The HR Scorecard

The HR Scorecard

What is it?

The HR Scorecard is the latest offering from academics to the HR performance
measurement and management pot. Like other tools before it, the Scorecard is intended
as an easy way for HR teams to measure the effects of their policies on the
organisation’s financial performance. Devised by three academics after studying
nearly 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 six steps:

– Clearly defining business strategy

– Building a business case for HR as a strategic asset

– Identifying HR deliverables within the strategy map

– Aligning HR architecture to HR deliverables

– Designing the strategic HR measurement system

– Implementing management by measurement.

The story so far

IT expert David Norton and Harvard Business School professor Robert Kaplan
created the original Balanced Scorecard – the management tool that 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 unveiled to the world this year.

The concept of the importance of setting targets, measuring HR activities
and linking them to company strategy is not new. But too often 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 resulted in 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 around 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 aims to try to prevent organisations
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).

But the Balanced Scorecard was criticised as having too little 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 that are 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 claimed to be:

– 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 yet
to be implemented widely. It has been hailed as a straightforward process, but
one HR manager in the US complained that she had trudged her way through the
book trying to get to grips with the various models but found it far too
scientific and inhuman.

HR consultant Paul Kearns says the Scorecard risks inflicting a 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 is academics going berserk trying to analyse things to the nth
degree," he says.

As with many initiatives that cover the entire organisation, the success of
the HR Scorecard depends on support from the top. If that is absent, the
attempts to progress are likely to flounder – something Dr Kaplan acknowledges.

At the very least, the Scorecard could be a catalyst for useful
brainstorming, although organisations will have to make sure they avoid the
trap of lots of thinking but little action.

Who’s on board

Most large organisations – including Nat West – tried 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, have gone down the route.

Verdict

We have yet to see whether the HR Scorecard is just another fad along the
lines of 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 increase.

Kearns, on the other hand, 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 that
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 promise of tying HR activity into the bottom line. It does have
the backing of respected academics and, if it attracts the attention its
predecessor did, it might just be the next Big Thing.

Fact file

Key players

Robert Kaplan, professor of accounting and control at Harvard Business
School, and David Norton, co founder of IT firm Nolan Norton & Co. The duo
jointly developed the Balanced Scorecard.

Also involved are Mark Huselid, Brian Becker and Dave Ulrich, of the
University of Michigan.

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 (2001)

Brian Becker, Mark Huselid and Dave Ulrich, published by Harvard Business
School Press

The Human Resources Scorecard:Measuring the return on investment

Jack JPhilips, Ron DStone, Patricia Pulliam Phillips, published by
Butterworth Heinemann

The Balanced Scorecard – Translating Strategy into Action (1996), published
by Harvard Business School Press

What’s Wrong with the HR Scorecard: A NASA Ballpoint Pen, by Paul Kearns. www.hr.com

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