Creating a strategic HR function using the HR scorecard

By Alan Fell

HR migrates from being mainly administrative or operational to a wider strategically-focused role.  This transformation is supported by using the concept of the Balanced Scorecard and applying this specifically to the HR function within the organisation.

The Need
People matter. What ultimately distinguishes a good from an average organisation is having the right people. “Right people” encompasses skills, attitude, engagement, leadership and behavioural attributes.

Those right people can develop the winning products and services, supported by the best processes within the organisation, to deliver the best value to the customers or citizens. It is a virtuous cycle – because good people like to work for winning organisations. So the cycle reinforces itself.

The Common Challenge
HR is often NOT given the credibility and authority that it needs to be effective at aligning talent development to the strategic needs of the overall business. The result is an HR function that is primarily administrative. In other words, HR is “operational” rather than “strategic”.  An organisation needs both aspects of HR support – operational and strategic.

A Strategic HR Function
What is “strategic HR”?  My own definition is:

An HR Function that is pro-actively engaged in aligning the development of human capital and organisational capability to the overall requirements of the organisation’s long-term business strategy.

A strategic HR should have, and should merit, a seat at the top table. It has a major role to play in the formulation and execution of the organisation’s strategy. It is not just a reactive support function of the old paradigm. It is this thinking which brings us to the Balanced Scorecard.

The HR Scorecard Solution
The Balanced Scorecard has been around for more than 20 years. It is now recognised as the #1 management tool to support Strategy Execution.

Does it work?  Survey after survey tell the same message – on average organisations that use the Balanced Scorecard (“BSC”) significantly outperform those that do not. It is the power of the measurement-culture: what gets measured gets managed.

What is the BSC ?  A brief overview can be based on the original schematic of the concept, as below:

balancedscorecard[1]Source

Note the sequence as highlighted below:

sequence

HR professionals will immediately note that one of the 4 perspectives in the main diagram is entitled “Learning & Growth” sometimes called “Organisational Capacity” .

The BSC, uniquely, aligns the development of people and organisational capability to the processes, customers and finances of the organisation. This presents a golden opportunity for the HR Function to align itself more explicitly with the mainstream business.

Let us take a simple, generic, example:

Strategic Objective: Strengthen the retention and development of good talent
Measure:  1) % retention of higher performers. 2)% training budget devoted to higher performers
Target: 1) 90% for 2015 (2013 base of 75 %). 2) 50% – a long term sustained target
Initiative(s): Likely to be a number of specific actions or projects directly aimed at achieving and sustaining the targeted levels of performance.

So what exactly is the “HR Scorecard Solution”? 

Firstly, it is important that the BSC / Scorecard for the organisation as a whole (often referred to as the Tier 1 or “corporate scorecard”) has a properly completed Organisational Capacity dimension. This addresses a simple question – what are the principal components of our corporate strategy that relate to people and capabilities of the organisation.

Secondly, it is extremely useful to apply the Scorecard concept to the HR function / department itself – as below:

  • Do we have the right skills, etc, within HR itself
  • How well do our internal processes work within HR.
  • Do we demonstrate good financial stewardship / efficiency in what we do
  • How well do we align with, and effectively support, our internal customers – the other departments throughout the organisation

The Outcome
I am convinced that that application of the HR Scorecard will help the HR function to become more strategically focused and more customer-focused. Ask any CEO whether it matters to have HR aligned with the business strategy of the organisation. It’s a no-brainer!

Alan Fell is a UK-based management consultant and trainer, specialising in the Balanced Scorecard and Strategy Execution.  He is a Senior Associate of the Balanced Scorecard Institute and runs many of public, in-house and consulting assignments in the Middle East in conjunction with IIR Middle East. He can be contacted on LinkedIn.

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