DESIGNING AND IMPLEMENTINGAN HR SCORECARD

Garrett Walker and J. Randall MacDonald

Verizon HR has effectively designed and implemented a strategic management system, ivhich ishased upon the Inilanced acurecard model of Dr. David Norton and Dr. Robert Kaphiii nf}lanard Business School. The HR Ralanced Scorecard was conceived with New Economyorganizational dynumics in mind. The scorecard uses a broad range of "leading and lagging"indicators—overall strutegy. operational processes, customer percepti<nis, umlfinanciak to evubi-ute the effectiveness ofHR initiatives to the bottom line. The HR Balanced Scorecard providesthe means to monitor workforce indicators, analyze workforce statistics, diagnose workforceis.siies, calculate the negative financial impact, prescribe solutions, and track improvements.© 200/ John Wiley & Sons, Inc.

Introduction

Most business leaders will agree that the em-ployees in tht'ir compiinies—their "humancapital"—are one of the key drivers ol theircompetitive advantage. Some leaders even goso far as to state this publicly in their annualreports. It is widely believed that in the ne.\tten years the primary' source of competitiveadvantage for most husinesses will continueto increasingly focus on the talent within theorganization, which means that the ahility toeffectively manage the employee talent withinthe organization is heeoming more crilicalevery day. While management makes decisionscontinuously about how to invest in humancapital, lew companies have an effective pro-cess to measure the value created by this "mostvaluable" asset.

What if HR could effectively manage thevalue created hy thorough investments inemployees? Managers know nov\ hov\ much

is paid to reward, hire, train, develop, andpro\ ide benefits to employees. What manag-ers need to know, however, is where the in-vestments are most effective and valuable.Should the business expand the incentive ptiyprogram? Should they outsource safety ad-ministration? What is the most effective useof training dollars? How much should hespent on reeruitment? Should employee ser-vices be in-sourced, out-sourced, or co-sourced? Should executive beneh strength hebuilt or bought? What is the eost in humancapital terms to break into a new market? Isthe iicquisition target d good lit tind tloes itadd or dilute our competitive advantage interms of talent? Do the current investmentsin employees match the strategic objectivesof the business? Is the HR organization apartner with the husiness to manage our em-ployees as assets?

To answer these questions, managementneeds more information not just simple cost

Human Resource Management, Winter 2001, Vol, 40. No. 4. Pp. 365-377'L 2001 John Wiley S Sons, Inc.

HlMW RESOLHte Winter 2001

figures. We in management need to track ourfinuncial results while monitoring progress inde\i'Iopino our human capital and ac(|uiringthe talent and capjibilities we will need lorbusiness success. The Balanced Seorecard(Kiiplan & Norton, I99f>) pro\ ides a systemthat leverages the traditioniji finaneiiil andefficiency measures we have tuailahle cur-rently for Human Resources with metrics olperformance fr()m three addilioniil perspee-tives—eustomers, internal husiness processes,and learning and growth.

Background

In 1996, J. Randall MacDonald, Executive\1ee President—Hunnin Resources o( C,T\LCorporation, v\as facing the biggest chiillengeof his career—to create the HR strategy andplans to support GTE's worklorce through amajor husiness triinslormation. Ihe leletom-munications Act was transforming the regu-lated world t)f protected markets and estah-lished profit margins into a turbulent, highKcompetitive husiness environment tor the tele-communications giant.

Historiciilly, GTli had emphasi/cd a locuson infrastructure quality and customer ser\ ice.Now CiTE s senior husiness leaders were pre-

Projected Industry Revenue Shift

paring lo transform the company into a mar-ket-focused organization that would he thecommunications provider of choice to targetedcustomer markets. Signiticant empliasis onnew markets and additional services was partofthe strategy. The teleconimunicatinns worldfollowing deregulation was turhulent. Fech-nolog) acceleration, emerging customer needs,and data and \ ideo transmissions were chang-ing how business operated. GTE s customerswere ht'coniing price sensitive and eould nowdemand superior service and advanced sup-port. The competition was in price, products,and technology New mergers and partnershipswere heginning to oeeur; brand preferencesand aggrcssi\e tactics from nontraditionalcompetitors were all part of the mix. G I tBusiness Strategies were glohal in scope andtranslated directly to clearly communicatedtargeted husiness results (see Figure 1).

Workforce Environment

.Additionally, the workforce environment wasdramatically different and highly competili\ e.CME faced the lowest United States' unem-ployment in 24 years. The employer-em-ployee relationship had changed; employeeswere less Mkely to remain with a single em-

Leadership 2000 Findings

Our leadership 2000 findings project

that by 2006. we wili emerge as a

market-ieading nationwide provider of

telecommunication services with revenue of

approximately $58 billion.

Business Goals*

• Revenue growth of 10% (compared to

acluai revenue growih of 7% m 1996

and an average ol 2% in 1993-1995)

• Earnings per share growth of 13%

to 15%.

• Increase of in-franchise wallet share

from 31% to 38%.

• $5 to S6 billion in new businesses-

outside o' our traditional services.

•This IS a soaosnol ol *fiere we were in 1997. Because this is a fasl-moving mduslry. Ihings hare clearly changedsnca ihen. but itie HR Balanced Scorecard is designed lo adapt anil produce value m a cofiimuously cnangmgenviranment. Fot currerl informatJon link lo htlil /; wwft.ven^on com

Figure 1. Targeted business results.

Denignitig and Implementing an HH Scorcciinl 367

ployer: specialized talent was hard to find;employees e.xpected more work/lile halanee;and the diverse talent pool most sought haddiffering interests and needs. Creating thevalue proposition to acquire the talent to drivethe husiness was more difficult to define andchanged rapidly.

HR Challenge & Strategy

The Human Resource Challenge was to trans-late the new business strategies and targetedhusiness results into human capital needs.Recognizing that GTE's employees were a eriti-ta! component in aehiev ing the husiness goals,GTE HR leaders inventoried the current skillsand abilities that would provide value hoth inthe short-term and into the future. HR pro-fessionals then identified the critical peopleimperatives necessary to grow that talent toincreiise the value delivered hy the workforce.Gib! would need new behaviors, actions, andcapabilities to drive the business results.

To foeus the H R organization on the achieve-ment of these people imperatives, GTE developeda new HR strateg\' to support the specific peoplerequirements o! the business strategy. This HRstrategy was defined in five strategic thrusts;

J. Talent:enlarge the talent poolinvest in employees developmentensure diversity

2. Leadership:establish a system to assess high-pu-tential employeesprovide coaching and developmentestablish accountability and rewardsfor leadership hehavior

3. Customer Service & Support:create an environment that fostersemployee engagementincrease business intelligence withinthe workforceprovide solutions to retention issues

4. Organizational Integration:create hetter systems for knowledge

managementenhance union partnerships

5. HR Capability:develop core HR competenciesidentify key talent for growth and de-velopment

invest in technologyinvest in employee self-servicebetter understand the relationship ofHR actions to business outcomes

These elements and their interrelation-ships can be seen graphically in Figure 2.When asked how he expected to implementsuch a comprehensive transformation for thebusiness from a people perspective,MacDonald said:

My biggest problem is tommunicating andreinforcing tbe linkage between HR iictionsiind business results. 1 be business has aclear strategy and targeted business results.Tbf HR Strategy is directly linked to tbeneeds ol the business and expressed in termsof HH strategic thrusts. What I need now isto effectively communicate and execute onstrategic intent, motivate and track perfor-mance against organization and businessgoals, and to align HR actions vvitb busi-ness results.

The Team

A newly formed HR Planning, Measure-ment, and Analysis team was created to de-sign and implement a tool that would quan-tify HR's contribution to the husiness. TheBalanced Scorecard model, which was atthe time a leading edge corporate perfor-mance assessment tool, was selected as theframework to adapt and build an HR Mea-surement model.

J. Randall MaeDonald served as the se-nior executive champion tor the HR mea-surement initiative. This role was critical tothe success of the project. RandyMacDonald actively influenced his seniorleadership team within HR to secure theirbuy-in and to hold them accountahle forsupporting the project.

The newly formed Planning, Measure-ment, and Analysis team included a directorand four employees solely dedicated to thedesign, development, implementation, andoperation of the HR Measurement System. An"HR Measurement core team" included eightsubject matter experts representing each oi thefunctions within HR and the husiness units.The core team members were instrumental in

Hi M-\y MwAcr-MFsr, Winter 200!

HR Strategic ThrusI 1Taient

' Grow the talent pool' Invest in our people• Provide growth

opportunities' Leverage diversity> Buiid an environment

tnat fosters creativityand innovation

HR Strategic Tiirust 5HR Capabiiity

• Invest in our growthand deveiopment

• Organize to deiiverexcalient service

• Enhance technoiogicalcapabiiities

^ ITThe Challenge ^ ^ ^

Positioning Verizon to become aLeading worldwide player in

TelecommunicationsHR Strategic Thrust 2

Leadership

' Invest in leadershipgrowth

' Define ieadershipcompetencies

' Structure rewards tofoster ieadershipbehavior

HR Strategic Thrust 3Customer Service

And Support

' Create an environmentthat supports empioyesengagement

' Buiid service capablitty

HR Strsiegic Thrust 4Organizationai

IntegrationLeverage totai - GTEcapat)ilitiesPartnership with ourunionsFoster business unitteamingStructure rewards tofoster integration

Figure 2, Delivering to the business.

assLiring alignment of the measurement modeland Lommunicatinfj and training HR depart-ments on the applications and uses ol the HRScorecard (see Tahle T).

The HR Balanced Scorecard

The Balanced Scorecard, as articulated byKaplan and Norton (1996). is a conceptualmeasurement model for assessing anorganization s performance. This modelcomplements financial measures ol past per-formance with measures of drivers of futureperformance. Unlike other accounting mod-els, the Balanced Seoreeard incorporates valu-ation of organizations' intangible and intellec-tual assets such as:

—High-quality products and services—Motivated and skilled employees—Responsi\e internal processes—Innovation & productivity

1 he HR Scorecard approach used slightlymodifies the initial BaLniced Scorecard model,which at the time was most commonly usedat the corjiorate level. The approach, however,remains focused on long-term strategies and

clear connections to business oiitconies.1 he HR Balanced Seoreeard includes four

perspectives:

— Strategic Perspective• Measures our success in achieving the

five strategic thrusts. Since the basis(or the HR Balaneed Scorecard isachieving husiness goals, the alignedHR Strategic objeetives are the driv-ers for the entire model.

— Operations Per.'ipective• Measures HR's success in operational

excellence. The focus here is prima-rily in three areas: staffing, technol-ogy, and HR processes andtransactions.

— Customer Perspective• Ineludes measures oi how HR is

viewed by our key customer segments.Survey results are used to track cus-tomer perceptions of service as wellas assessing overall employee engage-ment, competitive eapability. and linksto productivity.

— Fintnicial Perspective• Addresses how HR adds measurable

financial value to the organization.

Designing and Implemeiiihi^ tin HH Scorea-ird • 369

Wbiit Is a Core Team Member?

• Common link: Selected hy I'ltnctional \ 'P

• knowledgeable on key processes within \()ur HR luiictional areti

• Dedicated to building awareness and aeeountabilily touai-d iit.hie\in}i belter

• locused on measuring vvbal matters to enable better decision making and resource allocation

Key Responsibilities

• Attend Core leam meetings

• Communicatinji lo your lunclion ibe message of why we are measuring HR

• Eslablish SMEs wilhin xotir fiiiiction

• Identify key processes within your function

• tstablish key perlbrmance indicators/measures reflecting key processes

• Submit data witbin designated timeframe

• Responsible for overseeing target setting process for your functional area

Sourct'i Stephanie Field, Vcri/on CnminuniLatiuns

ment model. Defining the measure-ment criteria and seoreeard measures,establishing targets, defining the pro-cess for colleeting and tracking results,and creating the eommunicationsstrategy are the key deliverables in thisphase.

• implementation operationalizes theHR Scorecard from the drawing hoardto a management tool for HR to as-sess performanee and \alue added tothe business. Data eollection, resultsreporting, evaluation, and analysis allcome together as the scorecard isimplemented. Communications andtraining are delivered to the HH orga-nization as the HR Scorecard rolls out.

Once the team was selected, and the mis-sion and objeetives were established and com-municated, the work to link Business Strategyto HR Strategy began. Figure 3 illustrates theinitial model used to align Business Strategyto IIR Strategy and Actions and lists the spe-cific outputs within each step.

Beginning with a clear understanding ofthe husiness strategy and goals, the HR teamworked with the husiness leaders and HR lead-

including measures of ROI in train-ing, technology, staffing, risk manage-ment, and cost of service delivery.

The Process

A deliberate approach to the project wasclearly defined and communicated to eachmember of the team and to the 11R organiza-tion. The jiroject v\as established and orga-nized into four major components. Phumingand Alignment, Assessment, Development, andImplementation.

• Planning andAlignment set the foun-dation for the project. Project plan,objectives, and milestones estab-lished. Team education and trainingon business performance manage-ment, the balanced scorecard meth-(tdologv, and its application to HRmeasurement.

• Assessment focused on understandingwhat we currently measure to evalu-ate HR performance and to assess therelative value to the husiness.

• Development begins the actual pro-cess of designing the HR measure-

HuMW RfsouHCli MAS.viliMl-:sT, Winter 2001

Business strategy

"What are ihc siraiegic guaisnf Ihe husiness?"

Workforce Requirements

"Wiifll must HR deiLverto cnabie liic business to

achieve its goais'.'"

Understanding (he Business

Output:Clearly defined biisinesi goals

Delermining HR Detiverahtvi

Oiilpul:C 'ompetitivc Capability RL'quirc

HR Strategic Focus

"Whicii straiegies and action5wiilcnabieHRloddivtrbusiness requirement?'"

Transtaling HR Deliveratita. iiilii tiR Strategy

Olilpiil:Strategy mapLinkage Model

Detailed Measures

•"HLIW can HR measureiieiher it is executitiE v-e

for Lhe businL'ss','"

lde$iiifymii Detaited Metrics

Output:Metrin MmklMetric,): nuip

Figure 3. Initial model used to align HR Strategy and Actions \o Business Strategy.

ers to determine the key questions to be an-swered for the business and to determine whatkey drivers of the business would translate intoclear people requirements. The outcome wasan understanding of what questions need tobe ansv\ered and of the competitive capabili-ties required for current and future businesssuccess. This provided the detail to build astrategy map which would support the designand development of the HR BalaneedScorecard. Figure 4 describes the proeess fol-lov\ed to determine people requirements andbusiness drivers.

The people requirements defined the HRStrategy that then translated into specific HRinitiatives that should directly support the at-tainment of HR Strategy. Having this alignmentallowed us to develop a strategv' map which il-lustrated the cause and effeet linkage betweenI IR Strategy and business objectives. Using thestrategy map as the guide, we were then ableto evaluate the strategic objectives in terms ofmeasures and outcomes (see Figure 5 on page372). We could then further refine these intolagging measures (which tell how well a eom-pany has already done) and leading measures(which are indieators of future performanee).

In addition to aligning the scorecard mea-sures to the husiness objectives, we developedcausal links between the objectives and the

measures. For example, one of the financialobjectives. Minimize HR Cost, was ex^ieetedto be an outeome of the HR Strategy. To cre-ate a clear line of sight across the perspec-tives, we linked Minimize HR Cost back toobjectives in the Customer, Operations, andStrategic Perspectives that were performancedrivers for these outcomes. This cause andeffeet relationship described that if HR inte-grated the organization, implemented technol-ogy enablers and optimized service deliverythrough streamlined processes the costs forservice delivery would decrease and reduceoverall HR expense.

Once we had defined the link from ourfinancial objectives, we now focused on thecritical human capital requirements definedby the business. Previously our HR Perfor-mance measurement had focused solely onimprovement of administrative and transac-tional efficiency such as the error rate in em-ployee benefit processing and the number oftraining hours delivered per month. Now thefoeus was expanding to inelude new processesfor the HR tirgani/ation to develo]> best in classserviee delivery and increased employee valuewhile ensuring a focus on cost and value.

As v\e developed the measurement modelto support the business s people requirements,the process naturally led to objectives and

and Implementing an HR Scurecard

Understanding the Business

IIR puts loyeihera business strategy document capturing ihc major insights agathered ilunny lhe acquisition of business intelligence

HR Brainst:Qrniin}> Sessions

•"Whiil people ouleomesmust we produce to help thebusiness deliver againsl iisstrategy and goals'?"

List of HR Outcomes

, HR draws up a list of lhe skillsI needed in the or^ani/aiiiinI now and in futtu-e

Line Survev

DHR L-onduets a stirvey of linetweeutives. asking "Whal kindi)f peopk', skills and si:rvicesJo you need from HR?"

List o( HR PerformanceRequirements

Lthe provides a series ofjrj[r questions that eaptures how

Lhe line will assess whetherHR is delivering value

Comparison and Consolidation ofHR and Line Input

• H R cheeks for overlaps andfonlradielions between its own and

,̂ - . the line's input' - HR eonduets "reality eheek";

do lile required oulcomes/dcliverablcs niaji back lo businessstrategy?

Result: List of HR deliverablesI ; HR draws up list ot total people anil

set^iee requirements that providethe basis for the measurement niiidi;!

; Vi.Ti7iin Communiealions and Co ; l.eailership Council re.si.'art:h

Figure 4. The people requirement and business driver determination process.

measures forTalent, Leadership, and Organi-zationai Capability (see Table II). We recog-nized our employees would need to expandtheir skills and increase their productivity toprovide the new products and services that ourbusiness would provide. Our sales represen-tatives needed to be able to serve as our cus-tomers'telecommunications solution provider.Our customer service representatives also\\ ould need ready aeeess to customer accountinformation and be trained to quickly recog-nize possible customer needs and to commu-nicate optima! mixes t)rproducts, services, andprice plans to customers. We needed new in-centive systems to encourage the new behav-ior and skill acquisition as well as retentionplans for eritical skill employees. Providingworkforce solutions and ensuring alignmentand a strategy-focused workforce all contrib-ute to a more capable and skilled employeepopulation, who will then drive profitability.

Historically, HR had a difficult time com-municating to the business and maintainingtheir focus on the investments and initiativesdesigned to build employee eapability. Strate-gic skill development, leadership development,and employee development programs were alldiseussed with business leaders and generallyaccepted as valuable. When financial pressurewas applied, howcv er, these types of programswere the first to go. Now with measures, whiehlink leadership development with competitivecapability, people can see the relationship be-tween investing in these programs andachievement of long-term business goals.

Early Results

An early benefit of the HR Scorecard workwas that it provided a process for the seniorHR team to focus on a clear and commonobjeetive: to establish a common strategy tor

RtSOVIHk MAMCEMIM . WinUT 2001

Financiol

Customer

OrganHeoilh 4 Com pori rive

Capobrlily

Operotions

•-:---? -i- -\Sirategrc

Enable o PsrformancaBai«d Culture/

Climcrte

I Gfow thfi TolenI PoolSelect. Aisimibie & tKey Talon IOtgonijodonal BeneHi Polon'iol DovBtepm

' Reduce Turnovoi

ServcB Deliver/ Dniign• OrgoniiolionolC hongo Skillj

- Staffing EipflOoiionsDesign Inlet veniioos

. Provide Koinferconient• Rolationship Building• Hfi Planning• Performance Monogoment• Wbrllocce Planning

• CulHure thai Va\ueiRe t u b

Open Comrtiunicahoru• Climate thol whibi t t i

Flaxibifity. Clarity

Standards

ExWrnol Trend Dole- HR Ben

PioWieei/Bi eoklhiooghiInlernol Employe* DaW

D h

Invest m Leadership Growthleoderihip CompeKncieiStructure Rewards lo Foster

' Orgaoiia' ionol Sfrolegy• Industry Tronds• Intogroted Tectinology

InlrasiriiCturs ISAP]

Figure 5. GTE linkage model.

Tli linkage model

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S4 •

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Objectives

Moximise Sharat)olde( Volue

Maximize Human Copital Performance

Mirijmiza Human Keiouices Costs

Business Portner [Strategic Support)World CloM Standards

Ratpontiva Quality Servica

Low Cost Provider

Align HR Ptanning with Businejs PrioritiesProvide Quality Con iulla live Advice

Ensura a Sliategy Facusad ViferkForce

Develop & En ho nee Warld ClossProgromsOptimize Hfi Services ttiroughAltarnottvB Delivery Channels

Copability [Build Strotegic Campetanciat]Talent (Salaci, Asiim.lote 4 Tram)

Parformonce Bosed CuThJre/Climate

Orgonnational Intagtatton [Informationfor Dacision Making)Leadership

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Enterprise Measures(Lagging Measures)

Total Shareholdai RaturriRevenue per EmployeeHR ROI [index]Total HR Cost/EmployeeBudget Voriance

Rating oo Corporate Service AgreamanisRanking of HR PracticeDavelopmenl/Audit [vs Benchmork)Employee Satisfaction Survey RasolliBenefit Canter Satisfaction ParcantHR Cast Foctor Indices

% of HR Strategic Plans Impiamenled% of HR Customized RecommendationsImplemented% Productivity Improvament Gods EsKiWished% Compansotion Schemes Aligned lo StrategyBenchmofktng Ranking% Programs ExecutedCoi l Par betivety Channel - HRIritaroction, Automation, OutsourcingCycle lime to FillCost per Traniactiori

ID Parti Cl potionVoluntary Separation Rate/Seporotion Cost

Rating on Viewpoints SuiveyOrgan nol i oral Haolth IndanRapoftirig % accurate 1V RaquestTurnaround time far od hoc RaguastLDP BanctistrengthDiversityExecutive Cooching

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SBU Meoiures(Leadinq Measures)

Human Capital Valua Added

Tatoriabor Cos) ParcanI

Competitive CapabillV l"d«K

Employee Engagement IndexComporotive Analysis ResultsHi Tech. RBOC's, IT PeergraupsHawitt Averoge Time to RejolveFidelity Percent Resolved 1 st CollCOSI of 5arvica v j . Benchmark

Time Sjjent with Enaculivas% Service Covaroge/Client

% Porticipation in Goal Setting Pioces»Linked to StrotegyProgram Davoiopmefil Cycla TimaKey Initiative Irockirig vs. MilesianesHR Technology ROI & Payback Period% Troining Delivered • CBT

Critical Skill Attoinment

% New hliras Retention 6 mif is/ l yr RatioTar||aiad Workforce Churn RotaIntarnal Promotion Rote

Dota Availability

High Potentiol RetenticmOffer Acceptance RateExecutive Retention

mi HR Scuwcurd

HR in support of business objecthes. Every-one generally iigrt-ed on a hif̂ h level stratejiy:"Be a partner to tbe business'. Barely, bow-e\er, did all of tbc HR leatlersbip agree on bowto implement the strategy beeause eacb per-son had a tlilTerenl ()|)inion about what bein^business partner really meant and wbom ex-.telly tbe eustoiner was. Taking strategy andtranslating it into a measuremenl and man-agement model gave specific and operationaldefinitions for being a business partner andtargeted business customers.

Communiciiting the HR Scorecard

Communicating tbe HR Scorecard across tbeHR organization and the business was criticalaspect olsuccessful implementation (see Kig-ure 6). Ibe development process increasedlearning and understanding but was only vis-ible to tbe top leaders within 1IM and the husi-ness. lo use tbe I IB Seoreeard to lirive tbangetbrougbout the organization, tbe Planning.Measurement, and .Analysis team developed apbased approach to communicate and train

Figures 6a and 6b. Understanding the balanced scorecard.

6a

6b)

DoHan and $*nS*

Tracking lc«y linanCKd HR mWrict anablH u> to

OiH HG plaiu and program* arm compalOur HR dallvary t i coit •HuclivaHR il monaglng (ho coil of tumovat/chuVvrizon i i ganlng raluin or invatlmanl in

Fol socK p«ripacliva. taUI to tarn a companion iptfrForm compared to or

1 ore d«picl*d gioptiically Thiivfml mor* »atily and how rho

allowi

Staffing Activily71Th« traHing loclior rsptaHnH metrici which rsflocl Vorlion'i hiring octivtfyHiring i i plannsrf rtralegkally to luppori iha •upanbion gooli D( our butinaitai th«y link lo itaHing qnd arganizalionol octivitiu Tranuiclion volumai andcoit par hira maaiuiai liock how sKwrnvaly we ar« abl* fo maa! iha butinaitneadi arvd aitF'̂ '̂altaAA OrowiH rote ond ftaporol^ofi roMi hava Qvt impocton iha laval at tlaftng ond Idol hiring eoUi Planning iha cjctioni nrKtmoaiuring Iha odiviFy arA aKpanie ol tha staffing opafolioni ar« imporlanlilTotsgic buiinaii aciioni

Th* pvrpai* ol o budgal w >o pfovida a p(o<e» of pkonning ihs octiviliai a(<h* HR ofganiiol'ati'i raiponiibillly c»nl«t« lot iha coming yaor Thit lapartcomporai Cu(i*n1 raiulti ta iha plannsd budg*! Thii companion DI oclualpsrformanca with budgalad pailormanca piovidai a 'rad Rag', it diraciiottsnllon to aiaai whaca action may ba naadad An onalydi af iKa vnriancabelwaan actual and budgsled rasulti may halp ideriltly a ptoblwn arao Ihotn*«di attantiofi; revKil an opiportLiniiy not piWiclad in ifia bixig«l procau.ravaol ihot iha anginal budgat woi ijnivilithc <n soma way

A performanc* maaiuramant lyilam luch ai tha HR Bdanead Scoraccrd complimantt finarcipl maoiuras ol pail parlormar>ca with maoturoi oldrivmi of Iwlvfa parlorrnanca

Unlilw Irodtlional tinanciat accounting m<idali, iha HR Babncad Scoiecord ir^oiponiMi voluatian of i company') iniongibk and inta l̂witual oua»,luch ai higlvquality producli ond Mrvkai, moiivalad and ikillad ampJoy**t. laiponiiva mlstnol procauei, latiihod custornari

Implsmanhng an HR maoiuramant lyitam anablai ut ta diractV I'nlt the HR itralagy anii vision lo kay HR procati ond parformonc* indicolori ThaHR Uod«r»hlp taom will u » rha HR Soloncad Scuraeard lo battar undBntond whal i> truly driving HR luccali

Troeking ond poiHIvaty influancing laparalion in ourworktarca l i crillcal lo ptoducllvity ond axpanuconrro' High lufnovar raiuhi in lowai pfoduct^vlly,highar Iroming. iMffir^ ond occupoVionol haolihcoih. Iha Impocl i i ocmu tna booed ortd offact*buiinau proHtobJlliy.

Ths Verizon HR Balancsd Scorscard meaiurat tha HR orgoniioiion by loutparipactivai.r

Tha itralagic partpacliva includai objacKvai ond mwuut** cWvad fraoi tha HRKinction't viiion ond Uiolagy - in our COM, lh« diraci octioni which lupportochieving buiinaii gooli MaoiUTSt luch ot Laadarihip Banchitranglh, GloiiCailing, Parcant Divertity Raciuilmanl halp ui Farui on our ilrologic drivari

CuiMmar Panpadrva

Includai mvaiurai of how HR ii viewwj by Iti kay cuiKxnafi How wall do w*do our (ob? To oniwar ihil qi^ilian wa includa mvotureb luch oi E^nafitlVendor Cuitomar Saliiloction ond Employe* Sa'vicai Cuilomat Soliifoction

xluctai maaiurai ol altKtivaneu of HR Mrvic* dabvary k> #ie otganizotjI g , cycle time, training dallvary, poificipotion tatw, BTan, dawn nm»)

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Source: (iurrftt \cri/on Cdiiimuniciitions

374 RESOUBCEMANAGEMENT, Winter2001

the managers and tbeir departments on tbisnew management too!. Tbe emphasis on thescorecard was on tbe value tbe tool providedin communicating strategy and alignment totbc business. It also sened as a tool that pro-vided proactive solutions to employee issuesbefore a negative impact could occur to tbebottom line. I'erlormance measurement wasalso an essential component, und all in tbeHR organization bad tbcir incentive compen-sation tied to tbe results ol tbe IIH Scorecard.Training and communication material wasused extensive!) to reinforce understanding ofthe new management tool. An inleracti\oteaching tool was developed to train HR pro-fessionals to use tbe !!R Scorecard results inproblem-solving workforce issues.

Measures do not manage, and simplytrackingresults wasnot tbe only intended useof tbc MR Scijrecard. Tbc value was to usethe information provided in the scorecard andtake action to influence and improve businessperformance; tbis was the real value added lor

this tool. For example, one of the most impor-tant areas to manage in terms of cost is em-ployee turnover or "churn" . Turnover,particularly w itbin target front-line workforcecenters, is critical to productivity and expensecontrol. Higb turnover results in lower pro-ducti\ity, bigber training, and staffing and oc-cupational healtb costs. The impact is acrosstlie board and affects business profitability.

Starting in 1^98, witb a new disciplinedprocess using tbe HR Scorecard. HR profes-sionals tracked and analyzed turno\cr statis-tics, determined reasons for turnover,calculated tbe negative financial impact, pre-scribed solutions, tracked improvementtrends, and sbowcd dramatic results. In part-ncrsbip witb the business leadcrsbip in tar-geted call centers, significant costs wereavoided by reducing the regretted turno\er (seeKigure 7).

Linkages between husiness processes andvalue cbains to human resource actions andservices were clcarlv defined as the HR

Saparation/Churn

Separaiion/Cnurn consUlules onB ol lhe majw cosis Ol running our otganization

Retail Markets

I9SB Targeted CrlilcalWorkfofce Centee

Turnover .n our largeled fronl-line worklorco cenrers .S cnlical lo producHvity and e^penso conltol High lurnover resulls in lowerproducliuity. higher iratnmg, slaHing and occupational health costs. The .mpaci is across lhe tward and aHecis business proMability.

Cost Swings o( Reducing^mover in Targeled Call Centec '

Customer Contact Center (730 employees) SI 7.818.970

Business Sales Cantor (179 employees) S 4.36S, 211

Customer Care Center {59 employaeal S 1.440. 131

'Kilal Cost S*lna ( l year) $23,627,912

Estimaied savings using GTE Corp Human Resource Financial Repon - 1999 and Saratoga Institute GTE Business Ahalysis

Figure 7. GTE HR Balonced Scorecard - "HR that works"

Deatgtiiitg and Itufilementiiifi iiu HR ScoTecard

This particular screen tells you, at a glance,where we are excelling and where extraattention is needed.

illllllll

V

This screen iscalled a "briefingbook." It allows usto see the "bigpicture" in easy-to-read charts andgraphs that trackrelationships andtrends in the data.

Soum:

Figure 8. HR Balanced Scorecard desktop software

Scorecard became a business tool understoodand used across the HR organization. Not onlyare buman capita! InitiiUives needed to in-crease employee value delivered to the i)usi-ness. tbey are vulnerable to business processcbanges and tbe measures taken in isolationcan be misleading. For example, in a regionalcall center, our external business measures olcustomer satisfaction were trending downwardand accelerating. W ben MR reviewed tbe callcenter resuits from tbe liR Scoreeard, tberewas no single indicator tbat sbowed any di-rect relationsbip to tbe customer satisfactionissue; bowe\er. tbe measures., togetber witbinput and analysis by HR professionals andline management, pointed to botb an issue andsolution not readily apparent. I be HR metricsshowed a ver>' low cost per bire, a very quickcycle time to fill jobs, and an average employeeseparation rale. On tbe surfaee notbing un-usual^in fact tbe staffing metrics sbowed ahigb efficiency and cost control. Drill ingdeeper sbowed a bigb cost of training, a \er\'higb separation rate for sbort service employ-ees, and declining employee satisfaction forlong service employees. Furtber analysis re-

vealed tbat si.\ months prior a significant ex-pense reduction elfort had been put in placefor tbis call center. HR responded lo the re-quired reduced expense by cbanging talentpools and reducing the investments in selec-tion methods. T his action kept costs low whilebringing in applicants wbo were ready to startt|uickly but were barder to train and keep. Itwas a bad trade-off. It made sense to accept alonger cycle time and more eost to ensure tberigbt person was put in the right Job.

Drill down capability below tbe summarylevel results of tbe HR Seorecard is enabledtbrough a technoiogy architecture, whicb atthe top level uses a Web-based application todeploy and communicate to tbe desktop HRScorecard results in a "virtual briefing book".Figure 8 illustrates the HR Scorecard userinterface which is available on-line to all HRprofessionals. The "virtual briefing book*' iseasy to use and uses color (green, yellow, andred) to indicate wbether a metric bas exceeded,mel, or fallen below target.

Tbe underlying teebnology supporting tbe"virtual briefing book" provides links to CRPsystems (SAP and PeopleSoft) and a data ware-

.376 }1LM\\ 200J

bouse using a data-mining tool to drill downbelow^ tbe H R Scorecard results to analy/e andmodel cause and effects. Predictive modelingto evaluate workforce decision impacts (posi-tive and negative) prior to execution is tbeprimar\ objective of tbis investment in tech-nology. Figure 9 illustrates tbe technology ar-chitecture. Sheban Xavier, the key architecttor tbe teebnology platform, describes tbevalue to tbe business.

Tbe Employee Data Warehouse providesthe intelligence behind tbe measurestracked b\ the HR Scorecard. Our HR pro-fessionals have access to a rich base of em-ployee data integrated from 16 ilillcrcnt 11Rsystems including 20 years of historv. Us-ers ha\c a suite ot reporting tools that en-able tbem lo perform sopbisticated multi-dimensional workforce anahsis and predic-ti\e modeling. Hidden eorrelation betweenmeasures to prove or disprove what busi-ness managers previousiy knew onlythrough hypotheses or hunches can mmhf determined.

To fully appreciate the value of the HRScorecard within Verizon, il is important tounderstand bow it served as a catalyst lo pulltogether the two 11R leadership teams duringthe merger integration planning. The processof defining the role and strategy of HR in thenew company provided a common objectivefor integrating tbe HR leadership team. .Ar-ticulating a common strategy and businessalignment for HR sen ices provided a positiveperspective—a clear focus on tbe eustomerand a shared sense ofthe enormous potentialto deliver worid class programs.

The newly merged company faces ahighly competitive environment where a com-petitive cost structure, consistent revenuegrowth, controlled expense, and excellentinvestment management are criticai to winin tbe market place. I be V'erizon HRScorecard continues to pro\ ide the forum for\\W leaders to actively discuss performanceand future targets. HR leaders now have atool which supports a focus on tactical e\-cellenee \\hile ensuring alignment with busi-ness strategy.

Goals / Measures / Targets

Awareness and CommunicatiHR Balanced Scorecard

Employee Data Warehouse

RecommendAction Understanding

Sagmentillon

MuU-dlmanalofDrill dowtlSagmentatlon

Sourc«: Shehan Xsv<«r. VartzonComm u n Icatlon B

Figure 9. HR Balanced Scorecard technology architecture.

mid fniplcnwiiting an UR Scorecard • 377

Tbu HR Balanced Scort'tard bas niadc it gics will continue to evolve, and HR manag-possible lor HH manaj^crs to understand bow ers will continue to be llexibic and creativethey align to business objectives. They arc in supporting tbe cbanges. Tbe value of theable to explain not only ubat tbey are track- HH Scorecard as a tool is tbat it can get us toing but also bow tbey are performing on es- tbe new goals and measures and tbrougb tbesential strategies for tbc business. Business process ensure continued learning andenvironment and tbe objectives and strate- cbange management.

GARBETT F. W.ALKKR is the Director of Corporate Learning at IBM. Previously, hewas tbe project leader for Verizon's 1IH Balanced Scorecard and responsible for tbecifsign. dfVL'lopnu-nl, iind operation of ibe t-ntiTprisc HR stratt'gic managenicntsystem. In addition to stralfgic [icrfortnarKe tna[iagemfnl. he develops and rinploysadvanced techniques to evaluate the return on investment provided h\ human capi-tal. He is also respiinsihle lor the management control system tor the Human Re-sources organi/aUon.

J. R.WDAl I MAC DO.V\I_» joined IBM in .August 2000 as senior viee president, humanresources. In this position he is responsible for the human resources practices andpolicies of the organi/atiori ;ind repiirls lo the (_ hairnian and C'EO, I oiiis V. (ierstner.Jr. Prior to joining IBM. Mr. MacDunald was the executive vice president oi humanresources and administration for GTE (now Verizon Communications). He serveson the Board o\' Directors of Covanee. formerly known as Corning PharmaccutieiilServices. He is n nu-mber of Cornell Lni\ersit\'s Center for Advanced Humiui Ke-sources Study and is Chair of its Executive Board: the Ccmdriek group; the Person-able Rounthable: the Eabor Policy Association and serves on its Board of Directorsas \ Ice C liairman.

REFERENCE

Kaplan. R.S,. & Norlun. D.P. (!996).'Hu- Balanced Scoretaril; IranslHtingstratcg\ into action. Boston: ManardBusiness School Press.