THE HUMAN RESOURCE SCORECARD

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A CHANGING HR ENVIRONMENT  Globalization
 Technological Advances  Exporting Jobs  The Nature of Work  Workforce Demographics

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THE NEW HR MANAGER PROFICIENCIES
– HR proficiencies – Business proficiencies – Leadership proficiencies – Learning proficiencies

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MEASURING HR’S CONTRIBUTION
Top management wants to see, precisely, how the HR manager’s plans will make the company more valuable.

HR managers today are more involves in partnering with their top manager in both designing and implementing their companies’ strategies.
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HR’S STRATEGIC ROLES
 HR professionals should be part of the firm’s strategic planning executive team in order to:
– Identify the human issues that are vital to business strategy.

– Help establish and execute strategy.
– Provide alternative insights. – Are centrally involved in creating responsive and market-driven organizations. – Conceptualize and execute organizational change.
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WHAT IS THE BALANCE SCORECARD?
The Balanced Scorecard (BSC) is a management tool to mobilize employees to fulfill the mission of the organization.
The scorecard is a method of designing, organizing and communicating performance measures across multiple perspectives (i.e. customer, financial, business process and learning and growth), utilizing both short and long term goals.
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WHAT IS THE BALANCE SCORECARD?

The Scorecard is an analysis technique to translate an organization's mission statement and overall business strategy into specific, quantifiable goals and to monitor the organization's performance in terms of achieving these goals.

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THE BALANCE SCORECARD – 1990s
 By Robert Kaplan and David Norton of Harvard  A strategic management concept which helps managers (HR etc.) at all levels monitor results in their key areas.

 Monitors present performance, but also assesses how prepared a company is to perform well in the future.  Built around TQM Principles
 Examines specific areas to create a balance
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WHY MEASURE?
 Strategic feedback - to show the present status of the organization from many perspectives for decision making  Diagnostic feedback - assess various processes to guide improvements on a continuous basis  Determine trends in performance  Determine which metrics should be tracked based on feedback
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WHAT IS MEASURED?
 Outcomes are lagging indicators, and are the
final results of all of an organization's products and services (for example, enhanced mobility or, safe drinking water).

 Performance drivers are leading indicators or
inputs and are measures that are unique to each organization or business unit. Performance drivers and inputs measure the employee and unit activities which brings about the outcomes.
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THE PURPOSE OF THE SCORECARD
The balanced scorecard forces managers to look at the business from four important perspectives. It links performance measures by requiring firms to address four basic questions:  How do customers see us? - Customer perspective

 What must we excel at? - Internal perspective
 Can we continue to improve and create value? Innovation & learning perspective  How do we look to shareholders? - Financial perspective
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PERSPECTIVES OF THE BALANCE SCORECARD

© 2005 Prentice Hall Inc. All rights reserved.

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THE CUSTOMER PERSPECTIVE
 Who is your customer?  What services or products do they expect from you?  How do you listen to and learn from your customer?  How do you retain and acquire new customers?  How do you meet your customers needs?  How do you measure customer satisfaction and dis-satisfaction?
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THE FINANCIAL PERSPECTIVE There is a broad range of traditional financial questions that can be asked. The questions depend upon the standards in the various industry and may include financial measures such as return on investment (ROI), revenue enhancement and growth, risk, and improved productivity.

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THE BUSINESS PERSPECTIVE
 What products or services will your customers value in the future?  What processes best deliver the outcomes desired by the customers?  Looking into the future, what are the new business processes that you must excel at?

 What will be valued in the future, and how will innovation deliver future values?
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THE LEARNING & GROWTH PERSPECTIVE

"A core group of three employeebased measures--satisfaction, productivity and retention--provide outcome measures from investments in employees, systems and organizational alignment.”
Kaplan & Norton, 1996

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THE LEARNING & GROWTH PERSPECTIVE The learning and growth perspective supports the other three perspectives. Ultimately, if the workforce is not enabled with knowledge, innovation and advanced skill sets, the workforce will be unable to build and enhance innovative business processes, that in-turn will help retain and acquire new customers, and ultimately achieve financial objectives.
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WHAT IS THE HR SCORECARD?
It is a reporting tool or instrument which examines the internal workings of an organisation and identifies blockages to growth. It is based on the Balanced Scorecard and is used to measure employees attitude to three key areas of organizational effectiveness:– 1. Strategic intent; 2. Business processes; and 3. Culture/behaviour
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MEASURING HR’S CONTRIBUTION
 The HR Scorecard – Shows the quantitative standards, or “metrics” the firm uses to measure HR activities. – Measures the employee behaviours resulting from these activities. – Measures the strategically relevant organizational outcomes of those employee behaviours.
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OUTCOME METRICS
 You can't improve what you can't measure.  Metrics must be developed based on the priorities of the strategic plan, which provides the key business drivers and criteria for metrics managers to watch.  Decision makers examine the outcomes of various measured processes and strategies and track the results to guide the company and provide feedback.
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THE SCORECARD MANAGEMENT SYSTEM
The Scorecard system is based on performance metrics or "metadata" that are tracked continously over time to look for trends, best and worst practices, and areas for improvement. It delivers information to managers (HR etc.) for guiding their decisions.

Some of the metrics tracked in HR are Absence Rate, Time to Fill and Turnover Cost.
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HUMAN RESOURCE METRICS
 Absence Rate
[(Number of days absent in month) ÷ (Average number of employees during mo.) × (number of workdays)] × 100

 Cost per Hire
(Advertising + Agency Fees + Employee Referrals + Travel cost of applicants and staff + Relocation costs + Recruiter pay and benefits) ÷ Number of Hires

 Health Care Costs per Employee
Total cost of health care ÷ Total Employees

 HR Expense Factor
HR expense ÷ Total operating expense
Sources: Robert Grossman, “Measuring Up,” HR Magazine, January 2000, pp. 29–35; Peter V. Le Blanc, Paul Mulvey, and Jude T. Rich, “Improving the Return on Human Capital: New Metrics,” Compensation and Benefits Review, January/February 2000, pp. 13– 20;Thomas E. Murphy and Sourushe Zandvakili, “Data and Metrics -Driven Approach to Human Resource Practices: Using Customers, Employees, and Financial Metrics,” Human Resource Management 39, no. 1 (Spring 2000), pp. 93–105; [HR Planning, Commerce Clearing House Incorporated, July 17, 1996;] SHRM/EMA 2000 Cost Per Hire and Staffing Metrics Survey ; www.shrm.org.

Figure 1–5
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HUMAN RESOURCE METRICS
 Human Capital ROI
Revenue − (Operating Expense − [Compensation cost + Benefit cost]) ÷ (Compensation cost + Benefit cost)

 Human Capital Value Added
Revenue − (Operating Expense − ([Compensation cost + Benefit Cost]) ÷ Total Number of FTE

 Revenue Factor
Revenue ÷ Total Number of FTE

 Time to fill
Total days elapsed to fill requisitions ÷ Number hired
Sources: Robert Grossman, “Measuring Up,” HR Magazine, January 2000, pp. 29–35; Peter V. Le Blanc, Paul Mulvey, and Jude T. Rich, “Improving the Return on Human Capital: New Metrics,” Compensation and Benefits Review, January/February 2000, pp. 13–20;Thomas E. Murphy and Sourushe Zandvakili, “Data and Metrics -Driven Approach to Human Resource Practices: Using Customers, Employees, and Financial Metrics,” Human Resource Management 39, no. 1 (Spring 2000), pp. 93–105; [HR Planning, Commerce Clearing House Incorporated, July 17, 1996;] SHRM/EMA 2000 Cost Per Hire and Staffing Metrics Survey ; www.shrm.org.

Figure 1–5 (cont’d)
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HUMAN RESOURCE METRICS
 Training Investment Factor
Total training cost ÷ Headcount

 Turnover Costs
Cost to terminate + Cost per hire + Vacancy Cost + Learning curve loss

 Turnover Rate
[Number of separations during month ÷ Average number of employees during month] × 100

 Workers’ Compensation Cost per Employee
Total WC cost for Year ÷ Average number of employees
Sources: Robert Grossman, “Measuring Up,” HR Magazine, January 2000, pp. 29–35; Peter V. Le Blanc, Paul Mulvey, and Jude T. Rich, “Improving the Return on Human Capital: New Metrics,” Compensation and Benefits Review, January/February 2000, pp. 13–20;Thomas E. Murphy and Sourushe Zandvakili, “Data and Metrics -Driven Approach to Human Resource Practices: Using Customers, Employees, and Financial Metrics,” Human Resource Management 39, no. 1 (Spring 2000), pp. 93–105; [HR Planning, Commerce Clearing House Incorporated, July 17, 1996;] SHRM/EMA 2000 Cost Per Hire and Staffing Metrics Survey ; www.shrm.org.

Figure 1–5 (cont’d)
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PROBLEMS WITH THE HR SCORECARD?
 People only perform the task that are going to be measured. They sometimes skew their work to meet particular incentive pay targets.  People will work to achieve their scorecard goals, and may ignore important things which are not on the scorecard.

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REFERENCES
Dessler, Gary. (2005). Human Resource Management, (10th ed.). Prentice Hall Kaplan, R. & Norton, D. (1996). The Balanced Scorecard: translating strategy into action.

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