THE H.R.

SCORE CARD

An Essay submitted for internal assessment of

HUMAN RESOURCE MANAGEMENT

Under the guidance of

Prof. SATISH KUMAR

PREPARED BY

SANKALP KHATRI
ROLL NO. 18
SS-A

IIPM
GURGAON

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 INTRODUCTION
The new economic paradigm is characterized by speed, innovation, quality and
customer satisfaction. The essence of the competitive advantage has shifted from
tangible assets to intangible ones. The focus is now on human capital and its
effective alignment with the overall strategy of organizations.
This is a new age for Human Resources. The entire system of measuring HR’s
contribution to the organization’s success as well as the architecture of the HR
system needs to change to reflect the demands of succeeding in the new economy.
The HR scorecard is a measurement as well as an evaluation system for redefining
the role of HR as a strategic partner. It is based on the Balanced Scorecard
framework developed by Kaplan and Norton and is set to revolutionize the way
business perceives HR.
Based on various studies, it can be concluded that firms with more effective HR
management systems consistently outperform the competition. However, evidence
that HR can contribute to a firm’s success doesn’t mean it is now effectively
contributing to success in business. It is a challenge for managers to make HR a
strategic asset.
The HR scorecard is a lever that enables them to do so. Implementing effective
measurement systems for intangible assets is a very difficult task and demands the
existence of a unified framework to guide the HR managers. It is this difficulty that
has been the prime reason why managers tend to avoid dealing with intangible
assets as far as possible. In the process firms under-invest in their people and at
times invest in the wrong ways. Another difficulty is, managers cannot foresee the
consequences of their investments in intangible human assets in a well-defined
measurable manner and they are not willing to take the risk. Thus, the most
effective way to change this mindset is obvious – to build a framework just like the
Balanced scorecard, which has sound measurement strategies and is
able to link HR functions, activity and investment with the overall business
strategy. The HR scorecard framework was specifically designed for these
purposes.

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 The HR Architecture as a Strategic Asset
The focus of corporate strategy is to create sustained competitive advantage
whereas that of HR strategy is to maximize the contribution of HR towards the
same goal. Thinking about HR’s influence on the overall strategy of the company
requires one to look at all aspects of the HR architecture. The HR architecture
describes the relationship of the HR function, the HR system and the employee
behavior.
The HR function: The foundation of a value-creating HR strategy is a
management infrastructure that understands and can implement the firm’s strategy.
The professionals in the HR function would be expected to lead this effort. This
clearly implies that HR managers and professionals need to get a deeper
understanding of the HR function. There are two basic functional categories in HR
management. The first is technical. It includes delivery of HR basics such as
recruiting, compensation and benefits. The second is strategic. It involves
delivering the above mentioned services in a way that directly supports the
implementation of the firm’s strategy.
The HR system: In an effective high performance HR system, each element is
designed to maximize the overall quality of human capital throughout the
organization. To build and maintain a set of talented human capital, the HR system
should
• Link its selection and promotion decisions to validated competency models
• Develop strategies that provide timely and effective support for the skills
demanded by the firm’s overall strategy implementation.
• Enact compensation and performance management policies that attract, retain
and motivate high-performance employees.
Employee Behaviors: The final results of the strategies are mapped to required
employee behaviors. It is important that each employee be trained not just to do his
or her job but also to have a substantially clear understanding of where he or she
stands in the big picture of the overall strategy of the firm. Strategic behaviors are
productive behaviors that directly serve to implement the firm’s strategy. There are
two basic categories. Core behaviors are behaviors that are considered fundamental
to the success of the firm, across all business units and levels. Situation-specific
behaviors on the other hand, are more circumstantial behaviors. These are not
required all the time but are absolutely necessary in certain scenarios.
Understanding how people and processes within a firm actually create value is the
first step to identify the key behaviors. The second step is to develop methods to
instill these behaviors and also have measurement techniques that evaluate these
methods and key behaviors.

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 The Balanced Scorecard and Balanced Performance
Measurement
The Balanced Scorecard emphasizes the importance of measuring business
performance from the perspective of strategic implementation, rather than relying
solely on financial results. Senior managers tend to pay far too much attention to
the financial dimensions of performance and not enough attention to the driving
forces behind those results. Financial measures are lagging indicators i.e. backward
looking. They are designed to rectify or change past results. Performance drivers
on the other hand are within the control of the management in the present and the
Balanced Scorecard methodology encourages management to look at these leading
indicators as well. By specifying the important process measures, assessing them,
and communicating the firm’s performance based on these criteria to the
employees, the managers can ensure that the entire organization participates
actively in the strategy implementation process. It is a unifying tool in strategy
implementation.
To achieve strategy alignment, firms must engage in a two-step process. As
mentioned before, first the managers must understand the details of how value is
created in their firm. Once this is done, they can design a measurement system
based on their understanding. The first step focuses the organization on two
dimensions of the strategy implementation process namely breadth and causal
flow. Breadth refers to the fact that companies must study more than just financial
results as outcomes of strategy implementation. Causal flow refers to the series of
linkages between financial and non-financial determinants of firm performance.
This gives the managers a deeper perspective of why certain financial results are
the way they are. It allows them to link the financial measures to the non-financial
measures of success..
The next important step is communication. The top management that has done the
above analysis must communicate their findings and decisions to the middle and
front-line managers, who in turn must communicate it to the other employees. In
this way, everyone in the organization is made aware and can participate in the
strategy implementation process. This also helps allocate resources intelligently
and guides employees’ decisions. The Balanced Scorecard model recognizes the
importance of both tangible and intangible assets and of financial and non-financial
measures. It focuses on the complex connections among the firm’s customers,
operations, employees and technology and places an important role for HR.

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 Benefits of the HR Scorecard
The HR Scorecard offers the following benefits:
• It reinforces the distinction between HR do-ables and deliverables :
The HR measurement system must clearly distinguish between the
deliverables that influence strategy implementation and do-ables that do not.
Policy implementation is not a deliverable until it has a positive effect on the
HR architecture and creates the right employee behaviors that drive strategy
implementation. An appropriate HR measurement system will encourage
HR professionals to think both strategically as well as operationally.
• It enables cost control and value creation: HR is always expected to
control costs for the firm. At the same time, HR has to fulfill its strategic
goal, which is to create value. The HR scorecard helps HR professionals
balance the two and find the optimal solution. It allows HR professionals to
drive out costs where appropriate, but at the same time defend investments
in intangibles and HR by outlining the benefits in concrete terms.
• It measures leading indicators : Just as there are leading and lagging
indicators in the overall balanced performance measurement system, there
are drivers and outcomes in the HR value chain as well. It is thus important
to monitor the alignment of the HR decisions and systems that drive the HR
deliverables. Assessing this alignment provides feedback on HR’s progress
towards these deliverables and lays the foundation for HR’s strategic
influence.
• It assesses HR’s contribution to strategy implementation : The
cumulative effect of the HR Scorecard’s deliverable measures provides the
answer to the question regarding HR’s contribution to firm performance. All
measures have a credible and strategic rationale. Line managers can use
these measures as solutions to business problems.
• It lets HR professionals effectively manage their strategic
responsibilities: The scorecard encourages HR managers to focus on
exactly how their decisions affect the successful implementation of the
firm’s strategy. This is due to the systemic nature of the scorecard. It
provides a clear framework to think in a systemic manner.
• It encourages flexibility and change: The basic nature of the scorecard
with its causal emphasis and feedback loops helps fight against measurement
systems getting too standardized. Standardization is good for things that
don’t tend to have a dynamic nature but firm performance is a dynamic
phenomenon. Every decision needs to be taken based on the past and future
scenarios.

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 HR Strategy

The HR strategy can be defined in five strategic thrusts:

1. Talent:
• enlarge the talent pool
• invest in employees’ development
• ensure diversity

2. Leadership:
• establish a system to assess high-potential employees
• provide coaching and development
• establish accountability and rewards for leadership behaviour

3. Customer Service & Support:

• create an environment that fosters employee engagement
• increase business intelligence within the workforce
• provide solutions to retention issues

4. Organizational Integration:
• create better systems for knowledge management
• enhance union partnerships

5. HR Capability:
• develop core HR competencies
• identify key talent for growth and development
• invest in technology
• invest in employee self-service
• Better understand the relationship of HR actions to business outcomes

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 The HR Balanced Scorecard includes four perspectives:
— Strategic Perspective
• Measures success in achieving the five strategic thrusts. Since the basis for the
HR Balanced Scorecard is achieving business goals, the aligned HR
Strategic objectives are the drivers for the entire model.

— Operations Perspective
• Measures HR’s success in operational excellence. The focus was primarily in
three areas: staffing, technology, and HR processes and transactions.

— Customer Perspective
• Includes measures of how HR is viewed by the key customer segments.
Survey results were used to track customer perceptions of service as well as
assess overall employee engagement, competitive capability, and links to
productivity.

— Financial Perspective
• Addresses how HR adds measurable financial value to the organisation,
including measures of ROI in training, technology, staffing, risk
management, and cost of service delivery.

Conclusion:

The HR Balanced Scorecard has made it possible for HR managers to

understand how to align HR strategy with the overall business objectives.
They are able to explain not only what they are tracking but also how they
are performing on essential strategies for the business. Business environment
and the objectives and strategies will continue to evolve, and HR managers
will continue to be flexible and creative in supporting the changes. The value
of the HR Scorecard as a tool is that it can get HR to the new goals and
measures and through the process ensure continued learning and change
management.

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