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The Balanced Scorecard Approach

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Question:

Someone recommended that I take a “balanced scorecard” approach to HR management. What is a “balanced scorecard”?

Answer:

The authors of the book HR Scorecard, Dave Ulrich, Mark A. Huselid, and Brian E. Becker), coined the phrase “balanced scorecard”. It refers to a 7-step model that outlines an approach for HR practitioners who wish to become business partners in their organization. The seven steps are:

  1. Clearly define the business strategy – this involves learning more about the organization’s strategic objectives and goals. The HR Department should be in a position to align its objectives and goals with those of the organization. To do this the HR staff must get to know the management team and their challenges, barriers and constraints. After leaning about the needs of your managers, HR needs to conduct an audit of the HR function to determine if it has the competencies and skills necessary to help the company achieve its Mission, Vision, and Strategic Objectives.
  2. Build a business case for HR as a strategic asset – many managers perceive HR to be an administrative function. HR must make a proative effort to educate the leadership team about the potential HR has as a strategic business partner. It may be help to use a ‘return on investment’ (ROI) approach to HR activities. This entails looking at activities undertaken by HR as necessary to solve a business problem or need, helping to determine the cost of the business problem, recommending and implementing solutions, determining the cost of the solution(s), and calculating the savings to the company (the difference between the cost of the problem after HR interventions and the cost of the solution).
  3. Create a strategy map – HR needs to provide a value proposition for its activities and change the perception that HR is overhead, strictly an expense generating department. HR should take the time to map out each of their processes, such as benefits administration, to ensure that the processes are streamlined, provide a quality product or service, and are targeted to meet specific organizational objectives.
  4. Identify HR deliverables within the strategy map – this requires distinguishing between qualitative and quantitative deliverables.  Tangible deliverables might be saving $485,000 a year in turnover expenses following an HR intervention such as supervisory coaching. The types of deliverables that are more qualitative, and therefore difficult to put a solid number on, are those like time savings for managers who must handle conflict among direct reports. If their direct reports receive training and assistance to handle conflict themselves, this results in less time for that manager, who is then free to engage in other activities that might be more productive for the company.
  5. Align the HR architecture with HR deliverables – often HR’s education and training focuses on HR’s role as “the police”, people who hire and fire, or administrators whose job is simply to keep personnel records. Take steps to recruit and hire HR staff that take a strategic, wholistic approach towards the HR functions. HR competencies are expanding all the time – problem solving, decision making, strategic planning, business acumen, etc. are critical HR competencies.
  6. Design the strategic measurement system – identify appropriate measures for your unique organizational needs by looking at other companies. Don’t make the mistake of benchmarking against companies in an entirely different industry or in a different growth stage.
  7. Implement management by measurement – HR leadership needs to be diligent in first selecting, and then consistently measuring, the appropriate success criteria. It may be helpful to set process checkpoints at three or four times during the year to honestly discuss how HR staff is doing in relationship to their strategic objectives.

Our thanks go out to HR guru Linda Gravett for sharing her insights into the HR Scorecard and strategic planning for Human Resources.

In many organizations HR still struggles to find a place at the leadership table. By thinking strategically and relying on proven business practices and tools HR can show value and become a partner with the leadership team. Strategic HR knows how difficult it can be to approach integrating HR practices with the overall business strategy. Let us assist you with your strategic initiatives – visit our HR Strategy page to learn more.