Creating a Balanced Scorecard for HR

DICK BEATTY & JOE GROCHOWSKI

THE RBL INSTITUTE | MINI FORUM WHITE PAPER | MAY 2012

Participating RBL Institute Members:

Steve Bottomley, AstraZeneca | Patricia Humecke, Applied Materials | Christian Vie, AXA | Melissa Feigelson,
BASF | Brian Lynch, Bon Secours | Donna Mann, Cardinal Health | Todd Nalodka, Dell | Kathie Collins, Deutsche
Bank | Nathalie Carruthers, Flextronics | Aileen Richards, Mars | Colleen Brown, Nokia | Andreas Holst, Statoil |
Jay Smith, Target | Robert Bachman, UBS | Steve Syvrud, UHG

O
ur Premise: Traditional corporate scorecards often
fail to capture the HR metrics that impact a firms
strategic success. During this call we addressed HR
scorecards by focusing on HR analytics: What to measure and
how to measure as applied to the impact of the HR function
on the firms strategic success. Both firm level outcomes and
HR line manager practices, which impact these outcomes,
were discussed. Specific metric examples were provided for
the workforce, strategic talent, and line managers as well as
the HR function.
QUESTIONS A D D RESSED
What metrics, if you had them, could be used to intervene in
your firm and have an impact on the success of its business
strategy?
How, where, and who creates customer and economic value
for your firm?
How are you now measuring workforce mindset, talent suc-
cess, the line managers success in managing their work-
force, and the success of the HR function?
What are you measuring about HR and the workforce now
and what decisions are you making that impact the success
of your organization?
INSIGHTS FRO M TH E D I SC U SSI O N
All metrics start with the business strategy.
Metrics are answers to questions so you need to be asking
the right questions to have good data. Its important to
know what are the deliverables first, and then what the right
measures are.
The challenge in metrics is what to measure versus how to
measure.
Strategic workforce planning is a critical part of any discus-
sion of HR metrics as this helps organizations to identify
which positions have primary impact. HR needs to identify
where, how, and who creates wealth for the firm. In most
organizations, no more than 15% of positions are strategic.
Different lines of business in the same company may have
very different goals and cultures. Some units win by cost
and price, while others win through innovation and creativ-
ity. Different strategies require different metrics.
Line managers need to be held accountable for the HR work
they do. There needs to be much greater accountability for
line leaders, especially around talent and culture. Leaders
are essentially unmanaged resources and HR needs to do
a better job discerning which leaders are doing a good job
when it comes to the HR work line leaders do (e.g., perfor-
mance and rewards, selection, development, etc.).
DATA F O R D E C I S I O N M A K I N G : ST R AT E G I C
WO R K F O R C E M E T R I C S
The central issue with respect to metrics is what to mea-
sure versus how to measure it. Most organizations have
too much data but too little usable decision-making data that
will have a strategic impact on the organization. At the end of
the day, HR professionals must always remember that metrics
are simply answers to questions. The key is asking the right
questions first, and then determining the metrics that will
drive a decision.

Creating a Balanced Scorecard for HR | TheRBLGroup 2012 1

Historically, measurement in HR has been dominated by a C R E AT I N G A BA L A N C E D S CO R E CA R D F OR HR
focus on what can be characterized as administrative ef-
In their book, The Balanced Scorecard, Robert Kaplan and
ficiency measures (e.g., cost per hire, time to fill a position,
David Nortons original model included three core elements:
etc.). Although a number HR departments are now making
1) financial, 2) customer, and 3) internal business processes. A
real strides in the area of predictive metrics/analytics, there
fourth element around learning and innovation was added
are still many HR departments that measure administrative ef-
because the scorecard didnt look, well, balanced. In fact, the
ficiency. HR departments often provide these types of metrics
original balanced scorecard introduced by Kaplan and Norton
because thats what line leaders ask for. But it can also be ar-
has evolved quite a bit over time, especially the definition of
gued that line leaders ask for administrative metrics because
learning and innovation, which has been redefined several
thats the data that HR has always provided in the past.
times.
In this white paper we focus on putting HR metrics in proper
In this white paper we posit an alternative model to the tra-
context. We argue that the workforce is the deliverable of HR.
ditional balanced scorecard, which emphasizes the strategic
Given that the workforce is the deliverable of HR, the ques-
workforce as opposed to learning and innovation. At the heart
tion to ask is: who practices that delivery? And the reality is
of this scorecard is the business strategy because any score-
the deliverable of HR, the strategic workforce, is the respon-
card needs to start with the business strategy (e.g., where are
sibility of both the HR function and line leaders. A central
we going to grow and how are we going to win?). Metrics
question for HR professionals (and line leaders) is: what kind
have to be linked to the business strategy and the creation of
of strategic data can you capture about the workforce that
value both customer value and economic value.
would really make a difference in the delivery of the organiza-
tions strategic agenda? The ultimate goal is to obtain data for
decision-making - information that gives you insight that lets
you intervene in the organization and have strategic impact.

Figure 1: Strategic Workforce Metrics (Source: Dick Beatty)

Creating a Balanced Scorecard for HR | TheRBLGroup 2012 2

As shown in Figure 1, workforce/HR metrics focus on four
perspectives:
Mindset and culture (organization wide)
Strategic talent (individual)
The HR function (organization wide)
Leadership (individual)
These four perspectives of the strategic workforce help orga-
nizations understand what workforce they need to impact the
success of the organization. It raises questions, such as:
What do we want our workforce to understand about our
company culture and mindset?
What is our level of top talent in strategic positions?
How effective are our HR practices in delivering the work-
force to win in the markets we choose to compete in?
How effective are our leaders in delivering HR policies and
practices in managing their workforces to leverage our
firms competitive advantage?
For each of the four perspectives, it is important to look at the
deliverables, who is going to do it, where is the organization
now, and where does the organization want to be in the future.
And ultimately, what is the organization going to do about it?
The fundamental question the strategic workforce metrics
model seeks to address is: where, how, and who creates
wealth for the firm?
PERSPECTIV ES O N H R M ETRI C S
Ask the Right Questions
As the participant from Dell noted, traditional organizational
metrics (e.g., attrition, headcount trends, etc.) are the kinds of
metrics that line leaders ask for. These metrics are important
when they are put in proper context. For example, the real
question around a metric such as turnover is who is turning
over down to the individual level and are those individuals
strategic talent or not? The business wants and needs this
type of data at the individual level so they know where the
turnover is happening in the organization and what can be
done about it and what leaders may be held accountable.
Businesses want data; its the language of business. Line
leaders may not know what type of HR metrics they need so it
is up to HR to help shape the type of metrics they seek. This
requires information, education, and change management.
But the key question when it comes to what metrics HR
Creating a Balanced Scorecard for HR | TheRBLGroup 2012
should provide line leaders is: what data, if you had it, could
you intervene and have a significant impact on the success of
the enterprise? Metrics are answers to questions. If you dont
have the right question, youll never have the right data.
Strategic Positions and Strategic Capability
Strategic workforce planning metrics, which are part of pre-
dictive analytics, play a vital role in understanding how orga-
nizations will succeed in the future. For example, most firms
have no more than 15% strategic positions positions that
create both customer and economic value. So when it comes
to understanding the strategic workforce required to succeed
in the future, predictive analytics can provide answers to
questions such as:
How are we going to grow our business given the number
and effectiveness of people in strategic positions?
What is the work required in these strategic positions as we
grow in emerging markets?
How does our talent match up against strategic work?
Defining what is a strategic position is not always easy. A
useful model to help clarify strategic positions and strategic
capabilities is the VPC model.
V = Influences the customers perception of value
P = Enables us to charge our desired price
C = Enables us to produce at our desired cost
The VPC model can also be used to do a strategic capability
impact assessment as shown in Figure 2 on the next page.
The VPC model is the operational definition of strategy. As
part of the strategic capability assessment, it can help the or-
ganization understand, on one sheet of paper, which positions
will have a primary impact on the business in the future. For
example, if R&D is a strategic capability for your business in
the future, you can look at the roles in your organization and
ask if they will have an impact on the customers perception
of value, if they enable you to charge your desired price, if they
enable you to produce at your desired cost. The ultimate goal
of the strategic capability impact assessment is to under-
stand what work creates value for you in the future, what
skills match the future strategy, who will be your top talent
in the future, etc.? The answers will vary depending on your
business. For example, predicting the demand for skills in the
future must be much faster in high technology companies
compared to companies that have a long-term business cycle.
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Figure 2: Strategic Capability Impact Assessment (Source: Dick Beatty)
The Quest for a Global Scorecard
In large multinational companies such as AXA with over
160,000 employees around the world it is a challenging task
to try to converge data together into a single global score-
card that aligns with all its various business units. Different
countries within the same company often use different HRIS
systems and data definitions vary country to country making a
unified scorecard on a global scale extremely complex. Creat-
ing a global scorecard requires an understanding of the strate-
gic capabilities that need to be owned by corporate because
different lines of business in the same organization may have
different capabilities, goals, and cultures. For example, some
business units try to win on cost and price while others try to
win through innovation and creativity both require different
business strategies and different strategic capabilities. The
key metrics for one business may be useless to another.
The quest to develop a global scorecard requires a deep
understanding of the strategy of multiple business lines
because strategy is all about differentiation. In this scenario
HR needs to know how to leverage the differences and ask
what is common and what is unique. If you can figure out
Creating a Balanced Scorecard for HR | TheRBLGroup 2012
what is common across all business lines, some global metrics
can be used in a global scorecard. But the real question then
becomes, once you have that data, what do you do with it? In
the end, you want data that you can use to make a strategic
difference for the enterprise.
At Mars, they find that the most important place to have in-
sight and data is locally (in a global/local company). Mars has
very diverse product lines (from chocolate to pet care prod-
ucts) so they only have a very few key global metrics that they
roll up into a global people scorecard; others are measured
and managed in local units. Key metrics at Mars include three
levels: 1) enterprise level (e.g., the triple bottom line Perfor-
mance, People, and Planet), 2) strategy (e.g., key metrics would
include engagement metrics, talent metrics, and succession
information, etc.), and 3) the HR people scorecard. For Mars,
they wrestle with finding the golden thread across those
three levels of metrics.
Holding Line Leaders Accountable for HR Work
Its important to hold line leaders accountable because they
play a critical role in HR work in areas such as selection,
development, rewards, performance management, etc. How
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effective are your leaders at doing this HR work? How effec-
tive are leaders at delivering HR policy and practice? To hold
leaders accountable it becomes important to measure and
track how well they are doing. Leaders need to be responsible
for the organizations strategic talent. This is an emerging
area in the field of HR metrics.
Line leaders are most often assessed based on financial
results. Leaders can produce great financial results but de-
termining how much impact they had on those results is not
always cut and dry. HR professionals have to articulate what
they want leaders to do in areas such as workforce manage-
ment, performance and rewards, etc. and hold them account-
able. Again, it comes down to asking the right questions. Are
the leaders losing top talent? How do they measure talent?
How well are they managing critical talent?
Metrics
Employee engagement remains a popular metric for compa-
nies to measure and track. Engagement metrics, like other
metrics, are tools. Whether or not engagement metrics are
useful depends on the extent to which these metrics can be
looked at and used in meaningful ways. For example, in some
organizations those with the highest levels of engagement
are the lowest performers. So the question to ask is: who in
the organization do you want to be engaged? Despite the
popularity of employee engagement metrics, there is very
little evidence that it links to performance. But again, an
engagement metric is just another tool; its how you use it in
the strategic context of the business and the questions that
you ask that really matter.
At BASF, they have found success using metrics to monitor
their leadership pipeline. They know what their leadership
pipeline is and can use data to assess if they have enough of
the right talent to plan effectively for the business and help
leaders to make good talent choices. By also introducing the
concept of segmentation and critical roles, BASF is moving to-
wards a more robust supply and demand talent pipeline story.
HR is helping to coach people on what roles are critical in
their business based on their metrics and individual business
strategies. BASF is focused on providing business insight
while continuing to emphasize the importance of measure-
ment/measuring.
At AstraZeneca, the Strategy, Planning & Analytics team
exists to provide planning and governance leadership to the
HR function. It also exists to create impactful insights into
AstraZenecas people and the HR function that combined
Creating a Balanced Scorecard for HR | TheRBLGroup 2012
enable data driven decision-making. So enabling effective
decision-making is at the heart of what they do, including
their balanced scorecards.
AstraZeneca has five main balanced scorecards, described
below:
A company-wide Annual Scorecard that reviews progress
against the key objectives and targets for the year across
the organization. This includes some of the People Strategy
priorities for the year
A Global HR Annual Scorecard that reviews progress
against Global HRs key objectives and targets for the year
(including both People Strategy and HR Strategy priorities for
the year).
A People Strategy Dashboard that reviews progress against
the measures for success within AstraZenecas organizational
People Strategy.
A HR Performance Dashboard that reviews progress
against the measures for success within AstraZenecas HR
strategy.
A HR Service Delivery Dashboard that reviews progress
against the key aspects of HR service delivery, particularly
those aspects delivered by their outsourced partner.
AstraZeneca also runs three key annual projects that support
these and deliver specific business benefits, namely:
An annual employee survey with particular focus on em-
ployee engagement (also leadership, development, work-life
balance, etc.).
An annual HR voice of the customer survey focusing on HR
effectiveness.
An annual benchmarking study focusing on both human
capital measures and HR effectiveness/efficiency.
CO N C L U D I N G P O I N T S
Numbers are the language of the organization.
Most firms have too much data and too little decision-mak-
ing information.
HR must focus on what to measure, not how to measure.
The workforce is the deliverable of HR.
Line mangers influence the business more than HR does so
line managers must be held accountable for the workforce
they lead.
Strategy should drive metrics and metrics should drive
decision-making.
Metrics are answers to questions.
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