operations management, the hr scorecard

8/8/2019 Operations Management, The HR Scorecard

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Operations management

The HR-scorecard..

.. a tool to measure theintangible?


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Index

Index .......................................................................................................................................................21. Introduction .........................................................................................................................................32. De HR-scorecard................................................................................................................................ 43. HR-structure .......................................................................................................................................43.1 The HR-function................................................................................................................................ 5

3.2 The HR-system .................................................................................................................................53.3 Employee behaviour ........................................................................................................................54. Performance-drivers and "possible-makers" in HR-scorecard.......................................................... 65. Value chain .........................................................................................................................................76. from value chain to measurable performance-drivers .........................................................................77. Performance-drivers and possible-makers .......................................................................................88. HR-instruments as `possible-makers ..............................................................................................109. Conclusions ......................................................................................................................................10Bibliography ..........................................................................................................................................12

Appendix. Complete value-chain .........................................................................................................13


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2. De HR-scorecard.

The method of the HR-scorecard is in principle developed as adding to the well-known Balancedscorecard (BSC) of Kaplan and Norton4.Last mentioned, explained after the introduction of the HR scorecard by the authors in HarvardBusiness Review that he saw this method as a very powerful adding method on the BalanceScorecard. Especially the personnel part. In this specific part about the human capital in theorganisation there was, according to Norton a big lack that leads to many problems in organizations.One of the big issues concerns the defining of measurable indicators.Norton writes in the introduction of the book the following sentence:

We cant manage things that we cant describe5

Although the HR score method is in principle made for big profit organizations, it showed me that thismethod also can have an added value for organizations that do not work with a fully integrated BSCsystem. I had this experience in an organization in the Netherlands. One of the authors, Mark Huselidexplained after seeing this research and the way of using the method that this approach is a perfectexample of translating the ideas behind the HR scorecard to other suitable situations

The HR scorecard method offered me an approach to get indicators to manage the human capital6 inan organization as a strategic power. It also gave me the opportunity to make visible in which way

HRM instruments in the organization can be of important stimulators that will benefit the goals andaims of the organization.Especially in this organization where I did this research the human capital had an important function.It concerned an organization that is manly working with volunteers and it was useful to get a morestrategic focus from all employees, paid and also the none-paid employees (volunteers).

Beside that I have the opinion that the method itself and the vision behind the HR scorecard also is aperfect possibility to create a specific rewarding and appraising system for employees. An explanationof the method and the principles of the HR scorecard method can make this clearer.


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These three elements give the organization a way to reach successfully the objectives in the future bycreating a HR-structure with a clear consistency. Only in this consistent way the implementation of the

organisations strategy can lead to successful results as mentioned in the HR scorecard.

To understand an apply that a form of `system thinking"8 must also be implemented in theorganization. Within this way of system thinking, people and processes will be seen as values, as wellas separate individual contributors to the creation of these values. Actually the answer on the problemfor this whole research becomes clearer: For this paper I will not go deeper in this. A more expandedexplanation of this way of thinking can be found in several definitions.9The problem definition for the research in the non profit organization was:

Which measures must the organisation take to obtain and preserve sufficiently qualifiedemployees?10

With making an HR-structure according to the previous mentioned method, the organization was ableto set indicators and values to some activities that could not be indicated before. Using an entirely newcoherent policy was necessary in the future to obtain (and remain) the objectives.An HR-structure that consists of a HR-policy for a strategic focused organisation means that this hasto be made specifically with strategic focused employees. The way to do that is explained hereafter.

4. Performance-drivers and "possible-makers" in HR-scorecard.Both, the strategies from the analysis of the research and the insight in the needs and wishes ofemployees and volunteers needed a conversion into measurable indicators, In the HR scorecard theseare called: `Performance-drivers for the organization. This making visible, and, as result, makingmeasurable, is necessary to make it possible `to manage what we can describe as Norton earliercalled it.

The question is of course: How can I make the participation of volunteer work measurable?The responses on that question that I got frequently were that most volunteers often talked about

`working for fun or out of love and that it was something that an organization cannot and does not


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These indicators are often used, however they only indicate a quantity of a separate activity orcomponent and with that they become mostly aims in itself.

This focus, (the aim at raising or lowering percentage) simply relies on quantitative given figures. Thisresults and focus misses however the value that it has in the whole system.Managers are overall more targeted on achieving the results then on creating and making visible ofvalue. (This last, strongly generalising and subjective observation of mine is not meant as a valuejudgement but more an observation of an actual fact.)

5. Value chain

Making a `value chain - also called `strategy card - for the organisation is no unknown phenomenon.Many organisations already have made such value chains. It is, in a graphic manner, reflecting the

way in which an organisation creates value.It mostly concerns here value chains targeted in the direction of the customers in which is explainedwhich values the organisation creates for them, as indicated by Michael Porter.11.Based on this I made a different value chain for this organization in which the contribution of theemployees is indicated in values such as performance-drivers. See fig.2.

Place

Attitude Quality

Satisfactionclient

clientsBehaviou

remployee

.

employee.

Visibleneed forclients

Appreciatio

Motiveemploye

e

Value chain STOW


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chain. There is a repeating system of value factors which have influence for the next performance-driver.

The performance-drivers are in the value chain recognizable and visible as progress indicators.Because of this they can be made separately measurable and still count as factors and a total wholeof value creation.To explain how the mentioned performance-drivers can be seen as measurable progress-indicators Ihave made the following list.

Performance drivers progress indicators

Motive employee to participate - Degree of attention to aims in organisation- Degree recruitment and selection methods- Results selection interviews- Results exit interviews

Volunteers/ paid employees - Impact of recruitment campaign- Increase of the competencies of employees- Degree in which the organisation learns

Attitude employees - Effectiveness of information exchange- Degree in which employees are aware of goals

of the organisation- Degree in which employees are aware of own

goals- % employees that can explain what strategic

mission and intentions of the organisation are- Degree of involvement of the employees

Behaviour employees. - Performances of employees.- Performances of recent recruited employees.- % employees. that suggests ideas- Results research participation employees.

Satisfaction employees. - Trainings for employees.- Employee satisfaction level

Degree in which essentially human capital is


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In the HR-scorecard approach they are described as the `the amplifiers for the performance-drivers.The alignment with HR-instruments has been explained by me in the explanation of the HR-structure

and it makes clear that HR instruments are the possible-makers for the performance drivers and withthat therefore the `amplifiers of the whole value chain.

In the total overview that I will present in fig. 4 I can clarify now how I translated the whole results ofthe research coherent to a total value chain with performance-drivers, progress-indicators and finallywith possible makers in the form of HR-instruments.

Strategies Themes fromquestionnaire

Checked hypothesis Influence on whichperformance-driver

HR- instrument

Improvement internalcommunication

Attention forvolunteers

Volunteers too lessattention

Attitude/ behaviouremployees.

- Keeping theemployee in

- Quality of service

- Attraction for newemployees

- Service / product

- Income/ subsidiaries

-Improvementcommunication

- empowerment

- performanceappraisals

- job descriptions

- contract

- responsibility/tasks

- rules andregulations

Visible and latentneeds employee

Organisation has togive more attention to

the employees.Need for attention tothe employees in thefuture

Management volunteersmore professional Question for more

professionalising thework of the volunteers

and

Employees want theuse of professional HRinstruments

Use of HR-instrumentsintegrated

Strategic focusi ti


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Setting-up these HR-instruments in a concrete HR plan, focused on the indicators given, will help thevolunteers contributing to the strategic focus of the organisation. Beside that there is another importantcontribution to make.

Reward ing and appreciating employeesThe already existing and well-known methods and systems to reward and appreciate employees inorganisations are mostly based on stimulating employees with financial incentives. This because theseincentives are most strongly related to the company results, shareholder interests etc. Rewarding andappreciating with gratifications, periodicals, incentives, shares and options are well-known examples.

The volunteer organisation I did the research in, however works mainly with unpaid employees anddoes not have these (financial) possibilities. Therefore it has to create another reward andappreciation system, as mentioned in the HR-scorecard method.With the making visible and measurable of the separate performance-drivers in progress-indicators forthe total value chain I also already introduced for all employees a particular reward and appreciationsystem. This needs some explanation.

For the employees themselves and the environment it becomes more and more visible andrecognizable how the end value is made of the separate values that every employee creates with theircontribution.At the same time it also makes clear for the individual how he or she contributes to that whole valuechain of the organisation. This requires possibly a higher abstraction level, but perhaps I can clarifythis to refer to the earlier example of the motive of the employee.

Giving an answer on the motives of the volunteers, by rewarding this, is something that strongly will beseen by employees as an incentive and appreciation. The same of course also applies to otherperformance-drivers like attitude, behaviour etc. But it is clear that stimulating the cognitive driver of ahuman can have a big impact on the change of behaviour.12.If the organisation rewards these factors and appreciates attention in the form of making them visible

d i bl l ti thi ill l d t ti f ti f th l Thi i


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As stated in the beginning of this paper I mentioned operations management that I used the definitionas the term that is used for the activities, decisions and responsibilities of operations managers13.

This research and the approach I used made clear that it also can be used in non profit organizations.Managing operations in not for profit organisations is essentially the same as in commercialorganizations. Operations managers have to take the same decisions. They manage the process onbase of input, transformation and output to customers and clients

My decision to focus on making the intangible tangible is according to me a very important subject inOperations management. Although many times it is hard to measure the intangible, so called softskills I hope Ii made clear that it is also possible to use special methods and approaches for that. Theuse of an instrument like the HR-scorecard makes this clear.

Joop VinkeZutphen, the Netherlands,

October 2009


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Bibliography

Vinke, J., Dont try to motivate people, just try to reward their motives, research 2001,

Zutphen, The Netherlands,

Stack, N., Chambers,S. Johnston, R. Operations management, Prentice Hall 2004

Thomas, R & D., The service volunteers handbook, Resource publications, Inc. San Jose,California, 1998.

Sagawa, S., Segal, E., Common interest, Common good, Creating value through businessand social sector partnership,, Harvard Business School press, Boston Massachusetts, 1999.

Wilson, T.B., Innovative reward systems for the changing workplace, McGraw-Hill, Inc.2/e,New York, 2002.

Becker, B.E., Huselid, M.A., Ulrich, D; HR scorecard, Linking people, strategy andperformance, Harvard Business School press, 2001

Becker, B.E., Huselid, M.A., .Beatty,R., The Differentiated Workforce, McGraw-Hill, NewYork, 2009

King et al. (G. King, R.O. Keohane en S. Verba), Designing social inquiry, Princeton,Princeton University Press, 1994.


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Appendix. Complete value-chain

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