VERIZON COMMUNICATIONS Case Study

Overview
The merger of Bell Atlantic and GTE was named Verizon and it represented one of the major
telecommunications companies in the United States. It had annual revenues of about $60 billion
and about 260,000 employees.
This case study discusses the four “Perspectives” specified in Kaplan’s and Norton’s Balanced
Scorecard framework, focusing on their implementation at GTE. Subsequently the efficiency
of Garret Walker’s (PMA’s in charge) and J. Randall MacDonald’s (head of HR) internal
communication strategy is evaluated.
Introduction
In 1996, J. Randall MacDonald, head of Human Resources at the GTE Corporation was facing
the challenge to create an HR strategy supporting GTE's workforce through a major business
transformation. Moreover Charles R. Lee, GTE’s CEO wanted to know what the Human
Resources department was contributing to the company.
The main problems for GTE are high employee and customer turnover rates and the declining
quality of customer service. MacDonald realized that he needed a quantitative model that
showed whether his department was executing well for the business.
The Balanced Scorecard, as articulated by Kaplan and Norton, was a conceptual framework
for assessing an organization’s performance not only in terms of financial measures (the
conventional way of assessing an organization’s performance) but also in terms of non-
financial measures. It is concerned with non-financial measures that are closely linked to a
company’s strategic goals. Hence the non-financial measures important to one business may
be very different from the non-financial measures important to another business.
GTE’s Strategic Framework
The department outlined five strategic thrusts as follows:
• Talent
• Leadership
• Customer service and support
• Organizational integration
• HR capability
Measures
A group was formed within the HR department to translate these strategic thrusts into a
meaningful measurement model. The group was called Planning, Measurement, and Analysis
(PMA). Using feedback from the business presidents, the PMA group and the HR measurement
core team defined 118 measures, organized into four “Perspectives”,
(i) a strategic perspective
(ii) a customer perspective
(iii) an operations perspective
(iv) a financial perspective
A balanced scorecard developed by Kaplan and Norton was slightly different in this respect. It
also had four perspectives, but it didn’t have a “Strategic Perspective.” Instead it had an
“Innovation and Learning Perspective,” and strategy was assumed to be at the centre of
everything. At GTE, by contrast, innovation and learning were thought to be embedded in all
the perspectives.
Indexing
 Establishing a “target” for each measure
 “Weighting” the measures - Modifying weights with changing priorities
Communication
Communicating the results of the Balanced Scorecard within the organization was viewed as
key to its success. The HR department acquired software (called “PbViews”) that would enable
it to report, online, quarterly results of the scorecard in a visually appealing way. This material
was shared with all 2,000 employees of the HR department as well as with all the business
presidents.
Review Process
The HR “core team” would meet with business unit leaders to assess the meaningfulness of the
measures as well as the appropriateness of the targets.
Financial Payoffs
 Reducing the separation rate
 Reducing the absence rate
Conclusion
The implementation of Balanced Scorecards at GTE was capable to quantify the activities
conducted by the HR department and was useable to measure the quality of HR services
provided to GTE employees. However, implemented measures and associated linkages were
not enough to quantify the contribution of HR initiatives to shareholder’s value.
The customer perspective defined at GTE did not consider external customers but only focused
on internal customers, that is, GTE employees. Thus it did not include any data reflecting the
perspective of the company’s external customer base, indicating that GTE HR was not
interested in measuring the impact of HR activities towards the company’s main revenue
contributor.
To create an environment that would have promoted change, innovation and continuous
improvement, more aspects of the “Learning and Growth Perspective” should have been
injected into GTE’s linkage model. The implementation of Balanced Scorecards at GTE is
considered a move in the right direction. Nevertheless, GTE HR had still a long way to go.

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