Scorecard Metrics for HR

Human resource performance greatly affects overall performance of the company, especially a big one.  If a corporation consists of various departments and business units it is very important how personnel is managed, and whether or not human resource goals comply with strategic goals of the company.

Implementation of balanced scorecard is possible on the level of a human resource department.  Moreover, some companies prefer starting work with balanced scorecard on a department level to see how things work out.  If such companies have a positive experience in implementation of balanced scorecard then the system is implemented on a larger scale.

Satisfied employees have satisfied customers

Anyway, goals and measures of balanced scorecard should be tied to a strategy.  In other words, when drawing a strategic map, it should be evident how improvements in human resource management result in implementation of different goals in the four perspectives of balanced scorecard: financial, customer, internal business processes, learning and growth.

In other words, company management must understand how reorganization and measurement of human resource department will affect performance of the company in general.  For example, in order to achieve positive financial results in the company needs to attract more customers and to retain existing ones.  To achieve that, new approaches in customer relations must be used and the company should offer new products and services at competitive prices.  In its turn, this is only possible if personnel can actually use these methods.  Obviously, the company needs the best professionals in a certain area to gain competitive advantage.  This set of cause and effect ties vividly demonstrates how improvement in human resource policy results in implementation of financial goals.

Major HR tasks

If balanced scorecard is isolated in a certain department, it may turn out that different business units are moving different directions.  A strategy map is a well balanced system containing measures and goals related by cause and effect ties throughout BSC categories.

For example, such an indicator as employee turnover rate may directly influence sales growth of the company.  If people do not want to work for a company for a long time they are probably not even their best efforts to benefit the company.  This explains low sales growth rate.  This is just one of the various examples of how balanced scorecard can visualize company strategy and make it understood at all company levels, from top management to ordinary personnel who directly contacts with customers.

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Recently released BSC library reviews some really useful ideas about using of Balanced Scorecard in HR. Learn more in the HR section of the library.

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What makes an effective HR dept?

Some business owners and managers are not giving due attention to human resource management.  This is a very common mistake which may have negative consequences for the company.  Also, some business owners think that their business is money, real estate, production facilities, offices and computers.  However, they forget that all this is put into action by people.  People working for the company should know that they are valued and they are getting fair compensation.  At the same time the company expects its personnel to work as efficiently as possible.  The goal of human resource management is to use these people with a maximum profit for the company, at the same time providing them with convenient working conditions and good compensation.

Performance of human resource department should be constantly measured and controlled.  HR department must make sure that all positions in the company are filled with the best professionals will well trained and educated.  Of course, in order to find efficient employees the company should spend a certain amount of money.  It may happen that the company is overpaying for recruitment or educational employees.  That’s why, use of balanced scorecard system is highly recommended for managers and business owners who are trying to optimize the work of HR department and reach strategic goals set in this area.

One of the greatest advantages of balanced scorecard system is that BSC serves as an intermediary tool between operational management and strategic goals.  This system measures indicators split into four categories: financial, customer, internal processes, learning and growth.  In case of HR department we should rather talk about internal processes, learning and growth and of course financial indicators.

Effective HR department contributes to overall company success

As to financial indicators, the following KPI is the most important – Cost per hire which includes all fees, costs and expenses related to hiring one employee.  These are advertising costs, agent’s fees, administered if costs etc.

Logically, the last time the company requires to find an employee the less it spends.  Thus, time to fill is known as another important KPI.  Average employment time represents the time and employee works for the company.  If it happens that people do not work more than for example one year for a company it means that something is wrong with a company policy towards its personnel.  The longer people work for the company the more professional they are.

Sure, human resource metrics includes many more indicators that choice for which depends on strategic goals of the company or HR department.

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One of the most common reasons why balanced scorecard fails is the fact that the company personnel and top management is not ready to implement this complex but extremely effective performance evaluation tool that links operational management with strategic goals.  However, there are so many managers that consider Balanced Scorecard to be a magic tool that solve all business problems.  The reality is not so bright.  Balanced Scorecard is a great system but still it requires educated and competent human resources.  In other words the company needs will train personnel to successfully implement BSC.

Balanced Scorecard can be easily turned into a useless pile of unnecessary documents, tables, charts, plans and schemes.  Thus, it is imperative to know if the company and its personnel is ready to implement and use Balanced Scorecard.

It is also important to know if company needs balanced scorecard.  There a several signs indicating the necessity for a company to use Balanced Scorecard System.  There are four indicators, namely:

• Company management is not involved in strategic planning
• Company personnel does not understand strategic vision of the company
• There is no feedback and communication between companies belonging to one holding or corporation
• There is no operational control in the company

Thus, if the company management understood the necessity of implementing balanced scorecard the next step would be to determine readiness of the company top management and personnel to use this system.

This is where free questionnaire on BSC from AKS-LABS comes into play.  This free product aims at determining knowledge of managers and ordinary employees on Balanced Scorecard System.  The questionnaire covers many issues related to balanced scorecard, from general information on this system to questions on key performance indicators, strategy maps, strategic goals, role of balanced scorecard in the company etc.

This questionnaire would be very helpful both for top and midlevel management of any company that is already using balanced scorecard or about to use it.  At the same time, it would be very cute in the company management checks knowledge of ordinary employees on balanced scorecard, its role in the company, basic principles and personnel contribution to implementation of strategic goals.

Undergo a BSC test to check your knowledge

Using results analysis section it is possible to find out if one is ready to use balanced scorecard.  There are three options available: excellent results, which means complete knowledge on balanced scorecard, good results which is general knowledge on BSC and its principals, and improve your Balanced Scorecard knowledge which means that there is much to be learned about BSC.

Learn more about BSC questionnaire here.

Download questionnaire from this page

Are you ready to use BSC in your company?

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Balanced scorecard system has many supporters and critics.  Both of them have their own reasons to claim that balanced scorecard either perfectly works or this system is just a waste of time and money.  It should be noted that balanced scorecard will not work only in case it is improperly designed, implemented and maintained.  It is because of most common mistakes that balanced scorecard system fails to serve its ultimate purpose – communicate company strategy with operational management.

It is a fact that only about 30% of managers are satisfied with implementation of balanced scorecard when the system was designed by themselves, that is without professional assistance.  Of course there can be exclusions from the rules.  But in general, company management has to be very attentive and careful when implementing balanced scorecard as this is a lengthy and expensive procedure.  So, any mistake may cost really big money.

That’s why it is important to do everything right when using balanced scorecard and implementing it in organization or company.  Developers of balanced scorecard designer understand that it is sometimes difficult for managers to implement the system and even make the first steps.  That’s why AKS-LABS provides its customers with quality support and guidance.

Learn secrets of BSC system with a training course from AKS-LABS

Those who are interested in the work of balanced scorecard and those who want to know secrets of using this system shared by developers of balanced scorecard designer can purchase and special training audio course which covers the most interesting and complex issues in the work of balanced scorecard.

Through the course you will learn general information about balanced scorecard an initial steps to be taken to implement this system.  One of the most important issues is selection of KPIs and determining the right number of them.  Of course, the training course will not give answers to all questions as it is not a magic solution of all business problems.  But at the same time, you’ll get to know about basic things to be taken into account when implementing and maintaining balanced scorecard.

The course will cover issues of cascading balanced scorecard and strategic maps.  Of these are the issues to the goal for any big company that wants to automate business management process.

The course comes as a serious of mp3 files recorded in a very simple and comprehensive language.  Having listened to the entire words you will listen to that five hour lecture on the use of balanced scorecard system to evaluate business performance and reach company’s strategic goals.

How BSC works?

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It is well known in the business world that any business, company or organization needs to be constantly developing. This statement is just unquestionable. Once you decide to stop, your business will be surely wiped out by competitors. Markets are very volatile these days, and competition is very tough. No development means that you are standing at some point while your competitors have moved forward. They managed to make production cheaper and thus are ready to offer cheaper products/services to potential customers.

In order to develop your business, you first need to know how well it is performing now. Indeed, it is useless to plan anything without basic understanding of current business performance. This is like translating a poorly written text. First you need to correct original, and only then produce translation. The same applies to business. If you are having small problems now, you will have big problems in future if you choose to expand your business.

Use correct human resource indicators to measure HR performance

Evaluation of business is not an easy process. There are several general indicators of business performance like net profit or total loss. However, you need to know exactly what influences well being of a company.

We recommend that you start with a HR department. You need to understand that your company is the people who work there, but not offices, computers, production facilities etc. Your personnel needs to be properly manager.

Balanced Scorecard system measures different human resource indicators

All companies want to have the nest specialist. “Headhunting” is very popular now. One of the main jobs of HR department is to find and employ professionals, at the same time spending minimum amount of money for these purposes.

Using Balanced Scorecard and HR metrics you will be able to locate weak and strong point in the work of a HR department. There are several KPIs (key performance indicators) which are especially important in evaluation of a HR department performance. Let’s review some of them.

Cost per hire. This indicator is considered as one of the most important KPIs. Such costs usually include expenses for advertising, agent’s fees, relocation, recruiter pay and some others. Logically, the less money HR department spends for a professional employee, the more efficiently it works.

Length of employment is a very interesting indicator. It can represent several KPIs referring to organization climate. If people refuse to work for your company for a long time, then they are not satisfied with something. Thus, if this indicator shows a low value, try to find the root of the problem.

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They say that it is impossible to evaluate something without measuring it. In business terms, performance is measured in different values, often by money to time ratio. Thus, to analyze performance of your business, you need to find aspects of the work to be measured. Almost all businesses use IT support. Moreover, many firms use special software to evaluate performance of the company to find out what needs to be improved. Of course, in tiny companies this software is not very popular since it is possible to evaluate everything without automated tools. But why do extra work which can be done by computer?

All business professionals would admit that Human Resource Department is an important part of any business structure. You may have the best technologies, output capacities and equipment but you may be not getting proper profits because you personnel is poorly managed. When HR management works at its best you will immediately see positive results. However, the work of HR department also needs to be evaluated. HR managers should always get better and improve performance.

When it concerns companies and departments with 200+ employees it is not so easy to find out who or what makes the company perform worse than expected. Employee A is responsible for negotiations, employee B does the calculations, employee C goes through paperwork. If one of them fails, the entire chain fails. This influences the company’s overall revenue. Businesses must always get better, otherwise they will be wiped out by smarter competitors. In terms of HRM, one should always get better way of dealing with people and streaming their skills in the right direction.

For the purposes of performance evaluation thousands of companies are using Balanced Scorecard (BSC). What is a BSC? This is a mechanism of making personnel familiar with strategic success factors which are reached through key performance indicators (KPI). Different business and occupations have different KPIs. If we are talking about HR, KPIs mostly concern how efficiently personnel is managed in terms of finance and performance.

These days, many companies are using BSC metrics to evaluate performance of their HR department by key performance factors. So, let’s analyze how BSC metrics can help HR managers and HR departments. In order to perform an overall analysis we need to analyze KPIs, i.e. those factors influencing performance of HR department.

Cost per Hire. By evaluating this factor you will be able to see how expensive the recruiting process is. This process starts from posting job offer to the moment when a new person is officially employed in the company. Logically, the shorter this process is, the least expensive is cost per hire. This is a very important value, especially if the company counts hundreds and thousands of employees. This amount includes expenses related to advertising, agent’s fees, recruiter pay, relocation etc. to lover the average cost, a new person must be employed as quickly as possible.

Turnover Cost. These are the costs related to termination, new hire and learning. In other words, these are expenses related to integrating a new person into the company.

Turnover Rate. This value represents the situation in your company related to leaving and hiring new employees. Many people would agree that it is not good to change personnel too often. If the turnover rate is very high, then maybe you are treating your personnel wrong? Or is it something wrong with your business in general? Find out.

Time to Fill. Basically, this is the time needed to fill a vacant position in the company. Of course, this time depends on how well HR managers are working with recruiters, advertising and people in general. The shorter this time, the better performance of your HR department.

Length of Employment. This indicator is very easy to understand. It is possible to calculate an average value. For instance, in average an employee works 5 years for your company. Of course, everything depends on the position. If you are changing couriers or secretaries, this is not a big problem. But if chief managers work for your company less than a year, this is definitely not good.

Training and Development. Even if you hire the best specialist you need to integrate him into your company and train. Of course, you bear costs, related to training. If you manage to cut this cost without harming quality of training, then your HR department is doing a great job.

Salaries, compensation, bonuses. It is very important to know that you are not overpaying and allocating recourses wisely. This also concerns HR department of any company. With Balanced Scorecard you will be able to see how effectively company’s funds are being used in HR branch.

Cost Effectiveness. It all comes to cost effectiveness after all. All above-mentioned factors influence performance of HR department which has one goal – minimize costs and boost performance. If you HR department manages to cut costs and at the same time increase effectiveness, you can be proud of your HR specialists who know how to keep pace with the modern bsuiness.

Balanced Scoreboard will help you evaluate performance of HR managers and find solutions to problems. Once you enter all data, you will see graphs and values in percents which will indicate how well HR department is performing. Sometimes, it is difficult to find what takes the department down or what causes losses. With Balanced Scorecard you will be able to evaluate all KPI to see what needs to be improved.

Use specialized software to measure your business performance

HR metrics is important for large HR deparments

As to psychological aspect, BSC metrics will make managers and employees more enthusiastic. If they know where they need to work harder they will do that to improve overall performance of the company. In other words, they will channel their energy, knowledge and experience in the right direction. It is very important to know own weak points. Using Balanced Scorecard, heads of HR departments will know weaknesses of their employees. It may be not a problem if the department consists of 2 people, but what if we are talking about 200? If people working for you are self-assured and confident, your company will surely benefit.

HR metrics is a must have tool for heard of companies and departments. How can you achieve your goals if you are not performing the way you expected to perform? Besides, sometimes it is very difficult to find the problem or the factor which takes the whole department down.

It may happen that your HR department works in dissonance with other department and branches. For example, managerial braches need more employees and HR department cannot find them on time. It is possible that costs for training one employee are so high that the company suffers losses for the first two or three months of his employment. It is very difficult to find the root of the problem. Balanced Scoreboard is the tool which makes it possible to detect the problem and offer solutions. If you neglect problem you will be simply wiped out by competitors. Of course, this is not something you want to happen to your business, is it?

Many managers never think of organization climate. Indeed, why should they? The company seems to be doing OK. The work is being done. So, what else do you need? Well, this is not true. You company would perform better if employees have a loyal attitude towards the company management. Do not disregard emotional state of your colleagues. It is very important to measure organization climate. With the help of anonymous questionnaires you will be able to get basic info on climate in the office and use it in BSC. HR Scorecard metrics is a very useful tool in this sense. What is there is a negative climate in your company? What if something makes people disagree with the company policy? Why not change this little thing and perform better? BSC will surely help you out here.

If the curve of emotional state goes down, then something bothers people. There is only one way to learn it. All indicators can seem perfect but the work is not done the way it should be done. Again, the answer might be found in emotional climate.

Balanced Scorecard is the best tool to improve performance of HR department within a short period of time. You do not need any meetings and seminars to get information. Of course, personal meeting will also let you know what is wrong in the company and what needs to be improved, but with specialized software you will do that faster and more efficiently.

To sum it up, it needs saying that HR metrics tool is a MUST HAVE instrument in a top manager’s toolbox. This software will save you much money as well as let your earn more. This is the ultimate goal in business, isn’t it? So, take advantage of IT progress to become a true leader. As a true leader armed with HR metrics tool you will always know what needs to be improved in your company. Thus, you will have all chances of staying on the business Olympus.

Balanced Scoracard will help evaluate business performance

Improve performance of your HR deparment with Balanced Scorecard

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Improving the HR functions is often a tough ask owing to the degree of myriad complexity and human elements that are built in to the process. A tool like a balance scorecard can go a long way in clearing the picture and introducing clarity and purpose in the HR team. Metrics such as HR hire and Motivation, Training etc serve as clear reference points for HR executives to plan their initiatives.

Implementing a BSC approach for HR functions requires a careful study of the issues at hand and the subsequent planning implementation process. Preliminary research and discussions should be followed up with suitable brain storming sessions to devise a strategy that is tailored to the specific organization.

The BSC strategy also needs to look at building transparency into the processes and remove elements of ambiguity. It should look for devising a performance and compensation system that rewards good performance and presents clear goals that employees can look to achieve. Last but not the least this case study also highlights the need of having a suitable feedback mechanism for addressing the grievances of employees and explores how a BSC approach can achieve the same by learning from their views. Learn more about best practices in HR with Balanced Scorecard.

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The basic approach of the balanced scorecard case study management system is outlined for a hypothetical company. It can help to align bigger-picture goals with individual employee objectives.

Typical performance management focuses on monitoring tasks, and then managing them – or taking action – whenever the tasks diverge from what is expected. For example, if an employee suddenly does not fulfill his quota, then management will be sure to take admonitory action. But it is actually equally important to be able to articulate an organizational strategy, and also communicate this strategy to the entire organization. This is where the balanced scorecard system can help, and here we consider a hypothetical balanced scorecard case study.

Let us consider, for instance, the ACME Company. The director notices that their HR performance management system is not quite up to par, and would like to improve this. Having heard of how the balanced scorecard system has been implemented successfully in other organizations, the director becomes curious and would like to know how the system could help his company.

The first and crucial step is, as mentioned above, to be able to articulate an organizational strategy. That is, senior management should be able to agree upon a corporate destination, or in other words, where they want the organization to eventually be. In this case, the director, and the board, and senior managers should be asked to come up with a well-defined picture of the future of the ACME Company. This usually takes the form of a few pages of meaningful, specific statements. This step is necessary in order to build a consensus, and this agreed-upon destination will also be used in succeeding steps.

The next step would be to decide upon the organization’s priorities. In what is called a Strategic Linkage Model or SLM, the objectives that have been agreed upon, as well as the causal relationships between these objectives, are documented. This step identifies the few strategic activities to be focused upon, and the key strategic outcomes that the organization desires. In effect, this step localizes the broader strategic objectives outlined in the first step.

The next step is then the communication of these strategies to the organization, or what can be called cascading the corporate organizational strategy. In this step, the objectives are further refined and specified to become applicable to individual departments within the organization. For instance, the specific strategic objectives for the manufacturing arm of ACME would be quite different from those for the marketing arm, or the research and development arm.

And finally, the last step is selecting personal objectives. This step is the most specific of all, and involves working with individual employees in order to help them draw up their own objectives in line with the organization’s objectives. Questions that may help employees come up with specific objectives include: is this a business or development objective? Is this an activity or outcome objective? What corporate objective is being supported here? How can this objective be measured?

In this short balanced scorecard case study, the basic philosophy of the approach is already illustrated. From the most general and fundamental organizational goals, the process goes through successively smaller and more specific parts of the organization, until it reaches the individual employees themselves.

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They say, that it is better one time to see, so here is the Balanced Scorecard Example, this is an “Overview” report type which was generated with Balanced Scorecard Designer. The report contains information about top-level indicators and categories from the HR Hire scorecard.

This balanced scorecard report is for presentation purposes, if one need to have more detailed report the “Advanced Balanced Scorecard Report” is available.

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