Is the balanced scorecard HR’s ticket to the board?

Pressure is mounting for HR to show its contribution to the bottom line and
increasingly department’s are finding the balanced scorecard approach could
prove an invaluable tool. Paul Nelson reports

HR professionals are increasingly convinced of the benefits of using the
balanced scorecard approach to performance management.

Speakers at the Strategic HR Management: Using the Balanced Scorecard
conference in London last month claimed the scorecard is a vital weapon in the
profession’s fight to prove its importance and impact on the bottom line (see
pages 13 and 22).

The balanced scorecard system, which has evolved over the past 10 years,
provides an organisation with a mechanism for measuring all areas of business
to show how they contribute to overall performance.

But HR experts warned delegates that balanced scorecards must have clear
objectives and management buy-in if they are to be effective tools.

They also emphasised the need to have individual objectives tied to business

Bernard Marr, research fellow at Cranfield School of Management’s Centre for
Business Performance, said the balanced scorecard approach can help HR command
a boardroom seat by measuring its contribution to business.

Marr, who chaired the conference, said: "This is a great opportunity HR
directors should not miss. You cannot manage something you do not measure, and
HR plays a major role in managing companies’ intangible assets that are the
real strategic value drivers of any organisation.

"A transparent performance management system with a clear
cause-and-effect visualisation enables HR to show how it can contribute towards
overall strategic objectives."

The balanced scorecard must support all of an organisation’s business
objectives if it is to be successful, according to the CIPD. Karen Giles, CIPD
organisational development advisor said: "Any performance framework for
the function is positive as it moves the agenda away from financial performance
and looks at how customers view you, management processes and learning.

"HR is having to put greater emphasis on demonstrating how it adds
value to the business, and the only way to do this is through a performance
management framework."

Giles believes scorecards must also have the ultimate aim of contributing to
performance. "The way you win a boardroom place is to prove you add value
to the business and are able to move the organisation forward," she said.

The need for scorecards to ensure individual staff objectives are linked to
business aims was highlighted by Lynda Hatcher, director at HR consultancy The
Transformation Partnership.

It spreads the ownership of people policies, making it less likely to be
viewed by the organisation as HR-speak," she said.

But Hatcher is not convinced of the value of specific HR balanced scorecards
designed to measure HR performance in isolation from the rest of the business.

"The problem with functional scorecards is that you get so caught up in
the measures, that you lose sight of what you are trying to achieve," she

Conference speaker Paul Kearns, senior partner at HR consultancy Personnel
Works, stressed that the balanced scorecard must not only be an exercise in measuring
an individual’s or a department’s contribution, it must achieve bottom-line

"Have we got the right managers in place, do we make the best of our
people, do we generate new ideas? These are all critical business issues on
which HR people have a lot to say. Measurement is not the be-all-and-end-all –
contribution to the business is the key," Kearns said.

Case study: Marks and Spencer
Scorecard takes HR to the top of the agenda

Retail giant Marks & Spencer has
linked its staff satisfaction survey to the company’s sales performance to
measure HR’s output as part of its balanced scorecard.

The store is able to relate responses to certain questions in
the twice-yearly questionnaire to improvements in sales per square foot.

Marcus Powell, head of HR strategy and change, told delegates a
1 per cent increase in the ‘clarity about own contribution to meet customer
needs’ question equates to a 5.1 per cent increase in sales per square foot.

A 1 per cent increase in employee satisfaction on the ‘praise
for performance’ question translates to a 2.9 per cent jump in sales per square

Powell said the link between employee satisfaction and sales
performance is an important part of the company’s balanced scorecard. Powell
told delegates the scorecard has helped move HR to the top of the business
agenda and played a major part in the company’s improved UK performance over
the past year.

"HR had very short-term goals of helping the business
stabilise. The company had always been known for treating its staff well and we
want to get back to that and become the standard against which all other [HR
departments] are measured," Powell said.

The move is part of the organisation’s restructuring of HR,
which is designed to encourage and reward commitment.

"HR’s role now is to support the line providing leadership
to their people and help the business deliver better results," said Powell.

Case study: Parcelforce
HR system gets the green light

Operations managers at Parcelforce
recognise the importance of HR, after the firm introduced a performance
management system based on a balanced scorecard.

The scorecard shows employees’ individual targets and how they
fit with the department’s and company’s objectives. It uses a traffic light
system – red, amber and green – to show if targets are being met.

Natasha Kidd, business excellence manager at Parcelforce
Worldwide, said the scorecard makes it much clearer to managers the impact HR
has on performance.

"Staff are now able to see what and why we are doing
things. Operations managers used to say HR is fluffy and not their
responsibility. But this is starting to change as managers can see [through the
scorecard] the results HR achieves."

The scorecard has also helped monitor training given to new
employees and has helped reduce the large number of staff who were leaving
within six months of joining.

Kidd said: "The system has significantly reduced the
amount of time spent in meetings. The days of heroic planning are almost gone,
now staff are updated with company performance every month in the performance
appraisal meeting.

"It is short, sharp, slick and quick – we just see who is
doing what and if it is on target."

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