Scorecard Metrics for HR

What does usually company management of the take when the company faces obstacles or even severe crisis?  Top managers hold a meeting at which the attempt to find solutions to current problems.  Sure thing, most of the solutions require investments, but still all decisions and ideas come from employees at all levels.  Sometimes, the best and the most creative ideas come from ordinary front line managers who directly contact customers.  But what should one do to create such conditions in which an employee feels free to express himself?  An employee should be satisfied with his work, compensation and working conditions.  The task of human resource management is to provide employees with excellent working conditions and organization climate and offer them competitive salary and bonus systems.

The problem is that human resource department is not earning money.  That’s why inefficient human resource department only wastes money.  For example, the company may spend too much to find and hire professional personnel in such expenses will not be justified in the long term.  There is another example: human resource department conducts training session for employees but such training gives no visible results (increase of revenue, improvement in customer satisfaction etc).  This means that the company wasted money which is unacceptable, taking into account global recession.  That’s why the company should measure efficiency of HR department, as well as align HR measures and goals with the company strategy.

Different business areas required different approaches in evaluation of HR performance.  However, most businesses are using balanced scorecard system as this is a perfect tool to measure business performance and link operational in strategic management.  Differences in evaluation of HR in various business areas are choices of different key performance indicators.  In wholesale business these KPIs may look like this:

1. Average telecommunication costs per employee. Very often managers occupied in wholesale trade are looking for new customers via phone.  They call companies and businessmen who might be potentially interested in the products wholesale company is offering.  Telephone is a must have tools for any wholesale manager.  Sometimes telecommunication costs constitute the bulk of expenses.  Of course, there should be no restrictions as to communication via phone, but at the same time these expenses must be kept at a reasonable level.  For example the company should encourage use of online communication means, e-mail etc.  By optimizing telecommunication expenses the company can have additional costs which can be used for some other purposes (for instance, for bonuses and compensation packages).
2. Revenue per employee. This is a very important indicator in HR evaluation in wholesale business.  The wholesale company generates revenue by selling huge amounts of products.  There are managers who are responsible for sales, and these managers bring money to the company.  By tracking average revenue per employee it is possible to evaluate efficiency of sales managers.  If this indicator is constantly going down then something is wrong with a sales process, pricing policy, sales methods etc.  It is recommended to measure revenue per employee in the end of each reporting period.

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Evaluation of human resource management is equally important in all business areas.  Sure, some businesses require greater participation of people in production process, while other businesses are fully automated.  In both cases human factor plays different roles, but still, the business is run by people.  Some business owners tend to forget that their business is not only capital, real estate, production facilities, but people who work for the company.  Recent financial meltdown turned out to be a good lesson for many companies that did not value intellectual potential they had.  Many companies turned bankrupts just because they had no idea what to do in the new business reality, of while other businesses manage to survive and even expand.

Human resource management is all about recruiting, employing educating and retaining of personnel.  These processes seem quite easy and a first glance.  But nowadays it is not so easy to find a professional employee and create suitable working conditions for him.  Headhunting is very popular in certain business areas.  That’s why due attention should be given to human resource management at any midsize and large company.

Human resource policy and methods should be clear and understood for employees.  Only in such a way the feedback system will work which is very important for any company.  At the same time, performance of HR department should be evaluated.  Ineffective human resource management will not only result in loss of money but it can also weaken company position in the market.  Lots of competitive advantage is the worst thing that can happen to any business.

When evaluating human resource management in logistics/transport business it is imperative to take into account peculiarity is of this kind of work.  Logistics services require thorough planning and a very serious approach.  When using balanced scorecard system for HR evaluation in logistics it is recommended to measure the following indicators:

1. Average travel costs per employee.  Many logistics specialists have to accompany cargoes on the way to end customers.  The distance can be measured in thousands of miles.  A certain balance is to be kept here: logistics specialist should use convenient means of transportation but at the same time expenses should be reasonable.  By decreasing value of this indicator logistics department may save additional costs which can be used for special bonus and compensation programs.  Sometimes, there is no necessity or urgency for a logistics specialist to accompany cargoes.  In such cases the entire delivery process may be managed remotely.
2. Employee lateness.  This indicator is applicable in any business.  Being late for work is not good.  But lately is in logistics business may lead to failure of the entire delivery chain.  For example, logistics specialist is 1 hour late for work.  The cargo came late to airport terminal and thus it will come late for seaport.  Of this is a breakdown of the entire delivery scheme.  That’s why employee lath should be strictly controlled by HR department.  Those employees who were regularly late for work should be punished, while punctuality must be encouraged.

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HR performance is a vital aspect of any organization that deserves attention. Its various processes are undeniably linked to the performance of the organization as a whole.

HR performance refers to the effectiveness of people management, or human resource management, and is usually seen as one of the most difficult aspects of organizational performance to measure. In contrast to the financial aspect, for instance, which more or less has a strict, objective set of metrics (or measurement parameters) and performance criteria, people management is less cut and dried.

Intuitively at least, the link between HR practices and organizational performance is quite undeniable. Managing people well will inevitably lead to improved performance, in general. To be systematic about investigating and characterizing this link, over the years, many people have considered various types of metrics. Here, we present an overview of the different metrics and parameters commonly used to describe and evaluate different aspects of HR effectiveness.

The human resource process typically begins with selection and recruitment. Whenever there are vacancies to fill, it is the HR department’s job to find applicants and select from those most qualified to fill the available jobs. The relevant measurement dimension would then be the sophistication of these processes. That is, it would be useful to look at whether or not the application and selection process makes use of psychometric tests, whether or not there are clear criteria for selection, and whether or not interviews are well-structured.

The next processes are induction and training. Induction refers to the official entry of new employees into the organization. Once again, metrics that measure the sophistication of these processes are the most relevant. For instance, the duration of these programs in terms of time spent per employee may be a relevant metric. The effectiveness of induction and training, on the other hand, may be measured using targeted surveys of participants.

The final and perhaps most important HR process would be performance management, or how HR monitors and supervises the daily workings of the organization, with respect to its employees’ performance. It is important for these performance management processes to be coherent; that is, they should be orderly, logical, and they should fit well together. It is also important for these processes to have as large a coverage as possible; that is, as many aspects of organizational performance as possible should be managed. Relevant metrics would then be manpower and man-hours dedicated to performance management, percent increase or increase over time of employee efficiency due to management, and so on.

And of course, it is also important for performance managers to have a solid set of metrics to measure employee and organizational performance. These metrics would differ from organization to organization, depending on their business processes and the services they offer or perform.

So, in a nutshell, HR performance may be measured by looking at its processes, from selection to induction and training to day-to-day performance management. These processes may be evaluated using relevant metrics, some of which have been enumerated above. The measurement and evaluation of the HR aspect is a useful complement to the measurement and evaluation of the financial aspect of any organization, and thus should be given the same amount of consideration.

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