Balanced scorecard in human resource management


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Balanced scorecard in human resource management

  1. 1. Balanced Scorecard in Human Resource ManagementMarch 6th, 2010They say that it is impossible to evaluate something without measuring it. In businessterms, performance is measured in different values, often by money to time ratio. Thus, toanalyze performance of your business, you need to find aspects of the work to bemeasured. Almost all businesses use IT support. Moreover, many firms use specialsoftware to evaluate performance of the company to find out what needs to be improved.Of course, in tiny companies this software is not very popular since it is possible toevaluate everything without automated tools. But why do extra work which can be doneby computer?All business professionals would admit that Human Resource Department is an importantpart of any business structure. You may have the best technologies, output capacities andequipment but you may be not getting proper profits because you personnel is poorlymanaged. When HR management works at its best you will immediately see positiveresults. However, the work of HR department also needs to be evaluated. HR managersshould always get better and improve performance.When it concerns companies and departments with 200+ employees it is not so easy tofind out who or what makes the company perform worse than expected. Employee A isresponsible for negotiations, employee B does the calculations, employee C goes throughpaperwork. If one of them fails, the entire chain fails. This influences the company’soverall revenue. Businesses must always get better, otherwise they will be wiped out bysmarter competitors. In terms of HRM, one should always get better way of dealing withpeople and streaming their skills in the right direction.For the purposes of performance evaluation thousands of companies are using BalancedScorecard (BSC). What is a BSC? This is a mechanism of making personnel familiarwith strategic success factors which are reached through key performance indicators(KPI). Different business and occupations have different KPIs. If we are talking aboutHR, KPIs mostly concern how efficiently personnel is managed in terms of finance andperformance.These days, many companies are using BSC metrics to evaluate performance of their HRdepartment by key performance factors. So, let’s analyze how BSC metrics can help HRmanagers and HR departments. In order to perform an overall analysis we need toanalyze KPIs, i.e. those factors influencing performance of HR department.Cost per Hire. By evaluating this factor you will be able to see how expensive therecruiting process is. This process starts from posting job offer to the moment when anew person is officially employed in the company. Logically, the shorter this process is,the least expensive is cost per hire. This is a very important value, especially if thecompany counts hundreds and thousands of employees. This amount includes expenses
  2. 2. related to advertising, agent’s fees, recruiter pay, relocation etc. to lover the average cost,a new person must be employed as quickly as possible.Turnover Cost. These are the costs related to termination, new hire and learning. Inother words, these are expenses related to integrating a new person into the company.Turnover Rate. This value represents the situation in your company related to leavingand hiring new employees. Many people would agree that it is not good to changepersonnel too often. If the turnover rate is very high, then maybe you are treating yourpersonnel wrong? Or is it something wrong with your business in general? Find out.Time to Fill. Basically, this is the time needed to fill a vacant position in the company.Of course, this time depends on how well HR managers are working with recruiters,advertising and people in general. The shorter this time, the better performance of yourHR department.Length of Employment. This indicator is very easy to understand. It is possible tocalculate an average value. For instance, in average an employee works 5 years for yourcompany. Of course, everything depends on the position. If you are changing couriers orsecretaries, this is not a big problem. But if chief managers work for your company lessthan a year, this is definitely not good.Training and Development. Even if you hire the best specialist you need to integratehim into your company and train. Of course, you bear costs, related to training. If youmanage to cut this cost without harming quality of training, then your HR department isdoing a great job.Salaries, compensation, bonuses. It is very important to know that you are notoverpaying and allocating recourses wisely. This also concerns HR department of anycompany. With Balanced Scorecard you will be able to see how effectively company’sfunds are being used in HR branch.Cost Effectiveness. It all comes to cost effectiveness after all. All above-mentionedfactors influence performance of HR department which has one goal – minimize costsand boost performance. If you HR department manages to cut costs and at the same timeincrease effectiveness, you can be proud of your HR specialists who know how to keeppace with the modern bsuiness.Balanced Scoreboard will help you evaluate performance of HR managers and findsolutions to problems. Once you enter all data, you will see graphs and values in percentswhich will indicate how well HR department is performing. Sometimes, it is difficult tofind what takes the department down or what causes losses. With Balanced Scorecardyou will be able to evaluate all KPI to see what needs to be improved.
  3. 3. Use specialized software to measure your business performanceHR metrics is important for large HR deparmentsAs to psychological aspect, BSC metrics will make managers and employees moreenthusiastic. If they know where they need to work harder they will do that to improveoverall performance of the company. In other words, they will channel their energy,knowledge and experience in the right direction. It is very important to know own weakpoints. Using Balanced Scorecard, heads of HR departments will know weaknesses oftheir employees. It may be not a problem if the department consists of 2 people, but whatif we are talking about 200? If people working for you are self-assured and confident,your company will surely benefit.
  4. 4. HR metrics is a must have tool for heard of companies and departments. How can youachieve your goals if you are not performing the way you expected to perform? Besides,sometimes it is very difficult to find the problem or the factor which takes the wholedepartment down.It may happen that your HR department works in dissonance with other department andbranches. For example, managerial braches need more employees and HR departmentcannot find them on time. It is possible that costs for training one employee are so highthat the company suffers losses for the first two or three months of his employment. It isvery difficult to find the root of the problem. Balanced Scoreboard is the tool whichmakes it possible to detect the problem and offer solutions. If you neglect problem youwill be simply wiped out by competitors. Of course, this is not something you want tohappen to your business, is it?Many managers never think of organization climate. Indeed, why should they? Thecompany seems to be doing OK. The work is being done. So, what else do you need?Well, this is not true. You company would perform better if employees have a loyalattitude towards the company management. Do not disregard emotional state of yourcolleagues. It is very important to measure organization climate. With the help ofanonymous questionnaires you will be able to get basic info on climate in the office anduse it in BSC. HR Scorecard metrics is a very useful tool in this sense. What is there is anegative climate in your company? What if something makes people disagree with thecompany policy? Why not change this little thing and perform better? BSC will surelyhelp you out here.If the curve of emotional state goes down, then something bothers people. There is onlyone way to learn it. All indicators can seem perfect but the work is not done the way itshould be done. Again, the answer might be found in emotional climate.Balanced Scorecard is the best tool to improve performance of HR department within ashort period of time. You do not need any meetings and seminars to get information. Ofcourse, personal meeting will also let you know what is wrong in the company and whatneeds to be improved, but with specialized software you will do that faster and moreefficiently.To sum it up, it needs saying that HR metrics tool is a MUST HAVE instrument in a topmanager’s toolbox. This software will save you much money as well as let your earnmore. This is the ultimate goal in business, isn’t it? So, take advantage of IT progress tobecome a true leader. As a true leader armed with HR metrics tool you will always knowwhat needs to be improved in your company. Thus, you will have all chances of stayingon the business Olympus.
  5. 5. Balanced Scoracard will help evaluate business performance
  6. 6. Improve performance of your HR deparment with Balanced Scorecard