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Human Capital Scorecard: Aligning HR Strategy & Human Capital to Business Strategy
HR scorecard is a measurement system which focuses on measures of efficiency of HR strategy, activities, effectiveness of their outputs (for example, human capital) and impacts on the business. It is also useful to add inputs or investments to the start of this HR strategy map so that financial inputs can be compared to business impacts to produce a ROI. Also see, A Scorecard for making better hiring decisions – HBR (2016)
Putting an organisation’s HR measures into a HR strategy map ensures that the measures used by HR do support, inform and align with key business strategies and also that these are important lead measures which will drive predictive analysis. Once the right measures have been identified, HR professionals can also think about how these measures can be combined with others or presented most usefully to drive management decision making.
About the Client Organization
A large, financial services institution headquartered out of Mumbai. The Organization employs approximately 7000 employs in its offices and financial centers that are geographically dispersed.
The Pain Points
No integrated or uniform methodology existed for defining and measuring performance across the HR Division. Furthermore, none of these systems was tied to an overall, organizational strategic plan. In addition, the HR Leadership Team, which consisted of the HR CFO and managers of the various HR departments, did not regularly review departmental metrics or indicators; rather, it relied on anecdotal information from colleagues and internal customers relating to how the HR Division was performing.
Post deeper deliberations with The Brew, the decision was made to initiate the BSC methodology (Balanced Scorecard Methodology), Several key decisions were made to enhance the scorecard process. First, a cross-functional BSC Team was established. The purpose of the BSC Team was to provide ongoing feedback during the BSC development process and to create a sense of ownership and accountability for the metrics.
We developed a “path to success” from the ideals of the new approach. This “path” was designed to provide the systematic process that would be used to create the scorecard. The Path is described herewith:
- Build the foundation for the HR Strategy Scorecard a. Definition b. Purpose
- Identify the questions an HR Strategy Scorecard would attempt to answer
- Identify the measures that would answer these key questions
- Establish targets
- Capture data
The Brew’s Approach
The HR BSC Team began by defining the scorecard and determining its purpose. The stated purpose was to:
- review HR Division performance basis movement reflected in HR strategy scorecard,
- identify best practices,
- identify potential action plans or interventions to influence performance,
- communicate performance to HR leaders and employees, and
- reinforce HR’s strategic priorities by updating key performance indicators to align with the HR scorecard.
With the deployment of above, Employees would be able to evaluate tangible metrics of HR performance and trends based on the work that they contributed. The HR Strategy scorecard was established as a management framework within HR and as such it would not be used as a performance assessment tool. Ultimately, this decision meant that the HR Division would not tie employee performance evaluations or rewards systems to the outcomes of the BSC.
With the deployment of above, Employees would be able to evaluate tangible metrics of HR performance and trends based on the work that they contributed. The scorecard was established as a management framework within HR and as such it would not be used as a performance assessment tool. Ultimately, this decision meant that the HR Division would not tie employee performance evaluations or rewards systems to the outcomes of the BSC.
For example, here’s a snapshot of Financial Perspective from the BSC, addressing the following questions: 1) How’s the HR Division adding the greatest value at the optimal cost? 2 How’s the HR Division proactively managing the HR related financial risk? 3 How’s HR maximizing the organization’s investment in human capital ? The overall score for the Financial Perspectives for the 2nd Quarter is 75%.
Aligned Metrics for Financial Perspective:
- Improves Productivity: HR Cost per FTE, HR Cost as % of FTE Expenses, HR Operating Cost per Hire, HR Cost per Training Participant, HR Engagement Costs per HC
- Monitored Financials: Payroll G/L Account Recons completed on time, Payroll G/L Suspense Account Balance Aged over 30 days
- HR Savings: Corporate Cost Savings, Executive Search Corporate Cost Savings, Employee Relocation Corporate Costs Savings
Apart from aligning HR directly to the Business Strategy & Organizational Objectives, it helped both, the business teams & HR teams to ascertain the value brought to table by HR division – equally, it helped decision makers to focus on metrics that mattered, cutting down from earlier 70-80 Kpi’s to now essentially sub 20 metrics. Additionally, several data integrity issues were uncovered as part of the scorecard process and corrected.
After implementing the HR Strategy Scorecard, the team had more focused roles with clear ownership of work and execution resulting in greater job efficiency and productivity. Working on the business is just as important as working in the business. You have to make time to grow the capabilities of your team or you risk stagnation