How to develop an HR scorecard

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In keeping with the spirit of making the HR function more valuable and effective for organizations, I will focus today’s discussion around the development of an HR scorecard.

The HR scorecard is built on the principle of the balanced scorecard. It’s a cockpit view of a department/company, Building an HR scorecard will help determine what are the top 20-25 HR objectives that an HR department needs to be focused on, what are the performance measures and targets to achieve those objectives, and what are the top 10-15 projects that need to be done to deliver the agreed to strategic objectives.

Since the HR department is not a revenue generator, the top most perspective for an HR department’s scorecard is meeting internal customer expectations. Customers from an HR perspective could be unions, employees, line managers and senior management. What are the key customer expectations that the HR department needs to meet during the course of the year? They could be around managing career planning, compensation, training and skills development, etc.

The second perspective is financial. In order to meet the above customer expectations, what are the key financial objectives that an HR department could have? These could be around meeting its own internal HR budgets, ensuring that compensation and manpower budgets are on target, and also potentially ensuring that the IT system investments in HR have resulted in the efficiency gains.

In order to meet customer and financial expectations, HR needs to excel at key processes. There could be 50 processes within HR, but from an organisation’s standpoint no more than 20 per cent may be mission critical. The idea is to identify those and ensure they are excelled at. These could be recruiting, performance appraisal, change management, etc. It depends where in the company is its current life cycle.

Lastly, the HR department itself needs to have the right human capital framework and technology. Human capital framework includes having the right structure, clarity in roles and responsibilities, compensation, competencies, and the appropriate reward and recognition framework. On the technology side, over 80 per cent of HR transactions are administrative in nature and there are multiple IT systems available to automate those functions.

Once the HR head has identified the top 20-25 HR objectives using the above framework it is important to identify 20-25 performance measures to track HR performance. While HR tries to make employees performance and target oriented, it often fails to recognise that it has the same responsibilities for itself. Reporting performance once a month to senior management helps demonstrate performance of the HR organisation.

In the Middle East and Asia, finding quality HR professionals is always a challenge. By putting a HR scorecard together, one ensures that the HR team is all focused on delivering commonly identified objectives. The ensures that a average quality department delivers significant value.

While the HR will never be a revenue generator, by building a performance oriented HR organisation, it will ensure that the revenue drivers in the organisation have the right support to drive enterprise financial performance. And for once, HR will not be considered to be theoretical and blue sky oriented, but a true support organisation.

Author | Sanjiv Anand

For a further conversation on this subject of Cedar View or how we may be able to help please email Sanjiv Anand, Chairman, Cedar at sanjiv.anand@cedar-consulting.com

 

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