lecture 3 - hrm scorecard

7/27/2019 Lecture 3 - HRM Scorecard

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THE HUMAN RESOURCE SCORECARD

Lecturer:

Group URL:

http://uk.groups.yahoo.com/group/UTech_iHRM/.

Contact #:

Ground Rules:

– No cell phones

– Class attendance is expected

– Lecture will be on time so please be on time – Be courteous at all times

– Respect for each other

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A CHANGING HR ENVIRONMENT

Globalization

Technological Advances

Exporting Jobs

The Nature of Work

Workforce Demographics

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THE NEW HR MANAGER PROFICIENCIES

– HR proficiencies – Business proficiencies

– Leadership proficiencies – Learning proficiencies

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MEASURING HR’S CONTRIBUTION

Top management wants to see, precisely,how the HR manager’s plans will make thecompany more valuable.

HR managers today are more involves inpartnering with their top manager in both

designing and implementing theircompanies’ strategies.

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HR’S STRATEGIC ROLES

HR professionals should be part of the firm’sstrategic planning executive team in order to:

– Identify the human issues that are vital to business

strategy.

– Help establish and execute strategy.

– Provide alternative insights.

– Are centrally involved in creating responsive andmarket-driven organizations.

– Conceptualize and execute organizational change.

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WHAT IS THE BALANCE SCORECARD?

The Balanced Scorecard (BSC) is a managementtool to mobilize employees to fulfill the mission

of the organization.

The scorecard is a method of designing,

organizing and communicating performance

measures across multiple perspectives (i.e.

customer, financial, business process andlearning and growth), utilizing both short and

long term goals.

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THE BALANCE SCORECARD – 1990s

By Robert Kaplan and David Norton of Harvard A strategic management concept which helps

managers (HR etc.) at all levels monitor results

in their key areas.

Monitors present performance, but also

assesses how prepared a company is to perform

well in the future.

Built around TQM Principles

Examines specific areas to create a balance

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WHY MEASURE?

Strategic feedback - to show the present statusof the organization from many perspectives for decision making

Diagnostic feedback - assess various processesto guide improvements on a continuous basis

Determine trends in performance

Determine which metrics should be tracked basedon feedback

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WHAT IS MEASURED?

Outcomes are lagging indicators, and are the

final results of all of an organization's products

and services (for example, enhanced mobility or,

safe drinking water).

Performance drivers are leading indicators or

inputs and are measures that are unique to each

organization or business unit. Performance

drivers and inputs measure the employee and

unit activities which brings about the outcomes.

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THE PURPOSE OF THE SCORECARD

The balanced scorecard forces managers to look atthe business from four important perspectives. It linksperformance measures by requiring firms to addressfour basic questions:

How do customers see us? - Customer perspective

What must we excel at? - Internal perspective

Can we continue to improve and create value? -

Innovation & learning perspective

How do we look to shareholders? - Financialperspective

PERSPECTIVES OF THE BALANCE SCORECARD

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THE CUSTOMER PERSPECTIVE

Who is your customer?

What services or products do they expect from

How do you listen to and learn from your customer?

How do you retain and acquire new customers?

How do you meet your customers needs?

How do you measure customer satisfaction and

dis-satisfaction?

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THE FINANCIAL PERSPECTIVE

There is a broad range of traditionalfinancial questions that can be asked. The

questions depend upon the standards in

the various industry and may include

financial measures such as return on

investment (ROI), revenue enhancement

and growth, risk, and improved

productivity.

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THE BUSINESS PERSPECTIVE

What products or services will your customersvalue in the future?

What processes best deliver the outcomes

desired by the customers?

Looking into the future, what are the new

business processes that you must excel at?

What will be valued in the future, and how will

innovation deliver future values?

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THE LEARNING & GROWTH PERSPECTIVE

The learning and growth perspective supportsthe other three perspectives. Ultimately, if

the workforce is not enabled with

knowledge, innovation and advanced skillsets, the workforce will be unable to build

and enhance innovative business

processes, that in-turn will help retain andacquire new customers, and ultimately

achieve financial objectives.

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WHAT IS THE HR SCORECARD?

It is a reporting tool or instrument whichexamines the internal workings of anorganisation and identifies blockages to growth.

It is based on the Balanced Scorecard and isused to measure employees attitude to three keyareas of organizational effectiveness: –

1. Strategic intent;2. Business processes; and

3. Culture/behaviour

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OUTCOME METRICS

You can't improve what you can't measure.

Metrics must be developed based on the priorities

of the strategic plan, which provides the keybusiness drivers and criteria for metrics managersto watch.

Decision makers examine the outcomes of various measured processes and strategies andtrack the results to guide the company andprovide feedback.

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THE SCORECARD MANAGEMENT SYSTEM

The Scorecard system is based on performance

metrics or "metadata" that are tracked

continously over time to look for trends, best and

worst practices, and areas for improvement. Itdelivers information to managers (HR etc.) for

guiding their decisions.

Some of the metrics tracked in HR are Absence

Rate, Time to Fill and Turnover Cost.

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HUMAN RESOURCE METRICS

Absence Rate

[(Number of days absent in month) ÷ (Average number of employees during mo.) × (number of workdays)] × 100

Cost per Hire

(Advertising + Agency Fees + Employee Referrals + Travel

cost of applicants and staff + Relocation costs + Recruiterpay and benefits) ÷ Number of Hires

Health Care Costs per Employee

Total cost of health care ÷ Total Employees

HR Expense Factor

HR expense ÷ Total operating expense

Figure 1 –5

Sources: Robert Grossman, “Measuring Up,” HR Magazine, January 2000, pp. 29 –35; Peter V. Le Blanc, Paul Mulvey, and Jude T.

Rich, “Improving the Return on Human Capital: New Metrics,” Compensation and Benefits Review , January/February 2000, pp. 13 –

20;Thomas E. Murphy and Sourushe Zandvakili, “Data and Metrics-Driven Approach to Human Resource Practices: Using Customers,

Employees, and Financial Metrics,” Human Resource Management 39, no. 1 (Spring 2000), pp. 93 –105; [HR Planning , Commerce

Clearing House Incorporated, July 17, 1996;] SHRM/EMA 2000 Cost Per Hire and Staffing Metrics Survey ; www.shrm.org.

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Human Capital ROI

Revenue − (Operating Expense − [Compensation cost +Benefit cost]) ÷ (Compensation cost + Benefit cost)

Human Capital Value Added

Revenue − (Operating Expense − ([Compensation cost +

Benefit Cost]) ÷ Total Number of FTE

Revenue Factor

Revenue ÷ Total Number of FTE

Time to fillTotal days elapsed to fill requisitions ÷ Number hired

Figure 1 –5 (cont’d)

Sources: Robert Grossman, “Measuring Up,” HR Magazine, January 2000, pp. 29 –35; Peter V. Le Blanc, Paul Mulvey,

and Jude T. Rich, “Improving the Return on Human Capital: New Metrics,” Compensation and Benefits Review ,

January/February 2000, pp. 13 –20;Thomas E. Murphy and Sourushe Zandvakili, “Data and Metrics-Driven Approach to

Human Resource Practices: Using Customers, Employees, and Financial Metrics,” Human Resource Management 39,

no. 1 (Spring 2000), pp. 93 –105; [HR Planning , Commerce Clearing House Incorporated, July 17, 1996;] SHRM/EMA

2000 Cost Per Hire and Staffing Metrics Survey ; www.shrm.org.

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Training Investment Factor

Total training cost ÷ Headcount

Turnover Costs

Cost to terminate + Cost per hire + Vacancy Cost + Learningcurve loss

Turnover Rate

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

Workers’ Compensation Cost per Employee Total WC cost for Year ÷ Average number of employees

Figure 1 –5 (cont’d)

Sources: Robert Grossman, “Measuring Up,” HR Magazine, January 2000, pp. 29 –35; Peter V. Le Blanc, Paul Mulvey,

and Jude T. Rich, “Improving the Return on Human Capital: New Metrics,” Compensation and Benefits Review ,

January/February 2000, pp. 13 –20;Thomas E. Murphy and Sourushe Zandvakili, “Data and Metrics-Driven Approach to

Human Resource Practices: Using Customers, Employees, and Financial Metrics,” Human Resource Management 39,

no. 1 (Spring 2000), pp. 93 –105; [HR Planning , Commerce Clearing House Incorporated, July 17, 1996;] SHRM/EMA

2000 Cost Per Hire and Staffing Metrics Survey ; www.shrm.org.

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PROBLEMS WITH THE HR SCORECARD?

People only perform the task that aregoing to be measured. They sometimes

skew their work to meet particular

incentive pay targets.

People will work to achieve their

scorecard goals, and may ignore

important things which are not on thescorecard.

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Dessler, Gary. (2005). Human Resource Management, (10th ed.). Prentice Hall

Kaplan, R. & Norton, D. (1996). The Balanced Scorecard:translating strategy into action.

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