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Balanced Scorecard + HR Scorecard

Balanced Scorecard
for MBA students

Girish Kelkar
Why the Balanced Scorecard?
• The Organization will become more “strategically focused” over the
next ten years given the recent policy directive issued by BSP (Budget
& Strategic Planning).
• People at all levels have relied heavily on tactical performance
measurements, such as number of maps submitted, number of land
structures in flow, and % of supply vendor contracts in place.
• Need more balanced approach to looking at performance, both tactical
and strategic.
• Only 5% of a workforce tends to understand their company’s strategy.
• 86% of executive teams spend less than one hour per month
discussing strategy.
A Major Driver is . . .
• The Organization’s Information Resource Planning System (IRPS):

– Enterprise wide system for how we will evaluate success-


division read outs, data turnarounds, global partnerships,
etc.

– Must be integrated into all Organization components (such


as region & global outlet offices)
– Designed around the Balanced Scorecard framework

• The Balanced Scorecard will be the strategic view of performance for the agency, balancing out our current
tactical view of performance which is already in place.
Requirements for General
Performance Management /
Results
•Required
to develop long-term Strategic Plans ("SP")
•Specify
general Goals and Objectives (Business Plan)
•Develop
Annual Performance Plans ("APP")
•Specify
measurable performance goals
•Annual
Performance Report ("APR")
•Demonstra
te actual results
•APP goals
should show the expected progress toward meeting the long-term goals of the SP
•Developm
ent needs (Group & Individuals)
Where it started . . .
• Introduced in 1992, by Robert Kaplan and David Norton, the Balanced
Scorecard is the most commonly used framework for ensuring that
agencies execute their strategies.
• Today, about 70% of the Fortune 1,000 companies utilize the
Balanced Scorecard to help manage performance.

 Balanced Scorecards are used as the roadmap for creating the


“Strategic Management System”.
 And this will drive overall organizational performance for any
organization
Some Basic Principles

• Quantifies the Organization’s Strategy in measurable terms


• Strategy is summarized on a Strategy Map over four views of performance
(perspectives).
• Must capture a cause-effect relationship between strategic objectives over
the four perspectives on the Strategy Map.
• Critical Components include:

–Measurements
–Targets (Budgets & Internal Targets)
–Initiatives
• Everything must be linked: Goals to Objectives, Objectives to
Measurements, Measurements to Targets.
Four Views of Performance
Strategic Objectives

Stakeholders
• Strategy can be described as a “If we succeed, how will we look to
our stakeholders?”
series of cause and effect
relationships.
Internal Processes
• Provides a “line of sight” from
“To satisfy our customers, at which
strategic to operational activity processes must we excel?

–working on the Learning & Growth

“right” things. "To execute our processes, how must


our organization learn and improve?"

Investments
“In order to succeed, what
investments in people and
infrastructure must we make?”
Four Views of Performance
The Importance of Alignment
Complete Framework for IRPS

Strategy Objectives Measures

Organizati

on Departme
nt
Team/
Individual

Reviews
Alignment all the Way Through
Goal: Improve environmental health
Performance Gap: Less than Organization Goals, say Quality
Initiative: Data Mining Analysis of Quality reports Resource
Investment
Innovation Management
Improved "Cause Justified Initiatives to
and Effect" Business Improve Quality
Knowledge Processes
Improved Quality Investments Available to
Assessment Reports be Allocated to Other
Critical Areas

Financial
Management
Quality
Decreased
Health
Costs Relationship Improved Output Quality
Management
Enhanced Customer
Confidence

Increased
Investment
Accountability
In order to be successful, the
Organizational KRAs should .
..
• Be comprised of a balanced set of a limited vital few measures;

• Produce timely and useful reports at a reasonable cost;

• Display and make readily available information that is shared,


understood, and used by the Agency; and

• Supports the organization’s values and the relationship the


organization has with customers, suppliers, and stakeholders.
Before we can map your
strategy . . .
• Get down to a set of quantifiable strategic objectives:

Too vague Improve Quality of output / Customer


Service

More precise Reduce average customer wait times by


30% by year end & line rejection by 20%
• Make sure your objectives have a direct relationship to your goals and
your goals have a direct relationship to your mission and values.
Strategy Map: Capture a
Cause Effect Relationship
from the Bottom Up
Stakeholder

Improved Returns on
More rapid and accessible services &
Investments
products with quality
Internal Process

Economic Model
Reduce Re-Activities thru Establish Web Based Self
Process
ABC/M Services
Process
& Growth
Learning

Expand Global Knowledge


Facility Reach Leadership Development Management
Investments

Facilities and Fixed IT Infrastructure


Assets Human Capital
Two Special Techniques for
Building Strategy Maps
General Rule of Thumb to ensure strategy
map is developed both vertically and
Weak Strong
horizontally

The 4 to 5
Rule

Way of pulling out both drivers and outcomes


that match up against the core competencies
Splitting of the business model
Customer Perspective
the Customer Growth Retention Rate Customer Satisfaction Outcomes
Perspectiv Timely Delivery Pricing Quality Service Reputation Drivers
e
Key Benefits of Strategy Maps

• Articulates how the organization creates value for its constituents and
legitimizing authority
• Displays key priorities and relationships between outcomes (the
"what") and performance enablers or drivers (the "how")
• Provides a clear view of "how I fit in" for sub-organizations, teams,
and individuals
• "Cascading the scorecard throughout the organization”
• Clearly mapping the various units and functions back to the
organization -wide map is critical to leveraging and ensuring
alignment
Strategy Maps –
A Better Way to Communicate Strategy

Executive consensus and Educate and Communicate:


accountability:
Build awareness and
Building the map eliminates understanding of organization
ambiguity and clarifies strategy across the
responsibility. workforce.

Promote Transparency:
Ensure Alignment:
Communicate with and
Each sub-unit and individual educate constituents, partners,
link their objectives oversight bodies, and the
to the map. general public.

Source: "Using Balanced Scorecard Technology to Create Strategy-Focused Public Sector Organizations", Robert S. Kaplan,
April 21, 2004, pg. 20
Multiple Choice Question –
Cause Effect on Strategy
Map
• The top perspective of the Balanced Scorecard is the final end results
or outcomes we want to achieve. This perspective is called:

– a. Internal Processes
– b. Stakeholder / Customer
– c. Learning & Growth
– d. Investments
Multiple Choice Question –
and the answer is . . .
• b – “Stakeholder / Customer” are those who we ultimately serve and
we must meet their needs and requirements. This is our final end
result within the scorecard model.

Balanced Scorecards tell you the knowledge, skills and systems


that your employees will need (learning and growth) to innovate and
build the right strategic capabilities and efficiencies (internal
processes) that deliver specific value to the market (customer)
which will eventually lead to higher shareholder value (financial).

– “Having Trouble with Your Strategy? Then Map It” by Robert S.


Kaplan and David P. Norton - Harvard Business Review
Aligning the Scorecards
Once you have completed your strategy map, make sure it aligns with agencies or
divisions you report up to. This overall alignment of scorecards throughout the entire
Organization forms the Strategic Management System.

Expand Global Expand the Skill


Organization Best Business
Practices Reach Base
Scorecard

Departmental Lean Processes


Improve Asian Develop the
Scorecard Footprint Workforce

Highly Skilled
Sub-section Process Efficiency Grow Globally Workers
Scorecard

Service Scorecard Streamline Continue to Improve Employee


Processes Expand Range Competencies
Extend the Map into Measurements,
Targets and Initiatives

Strategy Map
Stakeholder

Detailed statement How success in The level of Key action


Faster Service Access of what is critical to achieving the performance programs
successfully strategy will be or rate of required to
achieving the measured and improvement achieve
strategy tracked needed objectives
Self Service
Applications
Internal Process

Objective
Measure Target Initiative
Lean Processes Description
Eliminate waste, Number of Rejects / 20 % reduction Lean / Six
reworks, & other Reworks in shop floor Sigma
Process and Value errors in processes rejections
Map Analysis for
Better quality
L&G

Web Enable
Technologies
Investments

Invest in IT
Alignment of Scorecard Components

Make sure the components of your scorecard fit together. We want to create a
tight model for driving execution of your strategy.
Goal Objective Measurement Target Initiative
Achieve Reduce Operational Cost per Rejection of 5% - Year 1 Activity Based
operational Rejections by 20% critical parts , observe 10% - Year 2 Costing /
efficiencies with Service Costs by 30% trends for reduction, 15% - Year 3 Management
best practices in over the next 5 years ensure reduction in
the industry sector overall cost of quality Introduction of Best
Practices

Reduce identified re- Waste Volume Waste stream Lean / Six Sigma
activities within primary Charts, Rework reductions of 5% each
processes by 80% over Tracking, Cycle Time year, Reworks cut in
the next 3 years End to End half for next 3 years,
cycle time cut by 75%
Identify & correct
Critical rejections
Multiple Choice Question –
Create a Tight Model
• The Balanced Scorecard process captures a cause and effect
relationship based on having all parts linked together.

• Strategic goals link down to objectives, objectives link down to


measurements, and measurements link to:

a.Mission
b.Goals
c.Budgets
d.Targets
Multiple Choice Question –
and the answer is . . .
• d - Measurements should be linked to targets. We want a one-to-one
relationship so that measurements are actionable to the Agency.
The Context of Measurement

• Performance Measurement is a process by which an Organization /


program / function / outlet office objectively assesses and evaluates
the extent to which it is accomplishing a specific objective, goal, or
mission. Performance measurement alone is incomplete.

• Performance Management is a systemic link between company


strategy, Investments, and processes. Performance Management is a
comprehensive management process.

• “Anything that needs improvement needs to measured, anything that


needs to be measured needs a unit of measure that is standard,
standards need to be reliable & consistent”
Why Measure Performance?
• Enables decision making
• Manage by results (data-based) not just gut feel
• Promote accountability & measurement
• Distinguish between program success and failure
• Allow for organizational learning and improvement
• Justify budget requests / Optimize Investments
• Provide means of performance comparison
• Fulfill mandates / objectives / schedules
• Establish catalysts for change
• And so on…
Without Measuring, Decision
Makers
Have No Basis For:
• Knowing what is going on in their enterprise
• Effectively making and supporting decisions regarding Investments,
plans, policies, schedules, and structure
• Specifically communicating performance expectations to subordinates
• Identifying performance gaps that should be analyzed and eliminated
• Providing feedback that compares performance to a standard
• Identifying performance that should be rewarded
Types of Measurements
Measure Type Definition Example

Intermediate outcomes that


Leading Employee turnover rate
predicts or drive bottom-line
performance results
Bottom-line performance
Lagging Employee satisfaction rating
results resulting from actions
taken
Investments, assets, equipment,
Input Number of cashiers
labor hours, or budget dollars
used
Units of a product or service
Output Number of Value Meal orders
rendered - a measure of yield
fulfilled
Resulting effect (benefit) of the
Outcome Customer satisfaction rating
use or application of an output

Objective / Empirical indicators of Wait time


Quantitative performance
Subjective / Perceptions and evaluations of Customer complaints received
Qualitative major customers and as a % of total customers
stakeholders served
Examples of Measurements by
Stakeholder /
Perspective
Internal
Customer
• Current customer satisfaction level Processes
• Number of unscheduled maintenance calls
• Improvement in customer satisfaction • Production time lost because of maintenance
• Customer retention rate problems
• Frequency of customer contact by • Percentage of equipment maintained on
customer service schedule
• Average time to resolve a customer • Average number of monthly unscheduled
inquiry outages
• Number of customer complaints • Mean time between failures

Learning and Investment


Growth
• Percentage employee absenteeism s• % of facility assets fully funded for
• Hours of absenteeism upgrading
• Job posting response rate • % of IT infrastructure investments approved
• Personnel turnover rate • # of new hire positions authorized for filling
• Ratio of acceptances to offers • % of required contracts awarded and in
• place
Time to fill vacancy
• Rejection %
Multiple Choice Question –
Appropriate Measurement
• The measurement, % of employees following a supervisor approved
competency model, would most likely be placed in which perspective
of the Balanced Scorecard?

– a. Stakeholder / Customer
– b. Learning and Growth
– c. Organization Investments
– d. Internal Processes
Multiple Choice Question –
and the answer is . . .
• b – this measurement relates to helping grow the workforce and this
would most likely fit with the Learning and Growth perspective of the
Balanced Scorecard.
Some Basic Guidelines for
Good Performance
Measures
• You should have at least one measurement for each objective.
• Measurements define or explain objectives in quantifiable terms:

– Vague => We will improve customer


service
– Precise => We will improve customer
service by reducing response times by
30% by year end.
• Measurements should drive change and encourage the right behavior.
• Should be able to influence the outcome.
Selection Criteria for
Performance Measurements
 MEANINGFUL - related significantly & directly to organizations mission &
goal
 VALUABLE – measure the most important activities of the organization
 BALANCED – inclusive of several types of measures (i.e. quality,
efficiency)
 LINKED - matched to a unit responsible for achieving the measure
 PRACTICAL – affordable price to retrieve and/or capture data
 COMPARABLE – used to make comparisons with other data over time
 CREDIBLE - based on accurate and reliable data
 TIMELY - use and report data in a usable timeframe
 SIMPLE -- easy to calculate and understand
Three Criteria select parameters
for Scorecard
• Relevant
– Addresses an operational or strategic performance issue
– Is results- or outcome-focused
– Provides useful information to enable decision making
• Measurable
– Quantifiable and Objective
– Facilitates Analysis
– Can be done in a timely manner with high accuracy
– Data are available and collectable
• Actionable
– Can be tracked to an appropriate person or team responsible for the
activity measured
– Measure relates to process inputs that can be controlled/adjusted to
address concerns
Multiple Choice Question –
Match the Objective to the
Metric
• Assume the organization Plan has an objective: Improve the productivity of
docking services at all stations. Which of the following measurements would be
most appropriate for this objective?

a. Number of reruns required to complete the


docking service
b. % of vendor contracts executed in 90 days
c. Number of people completing the off-shore
warranty training program
d. % of supervisors who submitted budget action
plans within 60 days of close-outs
Multiple Choice Question –
and the answer is . . .
• a – If we measure re-runs, this probably will give us some benchmark
by which we can measure docking station efficiency and productivity.
A Closer Look at How Things
Link
Transportation Safety Example
Mission:
Protect people and property

Strategic Goal #1:


Reduce damage caused by motor vehicle accidents

Annual performance goal 1A:


Reduce deaths per crashes to 1.10 per
100m miles traveled by 2005

Measure: Fatality rate per 100m miles traveled


The Measurement Pyramid

Goal
Strategic/GPRA Goals
Outcome
End-Outcomes
Performance
Measures

Longer-Term Intermediate Program


Outcomes
Program Performance Measures

Shorter-Term Program Components


Intermediate
Outcomes Program Component Performance Measures
& Outputs
Activities
Outputs
& Inputs Activity Performance Measures
Some Tools for Determining
What to Measure
Program Logic Model

Process/ Intermediate End


Inputs System Output Outcomes Outcome

Process Flow
Causal Analysis
Prototype
Product

Desired
Outcome Acceptable Not Acceptable
Results
Back to
To Market Of
Laboratory
Testing
Top Ten Metrics Service Sector
• Outputs/Product
• Program Inputs
• Financial Indicators
• Work/Activities
• Timeliness of Services
• Internal Measures of Quality
• Operating Ratios
• Outcomes of Products or Services
• External Customer Service
• Equity of Services to Users
How to Set Targets
• Past performance trends per historical data.
• Performance levels of similar organizational units at a comparable
level that facilitates benchmarking.
• Best practices across the organization, the public sector or the private
sector. Must be at a pre-existing high level of performance before you
use this approach.
• For newly launched services, may have to establish a baseline per a
prototype test and extend out from this point forward.
• For major strategic shifts, may have to set directly per the plan itself
without regard for hard data.
Checklist for Setting Targets
• Targets match up with measurements, one to one.
• Targets require improving current levels of performance.
• Targets are a stretch, but achievable: they may require improvements
to existing processes.
• Targets are quantifiable so that the target communicates if the
expected performance was met.
• Long-term targets are established before short-term targets.
• Financial/Budget related targets are established before non-financial
targets.
Examples of Targets
Average Turnaround Times at 8 days 7.5 days FY06 6.8 days FY07
Docking Sites FY05
Utilization Rate for Self Serve 10% 18% 25%
Web Portal FY05 FY06 FY07
Rotation Internship Participation 1,800 2,500 3,900
Rates FY05 FY06 FY07
Glider integration mapping tool Establish 8 per sets 10 per sets
used for geo-sets baseline

% of Organization SES Levels 30% 40% 65%


following IRPS from end to end FY05 FY05 FY05
for the entire year
% funding through SEPCO for 30% 35% 45%
space mapping FY05 FY06 FY07
Characteristics of Initiatives
• Leader Sponsored
• Requires Investments – people, funding, technology, etc.
• Has designated owners
• Includes deliverables or milestones
• Usually has time deadlines
• May be difficult to launch – not resourced
• Could encounter obstacles – people are confused, conflicts with other
functions
Initiatives should enable strategic execution

Initiatives Goals or Objectives


Value Mapping Project Improve identification and delivery of all Organization
services across the full stakeholder spectrum

Employee Rotation Program Improve the employee turnover and satisfaction scores

Web Self Service Portal Reduce Organization costs and streamline our services
for more direct service delivery
Common Knowledge Center Expand the overall knowledge base so that inter-
functions can learn from one another

Customer Survey and Analysis Develop a more systematic process across the entire
Tool Program Organization to better connect to our customers

Shared Service Center Tracking Reduce reworks and overlaps between our seven
System shared service centers
Going from Output to Outcome
When you first launch your Initiative, you probably want to use an Output
Measurement. Once the Initiative is up and running, change your
measurement to an Outcome to see if the Initiative is really having
strategic impact.
Initiative Output Measurement Outcome Measurement
Lean Process / Six Sigma Number of Projects Defined by Overall reductions in errors, reworks,
Region and cycle times

Activity Based Costing / % of Service Center Outlets with Reductions in identified re-activities
Management (ABC/M) ABC Models in place for per process study
Allocation Costs
Employee Competency % of Employees who have a Higher skill levels of employees using
Models Competency Model in place the models
Strategic Themes
• Describes an overall strategic direction
• Can improve the communication effectiveness of the Strategy Map
• Examples of themes:

– Innovative Services
– Lean Processes
– Adaptive Organization
– Realign our Core Competencies
– Reach the Stakeholder
• Group common set of objectives around a theme
Multiple Choice Question –
Sequence Of Steps
The basic steps for creating a Balanced Scorecard include:
• A = Align your strategy map to other organizational units
• B = Create your strategic plan – including goals and objectives
• C = Extend your strategy map into measurements and targets
• D = Map your strategy over four perspectives

• The sequence or order of these steps is (left to right):

Step 1 Step 2 Step 3 Step 4

–A C BD
–C A DB
–B D AC
–C B AD
Multiple Choice Question –
and the answer is . . .
• c –Step 1 or B – Start with your strategic plan
• Step 2 or D – Map your strategic plan
• Step 3 or A – Align your strategy map
• Step 4 or C – Extend the strategy map into measurements and
targets
Case Study Instructions
• The following handout is an example strategic plan for the Western
Organization Region Office (WARO).
• Your team has been assigned the responsibility of mapping the
WARO Plan into a single strategy map.
• Each team will be assigned to a breakout room – use post it notes on
the large white template sheets
• Try to limit your objective boxes on the strategy map to no more than
20 per our 4 to 5 Rule.
• If you have time, you might want to consider arranging or grouping
certain objectives together around themes.
• Each team will provide a 10-minute brief.
• You have 90 minutes to complete the case study exercise.
Table of Contents

• Balanced Scorecard Basics


• Creating the Strategy Map
• Good Performance Measurements
• The Final Scorecard Components
• Case Study Exercise
• Some Final Points
Making the connection to the
Baldrige Criteria
Malcolm
Malcolm Baldrige
Baldrige Balanced
Balanced Scorecard
Scorecard

Leadership
Leadership Learning
Learning &
& Growth
Growth Perspective
Perspective

Human
Human Resource
Resource Capital
Capital Learning
Learning &
& Growth
Growth Perspective
Perspective

Business
Business Results
Results Measurements
Measurements and
and Targets
Targets

Process
Process Management
Management Internal
Internal Process
Process Perspective
Perspective

Strategic
Strategic Planning
Planning Strategy
Strategy Map
Map

Customer
Customer Focus
Focus Stakeholder
Stakeholder // Customer
Customer
Perspective
Perspective
HR Scorecard – Background
• The industrial world around all of us is undergoing a transformation and
HR is no exception for the same.
• The role of HR is undergoing a change from Transactional / operational to
Strategic Discipline.
• There is a growing concern about ability of an organization to evaluate
the effectiveness of HR function at the strategic issues and its effect on
the overall performance of the organization. HR teams have challenge to
match these needs.
• HR has as yet not earned a position of Strategic importance in many
organizations but there is a growing concern about this change.
• HR contribution is difficult to quantify due to inherent nature of human
characters & attitudes but one can feel the effect of the contribution if
there is an effective Hr function.
• HR Scorecard provides a way to get over this problem. This is designed
based on the original score-card concept from Kaplan & Norton
HR Scorecard – Background
• Based on various studies carried out that firms with more effective HR management consistently out performs
the competition.
• However it is difficult to directly co-relate HR contribution to organizational success.

– It is a challenge for HR managers to make HR a strategic function. This is


difficult since such assets are intangible.
– At times managers are hesitant to invest heavily in the Human Assets. They
are not able to see consequences of their investments in intangible assets in
a direct way. This makes them weary of taking any risk.
• Admittedly judging the contribution of Hr function is very difficult. The development of the HR score card was
result of such dilemma.
• HR score card attempts to capture the essence of the HR contribution in terms of few Business Parameters
and looks at HR effectiveness from the Business Perspective. This is a sound framework for measurement of
the effectiveness of HR.
HR Effectiveness- Current &
Future Issues
• Basically many senior managements are skeptical about the role of HR in
success of the organization.
• Senior management personnel refuse to believe that Human Assets are their
main assets for the success of the organization.
• Human capital assets are intangible & HR’s influence is difficult to measure.
• Normally people relate HR parameters in terms of
– cost of wages & value added content expressed as
costs of employees
– employee turnover / attrition rates
– Performance ratings & competencies
• However the moot point is : Are these parameters relevant & adequate to judge
the contribution of HR function?
• Currently there is a clear rift between what is measured & what needs to be
measured
HR Effectiveness- Current &
Future Issues
• Basically for effectiveness measurement of HR one needs to measure soft
attributes such as:
– Committed workforce
– Competency programs
– Value adding ability of the work force (Problem
Solving , Innovations & dedication to task)
• HR in the essence needs to be Strategic in nature but there is a need to
substantiate this claim in terms of the impact on operations.
• Strategic assets are basically a set of scarce, special or even exotic resources
& capabilities that bestow upon organization its competitive advantage.
• The paradox is that the special qualities that make HR a primary contributor in
the organizational excellence make it difficult for measurement, hence the
assets and their contributions are treated as “intangibles”
HR Effectiveness- Current &
Future Issues
• Alignment of Employee efforts with organizational goals is the essence of
this approach. But people tend to measure only the operational
parameters and this is not effective for proper assessment of the
contribution made by HR as such.
• This can be achieved only when HR aligns with the basic strategy of the
organization. This is easy to understand but very difficult to practice and
measure.
• Many organization in modern times have realized that HR has significant
impact on the results of an organization. However most of the approaches
tend to make an “ individual “ as the focal point but miss the real impact to
due to misaligned direction and efforts for improvement in HR function.
• The stress has to be given on the streamlining with company goals, and
work co-operatively towards achievement of organizational goals. This is
very difficult to measure in comparison with operational / financial
parameters. In the situation of this dilemma HR is left behind and
contributions neglected.
HR Function - the new look
• The base foundation of value-creating HR strategy is appropriate management infrastructure
that understands & can implement Organizational Strategy.
• This is possible only if the HR professionals have good grip on the HR function and its approach
to add value for organizational achievement of the Strategic Objectives.
• HR function has two basic functional groups:

– Technical aspects: Recruitment / Retention / Deployment /


Salary Admin etc along with Employee Motivation & CSR
– Strategic Aspect: This includes all the necessary issues &
actions that help in achieving Organizational Strategic
Goals
– Most of the HR managers concentrate on the technical
aspects but rarely have competencies to address the
Business & Strategic aspects.
• This means that HR managers in the new era need to develop competencies in the Business &
Strategic Management arena to be effective in their new roles.
HR Function - the new look
• In an effective, new era HR function, each element of the HR activity is
designed to maximize the quality of human capital throughout the organization.
• This will mean attention to the following aspects:
– Link selection & promotion policies to validate
competency models for the organization
– Develop HR strategies that can provide competent
work force to support the skills & attitudes required for
the achievement of organizational strategy at large
– Introduce & practice policies for compensation that
attract / retain & motivate high performance
employees (to achieve desired results)
• HR systems will have to be designed to provide high performance work force.
• Systemic thinking needs on understanding the interrelationship of HR system
components & link between HR function & organizational strategy.
HR Function - the points to note
• Note that problems for today are caused by the past decisions. One has to understand the cause
– effect relationships between past approach & current problems
• One must think about conventional ways to handle the matter / decisions Vs new possible
approaches for improvement.

– If we continue to do the things in old ways we will get old results


and not the new ones that you need currently. Standard solutions
may not work!
• Cause & effect relationships work with time lag. Hence for new era HR function it important to
note & work on the leading indicators & not lagging indicators.

– An ability to anticipate & to be proactive in resolution of the issues


will be a must.
– HR needs to be with the flow of the Business situations and must
have astute stance to notice changes in the environment and
adjusting ways of doing things and arriving at decisions.
HR Function - the points to
note---contd
• Note that new strategies are often unobvious and hence difficult to develop.
– Few baby steps initiated may give pointers for the future
actions that need major changes. All this needs to be
managed in smart & alert ways.
• It is important never to loose sight of the Bigger picture and get mixed up with current
tit bits. Developing a systems overview for resolution of the problems is a must.
Historically HR functions tend to adopt “ proven age-old ways” and that too in parts.
This will be a bottleneck for the next-gen HR managers.
• For the new era HR managers it is mandatory to keep looking for alignment of HR
system’s components. They must work in unison and not in contradiction with each
other.
• Alignment process begins with clear understanding of the value generating process
in the organization and HR must learn to align all its decisions and actions to support
the Organizational Strategy. This is not as simple as it may look.
HR Function - the points to
note---contd
• Note that Balance Score Card concept is based on generating Strategy Map.
• Strategy Map stresses the relationship between the ultimate organizational goal and the
key success factors specified below:

– Customer satisfaction
– Internal Operations
– People and Learning Opportunities / Competencies
– Internal Systems & Processes
• HR processes need to ensure that employees in the company develop the requisite
competencies & behaviors to effectively achieve the organizational goals.
• It is not good enough to only develop good HR strategy & policies but it is equally
important to ensure proper implementation of such programs.
• High performance HR systems will have to unique since it is organization specific, taking
care of goals, strategy & people.
HR Function - the points to
note---contd
HR Function – Employee
Behavior
• In High-performance organizations employee competencies and behavior matter the
most and this has to be a major area of attention for the HR team.
• As specified earlier the BSC approach the organizational strategy are mapped to the
employee behaviors.
• Strategic / productive behaviors are such behaviors that serve the final outcome for the
organization.
• There are two types of behaviors:
– Strategic behaviors that are directly useful to implement
chosen strategy that are necessary for all the organizational
units & levels.
– Situational behaviors that required at specific events (these
are not required all the time for all the departments.
• HR needs to understand behavior of people & processes that create the value for the
organization. HR then needs to develop ways to ensure that they instill these behaviors in
the organization & also must develop ways to measure the impact.
Balanced Scorecard (BSC)
& Balanced Performance

Measurement
BSC emphasizes the importance of measuring Business Results from the perspective of
Strategy Implementation & does not rely too much on the financial results.
• It is necessary to identify parameters that influence the results rather than just look at the final
results in financial terms. Cause –effect relationships need to be understood well.
• Managers need to communicate the important of key parameters and what factors and
behaviors cause them, to the employees.
• Design of a measurement system is two step process.

– Identification of key parameters that lead to achievement of


desired results
– Design of measurement metrics that will compile the data for both
financial & non-financial determinants in line with organizational
strategy.
• BSC recognizes four basic parameters that reflect the success:

– Customer perspective, Financial perspective,


Process perspective & learning & growth
perspective (Employee based)
Balanced Scorecard (BSC)
& Balanced Performance
Measurement
HR managers must ensure that

– They develop Performance Measurement system in line with the Basic


Strategy & Business Plans for the organization
– Basic Strategy for HR function has to be woven around how to contribute the
most for the organizational effectiveness rather than the efficiency of the HR
department only.
– HR must consider the Performance Drivers and Performance Enablers built
into their systems & operations.
– Performance drivers are Core People Issues (such as Motivation /
Productivity / Satisfaction)
– Each Performance Driver will have many enablers. Each of the enablers
helps accentuate improvements.
– Performance Drivers & Enablers have to be organization specific to ensure
proper use & implementation of the schemes.
– HR department’s credibility is important for the organizational improvement
since without such credibility no one will take their contributions seriously.
Balanced Scorecard (BSC)
& Balanced Performance

Measurement
HR managers must ensure that HR drivers / parameters are chosen carefully:
They must carefully develop a list of HR parameters that are leading parameters & not lagging parameters

Note that generally the financial parameters operate and are given due weightage in most of the
– organizations. However the financial parameters are lagging indicators and tell the details on historical
basis. They do not give indication what is likely to follow.
HR systems must adopt proactive indicators that point towards the future.

Good financial performance for the current period but not so good on HR parameters indicate problems for
– the future. HR must have processes in place to deal with them quickly to avoid future issues.
HR team must be in position to make decisions and advise senior management in a proactive way. They
– must be able to validate the desired actions in terms of future impact.
This is not as simple as it looks and hence HR professionals need to develop right judgments and choose
– the drivers carefully for overall benefit of the organization.
Balanced Scorecard (BSC)
& Balanced Performance
Measurement
• HR managers must ensure that HR enablers reinforce HR performance drivers.
– HR driver “Productivity of Employees” will demand re-skilling & development of
right attitudes for the work force as key enablers
– HR Key enablers must be kept updated with current times and current priorities
for the organization. They also need to be organization specific and have to
chosen based on the strategy & business plans for that specific organization.
– HR key enablers affect / influence many Business Drivers and hence must be
chosen and operated diligently by the HR professionals.
– Without proper alignment of all the HR enablers (that affect not only Hr
performance but also affect organizational results) it is not possible to
implement Organizational strategies.
– Again note that “ Systems View-Point” is extremely important for all the HR
professionals.
– HR must ensure that they are able to influence the Employee Behavior in
many ways to ensure final achievement of organizational objectives.
Employee behavior will certainly affect HR as well as non-HR business
Parameters that are identified as Key Parameters in BSC.
7 step model for HR strategic
implementation & Balanced
Scorecard (BSC)
• Ulrich and others have suggested a 7 step model for the Implementation of HR strategies in new
era organizations.
1. Defining Business Strategy and ensure that HR strategies are in
line with the same
2. Building a case for HR as a Strategic Asset
3. Creating Strategy Map: This involves the following aspect before HR
BSC implementation is carried out.
• Identify Key Strategic Goals
• Identify Key Drivers for each one of them or group of parameters
• Decide how to measure progress towards such goals / drivers
• Identify barriers for achievement of each of these goals
• Recognize the Employee behaviors that are required for the
achievement
• Identify missing Employee Competencies
• Decide what needs to change in the organization and plan for
implementation
7 step model for HR strategic
implementation & Balanced
Scorecard (BSC)
4. Identification of HR Deliverables within HR
Strategy Maps
5. Aligning HR architecture with HR
Deliverables
6. Designing HR Measurement System in line
with Strategic Priorities
7. Implementation of the Strategy with use of
Balanced Score Card approach for HR
Function.
Advantages of using HR Score
Card
• HR BSC helps differentiate between HR Do-ables & HR Deliverables
• HR BSC helps creation of Value & Control over costs
• It helps the organization to keep track of KEY parameters (Drivers &
Enablers ) for over all organizational effectiveness and helps cause
improvement all the time.
• It helps HR function to identify key tasks that determine their crucial
contribution towards achievement of organizational Goals
• It helps HR professionals to manage their strategic contributions for
the organizational improvements
• It encourages flexibility and change management
• It helps HR professionals to realize how they can contribute
effectively towards organizational results & change role of HR from
transactional Role to Strategic Role
• IT effectively helps to manage the changes in the organization in a
systematic way
An example of HR Strategy
&

Score-card parameters
HR Strategy can be defined as specified below:

1.Employee Talent
• Enlarge Talent Pool for identified key skill-sets
• Invest in Employee Development programs
• Ensure diversity in talent pool
1.Leadership Development
• Identify Fast Track Employees
• Provide Coaching & Development
• Establish Rewards & Key Deployments for Leadership behavior
1.Customer Service & Support
• Create an atmosphere for Employee involvement & Engagement
• Increase Business Intelligence & Awareness about Customer Service
• Plan & operate motivational & empowerment initiatives
An example of HR Strategy
&

Score-card parameters
HR Strategy can be defined as specified below:

4.Organizational Integration
• Create better systems & programs for knowledge sharing
• Enhance participation by the shop floor employees
4.HR Capability
• Develop Core HR Competencies
• Identify Key talent for growth & development
• Invest in appropriate Technologies
• Invest in Employee self Improvement Programs
• Improve Strategic Contribution of HR function in the organization
• HR function has to be proactive in stance & has to improve ability to communicate the essence of
HR Strategy to all the Employees in the organization
• HR must be handled in an alert way & make suitable changes in the stance depending on the
changes in the Business Environment