Ten minute tutorial – HR scorecards

Liz Hall
offers a brief introduction to a tool which promises to make measuring the
impact of HR easier.

What
is it?

The
HR Scorecard is the latest offering from academics to the HR performance
measurement and management pot. 

Like
other tools that go before it, the Scorecard claims to be an easy way for HR to
measure the effects of its policies on the organisation’s financial
performance.

Devised
by a trio of academics after studying almost 3,000 firms, the scorecard is
described as a ‘roadmap designed to embed human resources systems within a
company’s overall strategy and manage the human resources architecture as a
strategic asset.’

The
Scorecard process involves the following seven steps:


Clearly defining business strategy
– Building a business case for HR as a strategic asset
– Identifying HR deliverables within the strategy map
– Aligning the HR architecture with HR deliverables
– Designing the strategic HR measurement system
– Implementing management by measurement

The
story so far:

IT
expert David Norton and Robert Kaplan are the people behind the original
Balanced Scorecard, the management tool which led to the HR Scorecard. The
Balanced Scorecard came into circulation around 1993.

The
HR Scorecard was developed by academics Brian Becker, Mark Huselid and Dave
Ulrich and was presented to the world in 2001.

The
concept of the importance of setting targets, measuring HR activities and
linking them in with company strategy is by no means a new one. But all too
frequently , one department’s targets clash with another’s. The idea of seeking
balance between the different organisational facets was highlighted in the
Sears Roebuck case in the early 1990s- used as an example in the HR Scorecard
book. The US store illustrated how looking after its employees led to happier
clients and shareholders.

With
increasing pressure on HR to justify its worth to the board, the search for the
Holy Grail in HR accountability has been in existence for some time. It has led
to a flourish of benchmarking exercises and HR measurement tools, of which the
HR Scorecard is the latest.

Kaplan
and Norton’s Balanced Scorecard is based on the premise of trying to stop
organisations from designing conflicting measures. It puts forward a range of
measures designed to work in harmony, approaching performance measurement from
four perspectives: financial; customer satisfaction; internal efficiency and
effectiveness, and learning and innovation (HR and people related issues.)

One
criticism of the Balanced Scorecard was that there was not enough emphasis on
the human element – hence the HR Scorecard.

The
promise

Becker,
Huselid and Ulrich claim that the Scorecard enables organisations to link the
results of HR policies to measures such as profitability and shareholder
values, measures which are easily understood and respected by line managers and
senior executives.

The
HR Scorecard promises to help the organisation successfully implement change in
a straightforward way. Likely outcomes are apparently:  better allocation of time and money spent on
human resources; a higher probability of implementing the firm’s overall
strategy; more productive and committed employees; a more competitive
organisation and increased shareholder value.

Pros
and cons

The
jury is still out as to the reliability of the Scorecard as it has not yet been
implemented widely. It has been hailed as a highly straightforward process but
one US HR manager complained that she had trudged her way through the book
trying to get to grips with the various models but found it all far too
scientific and inhuman.

HR
consultant Paul Kearns says that the Scorecard risks inflicting an extremely
complicated solution on a relatively simple problem. He writes off the case
study material as unintelligible to anyone without a degree in astro-HR and
ultimately unconvincing.

‘It’s
academics going beserk trying to analyse things to the nth degree,’ he says.

As
with many pan-organisation initiatives, the success of the HR Scorecard is
linked in with support from the top. If that’s not in place, the attempts to
strive ahead are likely to flounder, something Dr Kaplan acknowledges.

At
the very least, the scorecard could be act as a catalyst for useful
brainstorming although organisations will have to make sure they avoid there
being lots of thought and little action, with most of the work going into
working on the scorecard rather than on the business.

Who’s
on board

Most
large organisations – including the former NatWest – have tried the HR
Scorecard’s forerunner, the Balanced Scorecard with varying degrees of success
and failure.

But
it is still early days for the HR Scorecard. Although the HR Scorecard book’s
back cover is peppered with accolades from academics and senior HR people from
a range of organisations including Dell Computer Corporation and Hewlett
Packard, apart from telecommunications firm Verizon, it is unclear which, if
any, organisations have yet gone down the HR Scorecard route.

Verdict

We
have yet to see whether the HR Scorecard is just another fad a la TQM (Total
Quality Management) or BPR (Business Process Reengineering).

Dr
Kaplan insists it is not, pointing out that use of its predecessor is still on
the up. Paul Kearns says: ‘There is nothing new under the sun. The Scorecard approach
is about putting in place a continuous improvement system so it is just another
spin-off to TQM. It will attract HR teams who don’t really want to make a
difference but want to look as if they do. It’s all smoke and mirrors.’

The
HR Scorecard seems likely to generate some excitement in the HR world with its
golden promises of tying HR activity into the bottom line. It does have the
backing of well-respected academics and if it attracts the attention its
predecessor did, then it might well be the next Big Thing. 

Key
players

Robert
Kaplan, professor of accounting and control at Harvard Business School and
David Norton, co founder of IT firm Nolan, Norton and Co. The duo jointly
developed the Balanced Scorecard. Also involved are Mark Huselid, Brian Becker
and Dave Ulrich of the University of Michigan.

The
HR contribution

The
role of the HR professional is key in the HR Scorecard process. The head of the
HR department should be the ‘primary sponsor’, responsible for assigning a task
force to the initiative and making sure the scorecard is on the right track
according to the existing business strategy.

Essential
reading

The
HR Scorecard: Linking People, Strategy, and Performance.
Brian Becker, Mark
Huselid and Dave Ulrich, Harvard Business School Press, 2001.
The Balanced Scorecard- Translating Strategy into Action. Harvard
Business School Press, 1996.
What’s wrong with the HR Scorecard: A NASA Ballpoint Pen. Paul Kearns. www.hr.com

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