Reyes Fitness Centers Inc_IM

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R y s Fit ss C t rs, ITh Str t ic HR Opportu iBy John Sherlock, Ph.D.

STRaTegIC HR ManageMenTinstructors Manual


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Project team

Project leader: John Sherlock, Ph.D.

Project contributor: Nancy A. Woolever, SPHR

External contributor: Sharon H. Leonard

Editor: Courtney J. Cornelius, copy editor

Design: Kellyn Lombardi, graphic designer

Production: Bonnie Claggett, production/tra c specialist

2008 Society or Human Resource Management. John Sherlock, Ph.D.

Note to HR faculty and instructors: SHRM cases and modules are intended or use in HR classrooms atuniversities. Teaching notes are included with each. While our current intent is to make the materials available

without charge, we reserve the right to impose charges should we deem it necessary to support the program.However, currently, these resources are available ree o charge to all. Please duplicate only the number o copiesneeded, one or each student in the class.

For more in ormation, please contact:SHRM Academic Initiatives1800 Duke Street, Alexandria, VA 22314, USA Phone: (800) 283-7476 Fax: (703) 535-6432

Web: www.shrm.org/hreducation

08-0669-Instructor


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2008 Soci ty for Hum R sourc M m t. Joh Sh rlock, Ph. 1

R y s Fit ss C t rs, I c.:Th Str t ic HR Opportu ity

teaching notes

These teaching notes are intended to assist the instructor in using the RFCcase as a learning tool or HR students. Given that this case ocuses on thedevelopment o an HR scorecard, the expectation is that students will berequired to have read:

Becker, B.E., Huselid, M.A., & Ulrich, D. (2001).The HR scorecard: Linking people, strategy, and per formance. Boston: Harvard Business School Press

Instructors electing not to require the above text must provide extensive lecturematerial related to the content o the book, or students will not be able tobene t rom the case.

overview

This case describes a growing mid-size U.S. company in the Southeast in thetness club industry. The recently hired HR director is given the opportunity

by the organizations CEO to propose HR initiatives to help the business meetits strategic goals. The case gives HR students the opportunity to deepen theirunderstanding o strategic HR management. The case is divided into Parts A & B to allow fexibility o covering the case either one part at a time or in itsentirety, depending on the content and schedule o a course.


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2 2008 Soci ty for Hum R sourc M m t. Joh Sh rlock, Ph.D.

target audience

This case can be used or either an upper-level undergraduate or graduate HR class. The discussion questions in the case are worded so that the instructorcan appropriately expect more in-depth and sophisticated responses romgraduate students.

Learning objectives

Students completing this exercise and class discussion o the case will be able to:

Demonstrate basic business acumen in terms o organizational nance,1.strategy planning and execution.

Understand the2. philosophy behind developing an HR scorecard and its link to strategic human resource management.

Understand the3. process used to develop an HR scorecard.

Align HR deliverables with organizational st rategy.4.

Sell the HR scorecard concept(s) internally.5.

Key issues students shouLd Pay attention to in this case

As noted in The HR Scorecard , integrating HR into a business-per ormancemeasurement system requires the HR pro essional to identi y the points o intersection between HR and the organizations strategy implementation plan.These points can be considered strategic HR deliverables. This is in contrastto HR doables that ocus on HR e ciency and activity counts. In thiscase, students should have questions about the speci cs o RFCs strategy. Inexamining how HR adds value to an organizations strategy, ambiguity in theorganizational strategy will o ten be uncovered. For the cases purpose, allow students to make reasonable assumptions. However, point out that increasedclarity around the organizational strategy is o ten one o the bene ts o developing the HR scorecard.

Discussion questions (thirteen listed questions, but some are multi-part)are presented throughout the case. The questions are designed to challenge

students to think about an aspect o strategic HR management and are linked toone or more o the learning objectives or the case. There are no right or wronganswers to the discussion questions; however, students should be expected tosupport their responses with linkages back to The HR Scorecard text material.


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Students should pay particular attention to the way Lori developed the HR scorecard. Her HR team members were un amiliar with the process. To addressher teams lack o strategic HR knowledge, Lori purchased a copy o the book

or each member o the team and talked extensively about its content. In yourclass discussion, you may come up with other methods that could also work

well (e.g., bringing in a consultant). Loris meetings with various stakeholdersto gather in ormation and, at the same time, to build strategic partnershipsalso deserves attention. I Lori had not developed the HR scorecard in thismanner, it would have been much more di cult to achieve the buy-in to herHR strategic initiatives rom those stakeholders. Further, the quality o the HR scorecard product would have been weakened rom not having these criticalperspectives considered in the development process.

It should be noted that the HR scorecard developed by Lori and her team couldhave been considerably more sophisticated; this is done on purpose or tworeasons: 1) So students can consider enhancements to the scorecard; and 2)Because RFC and the HR team has no previous experience with any scorecardapproach to its per ormance (i.e., using something like the balanced scorecardapproach put orth in The Balanced Scorecard [Kaplan & Norton, 1992] or The HR Scorecard ), it is more realistic to assume that the rst iteration would besomewhat simple. Material rom chapter 3 (pp. 53-57) rom The HR Scorecard entitled Developing an HR Scorecard will be particularly use ul or casediscussion question #11, which asks students to critique the scorecard Lori andher team developed.

text

Becker, B.E., Huselid, M.A., & Ulrich, D. (2001). The HR scorecard: Linking people, strategy, and performance. Boston: Harvard Business School Press.


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P rt aintroduction

Lori Patricks conversation earlier that day with Mike Lowe, the companysCEO, kept running through Loris head during her 45-minute rush-hourcommute home. What a great opportunity Mikes given me, she thought.The CEO o this organization believes in the value o HR and asked me totell him how HR can help the company meet its strategic goals. When I wasstudying or my masters in HR, we kept reading and talking about how HR needs to position itsel as a strategic business partner; but I didnt think I

would get the opportunity so soon in my career. Lori had been the directoro Human Resources with Reyes Fitness Centers, Inc. (RFC) or only a coupleo months. She had been attracted to the position in part because it o ered her

rst opportunity to oversee all o HR, and because o her interview with MikeLowe. Lowe was airly new to the company (just less than two years) and washighly regarded by the ounder and chairman, John Reyes, and the rest o theboard o directors as a strategic thinker and someone with proven ability toinspire and motivate sta . Lori knew rom the interview with Lowe that whenhe said employees were the key to RFCs uture, he meant it.

rFc bacKgroundReyes Fitness Centers, Inc. was launched in May o 1999 by John Reyes with$150,000 o his own unding and some investment capital rom three college

riends rom the University o North Carolina, Chapel Hill, where they werebusiness majors attending the university in the mid-1990s. The rst center

was located in Raleigh, NC, and was an immediate success. The center o ereda ull range o workout equipment, exercise classes, personal trainers, anoutdoor pool, on-site daycare, and even a small restaurant. Additional privateinvestment was secured and RFC expanded rapidly rom 1999 to 2007, openingapproximately three new centers a year throughout the Southeast. By the end o 2007, RFC operated 28 tness centers, grossing $51 million in revenues and $1million in net income. Figure 1.0 below provides the nancial per ormance o RFC and its comparison to competitors.


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F 1.0 2007 rFc r l c p F l P(n r )

rFc om ll Fc

cF

m lm

hbg

d sp

Gross revenue $51M $25M $120M $45M $35M $164M

Total expenses(includingtaxes, interest,depreciation)

$50M $24.75M $119M $43.5M $34M $163M

Net income $1M $250K $1M $1.5M $1M $1M

Employees 900 450 1,100 825 750 2,100

Financialper ormancetrends 2004-2007

Flatannual netincome.

Flat annualnet income.

Decreasedannual netincomedue toexpansion.

5% annualgrowth innetincome.

5% annualgrowth innet income.

Decreasedannual netincomedue toacquisitions.

discussion Questions:

1) From the table above, what are three observations about RFCs nancialper ormance relative to their competition?

2) Explain how net income is determined or each o the companies in the table.

By 2005, John Reyes had general managers overseeing each center and hadgradually removed himsel rom day-to-day oversight o the company. Hehad become interested in other business ventures and, as a result, his boardencouraged hiring a CEO and other senior management team members tooversee the growing enterprise. He hired 48-year-old Mike Lowe as thenew CEO o RFC in late 2005, and Reyes assumed the role o chairman.This CEO position was the second in Lowes career. He had more than 20

years experience in the tness equipment industry; be ore coming to RFChe had been the CEO o a smaller tness center company in Cali ornia thathad been acquired. Lowes transition as CEO had gone quite well in Reyes,

the boards and in Lowes view. Lowe had been somewhat concerned aboutbeing micromanaged by Reyes, but he was given complete autonomy overthe operations o the company and was expected to involve the board only instrategic leadership issues.


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the Fitness center industry

While the tness center industry grew dramatically in the mid to late 1990s(more than 20 percent annually), overall industry growth had slowedconsiderably, as most towns now had two to three tness centers within closeproximity.

As shown in Figure 1.0, RFC is considered a medium-sized tness centerenterprise. While some competitors (Day Spa and Constant Fitness inparticular) continue to ocus on large-scale, either through acquisitions o smaller tness clubs or by opening new tness centers, many others (includingRFC) have reduced the number o new clubs being opened.

There is as much emphasis on health and recreation as ever in the U.S. Industry reports suggest that the outlook or tness centers in general is quite positive,although some consolidation may occur because certain markets have beensaturated with too many clubs to remain pro table. However, the market in theSoutheast (where RFC operates) is still growing and market saturation is notanticipated or at least ve years.

Fitness centers hire a variety o pro essional and support sta . Some ocus onpersonal training and employ a large number o certi ed pro essional trainers

who work with members during club hours (typically 5-6am unti l 10pm,although the more body-building oriented gyms have recently started o ering24-hour service). In addition to housekeeping and ront desk sta , tnesscenters employ customer service representatives who can assist existing members

with questions and also act as sales representatives, giving tours o the acility toprospective members.

rFc strategy

During Lowes tenure, RFC opened just one new tness center (just outsideo Atlanta, GA). This modest club expansion is consistent with the three-

year nancial strategy the RFC board has agreed on, where the ocus is ongrowing the pro tability o existing clubs by increasing member enrollment andretention. The company is privately held by a small group o investors and theboard wants it to stay that way. The board has discussed positioning itsel or

acquisition by one o the larger tness club chains at some point in the uture. Itis agreed that improving the bottom-line (i.e., net income) per ormance o RFC

wil l only help in this regard.

Within Michael Porters classic ramework o various business st rategies, RFCsstrategy most closely aligns with Porters ocus strategy, where a company

ocuses on serving the needs o a particular market segment to achieve acompetitive advantage. RFC has positioned itsel as a place where the whole

amily can enjoy tness and social activities. RFC has deliberately chosen


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not to compete with gyms that cater to body builders with large ree weight workout areas, 24-hour access, onsite training supplement sales, and no- rillsamenities. RFCs strategy is to attract amilies by o ering a wide variety o

tness o erings including cardio equipment; ree weights and circuit training weight machines; personal training; and exercise classes (such as Pilates, yoga,stationary cycling, etc.). Most RFC tness centers have a snack bar wherenutritional smoothies and other healthy snacks can be purchased. All RFCcenters o er extensive locker room acilities and on-site daycare. Newer RFC

tness centers have small indoor basketball courts and TV lounges to appeal tothe 10- to 16-year-old age group.

From his rst day on the job, Lowe has stressed to the sta that he wants themto be strategic in how they approach their daily, weekly, and annual activities

and projects. By that he means that they should consider how their jobscontribute to RFC being able to provide a tness club experience to couples and

amilies that is superior to any o the competition. He has worked diligently with his senior management team and the board to understand how RFCcreates value or its customers, employees and investors. The business model

or how tness centers make money is airly straight orward: pro table rmsgrow by recurr ing monthly member revenue (via new member recruitment andexisting member renewal) while maintaining relatively stable xed costs andlow variable costs. Lowe has worked to identi y both nancial and non nancial

variables that drive RFC per ormance. By locating RFC tness centers in upper-middle-class locations and ocusing marketing e orts on couples and amilies,RFC has been success ul recruiting new members. Research data shows that

members typically do not have issues with the RFC monthly dues. Membereedback indicates that having a riendly place or the whole amily to stay t is a

driver o member value.

rFc strategic chaLLenges

As with most start-ups, the early strategy or RFC ocused on growingrevenue. They did this by opening several clubs each year and o ering new club promotions to attract members. RFC experienced rapid revenue growth(more than 20 percent annually) through 2004. However, several o the RFCcenters are not reaching their pro t goals. Mike Lowe tried to address this by implementing operational e ciencies when he rst came on board at RFC,but he soon realized that the pro t challenges were driven in large part by acustomer retention problem. While a certain amount o turnover is expected inthe industry (due to competing clubs, amilies moving out o the area, etc.), thebest industry data RFC can nd relating to member retention shows that theirmember retention is approximately 20 percent lower than industry average.


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An analysis o member records shows that members o ten join during a specialpromotion (where the initiation ee is waived) but then rarely use the centerand ai l to renew. A telephone survey o members (lapsed and current) revealsthat non-use was one o the reasons or members not renewing or statingthey were unlikely to renew. An analysis o member-visit requency shows thatmore than 50 percent o members in 2006 hadnt even visited their RFC tnesscenter two times per week. The hypothesis is that members who arent goingto their RFC tness center requently are ar less likely to see su cient value torenew. Another concern is member eedback that R FC sta members do notprovide very good or excellent customer service. Lowe, senior management, andthe board have had extensive discussions about the member retention problem.

While part o Lowes strategy to increase pro ts is to enroll more members inexisting tness centers, those pro ts will be short-lived i members stay only one

year. Data also shows that membership cost, quality o o erings, amenities, etc.,

are all rated highly.

Lori thinks about these strategic issues and how HR might a ect them.Theres no question that problems with customer service and memberretention come down to people issues. It is a ected by the type o people webring on board, how theyre trained and how their per ormance is managed andrewarded.

rFc organizationaL structure

The organizational chart or RFC is shown below in Figure 2.0.

F 2.0: rFc o l c - m

rFc b

m k LCEO

P l jVice President o Finance

al gVice President o Sales

and Marketing

j h lVice President o Fitness

Center Operations

L P k Director o HR

j rChairman


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F 3.0: o l c h r m

h r d p

how Lori and the hr team are regarded by others at rFc

j h l , v P F c op :

I eel that Lori is trying to do a good job here and appreciate that shes seekingto add strategic value. Each member o her team has been with RFC or morethan ve years, which will help. Although Lori reports to me or per ormancemanagement purposes, her position is designed or her to work directly withthe CEO on people strategy issues. She does a great job keeping me in ormedo the things shes working on.

al g , v P s l m k :

HR is a tough job because employees are never satis ed. You can never pay them enough and employee loyalty doesnt exist anymore. Lori and her olksdo the best they can in administering the HR policies in a air manner.

P l j , v P F :

I think Lori will do a very good job leading HR at RFC. She has a masters in

the eld and has been a quick study learning what RFC is all about. I think thechallenge as we pursue improving pro tability at RFC is to look at all o ourcostsand HRs budget may be a ected.

L P k Director o HR

s LRecruiting Coordinator

a sMgr. o Training &

Development

e rMgr. o Compensation

and Benefts

j h lVice President o Fitness

Center Operations


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the strategic hr oPPortunity

As Lori pulls into her driveway that night, she remembers how her conversation with Mike Lowe ended. Lowe asked her about the HR departments initiativesor the coming two years. He speci cally said that he expects the departments

plan to be clearly linked to the organizations strategic goals and to demonstratehow accomplishment o those goals will be measured. Lowe was willing toconsider additional money or HR initiatives as long as a probable return oninvestment could be shown. He requested that the goals be presented to himand his senior management team in 45 days. What an opportunity, Lorithinks as she walks into her house. She decides that creating an HR scorecard(as described in the book, The HR Scorecard ) is the best way to present HRsgoals, because the scorecard development process will require her team toidenti y how HRs goals contribute to the organizations goals.


1) Identi y and prioritize a set o tasks or Lori. Provide a rationale or yourprioritization. Link your responses to the key concepts in The HR Scorecard .

2) Based on your understanding o RFC and its business strategy, how can HR add strategic value to RFC?

3) What challenges do you anticipate Lori will encounter as she develops theHR scorecard or RFC?


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2008 Soci ty for Hum R sourc M m t. Joh Sh rlock, Ph.D 11

P rt BbacKground

Part B o this case is a continuation o the strategic HR opportunity at RFC.The case resumes with Lori Patrick, the HR director, back at the o ce the day a ter being directed by Mike Lowe to develop a set o strategic HR initiatives tohelp RFC achieve its strategic objectives.

Lori convenes a staFF meeting

I appreciate you all taking time away rom your other work to meet with metoday. Mike Lowe has presented our team with a very exciting opportunity.He has asked us to develop over the next 45 days a set o st rategic HR initiatives that will help RFC achieve its strategic objectives. Lori asks orgeneral reactions, and sta members express excitement about the opportunity.They realize that a key to making RFC success ul involves people issues, butexpress anxiety about developing speci c strategic objectives. Wont thismake our jobs more vulnerable i we dont meet our objectives? one memberasked. Lori responded, CEOs everywhere are asking their departmentsto demonstrate how they add value to the bottom line. We should develop

objectives we think are challenging but have a good likelihood o being met.I we do that and work hard to achieve them, I think we can count on Mikegiving us his ull support even i we dont meet every single one. Anotherteam member said that she was a member o SHRM and that there weremember resources available to help develop strategic HR objectives. Lorienthused, Great. Well de nitely want to tap all the resources like this that

we can. At lunch today, Im picking up a copy o The HR Scorecard or each o you. The books thesis is that HR can add strategic value to an organizationand o ers a process that we can use to develop a scorecard to identi y, manageand measure strategic HR initiatives that will drive or enable success ulimplementation o an organizations strategy.

Lori continued, We have measured HR activities in our department or a longtime, such as cost per hire, time to ll a position, number o employees trained,etc. But to add strategic value, we must shi t our ocus to measure outcomes,not activities. Further, those outcomes must add essential value to RFCs ability to execute its strategy and meet it objectives. Please read as much o this book


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over the next three days as possible. Our rst planning meeting will be thisThursday at 9 a.m. Im well aware that 45 days is not much time. I want tomeet with each one o you over the next couple o days and talk about how youcan to contribute and how we will manage things so that other responsibilitiesdont su er.


1) I you were one o the employees in Loris meeting, what questions andconcerns would you have?

2) What other messages do you think are important or Lori to relay toher sta ?

hrs strategic roLe and scorecard deveLoPment

The HR Scorecard outlines a seven-step process to implement HRs strategic rolein an organization.

t hr s s - p P

Clearly de ne the business strategy.1.

Build a business case or HR as a strategic asset.2.

Create a strategy map.3.

Identi y HR deliverables within the strategy map.4.

Align the HR architecture with HR deliverables.5.

Design the strategic measurement system (HR scorecard).6.

Implement management by measurement.7.

Lori uses this process because she knows that what she is trying to achievegoes beyond presenting an HR scorecard but is, in act, the beginning o repositioning HR into a strategic role at RFC.

Lori read The HR Scorecard in graduate school and is amiliar with the sevensteps. She contacts some school and SHRM colleagues about the project andreceives some good suggestions and examples rom other industries. Hercolleagues stress the importance o meeting with stakeholders to learn theirperceptions o the organizations strategy and how HR can best drive orenable execution o that strategy. Lori arranges meetings with all o the seniormanagement, including CEO Mike Lowe.


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She starts by meeting with her ormal supervisor, Jonathan Henley, vicepresident o tness center operations. Lowe had brie ed Henley on what he hasrequested o Lori; Henley o ers to help Lori in any way he can, but notes thatHR is ar more her expertise than his. Henley spends considerable time travelingto tness centers and working with club managers to ensure the acilities stay clean and sa e, and that the equipment is in working order. Henley suggests thatLori discuss her strategic HR initiatives with Pam Johnson, vice president o

nance, because her departments support is critical to Loris success. Lori takesthat advice and meets with Johnson and her sta several times over the 45 days.Her meeting with Alex Garcia, the vice president o sales and marketing, goesreally well. Garcias ocus is to have his team bring in new members throughadvertising and special promotions. The incentive compensation program or hissales representatives has been an excellent motivation tool. There have been only

a ew months in the last 36 when monthly sales goals were not reached.

Lori learns rom senior management that there is general agreement thatRFCs strategy has shi ted rom revenue growth through club expansion topro t building through member retention and cost management. While costmanagement is important, RFC is not opposed to spending money i thedollars are an investment in something that will have a positive return (morethan break-even) and is clearly linked to RFC strategy. In regard to memberretention, it seems to Lori that while everyone knows member retention isimportant, no one is clear about their speci c role in retaining members.

Lori and her HR team members hold a series o ocus groups to collectqualitative data on what the sta knows about RFCs strategy and their role init. The comments gathered indicate that sta members are generally unawareo what the strategy is, other than to make money; and urther, that employeesare unclear how they speci cally contribute to the organizations strategy.Lori knows rom her experience that this is not uncommon. The HR Scorecard stresses that the business strategy must be very descriptive so that employeesunderstand their role in the plan and so that they can measure the success o the strategy. She raises this point in her weekly update meetings with MikeLowe, and he agrees that communication about the organizations strategy mustimprove.

For the second step in the process, Lori nds that building the business caseor HR as a strategic asset is easier than she expected. In her meetings with the

vice presidents, she shared various ar ticles rom SHR M and material rom The HR Scorecard and ound that they understood that RFC had nothing di erentin terms o weight training equipment, etc., rom any other gym in townitis the employees serving the members that make the di erence. Finance hadalready worked up a nancial scenario about how pro ts would improve with


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various increases in member retention. Lori plans to use these numbers todemonstrate how HR can support RFCs retention strategy by helping to builda team trained and motivated to provide great service to membersand delivermember renewals.

For the third step, Lori works with Mike Lowe on the ollowing graphic (seeFigure 4.0) to show how RFC creates valueand ultimately, pro t. While this

value map will l ikely be expanded, it provides a good pictorial or managers andemployees to better understand R FC strategy.

F 4.0 rFc s m p

rFc s m p: h rFc c v l


1) Explain the di erence between a leading and lagging indicator.

2) What other potential leading indicators exist in this case?

For the ourth step, Lori and her team spend considerable time discussing theRFC strategy and the organizational goals Mike Lowe had established:

Have a minimum o 50 percent o adult members visit an RFC center twontimes per week (currently only 35%).

Have 90 percent member satis action with RFC sta interactions (no ormalndata collected, but anecdotal data suggests its well below that now).

Improve pro tability by a minimum o 10 percent annually.n

Continue to achieve new member goals at current rate.n

Improve the annual member retention rate to 75 percent (currently 62%).n

i s w k

Leading Indicators

m w k c p w k Leading Indicators

m s

m r lLagging Indicator

i P fStrategic Impact


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Some o the key questions posed in The HR Scorecard related to this stepinclude, How would employees need to behave to ensure that the company achieves these goals? and Is the HR unction providing the company with theemployee competencies and behaviors necessary to achieve these objectives? I not, what needs to change?

In terms o HR deliverables, it becomes clear to Lori that there needs to bebetter alignment o the per ormance management system with RFCs strategicplan. Currently, per ormance goals are ocused on job description activitiesinstead o on results that contribute to RFCs goals.

As or member retention, Lori thought that HR needed to ensure that sta assigned primary responsibility or retention knew it, and that they had adequate

customer service skills and training. While there was a need or an individual inmanagement to have primary responsibility or leading retention e orts, Lori

elt that HR should make sure that all RFC employees saw member retentionas part o their jobs as well. All managers should incorporate retention activitiesand goals into employees annual per ormance plans. Lori recognized that herteam and senior management must work to build a culture where excellentcustomer service is seen as an absolute priority and a core value. Lori decided topresent this culture change to senior management as a multi-year initiative.

Finally, Lori knew that the compensation system should be analyzed to seei an incentive program would be e ective to ocus per ormance not only onmember retention e orts but on pro tability as well. Lori was aware o otherorganizations which had success ully implemented pro t-sharing programslinked to achievement o strategic objectives, and she thought it might work wellat RFC. Lori would need to work closely with Pam Johnson and her nanceteam to conduct a cost-bene t analysis o any proposed incentive program.

discussion Question:

1) What other HR practices/systems might Lori consider in developing acomprehensive HR scorecard?

For the th step, Lori evaluated how best to align the HR architecture with

the HR deliverables her team was considering. Lori and her team thought abouthow the components within the HR system t together (internal alignment) as

well as how the HR system aligned with (i.e., supported) the RFCs externalstrategy components. While Lori elt her HR departments organizationalstructure was aligned well with the RFC strategy, she elt certain job unctionsshould change to ocus behaviors toward the HR deliverables identi ed in the

ourth step.


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For the sixth step, Lori and her team reviewed the deliverables that had beendeveloped within the strategy map and identi ed the ollowing preliminary HR scorecard measures (Figure 5.0).

F 5.0: rFc hr s

s sp f , l l (hrl l )

hr

p

Have a minimum o50 percent o adultmembers visit anRFC center two

times per week .

Align the per ormance managementsystem to clari y skills and behaviorsrequired to increase member visit

requency by ______ _.

Have 90 percentmember satis actionwith RFC stainteractions.

Create and execute a customer servicetraining program with 95 percent o stacompleting training with satis actorycompetency rating by _______.

Improve proftabilityby a minimum o 10percent annually.

Initiate a culture-building program by __ ____ _. Once implemented , achieve90 percent agreement (through anemployee survey) that culture promotesand recognizes excellence in customersatis action and organizationalper ormance.

Continue to achievenew member goalsat current rate.

Align the incentive program or newmember sales with retention programby _______.

Improve memberretention to75 percent.

Have incentive program in operationby _______.

Align the per ormance managementsystem with expected member retentionbehaviors or all positions by _______.

Have 95 percent o employees receivesatis actory or better per ormance ratingon customer service actors.

discussion Question:

1) Discuss the strengths and weaknesses o RFCs HR scorecard above. Shouldanything be added?

The last step, implement management by measurement, required a signi cantmind-set change within Loris HR department. The HR Scorecard states that theseven-step model Lori ollowed produces a power ul management tool that is


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much more than something to keep score o HRs e ect. Rather, it provides aramework or every team member to learn what it takes to actually manage HR

as a strategic asset. Loris department had a history o measuring things. Thedramatic di erence now is that the things being measured are directly relatedto RFC strategy. Lori talked with her sta about the change, but she realizes it

wil l require urther discussion and experience with this new type o departmentmanagement approach or the signi cance o this di erence to really sink in.

FormaL Presentation oF hrs strategic objectivesand scorecard

It seemed as though the 45 days had fown by. Lori held a nal meeting withher sta be ore the presentation to senior management. I want to thank each

o you or embracing this strategic approach to HR. I realize it is new to many o you. You are all quick learners! Please understand that as we go orward withthe HR scorecard initiatives, I am going to ask Mike to support our teamscontinued learning o how to implement strategic HR, HR measurement, etc. Iam sure that the senior management team will have suggestions.

Lori had greatly appreciated the support received rom Jonathan, her ormalsupervisor. While she had kept Jonathan in ormed o her progress and asked

or his input periodically, she elt empowered throughout the process. She eltcon dent that she had his support going into the presentation.

Lori took her PowerPoint presentation and notes and walked toward theboardroom to present her scorecard. She was pleased that all o the people inthe room were amiliar with the work that had been done, and had contributedto its development with their comments and reactions. In particular, Lori wassatis ed with her e orts to gain support rom Pam Johnson. Pam and her team

were o incredible assistance in working through the metrics and deliverables.Their ocus, she thought to hersel , is appropriately on the dollars and cents; aslong as the HR strategic objectives were clearly tied to delivering that nancialper ormance, the HR teams proposal should be well-received. The next twohours were spent presenting the HR scorecard and discussing strategy.

Lori was exhausted driving home that day a ter the presentation to Mike and

senior management. The last 45 days had been quite a chal lengethe day-to-day HR activities didnt stop simply because HR had become strategically ocused. Time had to be managed so both could be done. In refecting on the

presentation, many o the senior management teams comments to Lori wereparticularly grati ying:

Youve done a good job linking your HR deliverables to what RFC is tryingto do as an organization. I eel like were all on the same page now, remarkedPamela Johnson. She also appreciated Mike Lowes comments that the HR


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scorecard project had some unintended bene ts: Through the work your HR teamcarried out, Lori, weve become aware how our corporate strategy and objectivescould be clearernot only to the senior management and the board, but to theentire sta . Thank you or that. She also appreciated the comments that theexercise would be help ul or other VPs to go through with their departments as

well, in some modi ed orm, because it provided a use ul process to identi y andlink what a department/division is striving to deliver directly into the RFC strategy.

Lori realized that the real work, in a sense, had just begun. The HR scorecardinitiatives still needed re nement and communication throughout the organization.Mikes comments about clari ying some o RFCs strategic objectives would likely a ect Loris HR scorecard. Lori had quickly learned rom this experience that HR fexibility is important, because any modi cations to RFC strategy could a ect

the HR strategy and the HR scorecard. One clear action item coming out o thepresentation involved the need to decide who should have speci c responsibility ormember retention activities and results. Mike had already pulled Lori aside and saidhe would like to get her input on that decision. Everyone liked the idea o buildinga culture where everyone elt a part o creating a great experience or members

visiting an RFC center. The work on the per ormance management system, trainingprogram and incentive program would take considerable time and e ort to developbecause Lori planned on having very open dialogue with the sta about what wasbeing developed, why, and getting their input on the design o the initiatives. Sheknew rom some o her discussions with sta that they were still a bit uzzy on whatthe RFC strategy was all about and their role in it. Hope ully, the development o the HR scorecard would help all sta to better understand what RFC was trying to

achieve. While she had concerns about what might happen i she didnt deliver onher teams HR deliverables, this concern was more than o set with the satis actionthat, or the rst time in her HR career, she was engaging in strategic HR andseeing a clear link between what HR was doing and the organizations bottom-lineper ormance. It elt good.


1) Consider the process Lori used to develop this rst dra t o the HR scorecard. What do you think was done particularly well? Why? What might you have donedi erently?

2) As Lori observed, the real work begins once the scorecard is developed and putin place. What critical things will Lori and her team need to do over the comingmonths to be success ul? What problems do you anticipate?


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