

Staff Engagement
(with Job and CU
Strategy)
+41.8 +41.0 +38.2 +40.5 +42.2 +45.2

© 2004, UW Credit Union and Russell Consulting, Inc.

 What is the HR Dashboard?
The Credit Union’s HR Dashboard is a panel of dials that display HR
effectiveness on the HR Deliverables: Job Satisfaction (QWL,
Values, 10-point), FSS Turnover, Engagement, Internal Customer
Satisfaction, and Internal FSS Promotions.
 HR Dashboard -- QWL Dimensions
QWL Dimensions
Leadership 4.87

Management 4.74

Communication 4.68

Pay & Benefits 4.77

Empowerment 4.56

Job Pride 4.90

Work Environment 4.73

Dept. Cooperation 4.76

Employee Growth 4.44

QWL Score 4.72 Dashboard Value

4.30 4.40 4.50 4.60 4.70 4.80 4.90 5.00

Mean
August 2004
 HR Dashboard: Quality of Worklife
4.8

Scale: 1 = Strongly Disagree to 6 = Strongly Agree

4.7

4.6

4.5

4.4
Mean QWL Score

4.3

4.2

4.1
1995 2001 Sept. '01 March '02 Sept. 02 April 03 Sept. 03 August 04
1998 June '01 Dec. '01 June 02 December 02 July 03 Dec. 03

Time of Employee Assessment

 HR Dashboard: Overall Job Satisfaction
8.5

Scale: 1 = Very Dissatisfied to 10 = Very Satisfied

8.0

7.5

7.0
Mean Job Satisfaction

6.5

6.0
1995 2001 Sept. '01 March '02 Sept. 02 April 03 Sept. 03 August 04
1998 June '01 Dec. '01 June 02 December 02 July 03 Dec. 03

Time of Employee Assessment

 HR Dashboard: Values Gap
1.6

1.4

1.2

1.0
Mean Core Values Gap

.8

.6
1995 2001 Sept. '01 March '02 Sept. 02 April 03 Sept. 03 August 04
1998 June '01 Dec. '01 June 02 December 02 July 03 Dec. 03

Time of Employee Assessment

© 2004, UW Credit Union and Russell Consulting, Inc.

 HR Dashboard: Overall Job Satisfaction
8.5

8.0

7.5

7.0

Job Satisfaction
6.5

Support Satisfaction
Mean

6.0 Retail Satisfaction

1995 2001 Sept. '01 March '02 Sept. 02 April 03 Sept. 03 August 04
1998 June '01 Dec. '01 June 02 December 02 July 03 Dec. 03

Time of Employee Assessment

© 2004, UW Credit Union and Russell Consulting, Inc.

 Overall Satisfaction with All Credit Union Departments
8.5

8.4
Mean Overall Satisfaction with Departments

8.3

8.2

8.1

8.0

7.9 Internal Customer Satisfaction

7.8
March 03 Oc tober 03 Decem ber 03 May 04

Time of Intern al Cu stomer Survey

Sc ale: 1 = Very D issatisfied to 10 = Very Satisfied

© 2004, UW Credit Union and Russell Consulting, Inc.

 Developing Your Scorecard
1. Define/Describe Your Business Strategy.
2. Develop a Strategy Map.
3. Identify the High Leverage HR Deliverables.
4. Identify Key Components of the HR
Architecture that Support the HR Deliverables.
5. Develop the HR Scorecard/Dashboard.
6. Educate Internal Customers on the Meaning and
Use of HR Measures.

© 2004, UW Credit Union and Russell Consulting, Inc.

 TPI at Sears
[Total Performance Indicators]

Key performance drivers at Sears:

„ Attitudes about the job . . .

„ Attitudes about the company . . .

© 2004, UW Credit Union and Russell Consulting, Inc.

Your
Questions . . .

© 2004, UW Credit Union and Russell Consulting, Inc.

Thank you for the opportunity
to guide you along the HR
Scorecard journey!

Best of luck in your efforts at

strengthening the effectiveness of
your HR programs

For an updated version of this

PowerPoint and the Handouts for
this session, visit:
www.RussellConsultingInc.com