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How can the balanced scorecard be applied to human resources?

By linking clearly defined department objectives and performance to the company’s strategic business goals, the human resource balanced scorecard can serve as a way of focusing human resource staff on activities that will support the company’s goals. It also demonstrates the strategic value of HR by defining and measuring its contribution in concrete, clearly understood terms.

A balanced scorecard is a strategic management system that leverages strategic non-financial performance measurements alongside the traditional financial metrics. This approach provides a more “balanced” view from four organizational perspectives: financial, customers, internal business processes, and learning and growth.

Using the area of recruiting as an example, a balanced scorecard would look something like this:

  • Objective: Reduce turnover costs.
  • Description: Develop effective recruiting methods and new-hire orientation methods to optimize the retention of new hires.
  • Actions:
    • Identify key attributes of successful employees who stay at the company for two or more years.
    • Utilize technology more effectively for recruiting and screening applications.
    • Identify selection methods that will contribute to successful hires.
    • Integrate branding efforts into recruiting.
    • Revise the orientation program to ensure new-hire retention.
  • Measures:

    • Cost-per-hire (financial).
    • Turnover rates and costs (financial).
    • Time-to-fill (business process).
    • Customer satisfaction with new-hire performance (customer).
    • New-hire satisfaction with orientation (learning and growth).
    • Supervisor satisfaction with orientation (learning and growth).

In addition to alignment with company goals, the HR scorecard must also contain the following elements to truly be effective: accountability, validity and actionable, measurable results.

In the previous example, HR and the line manager share joint accountability for the retention of employees. HR is responsible for developing retention strategies, and the line manager is responsible for providing feedback on whether the strategies are successful.

The HR scorecard must be valid. In other words, the measurement system must contain metrics that are understandable, aligned to the objective and can be supported with solid data.

For the balanced scorecard to be meaningful, it must contain only those measures that are most important to the objective and the company’s strategic plan; that is, the measures must result in actionable items.

The balanced scorecard must focus on results. For example, simply measuring turnover or time to fill is ineffective if no action is taken as a result of those measures. More meaningful measures that are aligned clearly with the company’s strategic plan include productivity and retention.

When it is successfully executed, the HR scorecard can be an extremely useful method of aligning HR with the company’s strategic plan. The key to success is careful planning and execution.


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