lecture 3 - hrm scorecard
TRANSCRIPT
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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
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© 2005 Prentice Hall Inc. All rights reserved. 1 –12
PERSPECTIVES OF THE BALANCE SCORECARD
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THE CUSTOMER PERSPECTIVE
Who is your customer?
What services or products do they expect from
you?
How do you listen to and learn from your customer?
How do you retain and acquire new customers?
How do you meet your customers needs?
How do you measure customer satisfaction and
dis-satisfaction?
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THE FINANCIAL PERSPECTIVE
There is a broad range of 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.
HUMAN RESOURCE METRICS
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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.
HUMAN RESOURCE METRICS
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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.
REFERENCES