Executive Summary

Creating the HR Scorecard was commissioned by Business Intelligence as part of its ongoing research programme into the latest developments and best-practice thinking in the fields of human resource management and business performance management and measurement.

Through eight focused chapters and ten dedicated case studies, this Report explains how exemplary HR functions are building and implementing balanced performance management frameworks that align the day-to-day activities of the function with the strategies of the organizations they serve.

Chapter 1: The Case for HR Measurement

This chapter sets the scene by explaining why performance measurement has become a critical issue for HR professionals.

It explains how HR leaders are being placed under increasing pressure to demonstrate, with hard data, the value that their functions deliver to the business. This chapter details how exemplary functions are implementing strategic management frameworks such as, but not exclusively, the balanced scorecard, to develop and embed value-creation processes into HR and communicate this value business-wide.

Moreover, this chapter explains why managing human capital has become a key issue for most organizations and how this is providing HR with an ideal opportunity to deliver competitive advantage to their organizations.

A case study on Borealis demonstrates best practice.

Chapter 2: HR Measurement Survey – Trends and Practices

Based on the findings from an exclusively commissioned survey to support this Report, this chapter discovers the extent to which the HR function is becoming a strategic partner to the business and how extensively the function is using balanced performance measurement frameworks.

Other specific topics include: the extent, and perceived success of, recent HR restructuring efforts; how the function is viewed internally by managers and the general employee base; the type of financial and non-financial metrics used within HR; the extent to which outsourcing and shared service options are being used by HR functions and how successfully such choices have been in driving up HR performance; and what HR professionals perceive to be their most
pressing concerns over the next couple of years.

A case study on survey respondent Union Fenosa demonstrates best practice.

Chapter 3: Evaluating the Strategic Contribution of HR

Chapter 3 provides a detailed explanation of what, in practical terms, being a strategic partner means to the HR function.

It explains the key components of a balanced scorecard and discusses whether HR should become the owners or custodians of the learning and growth perspective of their organization’s balanced scorecard.

Moreover, an explication of two other important performance management frameworks - the European Foundation for Quality Management’s Excellence Model and the US-based Malcolm Baldrige Model - will be provided, along with analysis of intellectual capital frameworks. HR’s role in delivering value through each approach will be explained.

Case studies on Corus Colors and BC Hydro and Power Authority demonstrate best practice.

Chapter 4: Measuring and Demonstrating the ‘Customer’ Value of HR Services

This chapter explores the range of performance measures available for HR to demonstrate the bottom-line effect of their interventions. It shows that identifying ‘hard’ measures of HR performance is not only possible but is also vital if HR is indeed to become a strategic partner to the business.

A detailed overview on how to conduct an HR audit that reveals present HR performance compared to desired performance and enables the identification of initiatives to close the ‘gap’ will be provided. Also provided is an explanation of how HR functions can assess the return on investment of HR programmes, and thus provide demonstrable and meaningful ‘hard’ financial measure of the value of HR.

A case study on Scotiabank demonstrates best practice.

Chapter 5: Measuring, Comparing and Improving Process Efficiency

Chapter 5 explains how the HR function can ensure that its processes are as efficient as possible. It contains a detailed explanation of how benchmarking can play a powerful role in driving up HR process performance.

Pulling together the themes of Chapters 4 and 5, the chapter explains that a successful HR organization goes out if its way to identify and blend together efficiency and effectiveness performance measures in order to provide a full, or balanced, view of the function’s performance. An example of such ‘blending’ is provided though the detailing of ten key measures of human capital that can be used to show the overall efficacy of the function.

A case study on the US Office of Personnel Management demonstrates best practice.

Chapter 6: Creating and Measuring Shared Services Centres and Outsourcing Arrangements

This chapter explains why HR outsourcing and the creation of HR shared services centres have both become agenda items for senior management.

It outlines the key challenges that will face those organizations that are considering such approaches and will detail the critical success factors for each.

The chapter also examines the role that performance measurement and balanced scorecards play in monitoring the performance of such approaches to HR service delivery.

A case study on the partnership between oil giant BP and HR outsourcing vendor Exult demonstrates outsourcing best practice.

Chapter 7: Aligning HR Staff with HR Strategic Goals

This chapter details the process of identifying and developing the new skills (and enhancing existing ones) that HR must possess if it is to become a business partner, deliver to business strategies and indeed create a dedicated HR Scorecard.

Specific skills areas covered include: how to become strategically and business-focused; understanding the role of performance measurement – both non-financial and financial – and change management.

This chapter also explores how HR ‘up-skilling’ may not be enough to meet the needs of the knowledge economy but that a more radical repositioning of the function may be required.

A case study on Nextel Communications demonstrates best practice.

Chapter 8: Creating the HR Scorecard

This concluding chapter pulls together the major themes of this Report and provides a practical template for creating and implementing a dedicated HR Scorecard.

It explains that the HR Scorecard must support the strategies of the business and that it should provide both ‘effectiveness’ and ‘efficiency’ performance dimensions.

The major challenges in HR Scorecard creation and implementation are discussed and critical success factors provided.

Case studies on Verizon Communications and First Union Corporation demonstrate best practice.