HR Balncd Scorcard C
HR Balncd Scorcard C
HR Balncd Scorcard C
• Overview
• HR Metrics
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 2
Balanced Scorecard: An Overview
One of the most basic challenges is the difficulty of measuring the value of
intangible assets with any level of precision. About 80% of a company’s market
value is said to be attributable to intangible assets, according to Robert Kaplan
and David Norton, developers of the Balanced Scorecard methodology. As a
result, the current structure of financial statements – most of which do little to
present the details of intangible assets – renders them “increasingly irrelevant as
a tool supporting meaningful decision-making,” said Dr. Junaid M. Shaikh in the
Journal of American Academy of Business.
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 3
The balanced scorecard is a strategic management system used to
drive performance and accountability throughout the organization
• Benefits include:
• Alignment of individual and
corporate objectives
• Accountability throughout the
organization
• Culture driven by performance
• Support of shareholder value
creation
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 4
The strategy mapping methodology translates high level strategic
vision into measures, and ensures alignment of objectives
throughout the organization
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Use consistent terms and definitions throughout the strategy
mapping process for communication across Business Units
and Functions
To monitor
Objectives progress, targets
support the are set for each
overall vision and measure in given
provide areas of time period.
emphasis for the Targets should be
organization to based off the
focus its strategic planning
activities financials and
assumptions.
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Strategy mapping produces strong bottom line benefits and
provides organizational alignment and accountability
Benefits
Organizational Alignment
• Translates Corporate Objectives– Provides a forum for managers to agree on corporate
strategies and measures while aligning organizational strategies.
• Communicates and links the strategy – Depicts the coordinated strategies throughout the
organization
• Rigorous management tool - Strategic objectives are translated into performance scorecards
that are used to manage the business and provide the standard for strategic feedback and
review
Accountability
• Establishes criteria for successful performance – Influences behavior to focus on both the
success of corporate strategy and direct line of influence
• Balances the financial and non-financial perspectives – establishes a rigorous business
management system that goes beyond traditional financial measures to leading indicators of
performance
Financial Success
$$$
Strategic Choice
Workforce Success Customer Success
• Operational
Excellence
• Product Leadership
• Customer Intimacy
Business Process
Success
Source: The New Workforce Metrics: SHRM Thought Leaders Conference, Oct 2003 / Chicago, IL
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 8
HR Scorecard : An Overview
BUSINESS SCORECARD
Customer Success Financial Success
WORKFORCE SCORECARD
Business Process HR Systems
Success Workforce Success • Align
• Mindset/Culture • Integrate
• Competencies • Differentiate
• Behavior
HR Competencies HR Practices
• Work Design
t:
• Strategic Partner
a • Perf. Measurement
th • Cultural Change
e
rc ds • Rewards
f o
rk ta
n • Employee Advocacy • Selection
wo ders do • Administrative • Development
A n to
• U ble Expertise • Communication
A s
• oe
•D
HR SCORECARD
Source: The New Workforce Metrics: SHRM Thought Leaders Conference, Oct 2003 / Chicago, IL
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 9
HR Scorecard : An Overview
Growth Strategy
• Primary growth strategy
Share of customer’s wallet
New markets
New products
New markets and new products
Present Goal
Strategic Capabilities/ • What are we/or must be “best at” competitive advantage? Those 3-4 items
Functions we must do extraordinarily well to achieve our growth strategy
− Strategic Capability 1___________________________
− Strategic Capability 2___________________________
− Strategic Capability 3___________________________
− Strategic Capability 4___________________________
Present Goal
Identify “A” Positions • Those jobs/titles inside a strategic capability that leverages our competitive
advantage and cause our growth strategy to succeed; create wealth for firm;
engage in core work; create value for customers.
− Position Title 1________________________________
− Position Title 2________________________________
− Position Title 3________________________________
Identify “A” Players • Individuals that have those jobs/titles in “A” positions that are among top 10%
available in labor market for this position; top performers in our firm; highest
potential in our firm; extremely difficult to replace; have many external, high-
level opportunities?
Present Goal
− Position Title _______________________________A’s % %
− Position Title _______________________________B’s % %
− Position Title _______________________________C’s % %
Source: The New Workforce Metrics: SHRM Thought Leaders Conference, Oct 2003 / Chicago, IL
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 10
HR Scorecard : An Overview
High
Differentiation: Your Firm’s Workforce(s)
Source: The New Workforce Metrics: SHRM Thought Leaders Conference, Oct 2003 / Chicago, IL
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 11
HR Scorecard : An Overview
• • • •
• • • •
• • •
• • •
BUSINESS SCORECARD
Culture
Customer Success Financial
• Success
•
•
• WORKFORCE SCORECARD
HR Systems
Business Process Workforce • Align
Success Success • Integrate
• Mindset/Culture • Differentiate
• Competencies
• Behavior
HR HR Practices
Competencies • Work Design
.
.. • Strategic Partner • Perf.
nd .
s ta . . • Cultural Change Measurement
r o
de e t . . • Employee Advocacy • Rewards
Un Abl Do . • Administrative • Selection
Expertise • Development
• Communication
HR SCORECARD
Source: The New Workforce Metrics: SHRM Thought Leaders Conference, Oct 2003 / Chicago, IL
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Contents
• Overview
• HR Metrics
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 13
Balanced Scorecard Development Overview
Provide templates
and Balanced Business Unit /
Scorecard Instruction Function Scorecards All Balanced
development sessions complete (including Scorecards
instructions complete targets). finalized
Initiate Develop
Balanced Align and
Balanced Scorecards
Scorecard finalize
including objectives,
Development Balanced
strategies, measures and
Implementation Scorecards
targets
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Process Overview
Business
Unit/ Review Approve finalized
Review & strategies, strategies,
Function
Approve measures and measures,
Executives targets targets
Business Unit and Division
alignment
1 2 3 4 5
Business Communicate Communicate
Identify Identify Business Unit
Unit/ horizontally and corporate/ Business Finalize targets
Business Unit/ strategies, measures
Function align objectives to Unit / Function for measures
Function and targets, aligning to
Planners other Business direction to Division
objectives Corporate strategy map
Unit/ Function execs & planners
Division
Executives Review &
approve
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Detailed Process
1 2 3 4 5
Communicate
Communicate Corporate/ Identify strategies,
Identify Finalize
horizontally and Business Unit / measures, and
Business Unit / targets for
align objectives to Function direction targets aligning to
Function level measures
other Business to Division execs & Corporate strategy
objectives
Units / Function planners map
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 16
1) Identify Business Unit/Function Level Objectives
1 2 3 4 5
Owners Identify
Business
Communicate
horizontally
and align
Communicate
Corporate/
Business Unit /
Identify
strategies,
measures,
Finalize
targets
• Business Unit / Function planners and managers Unit /
objectives to Function and targets
for
Function measure
other Business direction to aligning to
level s
Units / Division execs Corporate
objectives
Function & planners strategy map
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2) Communicate Horizontally And Align Objectives To
Other Business Units / Functions
1 2 3 4 5
Communicate Communicate Identify
Identify Finalize
horizontally Corporate/ strategies,
Owners
Business targets
and align Business Unit / measures,
Unit / for
objectives to Function and targets
Function measure
other Business direction to aligning to
level s
• Business Unit / Function planners objectives
Units /
Function
Division execs
& planners
Corporate
strategy map
and managers
Objectives
capabilities technology x
• Identification of cross-Business
Description
Description of the Description of the Sample Agenda
Description of the Description of the Unit opportunities
Objective Objective Objective Objective
Owners
Business targets
and align Business Unit / measures,
Unit / for
objectives to Function and targets
Function measure
other Business direction to aligning to
• Business Unit / Function planners level
objectives
Units /
Function
Division execs
& planners
Corporate
strategy map
s
and managers
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 19
4) Identify Strategies, Measures and Targets Aligning to
Corporate Strategy Map
1 2 3 4 5
Communicate Communicate Identify
Identify Finalize
horizontally Corporate/ strategies,
Business targets
and align Business Unit / measures,
Unit / for
objectives to Function and targets
Function measure
other Business direction to aligning to
level s
Units / Division execs Corporate
objectives
Function & planners strategy map
Financial
Strategies profit commitments • Revenue / Total •Marketing spend /
market Revenue
• Operating profit •% increase in
Improve marketing reach
Customer Develop new
Strategies brand products /
performance solutions •Brand recognition
rating •Global diversity
•New product ramp rating
rates •Meeting employee
Operational Develop effective, •New product retention plans
Excellence sustainable marketing revenue/Total revenue
Strategies programs Sample Bus Unit A Targets
Goals
C
Measure
*See measure development primer for detailed instructions Meeting employee retention plans
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 20
4A) Identify Strategies
1 2 3 4 5
Communicate Communicate Identify
Owners
Identify Finalize
horizontally Corporate/ strategies,
Business targets
and align Business Unit / measures,
Unit / for
objectives to Function and targets
Function measure
• Business Unit/Function and Division/sub- level
other Business
Units /
direction to
Division execs
aligning to
Corporate
s
objectives
Division planners and managers Function & planners strategy map
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 21
4B) Identify Measures
1 2 3 4 5
Communicate Communicate Identify
Owners
Identify Finalize
horizontally Corporate/ strategies,
Business targets
and align Business Unit / measures,
Unit / for
objectives to Function and targets
• Business Unit/Function and Division/sub- Function
level
other Business direction to aligning to
measure
s
Units / Division execs Corporate
Division planners and managers objectives
Function & planners strategy map
Deliverables
Reliability
Conforma nce
Cost to operate
Cost to ma intain
Relative
• Business Unit / Function
measures documented in
purchase price
Product mee ts Projected ROI
Performance expecations
Product mee ts
needs
Cost to use Cost to aquire
the Excel template
Product
Quality Price
Customer
Document Satisfaction
Measures
Quality
Service me ets
effect analysis to
needs Arrives when
Service meet s promised
expectations
Arrives when
determine measures
Flexibility needed On-time
Responsiveness delivery
Lead times
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4C) Identify Targets
1 2 3 4 5
Communicate Communicate Identify
Owners
Identify Finalize
horizontally Corporate/ strategies,
Business targets
and align Business Unit / measures,
Unit / for
objectives to Function and targets
Function measure
• Business Unit/Function and Division/sub-Division level
other Business
Units /
direction to
Division execs
aligning to
Corporate
s
objectives
planners and managers Function & planners strategy map
Make sure to
document all
assumptions made
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 23
5) Finalize Targets For Measures
1 2 3 4 5
Communicate Communicate Identify
Owners
Identify Finalize
horizontally Corporate/ strategies,
Business targets
and align Business Unit / measures,
Unit / for
objectives to Function and targets
Function measure
• Business Unit/Function and Division/sub- level
other Business
Units /
direction to
Division execs
aligning to
Corporate
s
objectives
Division planners and managers Function & planners strategy map
graphical format 0% •
Bus Unit A offerings; Integration of Bus Unit A with Corporate
sales efforts
Effects of Metric Variation
level
Jan Feb Mar Apr May Jun – Bus Unit A revenue
Jan Feb Mar Apr May Jun
• Finalized Balanced
Actual 10.0% 11.0% 13.0% 15.0% 17.0% 19.0%
Target 20.0% 21.0% 21.0% 22.0% 22.0% 23.0%
Variance -10.0% -10.0% -8.0% -7.0% -5.0% -4.0%
• Measure Description
Scorecards at Corporate,
Business Unit, Function, and
– Tracks attach rate by measuring the % of systems deals closed with a
sale at point-of-sale. Point-of-sale to be defined for each Division.
Division levels
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The Balanced Scorecard team (= name of whatever internal group is rolling it out)
is available to provide support when needed
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Southwest Airlines: Linking People to Financial
Performance
On-time Lowest
Service prices
Ground crew
alignment
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 26
Southwest Airlines’ Approach to Measurement
Strategy Map An Illustrative
Strategic Theme:
Strategic Theme: Objectives Measures Targets Initiatives
Operations Excellence
Operating Efficiency
Profits and
Financial RONA • Profitability • 30% CAGR
• Grow • 20% CAGR
Grow Revenues
Fewer planes
Revenues
• 5% CAGR
• Fewer planes
Attract &
Customer Retain More • More • # Customers • 12% • Customer
Customers Customers • FAA On Time growth loyalty
On-time • Flight is on Arrival Rating • Ranked #1 program
Lowest
Service prices -time • Market Survey • Ranked #1 • Quality
• Lowest prices management
Internal
• Fast ground • On Ground • 30 Minutes • Cycle time
Fast ground turnaround Time • 90% optimization
turnaround • On-Time
Departure
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Contents
• Overview
• HR Metrics
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 28
How to choose Balanced Scorecard measures
• Find the important drivers and reduce the number of measures applied.
solutions
/ Total revenue
Reliable - Verifiable and free from
Operational Develop effective,
•Marketing spend / Revenue
subjective judgment or bias
Excellence sustainable •% increase in marketing
Strategies marketing programs reach Timely - Current; available before
it loses its capacity to help make
decisions about tomorrow’s
Employee Attract the diversity,
skills and competencies
•Global diversity rating operations, activities, and budgets
Strategies •Meeting employee retention
we need plans Valuable - Able to help
management make significant
*Note: “Corporate” is made up of “Business decisions about significant issues
Units” that in turn are made up of “Divisions”
and “sub-Divisions”
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 30
Analyze Measures
Description
Often times measurement of the process rather than the result provides a better
leading indicator of performances
Description
The Cause and Effect diagram, also called the Fishbone or Ishikawa diagram (after it’s
creator Dr. Ishikawa) is a tool that is used to help identify all the possible or probable
sources of a given problem. Once developed, this list of potential causes can be narrowed
down to root causes using other methods such as Pareto Analysis.
The basic tool uses a graphic that allows potential sources of variation or defects to be
developed and recorded using categories of causes such as the “5 M’s” Man (resources),
Machine (or equipment), Methods (procedures), Materials and Measurement.
– List the “5 M’s” as categories (or develop Product meets Cost to use Cost to aquire
Arrives when
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 33
Reduce the Number of Measures
Find the important drivers and reduce the number of measures
applied
H
Arrives when H
expectations”, etc.) Flexibility needed On-time
Responsiveness delivery
L
Lead times
How to Use
•Total Assets •Cost Excess Capacity
Identify measures on the Business Unit level •Return on Net Assets •Inventory turnover
scorecard that can be removed and only Business •Days in Payables •On-time delivery
tracked on at the Division scorecard due to Unit •Net Income •Space utilization
one of the following: Measures
•Return rates •Turnover rate
– The measure is more influential for a specific
Division and does not make sense to track across •Total cost to •Employee
customer satisfaction
all Divisions
•Brand recognition •Ethics violations
• Example: Return rates may make sense for a
product Division but not for a service- •Sales per channel
oriented Division
– Although the measure is important, it may not be
very risky
•Days in Payables •Average lead time
• Example: Ethics violations are important but
•Forecast accuracy
ethics has never been an issue in the past Division •Accounts Receivable
Turnover
– The measure may play importance into how a Measures •Schedule adherence
Division executive manages the business but not •Revenue •Space utilization
in how a Business Unit executive would manage
• Example: Space utilization may drive a •Number of •Health promotion
Division executive’s decisions but the customers •Competency
Business Unit manager may not make space- •Return rates coverage ratio
related decisions •Customer •Ethics violations
complaints
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 36
Reduce the Number of Measures
• Most organizations will compare their performance to internal benchmarks (last year’s
performance or to plan).
• By comparing performance against external benchmarks, the Business Unit can further
understand how market and industry conditions may be affecting overall performance.
• When reducing the number of measures, take into account how easily the measure can be
externally benchmarked.
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 37
Balance the Scorecard
Look at overall scorecard and avoid any unbalanced, ‘game-able’
measures
• To make sure the measures are balanced and not encouraging the
wrong behavior, ask the following two questions:
– What actions could I take that would improve performance, yet be bad for the
company?
– For each of those actions, is there another measure that would prevent me
from taking it?
• If there isn’t a preventative measure, add one.
• If there is no preventative measure that can be added, the organization is better off
eliminating the measure that is encouraging sub-optimal behavior.
• Overview
• HR Metrics
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 39
Measurement/HR metrics is a strategic HR initiative that is present to a
relatively great extent in respondents’ organizations in 2002
1 2 3 4 5
Mean Response
Survey responses ranged from 1 for “No Extent” to 5 for “Very Great Extent”
Source: HRI’s “2002 Survey of the Role and Structure of Human Resources”
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 40
The size of the firm does not necessarily correlate to whether HR is
considered a fully integrated strategic partner
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. Source: SHRM/Fisher Human Resource Strategies 41
Cost per hire is considered one of the most valuable staffing metrics in
justifying HR’s contribution to the bottom line
Vacancies 88% 9% 3%
Participant 96.8%
100.0%
reaction 93.1%
Participant 54.8%
70.6%
learning 58.6%
All respondents
Observed 53.2% Large companies
52.9%
behavior 51.7% Global companies
Organizational 32.3%
35.3%
results 41.4%
Return on 17.7%
23.5%
investment 20.7%
0% 25% 50% 75% 100%
2003 survey of 62 companies
To a
considerable To a moderate
extent extent
14% 30%
To a great
extent
2% Not at all
14% To a minimal
extent
40%
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. Source: CFO Research Services 45
Watson Wyatt’s HCI study linked expected change in market value with a
significant improvement* in various dimensions
Dimension
Total Rewards and
Accountability
16.5%
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. Source: Human Capital Index Study 46
Some HR functions were perceived as showing a positive change in
efficiency
(value per dollar spent) in 2001
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only.Source: Human Resource Executive and ERC Dataplus 47
Firms expected to increase the degree to which HR is measured
between 1999 and 2004
4%
2004 67% 28%
1%
Specific HR
62% 18% 20%
Activities
Specific HR
57% 24% 19%
Program
Overall HR
58% 19% 23%
Department
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. Source: Human Resource Institute 49
Contents
• Overview
• HR Metrics
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 50
Verizon’s HR Metrics Map
HR Measurement Linkage Model
Customer Service Labor Staffing/ Compensation / Workforce Diversity
Relations benefits Benefits Development
• Absence rate • % Diversity • # Special • # of promotion FT & • Female glass
• Churn recruitment recognition awards PT ceiling
Strategic
• EE service center • LRRC call • Staffing cycle • Benefits vendor • Total # of training • Management
operational performance index volumes time operational days Placements
Operations
• Total cost of HR compared • Arbitrations • Retention rate • Benefits revenue % • EEO case volume
to budget rate – Overall – Internal
Financial
• Compensation
• HR headcount ratio – Overall<1 yr revenue % – External
• OSHA safety index – Overall< • Internal to external
3yrs EEO case
– Sales force conversion
• HIPO retention
rate
Source: Verizon Communications Inc; Corporate Leadership Council Research
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 51
The Balanced Scorecard in Practice (1/2)
When Gerry Isom became president of CIGNA Property and Casualty (P&C) in 1993, he faced a formidable challenge: a
very numbers-driven company that seemed unable to influence the direction the numbers were heading — down.
Business During the four years before Isom came on board, the company had lost more than $1 billion, and the combined ratio
Situation was 140%. (For every $1 premium coming in, the company was paying out $1.40 in losses and expenses.) In 1993
alone, CIGNA P&C lost $275 million. It was at the bottom of the fourth quartile in the P&C industry. Isom resolved to
take the company into the top quartile. His strategy for getting there? To reshape CIGNA from a generalist insurance
company, willing to underwrite a risk in any sector, to a specialist company that would underwrite only when it could be
assured of better-than-average results .
Starting at the top, Isom reinvigorated the executive council by bringing in four new hires to join the six members
Leading already on board. Twenty of the top performers, from the business and from the IT organization, were also brought
together to create a transformation team. In addition, the position of "transformation officer" was created. Distribution
Strategic management, underwriting, and claims management — the three components of P&C's value chain — were redesigned
Change to make them more responsive to changing market conditions. These changes set the stage for the leadership team to
begin focusing on the business segments that would yield profitable results. The new strategic approach to market
segmentation began to show results at the end of the first year of the strategy.
Once these changes were under way, Isom launched the Balanced Scorecard program. (A senior vice president was
Implementing given full-time responsibility for keeping it on track.) As a first step, the executive team began to translate the strategic
the Balanced vision into specific performance objectives:
•Enter markets that meet profit targets;
Scorecard •Build and maintain relationships with target customers and producers; and
•Manage risk more effectively.
Each of the business units had to understand whether it had relationships with the right agents and brokers to attract
the target customers it wanted to do business with. Each unit needed an appropriate set of underwriting and claims-
processing capabilities to perform well in its target markets. The BSC process was used to clarify issues and achieve
Achieving consensus on how to implement the strategy.
Consensus During the first eighteen months, the executives and transformation team developed a strong set of measures they
could all agree on. The next challenge was taking the scorecard to the rest of the organization. To accomplish this, the
leadership team agreed to integrate the scorecard with the financial planning process, communicate more effectively
with the rest of the organization, and link the BSC with the compensation plan to achieve organizational alignment.
Aligning the All business units ultimately shared a common set of strategic business objectives. Based on this shared understanding
Organization of the strategy, each of them was able to tailor scorecards to its own unique strategic realities.
with the The business units used scorecards to tell the story of their specific strategy to everyone in their own business. They
used measures to monitor progress toward meeting these objectives. The units identified the things they needed to get
Strategy done to move the company into the top quartile.
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only.Source: “Harvard Business School Working Knowledge 52
The Balanced Scorecard in Practice (2/2)
The next phase in the rollout was to implement the BSC at the individual level. This was a turnaround situation, and
there was considerable excitement (and some skepticism) associated with the changes that were introduced. An
incentive compensation system was used to involve every employee in the BSC program and reinforce all the strategic
Making changes.
Strategy A business unit roster was used to link every employee to a specific line of business. This allowed management to
Everyone's Job communicate a specific business vision to the people who would carry it out. In addition, incentive compensation was
tied to the contribution each individual made to a specific line of business. At the end of the year, each employee was
awarded a number of "phantom" shares based on his or her individual performance. The value of the employees'
shares was determined by the performance of the business unit they were a part of. How the business unit performed
against the measures on the scorecard determined the value of a share for the business unit.
CIGNA P&C built a monitoring system that provides a simple summary using red, yellow, and green indicators. When
Building a the indicators are green, the business is moving in the desired direction. Yellow indicates cause for concern. Red
Strategic means something is not right and requires further examination. For example, red might indicate a single large loss or
Feedback a number of smaller losses in a particular market. In either case, an alert is sounded, and attention is drawn to
discover the root cause of the situation. This reporting system has eliminated much confusion, and useful information
System is now readily available. Solutions can be developed more quickly.
At the start of this transformation effort, the finance department had control over much of the information considered
to be "important." As a result of the BSC, there has been a significant transfer of management authority from finance to
other business managers. For a numbers-driven organization, this has been a significant shift. Today, scorecard
information is available to everyone in the organization. Everyone knows what the strategies are, what the objectives
Culture Shift are, what the measures are, and how they are doing. The BSC management system makes it possible for people
everywhere in the organization to provide feedback (observations, comments, and suggestions) to those responsible
into High Gear for specific measures.
The front line has become a source of insight into how well the strategy is being executed. The ongoing challenge is to
shorten the time it takes to organize a meaningful response to market changes. Putting the strategy on everyone's
desktop, and inviting dialogue throughout the organization, helps to move knowledge around the organization faster. It
increases the ability to use knowledge, make decisions, and execute the strategy.
Within one year, Isom's team had eliminated the losses. Within two years, they were beginning to show a profit. After
The Bottom six years of using the BSC, CIGNA P&C joined the top quartile of its industry. Its financial performance went from a loss
Line of $275 million in 1993 to more than $100 million in profits five years later. Gerry Isom saw his vision translated into
reality.
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only.Source: “Harvard Business School Working Knowledge 53
The HR Balanced Scorecard Approach at TATA Engineering
Tata Engineering’s Views on Balanced Score Card: An HR practitioner’s perspective of Balanced Scorecard is
that of a tool that integrates the HR activities with the Business perspectives leading to the achievement of the
end-objectives. A comprehensive HR Balanced Scorecard to help HR practitioners to deliver visible and
measurable HR contribution to the Business. It will also help in bringing about changes in the workplace by
fostering a climate of innovation and intrapreneurship.It will lead to a smooth transition of HR into the 21st
century by building a strong and credible HR system and is a proactive step towards Human Resource Capital
Management.
HR role on the four perspectives is addressed as
Outcomes: The intent is to ensure that HR would deliver on clear and quantifiable measures and thus lead by
being a role model. An attempt has been made to quantify HR by specifying the expected outcome and defining
the corresponding quantifiable measure for it.
The Corporate HR Scorecard defines overall strategic priorities and context which will guide the HR activities
The Corporate HR BSC drawn up is consistent with the Business Unit strategic agenda on the four
perspectives.
Quantifiable and objective measures are identified for all HR activities, on which targets are taken. For these
measures, a strategic initiative plan is drawn up to spell out the specific action plan, the process owner and
milestones indicating completion of a phase. Resource and Budget allocations are then deployed to bridge the
gap between the current performance and the target.
Source: www.humanlinks.com/manres/articles/balanced_scorecard.htm
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 54
Marks and Spencer Scorecard takes HR to the top
of the agenda
Marks and Retail giant Marks & Spencer has linked its staff satisfaction survey to the company's
Spencer’S sales performance to measure HR's output as part of its balanced scorecard. The store is
Scorecard able to relate responses to certain questions in the twice-yearly questionnaire to
improvements in sales per square foot.
• According to Marcus Powell, head of HR strategy and change, a 1 per cent increase in
the 'clarity about own contribution to meet customer needs' question equates to a 5.1
per cent increase in sales per square foot. A 1 per cent increase in employee
satisfaction on the 'praise for performance' question translates to a 2.9 per cent jump
in sales per square foot.
The Bottom
Line • Powell said the link between employee satisfaction and sales performance is an
important part of the company's balanced scorecard. According to Powell the scorecard
has helped move HR to the top of the business agenda and played a major part in the
company's improved UK performance over the past year. HR had very short-term goals
of helping the business stabilize. The company had always been known for treating its
staff well and we want to get back to that and become the standard against which all
other [HR departments] are measured.
Source: www.personneltoday.com
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 55
Measuring Human Capital: Selected Case Studies
In 2001, Prudential reported that it had undertaken an HR strategic measurement program, driven by a need to understand its
human capital just as clearly as its marketplace and customer base. Michael W. Tindall, vice president of strategic measures,
presented Prudential's program at HRI's 29th Annual Issue Management Conference in February 2001. The 125-year-old financial
products and services company with 60,000 employees in 20 countries uses a data warehouse and an HR dashboard as its
backbone. The data warehouse provides a central repository for all human resources strategic data and is continually fed by the
organization's human resource management transactional system and by files from opinion surveys.
The core implementation team consists of a mix of systems and HR people with the business acumen to understand metrics. Senior
executive champions provide project oversight. The HR dashboard design process began with a lengthy analysis of the business
partner/client's business requirements, organizational structure, and physical/cultural environment. This analysis included looking
at how the client measures things and considering which technological tools would best suit its needs.
Prudential's internal HR dashboard begins with a PeopleSoft EPM/Business Objects-based system. Balanced scorecard perspectives
were defined by profit centers and business groups. The dashboard provides key performance contract HR metrics and drill-down
capability to the employee level. It has proven to be a viable tool for HR generalists and line managers trying to manage their
human capital.
Measuring the financial performance of the recruitment function is important to many organizations.
• GTE Directories aligns its HR practices to corporate strategy by tracking its turnover-to-hire ratio. When the firm pursues a growth
strategy, it seeks a turnover-to-hire ratio of less than one; if it is operating in an employment reduction market, it seeks a
turnover-to-hire ratio of greater than one.
• Merix measures both days-to-fill and cost-per-hire to monitor the efficiency of its recruitment process. The goals for the measures
are determined during planning sessions. The cost-per-hire metrics permit more accurate budgeting. In addition, Merix tracks
OSHA accident rates, lost-time measures and employee satisfaction survey results to project employee turnover. The turnover and
cost-per-hire measures combine to provide projections for the next year's hiring expenses.
AirBus is an example of how a distinct set of metrics can help an alliance evolve into a successful business. The European
commercial aircraft manufacturer was created as a consortium of government-controlled firms in England, France, Germany and
Spain. Partners established a clear set of metrics, as well as a common language. Metrics included establishing ways to track the
status of product development, schedules, quality control, operating efficiency, customer satisfaction, new technology, maintenance
and training. In 2001, three decades after its inception as an alliance, AirBus evolved into a single integrated company and has
been applauded for "changing the face of the commercial aviation industry."
• Overview
• HR Metrics
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 57
Guidelines for Discussion and Grading of Key HR Metrics
Grading Scale
• A” Very Interesting to Track; Could be a
KPI
• “C” Somewhat Interesting toTrack;
Unlikely to be a KPI
• “F” Not Interesting to Track
• A Group Exercise
• The success of this workshop is built on your input and unique knowledge of your company’s goals and
needs. Accordingly, your open participation is strongly encouraged.
• Driven by Strategy
• The value in the exercise results from the selection of the metrics most closely aligned with your
company-specific corporate and HR strategy, therefore we ask that you bear it in mind and refer to it
often.
• Focused on Ideals
• Recognizing that some of what you will encounter in this exercise will be aspirational, we ask you to
provide your input assuming no technological or informational limitations.
• Ongoing Work-in-Progress
• The decisions arrived at and metrics selected today are not set in stone. As your company’s strategic
goals and business environment change, you will be able to adjust your Key Performance Indicators to
mirror those changes.
Segmentation
Metric Options Description/Formula Grade (A,C,F)
Segmentation
Metric Options Description/Formula Grade (A,C,F)
Financial Measures
Operating Revenue • Function, location, line of business • Average operating revenue _
per FTE generated per full-time
equivalent employee:
Operating Revenue / FTE
Operating Expense • Function, location, line of business • Average operating expense _
per FTE incurred per full-time equivalent
employee: Operating Expense /
FTE
Operating Profit per • Function, location, line of business • Average operating profi t (before tax, _
FTE interest and depreciation) returned
per full-time equivalent employee:
(Operating Revenue – Operating
Expense) / FTE
Managerial Staffing Ratio • Function, location, line of business • Total expenses for selected option as _
a percentage of operating revenue:
Compensation Expense. Option /
Operating Revenue * 100
Managerial and • Function, location, line of business • Total expenses for selected option as _
Professional Versus Non- a percentage of operating expense:
M&P Staffi ng Ratio Compensation Expense. Option /
Operating Expense * 100
Segmentation
Metric Options Description/Formula Grade (A,C,F)
Financial Measures
Human Investment • Location, line of business • Number of (dollars, euro, _
Ratio pounds) of operating profit
returned inflated by employee
compensation) for every (dollar,
euro, pound) invested in
employee compensation plus
benefits: Operating Revenue –
(Operating Expense – Total
Compensation)] / Total
Compensation
New Products & Services • Location, line of business • Average new products and services _
Revenue per FTE operating revenue per full-time
equivalent employee: Operating
Revenue. New Products & Services / FTE
Segmentation
Metric Options Description/Formula Grade (A,C,F)
Financial Measures
_
Employee Ownership • None • Full-time equivalent employees who
Rate own company stock as a percentage of
total full-time equivalent employees:
FTE.Own Company Stock / FTE * 100
Workforce Costs
_
Termination Value • Total, employee-initiated, • The average cost of terminations per
(Cost of Turnover) organization-initiate full-time equivalent employee:
(Terminations * Total Compensation) /
FTE
(Dollar, euro, • Total, employee-initiated, • Average cost of sick leave per full-time _
pound) Value of Sick organization-initiate equivalent employee:[(Unscheduled
Leave per FTE Absence.Sick Leave / Workdays) *
Compensation] / FTE
(Dollar, euro, • Total, employee-initiated, • Average cost of disability leave per full- _
pound) Value of organization-initiate time equivalent employee: [(Workdays
Disability per FTE lost for Disability / Workdays) *
Compensation] / FTE
Segmentation
Metric Options Description/Formula Grade (A,C,F)
Employee
Satisfaction
Employee Satisfaction • Function, location, age, gender, • A relative measure of the level of _
ethnicity, occupational group, tenure, employee satisfaction:<Survey>
compensation band, performance
rating, etc.
Employee Satisfaction • Function, location, age, gender, • A relative measure of the level of _
ethnicity, occupational group, tenure, employee satisfaction:<Survey>
compensation band, performance
rating, etc.
Employee Satisfaction • Function, location, age, gender, • A relative measure of the level of _
ethnicity, occupational group, tenure, employee satisfaction:<Survey>
compensation band, performance
rating, etc.
Employees at Risk • High potentials, high performers, key • A relative measure of the level of _
Factor skills, occupational group, function employee satisfaction:<Survey>
Segmentation
Metric Options Description/Formula Grade (A,C,F)
Customer Contact
Segmentation
Metric Options Description/Formula Grade (A,C,F)
Attendance
Average Work Week • Function, line of business, location, • Average number of hours worked _
occupational group, employment per week per employee: (Hours
status, employment type Worked / Number of Weeks) /
Headcount
_
Absence
Segmentation
Metric Options Description/Formula Grade (A,C,F)
Recruitment
Employee Growth Rate • Location, function, line of business, • Number of hires into new positions _
ethnicity, gender, occupational group, for every one employee: Hires.New
employment type, etc. Positions / Headcount
External Hire Rate • Location, function, line of business, • External hires as a percentage of total _
occupational group, employment hires: Hires.External / Hires * 100
type, job level
External Rehire Rate • Location, function, line of business, • External rehires as a percentage of _
occupational group, employment total external hires:
type, job level Recruits.External.Rehire /
Hires.External * 100
Recruitment Source • Location, function, line of business, • Number of internal hires for every one _
Ratio ethnicity, gender, occupational group, external hire: Hires.Internal /
employment type Hires.External (Permanent)
Segmentation
Metric Options Description/Formula Grade (A,C,F)
Internal Movement
Internal Hire Rate • Location, function, line of business, • Internal hires as a percentage of _
occupational group, employment total hires: Hires.Internal / Hires *
type, job level 100
Cross Business Unit • Location, function, line of business, • Movements between organizational _
Mobility ethnicity, gender, occupational group, units as a percentage of total
employment type movements: Movements.Between Org
Units / Movements * 100
Segmentation
Metric Options Description/Formula Grade (A,C,F)
Career Path Ratio • Location, function, line of business, • Movements between functions as a _
ethnicity, gender, occupational group, percentage of total movements:
employment type Movements.Between Functions /
Movements * 100
Promotion Speed Ratio • Location, function, line of business, • Average number of years in a position _
ethnicity, gender, occupational group, prior to promotion: Position Tenure
employment type Prior to Promotion / Promotions
Labor Turnover
Segmentation
Metric Options Description/Formula Grade (A,C,F)
Career Path Ratio • Location, line of business, function • Number of employees returning _
from maternity leave for every
resignation while on maternity
leave: Maternity Returns / Maternity
Resignations
Segmentation
Metric Options Description/Formula Grade (A,C,F)
Development
Managerial Bench • Function, location, line of business, • A relative measure of the quality of _
Strength job level the managerial successor pool:
<To Be Established>
IDP Prevalence Rate • Function, location, line of business job • Employees with an individual _
level development plan as a percentage of
total employees: Headcount.IDPs /
Headcount * 100
Progress Against IDP • Function, location, line of business job • Relative measure of performance _
Goals level against individual development plans:
<To Be Established>
IDP Achievement Ratio • Function, location, line of business job • Relative measure of achievement _
level against individual development plans:
Headcount.IDP Goals Met /
Headcount.IDPs
Gap Between Current and • Function, location, line of business, • Relative measure of gap between _
Required Workforce Skills job level current and required skills for position:
<To Be Established>
ROI on (Non-Training) • Function, location, line of business, • Return on investment realized from _
Development job level non-training (informal) development
Investment opportunities: <To Be Established>
Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 70
Performance and Workforce Development Metrics
Segmentation
Metric Options Description/Formula Grade (A,C,F)
Development
New Hire Performance • Function, location, line of business • Relative measure of performance for _
employees in their first year of tenure:
<To Be Established>
Segmentation
Metric Options Description/Formula Grade (A,C,F)
Development
Performance-Based Pay • Function, location, line of business • Relative measure of the prevalence of _
Prevalence performance based pay:
Employees.Pay is Performance
Contingent / Employees * 100
Segmentation
Metric Options Description/Formula Grade (A,C,F)
Compensation
Total Compensation per • Function, location, line of business, • Average total compensation per _
FTE occupational group, tenure, full-time equivalent employee:
performance rating, gender, ethnicity Total Compensation / FTE
Direct Compensation per • Function, location, line of business, • Average direct compensation per full- _
FTE occupational group, tenure, time equivalent employee: Direct
performance rating, gender, ethnicity Compensation / FTE
Performance-Based Pay • Function, location, line of business, • A relative measure of the level of _
Differentials occupational group competitiveness of compensation
packages: <To Be Established>
Segmentation
Metric Options Description/Formula Grade (A,C,F)
Employee Satisfaction with • Function, location, line of business, • A relative measure of the level of _
Compensation Packages occupational group employee satisfaction as it relates
to compensation packages: <To Be
Benefits Established>
Benefits Expense per FTE • Function, location, line of business, • Average benefits expense per full- _
occupational group time equivalent employee: Benefits
Expense / FTE
Benefits Expense Type • Function, location, line of business, • Benefits expense by type as a _
Breakdown occupational group percentage of total benefits: Benefits
(Benefit Expense Rate) Expense. [Type] / Benefits Expense *
100
Employee Satisfaction • Function, location, line of business, • A relative measure of the level of _
with Benefits Packages occupational group employee satisfaction as it relates to
benefits packages: <To Be
Established>
Segmentation
Metric Options Description/Formula Grade (A,C,F)
Average Vacation Utilized • Line of business, job level, • A relative measure of the level of _
occupational group employee satisfaction as it relates
to compensation packages: <To Be
Established>
Benefits Expense per FTE • Function, location, line of business, • Average benefits expense per full- _
occupational group time equivalent employee: Benefits
Expense / FTE
Benefits Expense Type • Function, location, line of business, • Benefits expense by type as a _
Breakdown occupational group percentage of total benefits: Benefits
(Benefit Expense Rate) Expense.[Type] / Benefits Expense *
100
Employee Satisfaction • Function, location, line of business, • A relative measure of the level of _
with Benefits Packages occupational group employee satisfaction as it relates to
benefits packages: <To Be
Established>
Average Vacation • Line of business, job level, • Vacation time utilized as a percentage _
Utilized occupational group of total vacation time entitlement:
Vacation Utilized / Vacation Available *
100
Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 75
Workforce and Compensation Benefits Metrics
Segmentation
Metric Options Description/Formula Grade (A,C,F)
Organized Labor Rate • Line of business, location, function • Percentage of total employees _
participating in collective
bargaining agreements:
Employees Belonging to Unions /
Total Headcount
Grievance Factor • Line of business, location, function • The average number of grievances _
per employee: Grievances /
Headcount
Segmentation
Metric Options Description/Formula Grade (A,C,F)
Staffing
HR Staffing Mix Ratio • Location, line of business • Number of human resources clerical _
and operative full-time equivalent
employees for every one human
resource managerial and professional
full-time equivalent employee: HR FTE.
Clerical & Operative / HR FTE.
Managerial & Professional
HR Promotions Rate • Location, line of business, tenure, • Measure of upward mobility with the _
performance rating, gender, HR function: HR Promotions / HR
ethnicity Headcount * 100
Segmentation
Metric Options Description/Formula Grade (A,C,F)
HR Mobility Rate • Location, line of business, tenure, • Measure of total movements within _
performance rating, gender, ethnicity the HR function: (HR Promotions +
HR Lateral Moves) / HR Headcount
Financial * 100
HR Expense per FTE • Location, line of business • Average human resources expense _
per full-time equivalent: HR
Expense / FTE
Segmentation
Metric Options Description/Formula Grade (A,C,F)
Performance _
Payroll Expense per Pay • None • Average payroll expense per pay _
processed: Payroll Expense / Pays
Processed
Error Rate
Segmentation
Metric Options Description/Formula Grade (A,C,F)
Investment
Recruitment Cost Rate • Location, line of business • Recruitment expense as a percentage _
of HR expense: Recruitment Expense
/ HR Expense
Percentage of Hires • Location, line of business, job • Number of hires receiving a sign-on _
Receiving level, occupational group bonus as a percentage of total hires:
Sign-On Bonus Hire.Receiving Sign-On Bonus / Hires
Sign-On Bonus per • Location, line of business, job • Average sign-on bonus per employee _
Employee level, occupational group receiving a sign-on bonus:
Expense.Sign-On Bonus /
Hire.Receiving Sign-On Bonus
Segmentation
Metric Options Description/Formula Grade (A,C,F)
Retention After Sign-On • Location, line of business, job level, • Retention of employees _
Bonus occupational group receiving a sign-on bonus:<To
Be Established>
Effectiveness Productivity
On-Time Talent Delivery • Location, line of business, job level, • Measures how closely talent is _
occupational group delivered by the required date:
Total Days (+ or –)Deviated from
Needed-By Date / Hires
Time to Fill • Location, line of business, function, • Average calendar days to fi ll a vacant _
occupational group position: Days to Fill / Hires
Internal Time-to-Fill Ratio • Location, line of business, function, • Average calendar days to fi ll a vacant
occupational group position with an internal hire: Time to
Fill.Internal / Hires.Internal
Requisition Response • Location, line of business, function, • Average days from requisition being _
occupational group raised to when it is posted: Days from
Requisition to Posting / Requisitions
Applicant Conversion • Location, line of business, job • Percentage of applicants that are _
Rate level, occupational group converted to a new hire: Applicants /
Hires * 100
Interview Conversion • Location, line of business, job •
Number of interviews required to _
Rate level, occupational group generate a new hire: Interviews / Hires
* 100
Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 81
Staffing Function Metrics
Segmentation
Metric Options Description/Formula Grade (A,C,F)
Referral Conversion Rate • Location, line of business, function, • Referrals hired as a percentage _
occupational group of total referrals: Referrals Hired
/ Referrals * 100
Offer Acceptance Ratio • Location, line of business, function, • Offers accepted as a percentage of _
occupational group offers extended: Acceptances /
Offers
Top Candidate • Location, line of business, function, • Positions filled with the top choice _
Acceptance Rate occupational group candidate as a percentage of new
hires: Top Candidate Hires / Hires *
Effectiveness Quality 100
New Hire Failure Factor • None • The average number of new hires that _
turn over within a given time frame
(e.g., 6 months, 12 months): New
Hires.Early Departure / New Hires
Source: Closing the Strategy-Execution Gap in HR, Corporate Leadership Council
Copyright © 2005 Deloitte Consulting LLP. All rights reserved. For discussion purposes only. 82
Staffing Function Metrics
Segmentation
Metric Options Description/Formula Grade (A,C,F)
Segmentation
Metric Options Description/Formula Grade (A,C,F)
Investment
Training Expense Rate • Location, line of business, function, • Referrals hired as a percentage _
occupational group of total referrals: Referrals Hired
/ Referrals * 100
Training Investment per • Location, line of business, function, • External acceptances as a percentage _
Employee occupational group of external offers:
Acceptances.External / Offers.External
* 100
Training Days per • Location, line of business, function, • Positions filled with the top choice _
Employee occupational group candidate as a percentage of new
hires: Top Candidate Hires / Hires *
100
Segmentation
Metric Options Description/Formula Grade (A,C,F)
Investment
ROI of Training • None • ROI of training: <To Be _
Established>
Segmentation
Metric Options Description/Formula Grade (A,C,F)
Investment
H&S Expense per FTE • None • Health and safety expense per _
full-time equivalent employee:
H&S Expense / FTE
H&S Incidents per 100 • None • Health and safety incidents (lost time, _
FTEs deaths, injuries and diseases) for every
100 full-time equivalent employees:
(H&S Incidents / FTE) * 100
H&S Incidents per One • None • Health and safety incidents (lost time, _
Million Workhours deaths, injuries and diseases) for every
one million hours worked: (H&S
Incidents / H&S Hours Worked) *
1,000,000
Segmentation
Metric Options Description/Formula Grade (A,C,F)
Average Time Lost per • None • Average working days lost per _
H&S Incident health and safety incident:
Working Days Lost / H&S
Incidents