Balanced Scorecard 2

Balanced ScorecardBalanced Scorecardfor MBA students for MBA students

Balanced Scorecard + HR Scorecard Balanced Scorecard + HR Scorecard

Girish Kelkar Girish Kelkar

Why the Balanced Scorecard?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 . . . 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 Requirements for General Performance Management / Performance Management /

Results 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")

• Demonstrate actual results

• APP goals should show the expected progress toward meeting the long-term goals of the SP

• Development needs (Group & Individuals)

Where it started . . .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 PrinciplesSome 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 PerformanceFour Views of Performance

• Strategy can be described as a series of cause and effect relationships.

• Provides a “line of sight” from strategic to operational activity

–working on the “right” things.

“If we succeed, how will we look to our stakeholders?”

Stakeholders

Strategic Objectives

“To satisfy our customers, at which processes must we excel?

Internal Processes

"To execute our processes, how must our organization learn and improve?"

Learning & Growth

“In order to succeed, what investments in people and

infrastructure must we make?”

Investments

Four Views of PerformanceFour Views of Performance

Strategy

OrganizationOrganization

DepartmentDepartment

Team/IndividualTeam/Individual

Measures Objectives

Complete Framework for IRPS

The Importance of AlignmentThe Importance of Alignment

Reviews

Alignment all the Way Through Alignment all the Way Through

Improved "Cause and Effect" Knowledge

Innovation

Business ProcessesImproved Quality Assessment Reports

ManagementJustified Initiatives to Improve Quality

Investments Available to be Allocated to Other Critical Areas

Quality HealthImproved Output QualityRelationship

ManagementEnhanced Customer Confidence

Increased Investment Accountability

Financial ManagementDecreased Costs

Resource Investment

Goal: Improve environmental health

Initiative: Data Mining Analysis of Quality reports Performance Gap: Less than Organization Goals, say Quality

In order to be successful, the In order to be successful, the Organizational KRAs should . 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 Before we can map your strategy . . .strategy . . .

• Get down to a set of quantifiable strategic objectives:

Too vague

More precise

• Make sure your objectives have a direct relationship to your goals and your goals have a direct relationship to your mission and values.

Improve Quality of output / Customer Service

Reduce average customer wait times by 30% by year end & line rejection by 20%

Inte

rnal

Pro

cess

Sta

keho

lder

Lear

ning

& G

row

th

Reduce Re-Activities thru ABC/M

Establish Web Based Self Services

Knowledge Management

Human Capital

Improved Returns on Investments

More rapid and accessible services & products with quality

Leadership Development

Inve

stm

ents

Strategy Map: Capture a Strategy Map: Capture a Cause Effect Relationship Cause Effect Relationship

from the Bottom Upfrom the Bottom Up

IT InfrastructureFacilities and Fixed Assets

Economic Model Process

Process

Expand Global Facility Reach

Two Special Techniques for Two Special Techniques for Building Strategy MapsBuilding Strategy Maps

The 4 to 5 Rule

Splitting the Perspective

General Rule of Thumb to ensure strategy map is developed both vertically and horizontally

Way of pulling out both drivers and outcomes that match up against the core competencies of the business model

Customer Growth Customer SatisfactionRetention Rate

Timely Delivery Pricing Quality Service Reputation

Customer Perspective

Outcomes

Drivers

Weak Strong

Key Benefits of Strategy MapsKey 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

Executive consensus and Executive consensus and accountability:accountability:

Building the map eliminates ambiguity and clarifies

responsibility.

Educate and Communicate: Educate and Communicate:

Build awareness and Build awareness and understanding of organization understanding of organization

strategy across the strategy across the workforceworkforce.

Ensure Alignment: Ensure Alignment:

Each sub-unit and individual Each sub-unit and individual link their objectives link their objectives

to the mapto the map.

Source: "Using Balanced Scorecard Technology to Create Strategy-Focused Public Sector Organizations", Robert S. Kaplan, April 21, 2004, pg. 20

Promote Transparency: Promote Transparency:

Communicate with and Communicate with and educate constituents, partners, educate constituents, partners,

oversight bodies, and the oversight bodies, and the general public.general public.

Strategy Maps – Strategy Maps – A Better Way to Communicate StrategyA Better Way to Communicate Strategy

Multiple Choice Question – Multiple Choice Question – Cause Effect on Strategy Cause Effect on Strategy

MapMap• 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 – Multiple Choice Question – and the answer is . . . 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

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.

Best Business Practices

Expand Global Reach

Expand the Skill Base

Lean Processes

Organization Scorecard

Improve Asian Footprint

Develop the Workforce

Departmental Scorecard

Process Efficiency Grow Globally Highly Skilled

WorkersSub-section Scorecard

Streamline Processes

Continue to Expand Range

Improve Employee Competencies

Service Scorecard

Aligning the ScorecardsAligning the Scorecards

Sta

keh

old

er

Inte

rna

l Pro

cess

L&

GIn

vest

me

nts

Extend the Map into Measurements, Extend the Map into Measurements, Targets and InitiativesTargets and Initiatives

Detailed statement of what is critical to

successfully achieving the

strategy

How success in achieving the

strategy will be measured and

tracked

Key action programs

required to achieve

objectives

The level of performance

or rate of improvement

needed

Objective Description

Target

20 % reduction in shop floor rejections

InitiativeMeasure

Number of Rejects / Reworks

Strategy Map

Faster Service Access

Self Service Applications

Web Enable Technologies

Process and ValueMap Analysis

Lean Processes

Invest in IT

Lean / Six Sigma

Eliminate waste, reworks, & other errors in processes for Better quality

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 operational efficiencies with best practices in the industry sector

Reduce Operational Rejections by 20% Service Costs by 30% over the next 5 years

Cost per Rejection of critical parts , observe trends for reduction, ensure reduction in overall cost of quality

5% - Year 1

10% - Year 2

15% - Year 3

Activity Based Costing / Management

Introduction of Best Practices

Reduce identified re-activities within primary processes by 80% over the next 3 years

Waste Volume Charts, Rework Tracking, Cycle Time End to End

Identify & correct

Critical rejections

Waste stream reductions of 5% each year, Reworks cut in half for next 3 years, cycle time cut by 75%

Lean / Six Sigma

Alignment of Scorecard ComponentsAlignment of Scorecard Components

Multiple Choice Question – Multiple Choice Question – Create a Tight ModelCreate 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 – Multiple Choice Question – and the answer is . . .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 MeasurementThe 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?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 Without Measuring, Decision MakersMakers

Have No Basis For: 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

Leading

Definition

Lagging

Input

Output

Outcome

Objective / Quantitative

Example

Intermediate outcomes that predicts or drive bottom-line performance results

Measure Type

Bottom-line performance results resulting from actions taken

Investments, assets, equipment, labor hours, or budget dollars used

Units of a product or service rendered - a measure of yield

Resulting effect (benefit) of the use or application of an output

Empirical indicators of performance

Subjective / Qualitative Perceptions and evaluations of major customers and stakeholders

Employee turnover rate

Employee satisfaction rating

Number of Value Meal orders fulfilled

Customer satisfaction rating

Wait time

Customer complaints received as a % of total customers served

Number of cashiers

Types of MeasurementsTypes of Measurements

Stakeholder / CustomerStakeholder / Customer Internal ProcessesInternal Processes

Learning and GrowthLearning and Growth InvestmentsInvestments• % of facility assets fully funded for

upgrading• % of IT infrastructure investments approved• # of new hire positions authorized for filling• % of required contracts awarded and in

place

• Percentage employee absenteeism• Hours of absenteeism• Job posting response rate• Personnel turnover rate• Ratio of acceptances to offers• Time to fill vacancy• Rejection %

• Number of unscheduled maintenance calls• Production time lost because of maintenance

problems• Percentage of equipment maintained on

schedule• Average number of monthly unscheduled

outages• Mean time between failures

• Current customer satisfaction level• Improvement in customer satisfaction• Customer retention rate• Frequency of customer contact by

customer service• Average time to resolve a customer

inquiry• Number of customer complaints

Examples of Measurements by Examples of Measurements by PerspectivePerspective

Multiple Choice Question – Multiple Choice Question – Appropriate MeasurementAppropriate 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


• 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 forSome Basic Guidelines forGood Performance Good Performance

MeasuresMeasures• 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 Selection Criteria for Performance MeasurementsPerformance 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 Three Criteria select parameters for Scorecardfor 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 – Multiple Choice Question – Match the Objective to the Match the Objective to the

MetricMetric• 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 – Multiple Choice Question – and the answer is . . .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 A Closer Look at How Things LinkLink

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

Transportation Safety Example

The Measurement Pyramid The Measurement Pyramid

Goal

Outcome Performance

Measures

Program

Program Performance Measures

Program Components

Program Component Performance Measures

Activities

Activity Performance Measures

Strategic/GPRA GoalsEnd-Outcomes

Longer-Term IntermediateOutcomes

Shorter-TermIntermediateOutcomes& Outputs

Outputs& Inputs

Some Tools for Determining Some Tools for Determining What to MeasureWhat to Measure

InputsProcess/System Output

IntermediateOutcomes

EndOutcome

Program Logic Model

DesiredOutcome

Causal AnalysisProcess Flow

ResultsOf

Testing

Not AcceptableAcceptable

PrototypeProduct

Back to Laboratory

To Market

Top Ten Metrics Service Sector 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 TargetsHow 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 TargetsChecklist 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.

Average Turnaround Times at Docking Sites

8 days

FY05

7.5 days FY06

6.8 days FY07

Utilization Rate for Self Serve Web Portal

10%

FY05

18%

FY06

25%

FY07

Rotation Internship Participation Rates

1,800

FY05

2,500

FY06

3,900

FY07

Glider integration mapping tool used for geo-sets

Establish baseline

8 per sets 10 per sets

% of Organization SES Levels following IRPS from end to end for the entire year

30%

FY05

40%

FY05

65%

FY05

% funding through SEPCO for space mapping

30%

FY05

35%

FY06

45%

FY07

Examples of TargetsExamples of Targets

Characteristics of InitiativesCharacteristics 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 Goals or ObjectivesValue 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 Tool Program

Develop a more systematic process across the entire Organization to better connect to our customers

Shared Service Center Tracking System

Reduce reworks and overlaps between our seven shared service centers

Initiatives should enable strategic executionInitiatives should enable strategic execution

Initiative Output Measurement Outcome Measurement

Lean Process / Six Sigma Number of Projects Defined by Region

Overall reductions in errors, reworks, and cycle times

Activity Based Costing / Management (ABC/M)

% of Service Center Outlets with ABC Models in place for Allocation Costs

Reductions in identified re-activities per process study

Employee Competency Models

% of Employees who have a Competency Model in place

Higher skill levels of employees using the models

Going from Output to OutcomeGoing 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.

Strategic ThemesStrategic 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 – Multiple Choice Question – Sequence Of StepsSequence 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 B D–C A D B–B D A C–C B A D


• 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 InstructionsCase 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 ContentsTable 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 Making the connection to the Baldrige CriteriaBaldrige Criteria

Malcolm BaldrigeMalcolm Baldrige Balanced ScorecardBalanced Scorecard

LeadershipLeadership Learning & Growth PerspectiveLearning & Growth Perspective

Human Resource CapitalHuman Resource Capital

Business ResultsBusiness Results

Process ManagementProcess Management

Strategic PlanningStrategic Planning Strategy MapStrategy Map

Learning & Growth PerspectiveLearning & Growth Perspective

Internal Process PerspectiveInternal Process Perspective

Customer FocusCustomer Focus Stakeholder / Customer PerspectiveStakeholder / Customer Perspective

Measurements and TargetsMeasurements and Targets

HR Scorecard – Background 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 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 & HR Effectiveness- Current & Future Issues 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


• 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”


• 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 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 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 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 HR Function - the points to note---contd 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.


• 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 – Employee HR Function – Employee Behavior 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 Scorecard (BSC)& Balanced Performance & Balanced Performance

Measurement 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)


Measurement 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.


Measurement 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.


Measurement 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 7 step model for HR strategic implementation & Balanced implementation & Balanced

Scorecard (BSC)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 7 step model for HR strategic implementation & Balanced implementation & Balanced

Scorecard (BSC)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 Advantages of using HR Score Card 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 An example of HR Strategy & &

Score-card parameters 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

2.Leadership Development • Identify Fast Track Employees

• Provide Coaching & Development

• Establish Rewards & Key Deployments for Leadership behavior

3.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 An example of HR Strategy & &

Score-card parameters 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

5.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

Documents

Balanced Scorecard 2