Scorecard Metrics for HR

It seems like no one can deny the importance of HR management.  Sure, there are some business owners and top managers who still think that the supreme value for their company is money, investments, equipment and production facilities, real estate etc.  But the recent economic crisis has proved that those companies who possessed the most efficient and intelligent human resources managed to survive, and some of them even managed to conquer new market shares and attract new customers.  Business is run by people, no matter how efficient and smart IT solutions can be.  For this reason, it is important to measure performance of human resource department.  The problem is that HR department does not earn money, and just to the contrary it spends it in order to hire, educate and retain the best professionals in a certain business area.  This is sort of investment in human resources, which proved to be one of the most effective long-term investment tools.

HR BSC implementation

Poorly performing human resource department may waste company money even if HR managers hire competent employees.  There are so many factors to be taking into account when working with personnel.  Using balanced scorecard system, it is possible to evaluate human resource performance and align HR goals with the strategic goals of the company, its mission and values.

Balanced scorecard evaluates key performance indicators which represent critical success factors for a certain company.  The right choice of KPIs is the first correct step in the process of BSC implementation.  Of the choice of key performance indicators in human resource management depends on the company strategy and its organization structure.  For some companies, it is cheaper and more convenient to hire inexperienced employees and then educate them, while others are looking for experienced professionals who don’t need any education and start-up courses.  As said above, it depends on company strategy, goals, its structure and specific character of the business area.

Major HR tasks

Evaluation of HR performance is a must for big companies with numerous departments, branches and business units.  Excellent HR performance contributes to improvement in communication and feedback system, the system of education, training and coaching. Proper HR policy improves organization climate and employee satisfaction.  As known, satisfied employees usually have satisfied customers who then turn into regular customers for the company.

Use of balanced scorecard for HR performance is recommended for heads of human resource departments and top managers of big companies who want to optimize work of their enterprises and firms.

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The supreme value for any company is the people who work there, i.e.  human resources.  Very often, top managers and business owners tend to forget this axiom.

What is HR about?

They mistakenly think that improved production facilities, advanced IT technologies or enormous investments alone can save business from bankruptcy.  Well, of course these are very important elements of any successful business strategy.  But these are only tools in the hands of people.  If these tools are not properly used they will do more harm than good for a company.  The recent economic crisis has proved that those companies who possessed the most well educated and efficient personnel managed to survive and even increase their revenue through innovation, implementation of creative ideas that very often come from the lowest levels of the company.

• Nowadays all large and midsize companies have own HR departments.  Human resource management is not only about looking for the best professionals in a certain business.  HR management is about employment of people, creation of suitable working conditions, educating and coaching employees, monitoring organization climate, employee loyalty and satisfaction etc.

Sure thing, requirements to human resource management are different in different business areas.  But there is one thing in common – word of any HR department must be assessed.  Moreover, any actions of human resource managers should comply with the company strategy, value and mission.  This is where Balanced Scorecard system (BSC), created by Norton and Kaplan, comes into play.  BSC links strategic and operational management, or in other words it puts strategy into action.

How HR works?

So, why bother about personnel?  Statistics show that the most satisfied and loyal employees have the most satisfied and loyal customers.  What does it mean for a company?  Right!  This is regular source of income.  Making money is the goal of any commercial organization.  So, recruitment and education of personnel is inseparable part of a company action plan on its way to implementation of strategic goals.

• As already said above, HR management uses different principles, approaches and priorities in working with personnel.  It depends on business area the company works in, specific nature of running a certain kind of business, as well as company strategic goals.  For example, approaches to working with employees at an industrial enterprise and a web design in company cannot be the same.  Working conditions, motivation are compensation system are fairly different in industrial and programming business sector, and therefore HR Balanced Scorecard tends to use different metric systems and various sets of indicators (KPIs).

This article will attempt to summarize peculiar features and key performance indicators in HR evaluation in different business areas.

1.   Accounting. In this business area the cost of every mistake may be too high. That is why it is imperative to have error free documentation and follow standards of invoice accuracy. Also, accountants have access to confidential and sensitive information, and that’s why employee loyalty is extremely important.
2.   Arts and entertainment. The realm of arts and entertainment is characterized by creativity of employees. So, it is not easy to find good photographers or artists. That’s why HR managers should track how much they spend to hire one employee. Also, artists should be 1005 satisfied with their work, otherwise they will not create masterpieces.

3.   Agriculture. This is a business sector that not everybody wants to work in, as the job may be rather difficult. Also, there is a large number of part time or season employees working in farms and ranchos.

4.   Automotive. HR managers in automotive industry are to pay attention at the absence rate as this may cause production downtime. It is also important to know percentage of high and low performing employees.

5.   Banking. Employees in the bank have access to confidential information, and thus it is imperative that they sign the business conduct and ethics policy. Banker should also spend bulk of their working time on priority tasks.

6.   Building/construction services. Trade unions are very popular among construction workers due to high traumatism rate, and HR managers need to pay a special attention to these issues. It goes without saying that job satisfaction rate should be rather high among construction workers due to tough working conditions.

7.   Customer support services (tech support). This business sector is characterized by high staff turnover rate. Also, HR managers are to pay attention to average telecom costs per employee.

8.   Call centers (sales). As a rule, sales call center operators receive bonuses for completion of sales plans. It is imperative that most employees are satisfied with existing bonus system. As personnel turnover rate is rather high, average cost for recruitment must be minimized.

9.   Education. Average tenure per employee would be a good indicator, as the longer professors work at Universities the better university reputation. Also, education specialist should always improve their professional level.

10.  E-commerce. In e-commerce most employee are working remotely, and thus average cost saving per teleworking employee must be calculated. At the same time, employees must be satisfied with remote work.

11.  Chemicals. Chemical enterprises are usually characterized by tough working conditions and health dangers. That’s why it is important to track new hire retention (freshly employed people should stay in the company). If there are many employees on long term sickness leave then working conditions at the chemical plant are not satisfactory.

12.  Electronics production. Electronic devices are constantly upgrading and developing. That’s why indicator average time employees are in same job function is very important to find out whether personnel develops as well. Also, all tech and engineering positions must be well documented.

13.  Financial services (insurance, loans etc). It is not an easy task to find a good financial expert. That’s why interviewing costs might be too high. Mistakes in financial decisions may cause serious problems and thus, employees in insurance and loan companies must be regularly assessed.

14.  Food industry. Staff with appropriate professional qualification is a relevant indicator for this industry as poor quality food products are denied at all markets.

15.  Government/non-profit sector. Government officials often contact with taxpayers. They must reply to correspondence on time and reply to all emails, if possible. HR managers are to measure relevant indicators.

16.  Health care. Number of patients with medical errors per 1000 patients is a great indicator for HR in medicine. Number of patients leaving against medical advice is also very indicative.

17.  Investment. Making money earn more money is a real talent. So, investment company should especially value talented investors with strategic vision. It would be also helpful to measure forecast errors.

18.  IT technologies. Often IT specialists require rather expensive equipment for their work, and thus HR department may measure average equipment cost per employee and average office space per employee.

19.  Marketing and advertising. There are not many marketing specialists who can even create a new category of customers. So, if there is huge turnover in the advertising company this may be quite costly. Also, effective work of HR department in marketing and advertising business is the situation when employees find vacancies by themselves, without ads and outsourcing.

20.  Military. The army needs to be always ready for defense or attack. Every soldier or officer has his tasks, so average number of sick days per employee should be as low as possible. Also, very few people want to serve in the army (because of health and personal concerns) much depends of average time to recruit.

21.  Mining and oil and gas production. Often this is a very hard work, so if employees recommend company as a good employer to other people it means that working conditions and attitude of management are OK in such a company. HR department must also measure expenses related to medical claims (because of tough working conditions at oil producing plans and mines).

22.  News and mass media (Internet, printed media, TV). Very often printed and Internet mass media, as well as TV channels cooperate with freelance journalists who work remotely and who should be satisfied with teleworking. Also, the company needs to calculate savings cost because of cooperation with remote freelancers.

23.  Police. Lack of training in police may cost officer his life. It is imperative that police officers undergo regular training sessions (gun shooting, physical exercise etc). HR department in police must measure balance between rookies and experienced officers since policemen risk their lives out in the streets.

24.  Publishing services. Various equipment is used in publishing services depending on type of printed production. Equipment cost per employee as well as turnover of new hire during first 12 months are a couple of very interesting indicators used in this area.

25.  Real estate/property. Real estate agents receive percentage from total sold property cost (bonus payout). Also, they travel a lot to show properties to potential customers and travel costs per employee are also to be measured.

26.  Retail sales business. In retail sales business employees are financially interested to sell more. So, bonus system should be constantly measured. Employee communication etiquette also plays an important role in the work of a retailer.

27.  Telecom business. In telecommunication business employees have to possess much knowledge and specific skills. That is why it is important that new hires do not leave the company within 12 month period. Employees should also improve their performance as compared to previous performance reviews.

28.  Tourism/hotels. Customers return to hotels only if they liked their stay there. This much depends on hospitability of the personnel which in its turn depends on employee satisfaction. To keep high service level employees should undergo regular performance reviews.

29.  Transportation and logistics. If a logistics manager is late for work this may cause failure of the entire transportation chain. Travel costs of logistic managers who accompany cargoes are to be tracked.

30.  Wholesale trade. Whole sale managers make hundreds of calls offering products and cargoes. Telecommunication costs per employee is an excellent indicator in this sense. Revenue per employee also shows efficiency of salespeople.

It should be noted that the above example of KPIs are not most important indicators in certain business areas, but rather suggestions to HR managers willing to use human recourse sis a more efficient way. If you need to more info on indicators in different business areas feel free to follow the above link.

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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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It becomes even more crucial to measure HR efficiency in recession periods so that a smart, timely HR response can be made considering employee performance and morale.

Left and right, we keep hearing of even the biggest companies having correspondingly big troubles with the financial crisis. When it first started showing itself, the crisis was, of course, startling and worrying, but as it now wears on, people are starting to turn to the more practical matter of weathering it. One of the crucial things to realize is that it is very important to be able to measure HR efficiency in recession accurately. Despite the possibility of drops in sales and other record financial lows, it is not the Finance or Accounting departments that are vital during recessions at all. Instead, the Human Resources department is the one that has to act fast and act well in order to give the organization the best chances of making it through the crisis with minimized damage.

In any crisis, an organization is in grave danger of losing its best people. This is because news of impending crises and downturns always has the effect of worrying people, making them reconsider their employment options. The best people, being usually the most qualified, are the ones with the most leverage and drive to look for and find what they might think are better opportunities elsewhere. This is why the HR department must act fast to reassure their top performers that the organization will continue to compensate them as fairly as possible during the recession. The HR department and the management should be able to present a unified front and a smart, well-justified plan for the entire organization during the crisis.

The goal, of course, is to increase employee confidence in the organization as well as to boost morale in general. Recessions call for extensive communication with the employees, keeping them up to date with the most important decisions and developments. Leave your employees feeling out of the loop, and pretty soon, inevitably, their worries and doubts will start to surface again. Not only would this lead to worsened performance due to anxiety and nervousness, it might even lead to resignations, as the most worried employees might decide to try their luck elsewhere. Employee dissatisfaction is a very probable result that is very undesirable. This can be avoided entirely by ensuring that everyone knows about all major decisions and the justifications behind them. Even unpopular measures, such as raise reductions and salary cuts, might be taken better than expected if they are explained clearly and with full honesty.

Keeping track of HR efficiency is thus important, as it will also act as a barometer for determining the mood of employees. Generally, higher efficiency will point to better moods, while lower efficiency would indicate that something needs to be done. Measure HR efficiency in recession periods to keep on top of the organization’s internal atmosphere. This data will also, of course, be helpful in deciding which employees need to be retained as much as possible, and which ones could conceivably be let go. Weathering a financial recession is by no means going to be easy and a good HR response is the key.

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It is important to measure HR performance with KPI. The process keeps the company aligned towards achieving corporate goals and objectives.

It greatly helps to be familiar with KPI or key performance indicators. This is because it is important to measure HR performance with KPI. You have to understand that HR or human resource pertains to the human assets or the very workers that a certain company or organization has. To ensure the success and growth of the company, it is important to monitor and keep track of the performance of its workforce.

Thus, the reason behind measuring HR performance with KPI. With this procedure, the company can determine the strengths of the workforce and capitalize on them. This procedure also helps weed out the weaknesses in the workforce, and appropriate solutions can then be determined.

To further understand the importance of this procedure, the concept of KPI or key performance indicators should then be discussed. KPIs are actually metrics used in quantifying corporate objectives in line with the strategic performance of every worker and department in the workforce. These aspects are quite hard to quantify without the usage of KPIs, and this is primarily the reason behind the existence of KPIs. The figures being quantified here are actually used by the management to evaluate the present state of the organization against the corporate objectives and goals that were originally set.

KPIs also aid in determining the proper course of action when certain situations take place. In their most basic form, KPIs determine how the human assets of a company contribute to the overall performance of the company itself. Since this is the vital role played by KPIs, then it is very important to exert effort in determining the relevant KPIs to use. You have to understand that the needs of a company can shift at just about any time, so you have to be ready to implement changes as they are needed.

In any company, the workforce is indeed its most important asset. The workers are the frontliners, no matter what industry you belong to. The productivity of each employee has an impact on the company. If an employee is very productive at his job, then this would bring positive effects on the company. On the other hand, negative effects would arise when there is an employee who is not that productive.

The value of each employee is then quantified by HR departments. Oftentimes, the criteria used in quantifying the value of each employee include teamwork, initiative, quality of work, cooperation, and problem solving skills. These are the KPI used on the production side of the company. Other KPIs are used to determine the disposition employees have towards their jobs. These KPIs include job satisfaction and job security.

Other common KPIs used are training cost per employee, absence rate, turnover rate, resignation rate, average remuneration, revenue per employee, and the like.

Another thing to remember when you want to measure HR performance with KPI is the fact that the KPIs used can differ from one company to another. This is because companies have differences when it comes to corporate objectives, goals, and even their operations and mechanics. Thus, you cannot expect two companies to have the same KPIs, even if they are competitors in the same industry. However, if a company does develop an efficient system for their KPIs, then significant improvement and growth for the company can be noticed in good time.

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