Becker Chapters 2 3

MSMHR
Summary of Chapters 2 & 3

Becker, Huselid, & Ulrich’s The HR Scorecard
Inadequacy of Traditional Measurement Systems

1. Financial measures as lagging indicators, not leading indicators of
value creation.
2. Sole reliance on lagging indicators is short-sighted, because it
focuses on the “distant” past.
3. Need to uncover the firm’s value-creation chain (story): “business
model.”
Copyright 2004 Juan I. Sanchez, 1

Ph.D., All Rights Reserved
MSMHR
BALANCING COST CONTROL AND VALUE CREATION:
THE HR SCORECARD
1. Do you want HR to be perceived as a “cost control” or as a

“value creation unit?
2. What gets measured gets managed: if you measure only
HR costs, your unit will be treated as a commodity without
strategic value.
3. HR must control costs, but also create value.
4. Can you think of an example where value was lost due to
cost-control efforts? (“throw the baby with the bath water”)
Describe it for us.

MSMHR
CONTINGENCY THEORIES OF STRATEGIC HR
1. Not all HR practices fit all organizational strategies.

2. Organizations should pick and choose the HR practices that
best fit their organizational strategy (i.e., strategic alignment
of HR practices)

MSMHR
Competency Models by Strategy Exercise
Identify a series of relevant competencies or attributes that organizations should
possess to pursue each one of the following strategies (see some examples of
competencies a few slides further).
Cost-driven organization Relevant Performance Drivers (Competencies)
•Vigorous pursuit of
production/delivery efficiencies.
•Tight control over cost of
materials, resources, & overhead.
•Minimal expenditure in R&D,
marketing, sales, & service.
•Emphasis on large accounts &
economies of scale.
•Low-cost distribution system
MSMHR
Value-driven organization Relevant Performance Drivers (Competencies)
•Focus on developing best-in-

class capabilities in selected
activities.
•Promote reputation for
technological leadership & brand
image.
•Emphasize product engineering
or service integration.
•Maintain an active basic research
contingent.
•Partner with industry, universities,
& research organizations for
mutual benefit. Copyright 2004 Juan I. Sanchez, 5
MSMHR
Quality-driven organization Relevant Performance Drivers (Competencies)
•Aggressive pursuit of information

on customer careabouts, including
customer involvement in
product/service design.
•Efforts to instill a continuous
improvement orientation.
•Strict monitoring & screening of
subcontractors, franchises, and
suppliers.
•Some investment in R&D,
marketing, service, & training.

MSMHR
Service-driven organization Relevant Performance Drivers (Competencies)
•Value investments in people.
•Close monitoring of metrics
tracking service responsiveness.
•Cultivate good working
relationships among associates,
subcontractors, and suppliers.
•Creative involvement of R&D and
manufacturing groups in after-
sales support.
•Emphasis on customer service
and sales ranks’ contact with
customers.
MSMHR
Speed-driven organization Relevant Performance Drivers (Competencies)
•Willingness to accept risks

associated with delivering
product/service to market ahead of
competitors.
•Analysis of market trends.
•Aggressive management of new
product development cycles.
•Engage in joint ventures to speed
entry in emerging markets.
•Create geographical &
technological partnerships to
augment organizational
capabilities. Copyright 2004 Juan I. Sanchez, 8
MSMHR
Focus-driven organization Relevant Performance Drivers (Competencies)
•Emphasis on market research &

micromarket proclivities.
•Risk averse & focus on customer
careabouts.
•Intense management of
product/service modifications to
match profiled customer needs.
•Active involvement of targeted
customers in product/service
development.

MSMHR
Examples of Performance Drivers/Competency Definitions
•Informing: Disseminating relevant information about decisions, plans,
and activities to people who need the info to do their job.
•Clarifying: Assigning work, providing direction on how to do the work,
and communicating a clear understanding of job responsibilities, task
objectives, priorities, deadlines, and expectations.
•Monitoring: Gathering info about work activities and external conditions
affecting the work, checking on the progress and quality of work, and
evaluating the performance of individuals and the effectiveness of the
organizational unit.
•Planning: Determining long-term objectives and strategies, allocating
resources according to priorities, determining how to use resources
effectively.

MSMHR
VALUE CREATION EXAMPLE
Nordstrom
Financial ROI
CUSTOMER RETENTION
Customer
SUPERIOR CUSTOMER SERVICE
Internal/business process UNIQUE INVENTORY
KNOWLEDGEABLE AND
Learning and growth CUSTOMER-ORIENTED EMPLOYEES

MSMHR
VALUE CREATION EXAMPLE
Wal-Mart
Financial ROI
Customer CUSTOMER SATISFACTION
CONVENIENCE
Internal/business process SUPPLY-CHAIN MGMT. PRICING
Learning and growth RELIABLE EMPLOYEES
TRUSTWORTHY SUPPLIERS
MSMHR
VALUE CREATION EXERCISE
Outline the value chain of an organization you are familiar with
Financial
Customer
Internal/business process
Learning and growth

MSMHR
INTEGRATING HR INTO THE VALUE CREATION STORY
1. Is the HR function providing the company with the employee
competencies and behaviors necessary to achieve the
organization’s strategic objectives?
2. HR deliverables: Outcomes of the HR architecture that serve to
execute the firm’s strategy.
3. HR doables: HR efficiency & activity counts.
4. HR performance drivers: core people-related capabilities or assets.
5. HR enablers reinforce performance drivers (moderators whose
presence activates the HR performance drivers).
HR enablers HR Doables Impact
HR performance drivers Strategy

HR Deliverables
implementation

MSMHR EXERCISE:
DISTINGUSHING AMONG HR PERFORMANCE DRIVERS (PD),
DELIVERABLES (DE), DOABLES (DO), ENABLERS (EN)
SURVEY SAYS…
Measure PD DE DO EN
Average time for dispute resolution
Cost per trainee hour
Cost per hire
Time spent on new employee orientation
Troubleshooting skills
Ability to think out-of-the-box
Knowledge of sexual harassment legislation
Number of sexual harassment complaints
Sexual harassment-free environment
Risk-taking culture
Number of customer complaints
Performance ratings on teamwork
MSMHR
An example of HR Value Creation Story…
Honesty testing Random drug testing Cost per quarter (efficiency)
Inventory
Honest workforce Employee theft Pricing
shrinkage
What percent of your

coworkers are honest?
Cost per hire (efficiency)
Cost of missing items
What percent of the

items missing in the
inventory are stolen
by employees?

MSMHR
Your own HR Value Creation Story…
Now, build your own example of HR value creation story

based on an organization you are familiar with!
Define a series of scorecard measures that can speak to
how effectively each link of the value chain is working.
Define a series of HR efficiency measures that speak to the
cost-effectiveness of the HR function.

MSMHR
WRITE THREE HR PERFORMANCE DRIVERS (PD), THREE DELIVERABLES
(DE), THREE DOABLES (DO), AND THREE ENABLERS (EN) FOR YOUR HR
VALUE CREATION “STORY”
Type No. Measure

PD 1
2
3
DE 4
5
6
DO 7
8
9
EN 10
11
12

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MSMHR

Summary of Chapters 2 & 3

Inadequacy of Traditional Measurement Systems

Copyright 2004 Juan I. Sanchez, 1

1. Do you want HR to be perceived as a “cost control” or as a

Copyright 2004 Juan I. Sanchez, 2

1. Not all HR practices fit all organizational strategies.

Copyright 2004 Juan I. Sanchez, 3

•Focus on developing best-in-

•Aggressive pursuit of information

Copyright 2004 Juan I. Sanchez, 6

•Willingness to accept risks

•Emphasis on market research &

Copyright 2004 Juan I. Sanchez, 9

Copyright 2004 Juan I. Sanchez, 10

Internal/business process UNIQUE INVENTORY

Copyright 2004 Juan I. Sanchez, 11

Customer CUSTOMER SATISFACTION

Internal/business process SUPPLY-CHAIN MGMT. PRICING

Learning and growth RELIABLE EMPLOYEES

Learning and growth

Copyright 2004 Juan I. Sanchez, 13

HR enablers HR Doables Impact

HR performance drivers Strategy

Copyright 2004 Juan I. Sanchez, 14

What percent of your

What percent of the

Copyright 2004 Juan I. Sanchez, 16

Your own HR Value Creation Story…

Now, build your own example of HR value creation story

Copyright 2004 Juan I. Sanchez, 17

Type No. Measure

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