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HR Balanced Scorecard

Implementing Metrics to Assess and


Drive Business Performance

Deloitte Consulting LLP


August , 2005

For Discussion Purposes Only


Prepared by: Aman Gupta
HC OPP
Contents

• Overview

• Developing the scorecard

• Balanced Scorecard Measures

• HR Metrics

• Examples / Selected Case Studies

• Appendix: Key HR Metrics

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 2
Balanced Scorecard: An Overview

HR metrics are becoming more complex as organizations seek to define the


strategic value of human capital. While traditional HR measures such as turnover
rates and time-to-fill often serve as benchmarks these days, the move toward
more strategic measures calls into question whether benchmarks are even
appropriate anymore.

One of the most basic challenges is the difficulty of measuring the value of
intangible assets with any level of precision. About 80% of a company’s market
value is said to be attributable to intangible assets, according to Robert Kaplan
and David Norton, developers of the Balanced Scorecard methodology. As a
result, the current structure of financial statements – most of which do little to
present the details of intangible assets – renders them “increasingly irrelevant as
a tool supporting meaningful decision-making,” said Dr. Junaid M. Shaikh in the
Journal of American Academy of Business.

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 3
The balanced scorecard is a strategic management system used to
drive performance and accountability throughout the organization

• The scorecard balances traditional


performance measures with more
forward-looking indicators in four
key dimensions:
• Financial
• Operational Excellence
• Employees
• Customers

• Benefits include:
• Alignment of individual and
corporate objectives
• Accountability throughout the
organization
• Culture driven by performance
• Support of shareholder value
creation

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 4
The strategy mapping methodology translates high level strategic
vision into measures, and ensures alignment of objectives
throughout the organization

Sample “Bus Unit A” Strategy


Map

Corporate Best return on


Simple and
Objectives information World-class cost
rewarding Focused Innovation
technology structures
experiences
(RoIT)

Bus Unit A Establish


Build direct
Objectives Capture the XYZ
business
Protect Supplies company as a
market potential Business leader in
capabilities
technology X

Maximize market share while Sample Business Unit Balanced


Financial meeting current year revenue Scorecard
Strategies & profit commitments
Sample Bus Unit A

Customer Develop new • Revenue / Total •Marketing spend /


Improve brand market Revenue
Strategies products /
performance • Operating profit •% increase in
Strategies

solutions marketing reach

Operational Develop effective,


Excellence sustainable •Brand recognition
Strategies marketing programs rating •Global diversity
•New product ramp rating
rates •Meeting employee
Attract the diversity, •New product retention plans
Employee revenue/Total revenue
Strategies skills and
competencies we need

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 5
Use consistent terms and definitions throughout the strategy
mapping process for communication across Business Units
and Functions

To monitor
Objectives progress, targets
support the are set for each
overall vision and measure in given
provide areas of time period.
emphasis for the Targets should be
organization to based off the
focus its strategic planning
activities financials and
assumptions.

Measures are directly linked to strategies of the


organization and should include all major
performance drivers for each strategy.

Strategies break down the objectives Measures should be:


into more actionable elements and in • Timely, accurate, focused and relevant
aggregate should represent the overall • Leading indicators of performance
organizational focus • Linked to controllable events
• Cost effective to collect and compute
• Easy to communicate broadly to the
organization

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 6
Strategy mapping produces strong bottom line benefits and
provides organizational alignment and accountability

84% of the companies that prepared a strategy map reported


bottom-line benefits from the exercise while companies that
"implemented" the Balanced Scorecard without strategy mapping
reported no bottom-line benefits.

Benefits
Organizational Alignment
• Translates Corporate Objectives– Provides a forum for managers to agree on corporate
strategies and measures while aligning organizational strategies.
• Communicates and links the strategy – Depicts the coordinated strategies throughout the
organization
• Rigorous management tool - Strategic objectives are translated into performance scorecards
that are used to manage the business and provide the standard for strategic feedback and
review

Accountability
• Establishes criteria for successful performance – Influences behavior to focus on both the
success of corporate strategy and direct line of influence
• Balances the financial and non-financial perspectives – establishes a rigorous business
management system that goes beyond traditional financial measures to leading indicators of
performance

Source: The Balanced Scorecard Collaborative survey findings


Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 7
HR Scorecard : An Overview

The Basic Business Model

Financial Success
$$$

Strategic Choice
Workforce Success Customer Success
• Operational
Excellence
• Product Leadership
• Customer Intimacy

Business Process
Success

How will we grow? What strategic capabilities are


necessary? How will we measure our progress?

Source: The New Workforce Metrics: SHRM Thought Leaders Conference, Oct 2003 / Chicago, IL
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 8
HR Scorecard : An Overview

Business Scorecard Workforce Scorecard

BUSINESS SCORECARD
Customer Success Financial Success

WORKFORCE SCORECARD
Business Process HR Systems
Success Workforce Success • Align
• Mindset/Culture • Integrate
• Competencies • Differentiate
• Behavior

HR Competencies HR Practices
• Work Design
t:
• Strategic Partner
a • Perf. Measurement
th • Cultural Change
e
rc ds • Rewards
f o
rk ta
n • Employee Advocacy • Selection
wo ders do • Administrative • Development
A n to
• U ble Expertise • Communication
A s
• oe
•D
HR SCORECARD

Source: The New Workforce Metrics: SHRM Thought Leaders Conference, Oct 2003 / Chicago, IL
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 9
HR Scorecard : An Overview

The Strategic Capability Cascade - XYZ Corp.

Growth Strategy
 • Primary growth strategy
Share of customer’s wallet
New markets
New products
New markets and new products 
Present Goal
Strategic Capabilities/ • What are we/or must be “best at”  competitive advantage? Those 3-4 items
Functions we must do extraordinarily well to achieve our growth strategy
− Strategic Capability 1___________________________  
− Strategic Capability 2___________________________  
− Strategic Capability 3___________________________  
− Strategic Capability 4___________________________  
Present Goal
Identify “A” Positions • Those jobs/titles inside a strategic capability that leverages our competitive
advantage and cause our growth strategy to succeed; create wealth for firm;
engage in core work; create value for customers.
− Position Title 1________________________________  
− Position Title 2________________________________  
− Position Title 3________________________________  

Identify “A” Players • Individuals that have those jobs/titles in “A” positions that are among top 10%
available in labor market for this position; top performers in our firm; highest
potential in our firm; extremely difficult to replace; have many external, high-
level opportunities?
Present Goal
− Position Title _______________________________A’s % %
− Position Title _______________________________B’s % %
− Position Title _______________________________C’s % %

Source: The New Workforce Metrics: SHRM Thought Leaders Conference, Oct 2003 / Chicago, IL
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 10
HR Scorecard : An Overview

High
Differentiation: Your Firm’s Workforce(s)

Professional Partners Strategic Capabilities


Uniqueness of Human Capital

Contract Services Operational Partners


Low

Low Competitive Advantage Value of Human Capital High

Source: The New Workforce Metrics: SHRM Thought Leaders Conference, Oct 2003 / Chicago, IL
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 11
HR Scorecard : An Overview

The Strategic Diagnostic

Strategic Choice Strategic Capabilities “A” Positions “A” Players

• • • •
• • • •
• • •
• • •

BUSINESS SCORECARD
Culture
Customer Success Financial
• Success



• WORKFORCE SCORECARD
HR Systems
Business Process Workforce • Align
Success Success • Integrate
• Mindset/Culture • Differentiate
• Competencies
• Behavior

HR HR Practices
Competencies • Work Design
.
.. • Strategic Partner • Perf.
nd .
s ta . . • Cultural Change Measurement
r o
de e t . . • Employee Advocacy • Rewards
Un Abl Do . • Administrative • Selection
Expertise • Development
• Communication
HR SCORECARD

Source: The New Workforce Metrics: SHRM Thought Leaders Conference, Oct 2003 / Chicago, IL
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 12
Contents

• Overview

• Developing the scorecard

• Balanced Scorecard Measures

• HR Metrics

• Examples/ Selected Case Studies

• Appendix: Key HR Metrics

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 13
Balanced Scorecard Development Overview

Provide templates
and Balanced Business Unit /
Scorecard Instruction Function Scorecards All Balanced
development sessions complete (including Scorecards
instructions complete targets). finalized

Initiate Develop
Balanced Align and
Balanced Scorecards
Scorecard finalize
including objectives,
Development Balanced
strategies, measures and
Implementation Scorecards
targets

Internal Full Internal Final Internal


Strategic Strategic Strategic
Planning Planning Planning
Submissions submission due submissions
due for Business due for
Units / Business Units /
Functions Functions

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 14
Process Overview

Communicate Communicate preliminary Corporate and


Revise and finalize Business Unit
Corporate corporate corporate strategies and corporate strategies,
objectives measures alignment
measures, targets

Business
Unit/ Review Approve finalized
Review & strategies, strategies,
Function
Approve measures and measures,
Executives targets targets
Business Unit and Division
alignment
1 2 3 4 5
Business Communicate Communicate
Identify Identify Business Unit
Unit/ horizontally and corporate/ Business Finalize targets
Business Unit/ strategies, measures
Function align objectives to Unit / Function for measures
Function and targets, aligning to
Planners other Business direction to Division
objectives Corporate strategy map
Unit/ Function execs & planners

Division
Executives Review &
approve

Division Identify Division


Planners proposed objectives, Ensure alignment Finalize
strategies, measures with Business targets for
and targets with input Unit objectives measures
from sub-Divisions

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 15
Detailed Process

1 2 3 4 5
Communicate
Communicate Corporate/ Identify strategies,
Identify Finalize
horizontally and Business Unit / measures, and
Business Unit / targets for
align objectives to Function direction targets aligning to
Function level measures
other Business to Division execs & Corporate strategy
objectives
Units / Function planners map

 Business  Business  Business Unit/  Business  Business


Unit/Function Unit/Function Function planners Unit/Function and Unit/Function and
Owners planners and planners and and managers Division/sub-Division Division/sub-
managers managers planners and Division planners
managers and managers
 Conduct Kick-off  Publish Corporate  Publish all  Provide templates  Provide
meeting objectives and all Business Unit / and instructions information on
Initiative  Provide Templates Business Unit / Function objectives
 Conduct strategy Corporate
Support Function objectives online mapping workshops Scorecard targets
and instructions  Conduct best
online  Conduct practice forums
 Conduct Community of community of
Practice forums Practice forums
 Corporate level  Business  Business Unit/  Corporate level  Business Unit/Function
objectives Unit/Function Function objectives strategies and targets
Strategic Planning objectives Corporate level measures  Division/sub-Division
Input
 
information  Corporate level objectives
 Strategic planning targets
financials and  Corporate targets
objectives assumptions
 Aligned Corporate  Business Unit/Function  Business  Business Unit/Function  Finalized targets for
Deliverables level and Business objectives communicated Unit/Function strategies, measures each measure at the
Unit objectives to all other Business objectives and targets Business
Units and Functions communicated to  Division/sub-Division Unit/Function and
 Identification of cross- Divisions and sub- strategies, measures Division level
Business Unit Divisions and targets  Finalized Balanced
opportunities  Aligned Business  Aligned Corporate level Scorecards at
 Identification of potential Unit, Division, and and Business Corporate, Business
strategies and measure sub-Division Unit/Function Unit, Function, and
to incorporate into objectives objectives, strategies, Division levels
Corporate level measures and targets
scorecard

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 16
1) Identify Business Unit/Function Level Objectives

1 2 3 4 5
Owners Identify
Business
Communicate
horizontally
and align
Communicate
Corporate/
Business Unit /
Identify
strategies,
measures,
Finalize
targets
• Business Unit / Function planners and managers Unit /
objectives to Function and targets
for
Function measure
other Business direction to aligning to
level s
Units / Division execs Corporate
objectives
Function & planners strategy map

How Tips / Rules of


• Understand Corporate level objectives Thumb
• Determine, at a high level, how the Business Unit • Each Business Unit / Function will have about 3-5
objectives
or Function will support the organization in
delivering the Corporate level objectives • Objectives should be easily understood and not require
extensive explanation
• Document the objectives indicating which
Corporate objective is supported.

Tools / Templates Deliverables


Objectives • Business Unit level objectives
Please describe your Group's objectives below and check which Company X level objectives it supports. Every objectives documented in Excel template
should Place a check mark in the
box of the Corporate
support at least one of the four Company X level
objectives.
Corporate objective supported Simple,
objectives rewarding World-class Focused
Group Objectives Description RoIT experiencescost structuresinnovation
What are the areas of focus which supportPlease
the describe the objective in detail
Group/Function's overall vision and the Company X level
objectives?
Business Unit/Function’s overall vision
and the Corporate level objectives
1)
2)
3)

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 17
2) Communicate Horizontally And Align Objectives To
Other Business Units / Functions
1 2 3 4 5
Communicate Communicate Identify
Identify Finalize
horizontally Corporate/ strategies,

Owners
Business targets
and align Business Unit / measures,
Unit / for
objectives to Function and targets
Function measure
other Business direction to aligning to
level s
• Business Unit / Function planners objectives
Units /
Function
Division execs
& planners
Corporate
strategy map
and managers

How Tips / Rules of


• The planning team will facilitate a conference call with all Business
Unit / Function BSC leads to communicate cross-Business Thumb
Unit/Function objectives to: • Document objectives in
– Facilitate communication across Business Units and Functions. presentation format that
– Provide “cross-pollination” of strategy development. clearly articulates the
Business Unit / Function
– Discuss and identify potential pan-Corporate initiatives.
objectives and how they
– Preliminarily identify common strategies and measures to be relate to the Corporate
incorporated into the Corporate level balanced scorecard. Objectives.

Tools / Templates Deliverables


Sample Communication Template • Business Unit/Function objectives
Corporate
Objectives
Best return on
information
Simple and
rewarding
World-class cost
structures
Focused Innovation
communicated to all other
technology (RoIT) experiences

Build direct Establish Company


Business Units and Functions
Bus Unit A Capture the XYZ Protect Supplies
Objectives business as a leader in
market potential Business

Objectives
capabilities technology x
• Identification of cross-Business
Description
Description of the Description of the Sample Agenda
Description of the Description of the Unit opportunities
Objective Objective Objective Objective

• 15 minutes Introductions • Identification of potential


• 90 minutes Round Table strategies and measure to
presentation of Objectives and
explanations incorporate into Corporate level
• 15 minutes Wrap-up and next scorecard
steps
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 18
3) Communicate Corporate, Business Unit / Function
Direction to Division Executives and Planners
1 2 3 4 5
Communicate Communicate Identify
Identify Finalize
horizontally Corporate/ strategies,

Owners
Business targets
and align Business Unit / measures,
Unit / for
objectives to Function and targets
Function measure
other Business direction to aligning to
• Business Unit / Function planners level
objectives
Units /
Function
Division execs
& planners
Corporate
strategy map
s

and managers

How Tips / Rules of


• Business Units / Functions facilitate communication Thumb
of Corporate and Business Unit / Function objectives
to: • Document objectives in presentation format
– Provide direction for the Divisions and sub- that clearly articulates the Business Unit /
Divisions in developing Division level objectives, Function objectives and how they relate to
strategies and measures the Corporate Objectives.
– Discuss and identify cross-Division initiatives • Communicate Corporate and all Business
– Preliminarily identify Business Unit strategies and Unit / Function objectives to help with
measures organization-wide understanding of
Corporate strategy

Tools / Templates Deliverables


Communications plan
• Business Unit/Function
Snapshot of sample objectives communicated to
company communications Sample Communication Template Divisions and sub-Divisions
collateral replaces
Best return onthis white
• Aligned Business Unit,
Simple and
Corporate World-class cost
information rewarding Focused Innovation
box (overlay
Objectives
on (RoIT)
technology box below) experiences
structures

Business Unit Capture the XYZ


Build direct
Protect Supplies
Establish Company Division, and sub-Division
business as a leader in
Objectives market potential
capabilities
Business
technology x objectives
Objectives
Description
Description of the Description of the Description of the Description of the
Objective Objective Objective Objective

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 19
4) Identify Strategies, Measures and Targets Aligning to
Corporate Strategy Map
1 2 3 4 5
Communicate Communicate Identify
Identify Finalize
horizontally Corporate/ strategies,
Business targets
and align Business Unit / measures,
Unit / for
objectives to Function and targets
Function measure
other Business direction to aligning to
level s
Units / Division execs Corporate
objectives
Function & planners strategy map

Sample Business Unit Strategy Map


Corporate Best return on Simple and
Objectives World-class cost
information rewarding Focused Innovation
structures
technology (RoIT) experiences

Bus Unit A Build direct Establish Company


Objectives Capture the XYZ Protect Supplies
business as a leader in
market potential Business
capabilities technology x

Sample Bus Unit A Balanced Scorecard


A Maximize market share while
B
meeting current year revenue &
Sample Bus Unit A Strategies

Financial
Strategies profit commitments • Revenue / Total •Marketing spend /
market Revenue
• Operating profit •% increase in
Improve marketing reach
Customer Develop new
Strategies brand products /
performance solutions •Brand recognition
rating •Global diversity
•New product ramp rating
rates •Meeting employee
Operational Develop effective, •New product retention plans
Excellence sustainable marketing revenue/Total revenue
Strategies programs Sample Bus Unit A Targets
Goals

C
Measure

Employee Attract the diversity, 1hYY+1 2hYY+1 FYYY+2 FYYY+3

Revenue / Total market

Strategies skills and competencies Operating profit

we need Brand recognition rating

New product ramp rates


New product revenue/Total
revenue
Marketing spend / Revenue

% increase in marketing reach

Global diversity rating

*See measure development primer for detailed instructions Meeting employee retention plans

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 20
4A) Identify Strategies

1 2 3 4 5
Communicate Communicate Identify

Owners
Identify Finalize
horizontally Corporate/ strategies,
Business targets
and align Business Unit / measures,
Unit / for
objectives to Function and targets
Function measure
• Business Unit/Function and Division/sub- level
other Business
Units /
direction to
Division execs
aligning to
Corporate
s
objectives
Division planners and managers Function & planners strategy map

How Tips / Rules of


• Determine how Thumb
• Classify strategies into one of the four dimensions • Each strategy should fit into one of the
• Document strategies Balanced Scorecard dimensions
• Strategies should be meaningful and easily
understood
• Each Business Unit/Function strategy must be in
support of a Business Unit/Function objectives

Tools / Templates Deliverables


Document • Business Unit / Function
Strategies strategies documented in
Strategies
the Excel templates
Description
Objectives Strategies BSC Dimension
(optional)
What objective(s) does this How will we achieve our objectives? Provide a more detailed description of the What BSC dimension does this
strategy support? strategy, if appropriate. strategy belong to? Customer,
employee, financial, or operational
excellence.

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 21
4B) Identify Measures

1 2 3 4 5
Communicate Communicate Identify

Owners
Identify Finalize
horizontally Corporate/ strategies,
Business targets
and align Business Unit / measures,
Unit / for
objectives to Function and targets
• Business Unit/Function and Division/sub- Function
level
other Business direction to aligning to
measure
s
Units / Division execs Corporate
Division planners and managers objectives
Function & planners strategy map

How Tips / Rules of


• For each strategy, identify measures that indicate Thumb
performance against the strategy Measures should be:
• Relevant
• For each measure identified, conduct a cause and
• Reliable
effect analysis to determine other measures that
• Timely
may be a leading driver of the original measure
• Valuable
• Choose the measure or set of measures that will • Easy to represent visually
best provide measurement of the strategy • Easily benchmarked
• Document measures • Permit analysis over time
• Emphasize leading indicators of performance
• Linked to controllable events

Tools / Templates • Cost effective to collect and compute

Deliverables
Reliability
Conforma nce

Cost to operate
Cost to ma intain

Relative
• Business Unit / Function
measures documented in
purchase price
Product mee ts Projected ROI
Performance expecations

Product mee ts
needs
Cost to use Cost to aquire
the Excel template
Product
Quality Price

Customer

Document Satisfaction

Use a cause and Service


Delivery

Measures
Quality
Service me ets

effect analysis to
needs Arrives when
Service meet s promised
expectations
Arrives when

determine measures
Flexibility needed On-time
Responsiveness delivery

Lead times

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 22
4C) Identify Targets

1 2 3 4 5
Communicate Communicate Identify

Owners
Identify Finalize
horizontally Corporate/ strategies,
Business targets
and align Business Unit / measures,
Unit / for
objectives to Function and targets
Function measure
• Business Unit/Function and Division/sub-Division level
other Business
Units /
direction to
Division execs
aligning to
Corporate
s
objectives
planners and managers Function & planners strategy map

How Tips / Rules of


• For each measure set targets for a 3 year period Thumb
(including 1st and 2nd half of 1st year).
• Targets should be consistent with the financials
• Document all assumptions made for each set of and assumptions made for the strategic
targets. planning processes
• Coordinate targets with Corporate, Divisions and • Targets should be set based on both internal
sub-Divisions. forecast and external benchmarks

Tools / Templates Deliverables


Measure Assumptions
Goals • Business Unit / Function
1hYY+1 FYYY+1 FYYY+2 FYYY+3
targets documented in the
What is the measure name? What key assumptions What is the What is the What is the What is the
support achieving the
proposed goal?
target for the
period?
target for the
period?
target for the
period?
target for the
period?
Excel template

Make sure to
document all
assumptions made

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 23
5) Finalize Targets For Measures

1 2 3 4 5
Communicate Communicate Identify

Owners
Identify Finalize
horizontally Corporate/ strategies,
Business targets
and align Business Unit / measures,
Unit / for
objectives to Function and targets
Function measure
• Business Unit/Function and Division/sub- level
other Business
Units /
direction to
Division execs
aligning to
Corporate
s
objectives
Division planners and managers Function & planners strategy map

How Tips / Rules of


• Meet with Corporate corporate balanced scorecard Thumb
leads to align targets where necessary.
• Targets should be consistent with the financials
• Make adjustments to targets as required. and assumptions made for the strategic
planning processes.
• Meet with Divisions and sub-Divisions to align
targets where necessary. • Targets should be set based on both internal
forecast and external benchmarks.
• Make adjustments to targets as required.
• Finalize target documentation.

Tools / Templates Deliverables


30%
• Calculation
– # of systems deals closed with Bus Unit A sales contract / Total #
of systems deals closed
• Finalized targets for each
Business Units / Functions Sample Chart View • Rationale
measure at the Business
20% Target
– Serves as a real-time attach rate measure. Allows Bus Unit A to
Tren
may want to present
track how many systems deals closed include a Bus Unit A sale,

Unit/Function and Division


enabling Bus Unit A to determine if they are optimizing the sale
d potential

measures and targets in • Drivers of Metric Variation


10% Actuals – Corporate sales targets; Corporate knowledge and training of

graphical format 0% •
Bus Unit A offerings; Integration of Bus Unit A with Corporate
sales efforts
Effects of Metric Variation
level
Jan Feb Mar Apr May Jun – Bus Unit A revenue
Jan Feb Mar Apr May Jun

• Finalized Balanced
Actual 10.0% 11.0% 13.0% 15.0% 17.0% 19.0%
Target 20.0% 21.0% 21.0% 22.0% 22.0% 23.0%
Variance -10.0% -10.0% -8.0% -7.0% -5.0% -4.0%

• Measure Description
Scorecards at Corporate,
Business Unit, Function, and
– Tracks attach rate by measuring the % of systems deals closed with a
sale at point-of-sale. Point-of-sale to be defined for each Division.

Division levels

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 24
The Balanced Scorecard team (= name of whatever internal group is rolling it out)
is available to provide support when needed

• The Balanced Scorecard team will provide additional support as requested by


each Business Unit/Function

• Support activities may include the following:


– Strategy mapping workshops
– Strategy mapping instruction sessions with Divisions
– Measure development and/or review
– Balanced scorecard best practice sessions

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 25
Southwest Airlines: Linking People to Financial
Performance

Strategy Map An Illustrative

Strategic Theme: Goals: Measures: Targets: Initiatives:


Operating Efficiency What the How success The level of Key action
Profits and strategy is or failure performance programs
Financial RONA
trying to (performance) or rate of required to
Grow achieve against goals improvement achieve
Fewer planes
Revenues is monitored needed targets
Attract &
Customer Retain More
Customers

On-time Lowest
Service prices

Internal Objectives Measures Targets Initiatives


Fast ground
turnaround
• Fast ground • On Ground • 30 Minutes • Cycle time
turnaround Time • 90% optimizatio
• On-Time n
Learning Departure

Ground crew
alignment

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 26
Southwest Airlines’ Approach to Measurement
Strategy Map An Illustrative

Strategic Theme:
Strategic Theme: Objectives Measures Targets Initiatives
Operations Excellence
Operating Efficiency
Profits and
Financial RONA • Profitability • 30% CAGR
• Grow • 20% CAGR
Grow Revenues
Fewer planes
Revenues
• 5% CAGR
• Fewer planes
Attract &
Customer Retain More • More • # Customers • 12% • Customer
Customers Customers • FAA On Time growth loyalty
On-time • Flight is on Arrival Rating • Ranked #1 program
Lowest
Service prices -time • Market Survey • Ranked #1 • Quality
• Lowest prices management
Internal
• Fast ground • On Ground • 30 Minutes • Cycle time
Fast ground turnaround Time • 90% optimization
turnaround • On-Time
Departure

Learning • Ground crew • % Ground crew • yr. 1 70% • Ground


alignment trained yr. 3 90% crew
Ground crew yr. 5 100% training
alignment • % Ground crew
stockholders • ESOP

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 27
Contents

• Overview

• Developing the scorecard

• Balanced Scorecard Measures

• HR Metrics

• Examples/ Selected Case Studies

• Appendix: Key HR Metrics

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 28
How to choose Balanced Scorecard measures

What gets measured gets done

• Identify measures that are drivers of performance for each strategy.

• Analyze measures to include both leading and lagging indicators.

• Find the important drivers and reduce the number of measures applied.

• Look at overall scorecard and avoid any unbalanced, ‘game-able’ measures.

Source: “Challenge your Balanced Scorecard”, Graham


Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 29
Identify Measures
Identify measures that are drivers of performance for
each strategy.
Sample “Bus Unit A” Strategy
Map

Corporate Best return on Simple and


Objectives* World-class cost
information rewarding Focused Innovation
structures
technology (RoIT) experiences

Bus Unit A Build direct Establish company


Objectives* Capture the XYZ Protect Supplies
business as a leader in
market potential Business
capabilities technology x

Maximize market share while • Revenue / Total market


Financial meeting current year revenue • Operating profit
Strategies & profit commitments Each measure should meet four
essential criteria:
Sample Bus Unit A

Customer Develop new •New product ramp Relevant - Directly linked to


Improve brand •Brand
Strategies recognition products / rates
performance
rating •New product revenue critical objectives and strategies
Strategies

solutions
/ Total revenue
Reliable - Verifiable and free from
Operational Develop effective,
•Marketing spend / Revenue
subjective judgment or bias
Excellence sustainable •% increase in marketing
Strategies marketing programs reach Timely - Current; available before
it loses its capacity to help make
decisions about tomorrow’s
Employee Attract the diversity,
skills and competencies
•Global diversity rating operations, activities, and budgets
Strategies •Meeting employee retention
we need plans Valuable - Able to help
management make significant
*Note: “Corporate” is made up of “Business decisions about significant issues
Units” that in turn are made up of “Divisions”
and “sub-Divisions”
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 30
Analyze Measures

Analyze measures to include both leading and lagging indicators

Well chosen leading indicators foreshadow success or failure well


before financials can reflect them

• Look to measure important business processes, not just results.


– A result may be a lagging indicator while the process that drives the result may
provide a more leading indicator of performance.
• Example: Inventory turnover is a result measure while set-up time reduction is a process
measure.
• Example: Market share is a result measure while product development lead time is a process
measure.

• Conduct an analysis to determine the cause and effect relationship


between measures and identify the best indicator of performance.
– In many instances, a measure can be predicted by one or more other measures.
– Conducting a cause and effect analysis will help the management team to
understand the full set of potential measures and choose the most appropriate
measures to drive and measure performance.
• Example: Customer satisfaction may be predicted by on-time delivery rates and quality
ratings.

Source: “Challenge your Balanced Scorecard”, Graham


Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 31
Analyze Measures

Look to measure important business processes, not just results

Description
Often times measurement of the process rather than the result provides a better
leading indicator of performances

How to Use Example Process Measures


Operational Sample Process Measures
• For the measures identified, Strategies
determine whether it is a process or “Differentiate the • Number of products or services
result measure. product” or “Simplify
• Number of parts
the product”
• If the measure is a result measure,
“Serve the customer • Length of the order fulfillment cycle
determine if there is a process that as a first priority”
drives the result. • Length of the manufacturing cycle
• Number of distribution points
• Identify a measure(s) that indicate
performance of the process. “Develop • Product development lead time
technologically
• Number of engineering changes
advanced products in
an effective manner” • Number of new patents

“Procure material • Items passing quality standards


effectively”
• Unit cost

“Establish a low-cost • Number of profit centers


administrative
• Number of bank relationships
structure”
• Number of invoices

“Develop our human • Training hours achieved


resource assets”
• Counseling frequency

Source: “implementing your strategies”, Keegan, Jones, Eiler


Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 32
Analyze Measures

Conduct a Cause and Effect analysis

Description
The Cause and Effect diagram, also called the Fishbone or Ishikawa diagram (after it’s
creator Dr. Ishikawa) is a tool that is used to help identify all the possible or probable
sources of a given problem. Once developed, this list of potential causes can be narrowed
down to root causes using other methods such as Pareto Analysis.
The basic tool uses a graphic that allows potential sources of variation or defects to be
developed and recorded using categories of causes such as the “5 M’s” Man (resources),
Machine (or equipment), Methods (procedures), Materials and Measurement.

How to Use Example Cause and Effect Diagram


Conformance Cost to maintain

– Define the problem to be solved, record Reliability Cost to operate Relative


purchase price

on the left side of the diagram Performance


Product meets
expecations
Projected ROI

– List the “5 M’s” as categories (or develop Product meets Cost to use Cost to aquire

your own more specific categories) listing


needs

each on a separate thread or bone Product


Quality Price

– Brainstorm potential causes, listing them Customer


Satisfaction

under the appropriate category Service


Delivery
Quality
– Add additional branches or bones to Service meets
needs Arrives when

capture causes related to one another Service meets


expectations
promised

Arrives when

– Review the resulting list to identify Flexibility


Responsiveness
needed On-time
delivery

others not yet captured. Lead times

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 33
Reduce the Number of Measures
Find the important drivers and reduce the number of measures
applied

Well-designed balanced scorecards avoid large numbers of measures – Kaplan


and Norton recommend 25 measures or less for the Balanced Scorecard

• Reduce the number of measures based on their indication of


performance
– Measures should only be chosen if they provide a good indication of
either past or future performance
– Delegate measures to lower level scorecards
– Executive-level scorecards focus on processes that require executive-
level attention, while scorecards of middle managers focus on
processes for which they are responsible
• Identify measures that can be externally benchmarked
– When making the choice between measures, choose those measures
that can be benchmarked against external sources to help the
company from having an internal bias

Source: “Challenge your Balanced Scorecard”, Graham


Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 34
Reduce the Number of Measures
Reduce the number of measures based on their indication of
performance
Description
Reduce the number of measures by rating the cause and effect measures identified and
eliminating all measures that rated to have a low effect on the outcome.

How to Use Example Cause and Effect Rating Diagram


Conformance Cost to maintain
• In defining the leading and lagging
indicators, a cause and effect diagram has Reliability
H Cost to operate Relative
been drawn. purchase price
H Product meets
H Projected ROI
• For each cause, indicate the level of influence Performance expecations L L
on the effect M
– High Effect: has high influence over the Product meets Cost to use Cost to aquire M
result needs L
M
– Medium Effect: Some influence over the Product H
result M Quality Price

– Low Effect: Little influence over the H


L Customer
result Satisfaction
• Remove all measures that have a low effect M M
on the result along with its entire branch: L Service
Quality
Delivery
– Example: in the example diagram, Service meets M
“Product Quality” would be removed needs H H Arrives when
Service meets promised
along with its entire branch (“product
meets needs”, “product meets
M expectations

H
Arrives when H
expectations”, etc.) Flexibility needed On-time
Responsiveness delivery
L
Lead times

Source: “Challenge your Balanced Scorecard”, Graham


Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 35
Reduce the Number of Measures

Delegate measures to lower level scorecards


Description
Executive-level scorecards focus on processes that require executive-level attention, while
scorecards of middle managers focus on processes for which they are responsible.

How to Use
•Total Assets •Cost Excess Capacity
Identify measures on the Business Unit level •Return on Net Assets •Inventory turnover
scorecard that can be removed and only Business •Days in Payables •On-time delivery
tracked on at the Division scorecard due to Unit •Net Income •Space utilization
one of the following: Measures
•Return rates •Turnover rate
– The measure is more influential for a specific
Division and does not make sense to track across •Total cost to •Employee
customer satisfaction
all Divisions
•Brand recognition •Ethics violations
• Example: Return rates may make sense for a
product Division but not for a service- •Sales per channel
oriented Division
– Although the measure is important, it may not be
very risky
•Days in Payables •Average lead time
• Example: Ethics violations are important but
•Forecast accuracy
ethics has never been an issue in the past Division •Accounts Receivable
Turnover
– The measure may play importance into how a Measures •Schedule adherence
Division executive manages the business but not •Revenue •Space utilization
in how a Business Unit executive would manage
• Example: Space utilization may drive a •Number of •Health promotion
Division executive’s decisions but the customers •Competency
Business Unit manager may not make space- •Return rates coverage ratio
related decisions •Customer •Ethics violations
complaints

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 36
Reduce the Number of Measures

Identify measures that can be externally benchmarked

• Most organizations will compare their performance to internal benchmarks (last year’s
performance or to plan).
• By comparing performance against external benchmarks, the Business Unit can further
understand how market and industry conditions may be affecting overall performance.
• When reducing the number of measures, take into account how easily the measure can be
externally benchmarked.

Example information that can be used for external


benchmarks:
•Benchmarking studies
•Statistics about major competitors
•Items in the business press
•Measurements of customer complaints
•Prices achieved for bellwether items
•Detailed part cost comparisons
•“Thought pieces” concerning innovative approaches to product
distribution
•Capital redeployment techniques being used by others

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 37
Balance the Scorecard
Look at overall scorecard and avoid any unbalanced, ‘game-able’
measures

Balanced Scorecards should consist of a set of measures that work


together to provide a robust measurement system

• A scorecard should be balanced in breadth of metrics and avoidance of


sub-optimization (optimizing a sub-part at the expense of the whole).

• To make sure the measures are balanced and not encouraging the
wrong behavior, ask the following two questions:
– What actions could I take that would improve performance, yet be bad for the
company?
– For each of those actions, is there another measure that would prevent me
from taking it?
• If there isn’t a preventative measure, add one.
• If there is no preventative measure that can be added, the organization is better off
eliminating the measure that is encouraging sub-optimal behavior.

Source: “Challenge your Balanced Scorecard”, Graham


“To implement your strategies, change your measurements”, Keegan, Jones Eiler
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 38
Contents

• Overview

• Developing the scorecard

• Balanced Scorecard Measures

• HR Metrics

• Examples/ Selected Case Studies

• Appendix: Key HR Metrics

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 39
Measurement/HR metrics is a strategic HR initiative that is present to a
relatively great extent in respondents’ organizations in 2002

Being a Business Partner 4.28


Being a Strategic Thinker 4.04
Facilitating Change 3.79
Measurement/HR Metrics 3.76
Developing Shared Services 3.72
Being a Business Leader 3.60
New Information Technology 3.48
Developing New HR Competencies 3.40
Developing Centers of Excellence 3.20
Team-Building 3.04
Outsourcing 3.00 2002 survey of HR executives
from 32 large companies
Redefining Line Management’s Role 2.84
Making HR a Profit Center 1.84

1 2 3 4 5
Mean Response
Survey responses ranged from 1 for “No Extent” to 5 for “Very Great Extent”

Source: HRI’s “2002 Survey of the Role and Structure of Human Resources”
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 40
The size of the firm does not necessarily correlate to whether HR is
considered a fully integrated strategic partner

Fully Integrated Partner Primarily Reactive to Organizational Needs


Partially Integrated Strategic Partner Other

Total 24% 25% 48% 3%

2,500 or more 23% 23% 52% 1%

1,000 to 2,499 27% 27% 44% 2%

500 to 999 16% 27% 53% 4%

250 to 499 24% 19% 56% 1%

100 to 249 27% 25% 43% 5%

Fewer than 100 30% 27% 37% 6%

0% 25% 50% 75% 100%

2002 survey of 571 randomly selected SHRM members

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. Source: SHRM/Fisher Human Resource Strategies 41
Cost per hire is considered one of the most valuable staffing metrics in
justifying HR’s contribution to the bottom line

Staffing Metrics Extremely Valuable Valuable


Time-to-Start 23% 37%
Involuntary Separation Cost 22% 51%
Voluntary Separation Cost 24% 51%
Number of Replacements 39% 43%
Time-to-Fill a Position 44% 44%
Vacancies 45% 38%
Quality of New Hires 48% 41%
Number of New Hires 50% 41%
Total Cost per Newly Hired Employee 50% 43%
Source of Hire 55% 36%
Cost of Turnover 59% 35%
Recruitment Costs per Hire 60% 34%

0% 25% 50% 75% 100%


Percent of Respondents
Survey of 627 HR professionals

Source: 2002 SHRM/EMA Staffing Metrics Survey


Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 42
New-hire data is likely to be reported more frequently than other
staffing metrics

Monthly Quarterly Semiannually Annually


Voluntary Separation Cost 20% 34% 6% 41%

Involuntary Separation Cost 20% 34% 6% 41%

Cost of Turnover 28% 26% 12% 34%

Quality of New Hires 49% 28% 11% 13%

Time-to-Start 76% 16% 7%

Total Cost per Newly Hired Employee 35% 25% 8% 31%

Recruitment Costs per Hire 41% 22% 10% 27%

Time-to-Fill a Position 68% 20% 10%

Number of Replacements 78% 12% 8%

Source of Hire 70% 19% 9%

Vacancies 88% 9% 3%

Number of New Hires 78% 13% 8%

0% 25% 50% 75% 100%

Study of 627 human resource professionals

Source: 2002 SHRM/EMA Staffing Metrics Survey


Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 43
“How does your organization evaluate training and/or development
program effectiveness?”

Participant 96.8%
100.0%
reaction 93.1%
Participant 54.8%
70.6%
learning 58.6%
All respondents
Observed 53.2% Large companies
52.9%
behavior 51.7% Global companies

Organizational 32.3%
35.3%
results 41.4%
Return on 17.7%
23.5%
investment 20.7%
0% 25% 50% 75% 100%
2003 survey of 62 companies

Source: Human Resource Institute


Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 44
Financial executives’ responses to
“To what extent do you know the return on your aggregate investments
in human capital?”

To a
considerable To a moderate
extent extent
14% 30%
To a great
extent
2% Not at all
14% To a minimal
extent
40%

2002 Mercer Human Resource


Consulting/CFO Research Services survey
of 180 financial executives

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. Source: CFO Research Services 45
Watson Wyatt’s HCI study linked expected change in market value with a
significant improvement* in various dimensions
Dimension
Total Rewards and
Accountability
16.5%

Collegial, Flexible Workplace 9.0%

Recruiting and Retention


Excellence
7.9%

Communications Integrity 7.1%

Focused HR Service 6.5%


Technologies

Prudent Use of Resources -33.9%

-40% -30% -20% -10% 0% 10% 20% 30% 40%


*Defined as a one standard deviation increase
2001 survey of over 500 North
American companies

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. Source: Human Capital Index Study 46
Some HR functions were perceived as showing a positive change in
efficiency
(value per dollar spent) in 2001

Much Better Better About the Same Worse and N/A

Career Planning 3% 22% 58% 17%

EAP Administration 6% 26% 52% 16%

Legal Issues 11% 34% 51% 4%

Selection 11% 34% 48% 7%

Training 14% 36% 42% 8%

HRIS 16% 35% 34% 15%

Compensation Administration 11% 43% 39% 7%

Recruiting 14% 42% 34% 10%

Employee Orientation 16% 40% 37% 7%

General Record-Keeping 15% 43% 38% 4%

Employee Relations 15% 44% 36% 5%

Organizational Communication 15% 46% 32% 7%

Benefits Administration 24% 42% 29% 5%

0% 25% 50% 75% 100%

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only.Source: Human Resource Executive and ERC Dataplus 47
Firms expected to increase the degree to which HR is measured
between 1999 and 2004

High Degree Moderate Degree Low Degree Not at All

4%
2004 67% 28%
1%

1999 15% 53% 30% 2%

0% 25% 50% 75% 100%


Percent of Respondents

1999 survey of 184 HR professionals

Source: Human Resource Institute


Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 48
More firms measure the effectiveness of HR than they do the efficiency
of HR

Effectiveness Efficiency Both

Specific HR
62% 18% 20%
Activities

Specific HR
57% 24% 19%
Program

Overall HR
58% 19% 23%
Department

0% 25% 50% 75% 100%


Percent of Respondents Measuring

1999 survey of 184 HR professionals

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. Source: Human Resource Institute 49
Contents

• Overview

• Developing the scorecard

• Balanced Scorecard Measures

• HR Metrics

• Examples/ Selected Case Studies

• Appendix: Key HR Metrics

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 50
Verizon’s HR Metrics Map
HR Measurement Linkage Model
Customer Service Labor Staffing/ Compensation / Workforce Diversity
Relations benefits Benefits Development
• Absence rate • % Diversity • # Special • # of promotion FT & • Female glass
• Churn recruitment recognition awards PT ceiling
Strategic

− Call Centers • % Promo from • Minority glass


HIPO ceiling
• % HIPO with • UDLS %
development participation by
plans business unit
• Diversity profile

• Employee Services • LRRC- % client • Benefits Vendor • Viewpoints-I am • Viewpoints- VZ


customer satisfaction index satisfaction customer given a real respects ee’s of
Customer

satisfaction opportunity to different ages,


• Viewpoints – VZ compared
improve my skills at races, gender etc
to other companies • Viewpoints- Total
VZ
benefits program • Viewpoints- Work/
rating personal life
balance
• Viewpoints- EE
satisfaction with pay

• EE service center • LRRC call • Staffing cycle • Benefits vendor • Total # of training • Management
operational performance index volumes time operational days Placements
Operations

– Internal operations performance – Initial – Female


• Offer
– Vendors Acceptance – Continuation – Minority
rate • % Failures (Training)
• # filled
positions
• Aged
requisitions

• Total cost of HR compared • Arbitrations • Retention rate • Benefits revenue % • EEO case volume
to budget rate – Overall – Internal
Financial

• Compensation
• HR headcount ratio – Overall<1 yr revenue % – External
• OSHA safety index – Overall< • Internal to external
3yrs EEO case
– Sales force conversion
• HIPO retention
rate
Source: Verizon Communications Inc; Corporate Leadership Council Research
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 51
The Balanced Scorecard in Practice (1/2)

When Gerry Isom became president of CIGNA Property and Casualty (P&C) in 1993, he faced a formidable challenge: a
very numbers-driven company that seemed unable to influence the direction the numbers were heading — down.
Business During the four years before Isom came on board, the company had lost more than $1 billion, and the combined ratio
Situation was 140%. (For every $1 premium coming in, the company was paying out $1.40 in losses and expenses.) In 1993
alone, CIGNA P&C lost $275 million. It was at the bottom of the fourth quartile in the P&C industry. Isom resolved to
take the company into the top quartile. His strategy for getting there? To reshape CIGNA from a generalist insurance
company, willing to underwrite a risk in any sector, to a specialist company that would underwrite only when it could be
assured of better-than-average results .

Starting at the top, Isom reinvigorated the executive council by bringing in four new hires to join the six members
Leading already on board. Twenty of the top performers, from the business and from the IT organization, were also brought
together to create a transformation team. In addition, the position of "transformation officer" was created. Distribution
Strategic management, underwriting, and claims management — the three components of P&C's value chain — were redesigned
Change to make them more responsive to changing market conditions. These changes set the stage for the leadership team to
begin focusing on the business segments that would yield profitable results. The new strategic approach to market
segmentation began to show results at the end of the first year of the strategy.

Once these changes were under way, Isom launched the Balanced Scorecard program. (A senior vice president was
Implementing given full-time responsibility for keeping it on track.) As a first step, the executive team began to translate the strategic
the Balanced vision into specific performance objectives:
•Enter markets that meet profit targets;
Scorecard •Build and maintain relationships with target customers and producers; and
•Manage risk more effectively.

Each of the business units had to understand whether it had relationships with the right agents and brokers to attract
the target customers it wanted to do business with. Each unit needed an appropriate set of underwriting and claims-
processing capabilities to perform well in its target markets. The BSC process was used to clarify issues and achieve
Achieving consensus on how to implement the strategy.
Consensus During the first eighteen months, the executives and transformation team developed a strong set of measures they
could all agree on. The next challenge was taking the scorecard to the rest of the organization. To accomplish this, the
leadership team agreed to integrate the scorecard with the financial planning process, communicate more effectively
with the rest of the organization, and link the BSC with the compensation plan to achieve organizational alignment.

Aligning the All business units ultimately shared a common set of strategic business objectives. Based on this shared understanding
Organization of the strategy, each of them was able to tailor scorecards to its own unique strategic realities.
with the The business units used scorecards to tell the story of their specific strategy to everyone in their own business. They
used measures to monitor progress toward meeting these objectives. The units identified the things they needed to get
Strategy done to move the company into the top quartile.

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only.Source: “Harvard Business School Working Knowledge 52
The Balanced Scorecard in Practice (2/2)
The next phase in the rollout was to implement the BSC at the individual level. This was a turnaround situation, and
there was considerable excitement (and some skepticism) associated with the changes that were introduced. An
incentive compensation system was used to involve every employee in the BSC program and reinforce all the strategic
Making changes.
Strategy A business unit roster was used to link every employee to a specific line of business. This allowed management to
Everyone's Job communicate a specific business vision to the people who would carry it out. In addition, incentive compensation was
tied to the contribution each individual made to a specific line of business. At the end of the year, each employee was
awarded a number of "phantom" shares based on his or her individual performance. The value of the employees'
shares was determined by the performance of the business unit they were a part of. How the business unit performed
against the measures on the scorecard determined the value of a share for the business unit.
CIGNA P&C built a monitoring system that provides a simple summary using red, yellow, and green indicators. When
Building a the indicators are green, the business is moving in the desired direction. Yellow indicates cause for concern. Red
Strategic means something is not right and requires further examination. For example, red might indicate a single large loss or
Feedback a number of smaller losses in a particular market. In either case, an alert is sounded, and attention is drawn to
discover the root cause of the situation. This reporting system has eliminated much confusion, and useful information
System is now readily available. Solutions can be developed more quickly.

At the start of this transformation effort, the finance department had control over much of the information considered
to be "important." As a result of the BSC, there has been a significant transfer of management authority from finance to
other business managers. For a numbers-driven organization, this has been a significant shift. Today, scorecard
information is available to everyone in the organization. Everyone knows what the strategies are, what the objectives
Culture Shift are, what the measures are, and how they are doing. The BSC management system makes it possible for people
everywhere in the organization to provide feedback (observations, comments, and suggestions) to those responsible
into High Gear for specific measures.
The front line has become a source of insight into how well the strategy is being executed. The ongoing challenge is to
shorten the time it takes to organize a meaningful response to market changes. Putting the strategy on everyone's
desktop, and inviting dialogue throughout the organization, helps to move knowledge around the organization faster. It
increases the ability to use knowledge, make decisions, and execute the strategy.

Within one year, Isom's team had eliminated the losses. Within two years, they were beginning to show a profit. After
The Bottom six years of using the BSC, CIGNA P&C joined the top quartile of its industry. Its financial performance went from a loss
Line of $275 million in 1993 to more than $100 million in profits five years later. Gerry Isom saw his vision translated into
reality.

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only.Source: “Harvard Business School Working Knowledge 53
The HR Balanced Scorecard Approach at TATA Engineering
Tata Engineering’s Views on Balanced Score Card: An HR practitioner’s perspective of Balanced Scorecard is
that of a tool that integrates the HR activities with the Business perspectives leading to the achievement of the
end-objectives. A comprehensive HR Balanced Scorecard to help HR practitioners to deliver visible and
measurable HR contribution to the Business. It will also help in bringing about changes in the workplace by
fostering a climate of innovation and intrapreneurship.It will lead to a smooth transition of HR into the 21st
century by building a strong and credible HR system and is a proactive step towards Human Resource Capital
Management.
HR role on the four perspectives is addressed as

The Initiative: At Tata Engineering, the Balanced


Customer : Developing
Scorecard initiative was undertaken at the Business Financial: Improving the
Human Resource to meet
Unit level and a comprehensive roadmap was drawn up returns on the Human
Internal and External
Capital employed
addressing the four perspectives: Financial, Customer, Customer Expectations
Business Processes and Learning & Growth. The
Balanced Scorecard initiative also integrates the TBEM Internal Processes: Learning & Growth: Equip
process of internal assessment, which has been Continuously evolving HR the HR team to deliver as
processes in order to meet planned
institutionalized to nurture an environment of high the stakeholders expectation
performance and organization wide learning and & contribute to the
sharing. Business objectives

Outcomes: The intent is to ensure that HR would deliver on clear and quantifiable measures and thus lead by
being a role model. An attempt has been made to quantify HR by specifying the expected outcome and defining
the corresponding quantifiable measure for it.
The Corporate HR Scorecard defines overall strategic priorities and context which will guide the HR activities
The Corporate HR BSC drawn up is consistent with the Business Unit strategic agenda on the four
perspectives.
Quantifiable and objective measures are identified for all HR activities, on which targets are taken. For these
measures, a strategic initiative plan is drawn up to spell out the specific action plan, the process owner and
milestones indicating completion of a phase. Resource and Budget allocations are then deployed to bridge the
gap between the current performance and the target.
Source: www.humanlinks.com/manres/articles/balanced_scorecard.htm
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 54
Marks and Spencer Scorecard takes HR to the top
of the agenda

Marks and Retail giant Marks & Spencer has linked its staff satisfaction survey to the company's
Spencer’S sales performance to measure HR's output as part of its balanced scorecard. The store is
Scorecard able to relate responses to certain questions in the twice-yearly questionnaire to
improvements in sales per square foot.

• According to Marcus Powell, head of HR strategy and change, a 1 per cent increase in
the 'clarity about own contribution to meet customer needs' question equates to a 5.1
per cent increase in sales per square foot. A 1 per cent increase in employee
satisfaction on the 'praise for performance' question translates to a 2.9 per cent jump
in sales per square foot.
The Bottom
Line • Powell said the link between employee satisfaction and sales performance is an
important part of the company's balanced scorecard. According to Powell the scorecard
has helped move HR to the top of the business agenda and played a major part in the
company's improved UK performance over the past year. HR had very short-term goals
of helping the business stabilize. The company had always been known for treating its
staff well and we want to get back to that and become the standard against which all
other [HR departments] are measured.

The move is part of the organization’s restructuring of HR, which is designed to


New Role of encourage and reward commitment. HR's role now is to support the line providing
HR leadership to their people and helps the business deliver better results and Balanced
Scorecard at Marks & Spencer is doing the same or even more.

Source: www.personneltoday.com
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 55
Measuring Human Capital: Selected Case Studies

In 2001, Prudential reported that it had undertaken an HR strategic measurement program, driven by a need to understand its
human capital just as clearly as its marketplace and customer base. Michael W. Tindall, vice president of strategic measures,
presented Prudential's program at HRI's 29th Annual Issue Management Conference in February 2001. The 125-year-old financial
products and services company with 60,000 employees in 20 countries uses a data warehouse and an HR dashboard as its
backbone. The data warehouse provides a central repository for all human resources strategic data and is continually fed by the
organization's human resource management transactional system and by files from opinion surveys.
The core implementation team consists of a mix of systems and HR people with the business acumen to understand metrics. Senior
executive champions provide project oversight. The HR dashboard design process began with a lengthy analysis of the business
partner/client's business requirements, organizational structure, and physical/cultural environment. This analysis included looking
at how the client measures things and considering which technological tools would best suit its needs.
Prudential's internal HR dashboard begins with a PeopleSoft EPM/Business Objects-based system. Balanced scorecard perspectives
were defined by profit centers and business groups. The dashboard provides key performance contract HR metrics and drill-down
capability to the employee level. It has proven to be a viable tool for HR generalists and line managers trying to manage their
human capital.

Measuring the financial performance of the recruitment function is important to many organizations.
• GTE Directories aligns its HR practices to corporate strategy by tracking its turnover-to-hire ratio. When the firm pursues a growth
strategy, it seeks a turnover-to-hire ratio of less than one; if it is operating in an employment reduction market, it seeks a
turnover-to-hire ratio of greater than one.
• Merix measures both days-to-fill and cost-per-hire to monitor the efficiency of its recruitment process. The goals for the measures
are determined during planning sessions. The cost-per-hire metrics permit more accurate budgeting. In addition, Merix tracks
OSHA accident rates, lost-time measures and employee satisfaction survey results to project employee turnover. The turnover and
cost-per-hire measures combine to provide projections for the next year's hiring expenses.

AirBus is an example of how a distinct set of metrics can help an alliance evolve into a successful business. The European
commercial aircraft manufacturer was created as a consortium of government-controlled firms in England, France, Germany and
Spain. Partners established a clear set of metrics, as well as a common language. Metrics included establishing ways to track the
status of product development, schedules, quality control, operating efficiency, customer satisfaction, new technology, maintenance
and training. In 2001, three decades after its inception as an alliance, AirBus evolved into a single integrated company and has
been applauded for "changing the face of the commercial aviation industry."

Source: Human Resource Institute


Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 56
Contents

• Overview

• Developing the scorecard

• Balanced Scorecard Measures

• HR Metrics

• Examples/ Selected Case Studies

• Appendix: Key HR Metrics

Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 57
Guidelines for Discussion and Grading of Key HR Metrics

Grading Scale
• A” Very Interesting to Track; Could be a
KPI
• “C” Somewhat Interesting toTrack;
Unlikely to be a KPI
• “F” Not Interesting to Track

• A Group Exercise
• The success of this workshop is built on your input and unique knowledge of your company’s goals and
needs. Accordingly, your open participation is strongly encouraged.
• Driven by Strategy
• The value in the exercise results from the selection of the metrics most closely aligned with your
company-specific corporate and HR strategy, therefore we ask that you bear it in mind and refer to it
often.
• Focused on Ideals
• Recognizing that some of what you will encounter in this exercise will be aspirational, we ask you to
provide your input assuming no technological or informational limitations.
• Ongoing Work-in-Progress
• The decisions arrived at and metrics selected today are not set in stone. As your company’s strategic
goals and business environment change, you will be able to adjust your Key Performance Indicators to
mirror those changes.

Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council


Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 58
Demographic Profile Metrics

Segmentation
Metric Options Description/Formula Grade (A,C,F)

Staffing Rate • Function, location, age, gender, • Full-time equivalent _


ethnicity, employment type, employees in the specifi ed
occupational group, tenure, category as a percentage of
compensation band, etc. total full-time equivalent
employees: Headcount
Option / Headcount * 100

Staffing Ratio • Function, location, age, gender, • Number of full-time equivalent _


ethnicity, employment type, employees in the specifi ed
occupational group, tenure, category for every one full-time
compensation band, etc. equivalent employee out of the
specifi ed category. Headcount
Option / (Headcount – Headcount
Option)

Span of Control • Function, location, line of business • Number of full-time equivalent _


clerical, op er a tive and professional
employees for every one full-time
equivalent managerial employee:
(FTE.Clerical + FTE.Operative +
FTE.Professional) / FTE.Managerial
Managerial Staffing Ratio • Function, location, line of business • Number of full-time equivalent _
employees for every one full-time
equivalent managerial employee: FTE
/ FTE.Managerial
Managerial and • Function, location, line of business •
Number of full-time equivalent clerical _
Professional Versus Non- and operative employees for every
M&P Staffi ng Ratio one full-time equivalent managerial or
professional employee:(FTE.Clerical +
FTE.Operative) / (FTE.Managerial +
FTE.Professional)
Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 59
Workforce Productivity Metrics

Segmentation
Metric Options Description/Formula Grade (A,C,F)

Financial Measures
Operating Revenue • Function, location, line of business • Average operating revenue _
per FTE generated per full-time
equivalent employee:
Operating Revenue / FTE
Operating Expense • Function, location, line of business • Average operating expense _
per FTE incurred per full-time equivalent
employee: Operating Expense /
FTE

Operating Profit per • Function, location, line of business • Average operating profi t (before tax, _
FTE interest and depreciation) returned
per full-time equivalent employee:
(Operating Revenue – Operating
Expense) / FTE
Managerial Staffing Ratio • Function, location, line of business • Total expenses for selected option as _
a percentage of operating revenue:
Compensation Expense. Option /
Operating Revenue * 100
Managerial and • Function, location, line of business • Total expenses for selected option as _
Professional Versus Non- a percentage of operating expense:
M&P Staffi ng Ratio Compensation Expense. Option /
Operating Expense * 100

Managerial and • Function, location, line of business •


Number of (dollars, euro, pounds) of _
Professional Versus Non- operating profit returned for every
M&P Staffi ng Ratio (dollar, euro, pound) invested in
employee compensation plus benefits:
(Operating Revenue – Operating
Expense) / Total Compensation
Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 60
Workforce Productivity Metrics

Segmentation
Metric Options Description/Formula Grade (A,C,F)

Financial Measures
Human Investment • Location, line of business • Number of (dollars, euro, _
Ratio pounds) of operating profit
returned inflated by employee
compensation) for every (dollar,
euro, pound) invested in
employee compensation plus
benefits: Operating Revenue –
(Operating Expense – Total
Compensation)] / Total
Compensation

Corporate Expense • None • Corporate operating expense as a _


percentage of total operating
Ratio
expense: Operating Expense.
Corporate / Operating Expense *
100

R&D Expense Ratio • None • Research and development expense _


as a percentage of total operating
expense: Expense.R&D / Operating
Expense

New Products & Services • Location, line of business • Average new products and services _
Revenue per FTE operating revenue per full-time
equivalent employee: Operating
Revenue. New Products & Services / FTE

Market Capitalization • None • Market capitalization per full-time _


per FTE equivalent: Market Capitalization /
FTE

Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council


Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 61
Workforce Productivity Metrics

Segmentation
Metric Options Description/Formula Grade (A,C,F)

Financial Measures
_
Employee Ownership • None • Full-time equivalent employees who
Rate own company stock as a percentage of
total full-time equivalent employees:
FTE.Own Company Stock / FTE * 100

Employee Stock • None • Percentage of company stock owned by _


Ownership Percentage employees: Shares owned by
employees / shares outstanding

Workforce Costs
_
Termination Value • Total, employee-initiated, • The average cost of terminations per
(Cost of Turnover) organization-initiate full-time equivalent employee:
(Terminations * Total Compensation) /
FTE

(Dollar, euro, • Total, employee-initiated, • Average cost of sick leave per full-time _
pound) Value of Sick organization-initiate equivalent employee:[(Unscheduled
Leave per FTE Absence.Sick Leave / Workdays) *
Compensation] / FTE

(Dollar, euro, • Total, employee-initiated, • Average cost of disability leave per full- _
pound) Value of organization-initiate time equivalent employee: [(Workdays
Disability per FTE lost for Disability / Workdays) *
Compensation] / FTE

Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council


Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 62
Workforce Productivity Metrics

Segmentation
Metric Options Description/Formula Grade (A,C,F)

Employee
Satisfaction

Employee Satisfaction • Function, location, age, gender, • A relative measure of the level of _
ethnicity, occupational group, tenure, employee satisfaction:<Survey>
compensation band, performance
rating, etc.

Employee Satisfaction • Function, location, age, gender, • A relative measure of the level of _
ethnicity, occupational group, tenure, employee satisfaction:<Survey>
compensation band, performance
rating, etc.

Employee Satisfaction • Function, location, age, gender, • A relative measure of the level of _
ethnicity, occupational group, tenure, employee satisfaction:<Survey>
compensation band, performance
rating, etc.

Employees at Risk • High potentials, high performers, key • A relative measure of the level of _
Factor skills, occupational group, function employee satisfaction:<Survey>

Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council


Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 63
Workforce Productivity Metrics

Segmentation
Metric Options Description/Formula Grade (A,C,F)

Customer Contact

Customer-Facing • None • Full-time equivalent employees in _


Employee Staffing Rate customer-facing roles as a percentage
of all full-time equivalent employees:
FTEs.Customer-Facing / FTEs

Customer-Facing Time • Function, location, age, gender, • Number of workdays devoted to _


Ratio ethnicity, occupational group, tenure, customer-facing activities as a
compensation band, performance percentage of total workdays:
rating, etc. Workdays.Customer-Facing / Workday

Revenue-Generating • Function, location, age, gender, • Full-time equivalent employees in _


Employee Staffing Rate ethnicity, occupational group, tenure, revenue-generating roles as a
compensation band, performance percentage of all full-time equivalent
rating, etc. employees: FTEs.Revenue-Generating /
FTEs

Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council


Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 64
Workforce Availability Metrics

Segmentation
Metric Options Description/Formula Grade (A,C,F)

Attendance

• Function, line of business, location, • Average number of attendance _


Attendance Rate occupational group, employment days as a percentage of the total
status, employment type days available for work:
Attendance / Workdays * 100

Average Work Week • Function, line of business, location, • Average number of hours worked _
occupational group, employment per week per employee: (Hours
status, employment type Worked / Number of Weeks) /
Headcount

_
Absence

Unscheduled Absence • Function, line of business, location, • Average number of unscheduled _


Rate occupational group, employment absence days as a percentage of total
status, employment type days available for work: Unscheduled
Absence / Workdays * 100

Unscheduled Absence • Function, line of business, location, • Average number of unscheduled _


per FTE occupational group, employment absence days per full-time equivalent
status, employment type employee: Unscheduled Absence /
FTEs

Unscheduled Absence • Function, line of business, location, • Percentage of unscheduled absences _


Breakdown occupational group, employment due to sick leave, worker’s
status, employment type compensation, family leave, industrial
dispute or other: Unscheduled
Absence.[Type] / Unscheduled
Absences

Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council


Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 65
Workforce Mobility Metrics

Segmentation
Metric Options Description/Formula Grade (A,C,F)

Recruitment

• Location, function, line of business, • Number of external hires for every _


Net Hire Ratio ethnicity, gender, occupational group, one terminated employee:
employment type, etc. Hires.External / Terminations

Employee Growth Rate • Location, function, line of business, • Number of hires into new positions _
ethnicity, gender, occupational group, for every one employee: Hires.New
employment type, etc. Positions / Headcount

External Hire Rate • Location, function, line of business, • External hires as a percentage of total _
occupational group, employment hires: Hires.External / Hires * 100
type, job level

External Rehire Rate • Location, function, line of business, • External rehires as a percentage of _
occupational group, employment total external hires:
type, job level Recruits.External.Rehire /
Hires.External * 100

Recruitment Source • Location, function, line of business, • Number of internal hires for every one _
Ratio ethnicity, gender, occupational group, external hire: Hires.Internal /
employment type Hires.External (Permanent)

Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council


Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 66
Workforce Mobility Metrics

Segmentation
Metric Options Description/Formula Grade (A,C,F)

Internal Movement

Internal • Location, function, line of business, • Internal hires as a percentage of _


Movement Rate occupational group, employment total headcount: Hires.Internal /
type, job level Headcount * 100

Internal Hire Rate • Location, function, line of business, • Internal hires as a percentage of _
occupational group, employment total hires: Hires.Internal / Hires *
type, job level 100

Upward Mobility • Location, function, line of business, • Promotions as a percentage of total _


ethnicity, gender, occupational group, movements: Promotions / Movements
employment type * 100

Lateral Mobility • Location, function, line of business, • Lateral movements as a percentage of _


ethnicity, gender, occupational group, total movements: Movements.Lateral /
employment type Movements * 100

Downward Mobility • Location, function, line of business, • Demotions as a percentage of total _


ethnicity, gender, occupational group, movements: Movements.Demotions /
employment type Movements * 100

Cross Business Unit • Location, function, line of business, • Movements between organizational _
Mobility ethnicity, gender, occupational group, units as a percentage of total
employment type movements: Movements.Between Org
Units / Movements * 100

Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council


Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 67
Workforce Mobility Metrics

Segmentation
Metric Options Description/Formula Grade (A,C,F)

Cross Functional • Location, function, line of business, • Movements between functions as a _


Mobility ethnicity, gender, occupational group, percentage of total movements:
employment type Movements.Between Functions /
Movements * 100

Career Path Ratio • Location, function, line of business, • Movements between functions as a _
ethnicity, gender, occupational group, percentage of total movements:
employment type Movements.Between Functions /
Movements * 100

Promotions Rate • Location, function, line of business, • Number of employees internally _


ethnicity, gender, occupational group, promoted for every one employee
employment type, gender, internally transferred: Promotions /
occupational group, employment type Transfers

Promotion Speed Ratio • Location, function, line of business, • Average number of years in a position _
ethnicity, gender, occupational group, prior to promotion: Position Tenure
employment type Prior to Promotion / Promotions
Labor Turnover

Termination Rate • Employee-initiated, organization- • Terminations as a percentage of total _


initiated, tenure, performance rating, employees: Terminations / Headcount
high potential, high performer, * 100
occupational group, gender, ethnicity,
age

Termination Reason • Employee-initiated, organization- • Percentage of terminations resulting _


Breakdown initiated, tenure, performance rating, from an employee-initiated action, an
high potential, high performer, organization-initiated action, a transfer
occupational group, gender, ethnicity, or expiration of a contract:
age Terminations.Reason / Terminations
Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 68
Workforce Mobility Metrics

Segmentation
Metric Options Description/Formula Grade (A,C,F)

Management • Location, line of business, function • Employees with two or more _


Stability managers in a one-year period:
Employees With Two or More
Managers in a One-Year Period /
Headcount

Career Path Ratio • Location, line of business, function • Number of employees returning _
from maternity leave for every
resignation while on maternity
leave: Maternity Returns / Maternity
Resignations

Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council


Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 69
Performance and Workforce Development Metrics

Segmentation
Metric Options Description/Formula Grade (A,C,F)

Development

Managerial Bench • Function, location, line of business, • A relative measure of the quality of _
Strength job level the managerial successor pool:
<To Be Established>

Successor Pool • Function, location, line of business, • Percentage of managerial positions _


Coverage job level with identifi ed successors:
Managerial Positions.Successors /
Managerial Positions * 100

IDP Prevalence Rate • Function, location, line of business job • Employees with an individual _
level development plan as a percentage of
total employees: Headcount.IDPs /
Headcount * 100

Progress Against IDP • Function, location, line of business job • Relative measure of performance _
Goals level against individual development plans:
<To Be Established>

IDP Achievement Ratio • Function, location, line of business job • Relative measure of achievement _
level against individual development plans:
Headcount.IDP Goals Met /
Headcount.IDPs

Gap Between Current and • Function, location, line of business, • Relative measure of gap between _
Required Workforce Skills job level current and required skills for position:
<To Be Established>

ROI on (Non-Training) • Function, location, line of business, • Return on investment realized from _
Development job level non-training (informal) development
Investment opportunities: <To Be Established>
Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 70
Performance and Workforce Development Metrics

Segmentation
Metric Options Description/Formula Grade (A,C,F)

Development

Individual Managers’ • N/A • Relative measure of individual _


Track Records for managers’ track record in
Employee Development developing employees: <To Be
Established>
Performance
Performance Appraisal • Function, location, line of business • Employees whose performance is _
Penetration appraised as a percentage of total
employees: Headcount.Performance
Appraisals / Headcount * 100

Employee • Function, location, line of business • Number of employees who turnaround _


“Turnarounds” their performance as a percentage of
the total number of employees under
review: <To Be Established>

Employee “Downgrades” • Function, location, line of business • Average number of employees _


downgraded during the most recent
performance review: <To Be
Established>

New Hire Performance • Function, location, line of business • Relative measure of performance for _
employees in their first year of tenure:
<To Be Established>

Management Performance • Function, location, line of business, • Relative measure of performance in _


job level leadership and managerial positions:
<To Be Established>

Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council


Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 71
Performance and Workforce Development Metrics

Segmentation
Metric Options Description/Formula Grade (A,C,F)

Development

Percentage of “Critical” • Function, location, line of business • Percentage of critical jobs/roles _


Jobs/Roles occupied by below average
Occupied by Below Average performers: Headcount.Critical
Performers Role.Below Average /
Headcount.Critical Role
Performance

Performance-Based Pay • Function, location, line of business • Relative measure of the prevalence of _
Prevalence performance based pay:
Employees.Pay is Performance
Contingent / Employees * 100

Performance Rating • To Be Established • Percentage of total employees with _


Distribution performance ratings that received a
given rating: <To Be Established>

Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council


Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 72
Workforce and Compensation Benefits Metrics

Segmentation
Metric Options Description/Formula Grade (A,C,F)

Compensation

Total Compensation per • Function, location, line of business, • Average total compensation per _
FTE occupational group, tenure, full-time equivalent employee:
performance rating, gender, ethnicity Total Compensation / FTE

Direct Compensation per • Function, location, line of business, • Average direct compensation per full- _
FTE occupational group, tenure, time equivalent employee: Direct
performance rating, gender, ethnicity Compensation / FTE

Compensation • Function, location, line of business, • Direct compensation by type (base, _


Breakdown occupational group, tenure, overtime, bonus, incentives, etc.) as a
performance rating, gender, ethnicity percentage of total: Direct
Compensation. Type] / Direct
Compensation * 100
Overtime Rate • Function, location, line of business, • Average (dollars, euro, pounds) of _
occupational group, tenure, direct compensation paid to top
performance rating, gender, ethnicity performers for every (dollar, euro,
pound) paid to mid or low performers:
Direct Compensation. Top Performers /
(Direct Compensation. Mid Performers
+ Direct Compensation. Low
Performers)

Performance-Based Pay • Function, location, line of business, • A relative measure of the level of _
Differentials occupational group competitiveness of compensation
packages: <To Be Established>

Compensation • Function, location, line of business, •


Average number of (dollars, euro, _
Competitiveness Factor occupational group pounds) of total compensation paid or
equivalent (dollar, euro, pound) of
market compensation: Total
Compensation / Market Compensation
Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 73
Workforce and Compensation Benefits Metrics

Segmentation
Metric Options Description/Formula Grade (A,C,F)

Employee Satisfaction with • Function, location, line of business, • A relative measure of the level of _
Compensation Packages occupational group employee satisfaction as it relates
to compensation packages: <To Be
Benefits Established>

Benefits Expense per FTE • Function, location, line of business, • Average benefits expense per full- _
occupational group time equivalent employee: Benefits
Expense / FTE

Benefits Compensation • Function, location, line of business, • Benefits expense as a percentage of _


Factor occupational group total compensation: Benefits Expense /
Total Compensation * 100

Benefits Expense Type • Function, location, line of business, • Benefits expense by type as a _
Breakdown occupational group percentage of total benefits: Benefits
(Benefit Expense Rate) Expense. [Type] / Benefits Expense *
100

Benefits • Function, location, line of business, • A relative measure of the level of _


Competitiveness occupational group competitiveness of benefits packages:
<To Be Established>

Employee Satisfaction • Function, location, line of business, • A relative measure of the level of _
with Benefits Packages occupational group employee satisfaction as it relates to
benefits packages: <To Be
Established>

Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council


Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 74
Workforce and Compensation Benefits Metrics

Segmentation
Metric Options Description/Formula Grade (A,C,F)

Average Vacation Utilized • Line of business, job level, • A relative measure of the level of _
occupational group employee satisfaction as it relates
to compensation packages: <To Be
Established>

Benefits Expense per FTE • Function, location, line of business, • Average benefits expense per full- _
occupational group time equivalent employee: Benefits
Expense / FTE

Benefits Compensation • Function, location, line of business, • Benefits expense as a percentage of _


Factor occupational group total compensation: Benefits Expense /
Total Compensation * 100

Benefits Expense Type • Function, location, line of business, • Benefits expense by type as a _
Breakdown occupational group percentage of total benefits: Benefits
(Benefit Expense Rate) Expense.[Type] / Benefits Expense *
100

Benefits • Function, location, line of business, • A relative measure of the level of _


Competitiveness occupational group competitiveness of benefits packages:
<To Be Established>

Employee Satisfaction • Function, location, line of business, • A relative measure of the level of _
with Benefits Packages occupational group employee satisfaction as it relates to
benefits packages: <To Be
Established>

Average Vacation • Line of business, job level, • Vacation time utilized as a percentage _
Utilized occupational group of total vacation time entitlement:
Vacation Utilized / Vacation Available *
100
Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 75
Workforce and Compensation Benefits Metrics

Segmentation
Metric Options Description/Formula Grade (A,C,F)

Organized Labor Rate • Line of business, location, function • Percentage of total employees _
participating in collective
bargaining agreements:
Employees Belonging to Unions /
Total Headcount

Grievance Factor • Line of business, location, function • The average number of grievances _
per employee: Grievances /
Headcount

Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council


Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 76
HR Operational Profile Metrics

Segmentation
Metric Options Description/Formula Grade (A,C,F)

Staffing

HR Staffing Ratio • Location, line of business • Number of full-time equivalent _


employees for every one human
resources full-time equivalent
employee: FTE / HR FTE

HR Staffing Rate • Location, line of business • Human resources full-time equivalent _


employees as a percentage of total
full-time equivalent employees: HR
FTE / FTE * 100

HR Staffing Breakdown • Location, line of business • Percentage of human resources FTEs in _


the areas of recruiting, training,
payroll, compensation & benefits, and
health and safety as a percentage of all
HR FTEs: HR FTE [Function] / HR FTE *
100

HR Staffing Mix Ratio • Location, line of business • Number of human resources clerical _
and operative full-time equivalent
employees for every one human
resource managerial and professional
full-time equivalent employee: HR FTE.
Clerical & Operative / HR FTE.
Managerial & Professional

HR Promotions Rate • Location, line of business, tenure, • Measure of upward mobility with the _
performance rating, gender, HR function: HR Promotions / HR
ethnicity Headcount * 100

Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council


Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 77
HR Operational Profile Metrics

Segmentation
Metric Options Description/Formula Grade (A,C,F)

HR Mobility Rate • Location, line of business, tenure, • Measure of total movements within _
performance rating, gender, ethnicity the HR function: (HR Promotions +
HR Lateral Moves) / HR Headcount
Financial * 100

HR Operating Expense • Location, line of business • Human resources expense as a _


Rate percentage of total operating
expense: HR Expense / Operating
Expense * 100

HR Expense per FTE • Location, line of business • Average human resources expense _
per full-time equivalent: HR
Expense / FTE

HR Expense Type • Location, line of business • Human resources expense by type as a _


Breakdown percentage of total human resources
expense: HR Expense.[Type] / HR
Expense * 100

Employee Self Service

Employee Self-Service • N/A • HR transactions available via self- _


Availability Rate service as a percentage of the total
number of HR transactions: HR
Transactions Available via Self-Service
/ Number of HR Transactions * 100
Employee Self-Service • N/A •
HR transactions conducted via self- _
Penetration Rate service as a percentage of the total
number of HR transactions: HR
Transactions Conducted via Self-
Service / Number of HR Transactions *
100
Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 78
HR Operational Profile Metrics

Segmentation
Metric Options Description/Formula Grade (A,C,F)

Performance _

HR Customer • Location, line of business • HR customers satisfied as a _


Satisfaction Rate percentage of total HR customers: HR
Customers.Satisfied / HR Customers *
100

Productivity of Individual • N/A • Relative measure of the _


HR Employees productivity of individual human
resources employees:<To Be Estab
lished>

Aggregate ROI of HR • N/A • Relative measure of the return on _


Function investment generated by the human
resources function: <To Be
Established>
Financial

Payroll Expense Rate • None • Payroll expense as a percentage of _


total operating expense: Payroll
Expense / Operating Expense * 100

Payroll Expense per Pay • None • Average payroll expense per pay _
processed: Payroll Expense / Pays
Processed
Error Rate

Payroll Error Rate • None • Number of errors as a percentage of _


pays: Number of Errors / Number of
Pays * 100

Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council


Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 79
Staffing Function Metrics

Segmentation
Metric Options Description/Formula Grade (A,C,F)

Investment
Recruitment Cost Rate • Location, line of business • Recruitment expense as a percentage _
of HR expense: Recruitment Expense
/ HR Expense

Recruitment Expense • N/A • Recruitment expense by type _


Breakdown (Travel, Advertising, Compensation,
Other) as a percentage of total
recruitment expense: Recruitment
Expense.[Type] / Recruitment
Expense * 100

Recruitment Cost per • N/A • Average recruitment expense per hire: _


Hire Recruitment Expense / Hires

Cost per Hire • None • Relative measure of costs per hire by _


Permutations various permutations: <To Be
Established>

Percentage of Hires • Location, line of business, job • Number of hires receiving a sign-on _
Receiving level, occupational group bonus as a percentage of total hires:
Sign-On Bonus Hire.Receiving Sign-On Bonus / Hires

Sign-On Bonus per • Location, line of business, job • Average sign-on bonus per employee _
Employee level, occupational group receiving a sign-on bonus:
Expense.Sign-On Bonus /
Hire.Receiving Sign-On Bonus

Sign-On Bonus per • Location, line of business, job •


Average sign-on bonus per employee _
Employee level, occupational group receiving a sign-on bonus:
Expense.Sign-On Bonus /
Hire.Receiving Sign-On Bonus
Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 80
Staffing Function Metrics

Segmentation
Metric Options Description/Formula Grade (A,C,F)

Retention After Sign-On • Location, line of business, job level, • Retention of employees _
Bonus occupational group receiving a sign-on bonus:<To
Be Established>
Effectiveness Productivity

On-Time Talent Delivery • Location, line of business, job level, • Measures how closely talent is _
occupational group delivered by the required date:
Total Days (+ or –)Deviated from
Needed-By Date / Hires

Time to Start • N/A • Average calendar days to start an _


employee in a vacant position: Days to
Start / Hires

Time to Fill • Location, line of business, function, • Average calendar days to fi ll a vacant _
occupational group position: Days to Fill / Hires

Internal Time-to-Fill Ratio • Location, line of business, function, • Average calendar days to fi ll a vacant
occupational group position with an internal hire: Time to
Fill.Internal / Hires.Internal
Requisition Response • Location, line of business, function, • Average days from requisition being _
occupational group raised to when it is posted: Days from
Requisition to Posting / Requisitions

Applicant Conversion • Location, line of business, job • Percentage of applicants that are _
Rate level, occupational group converted to a new hire: Applicants /
Hires * 100
Interview Conversion • Location, line of business, job •
Number of interviews required to _
Rate level, occupational group generate a new hire: Interviews / Hires
* 100
Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 81
Staffing Function Metrics

Segmentation
Metric Options Description/Formula Grade (A,C,F)

Referral Conversion Rate • Location, line of business, function, • Referrals hired as a percentage _
occupational group of total referrals: Referrals Hired
/ Referrals * 100

Offer Acceptance Ratio • Location, line of business, function, • Offers accepted as a percentage of _
occupational group offers extended: Acceptances /
Offers

External Acceptance • Location, line of business, function, • External acceptances as a percentage _


Rate occupational group of external offers:
Acceptances.External / Offers.External
* 100

Top Candidate • Location, line of business, function, • Positions filled with the top choice _
Acceptance Rate occupational group candidate as a percentage of new
hires: Top Candidate Hires / Hires *
Effectiveness Quality 100

Line Manager • None • Relative measure of line managers’ _


Satisfaction satisfaction with new hires:<To Be
with New Hires Established>

Line Manager • None • Relative measure of the level of _


Satisfaction with satisfaction of line managers with the
Recruiting recruiting process: <To Be
Established>

New Hire Failure Factor • None • The average number of new hires that _
turn over within a given time frame
(e.g., 6 months, 12 months): New
Hires.Early Departure / New Hires
Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 82
Staffing Function Metrics

Segmentation
Metric Options Description/Formula Grade (A,C,F)

Employment Brand • Location, line of business, function, • A relative measure of the _


Strength occupational group recognition among potential
recruits of the organization as a
desirable place to work: <To Be
Established>

Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council


Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 83
Staffing Training Function

Segmentation
Metric Options Description/Formula Grade (A,C,F)

Investment
Training Expense Rate • Location, line of business, function, • Referrals hired as a percentage _
occupational group of total referrals: Referrals Hired
/ Referrals * 100

Training Expense as a • Location, line of business, function, • Offers accepted as a percentage of _


Percentage occupational group offers extended: Acceptances /
of Operating Expense Offers

Training Investment per • Location, line of business, function, • External acceptances as a percentage _
Employee occupational group of external offers:
Acceptances.External / Offers.External
* 100

Training Days per • Location, line of business, function, • Positions filled with the top choice _
Employee occupational group candidate as a percentage of new
hires: Top Candidate Hires / Hires *
100

Training Cost Factor • None • Relative measure of line managers’ _


satisfaction with new hires:<To Be
Effectiveness Established>

Training Penetration • None • Percentage of fully trained employees: _


Rate Employees Completing All Courses for
Position / Total Employees to Be
Trained

Quality of Delivered • None • Quality of delivered training content: _


Training Content <To Be Established>

Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council


Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 84
Staffing Training Function

Segmentation
Metric Options Description/Formula Grade (A,C,F)

Investment
ROI of Training • None • ROI of training: <To Be _
Established>

Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council


Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 85
Staffing Training Function

Segmentation
Metric Options Description/Formula Grade (A,C,F)

Investment
H&S Expense per FTE • None • Health and safety expense per _
full-time equivalent employee:
H&S Expense / FTE

H&S Premium per FTE • None • Workers compensation premium _


expense per full time equivalent
employee: Workers Compensation
Premium / FTE

H&S Expense Breakdown • None • Health and safety expense by type _


(preventive, rehabilitation,
compensation, other) as a percentage
of total H&S expense: H&S Expense
Incidents [Type] / H&S Expense

H&S Incidents per 100 • None • Health and safety incidents (lost time, _
FTEs deaths, injuries and diseases) for every
100 full-time equivalent employees:
(H&S Incidents / FTE) * 100

H&S Incidents per One • None • Health and safety incidents (lost time, _
Million Workhours deaths, injuries and diseases) for every
one million hours worked: (H&S
Incidents / H&S Hours Worked) *
1,000,000

H&S Incident Type • None • Health and safety incidents by type as _


Breakdown a percentage of total health and safety
incidents: H&S Incidents.[Type] / H&S
Incidents * 100

Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council


Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 86
Staffing Training Function

Segmentation
Metric Options Description/Formula Grade (A,C,F)

Average Time Lost per • None • Average working days lost per _
H&S Incident health and safety incident:
Working Days Lost / H&S
Incidents

H&S Incidents per Site • None • Average number of incidents per _


site: H&S Incidents / Total
Number of Sites

H&S Incidents with No • None • Health and safety incidents that _


Time Lost did not result in any lost time
per 100 FTEs for every 100 full-time
equivalent employees: H&S
Incidents. No Working Days Lost
/ FTEs * 100

H&S Incident Severity • None • Health and safety incidents that _


Rate resulted in an extended
absences from work as a
percentage of total health and
safety incidents: H&S Incidents.
Greater Than 60 Days Lost /
H&S Incidents * 100

Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council


Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 87