The HR Scorecard: Linking People, Strategy and Performance

Citation

Fahed‐Sreih, J. (2009), "The HR Scorecard: Linking People, Strategy and Performance", Management Research News, Vol. 32 No. 3, pp. 297-299. https://doi.org/10.1108/01409170910943147

“The HR Scorecard, Linking People, Strategy and Performance” is a book that practitioners and scholars in the field of human resources should read. It highlights a new perspective in human resource management, and demonstrates how human resource management should be an integral component of organizational strategy. The authors reveal how human resource managers can “sit at the table of strategy”. The authors also discuss how human resource managers can become nominator managers rather than denominator managers, contributing to the organization's growth rather than only affecting the expense side of the organization.

The theme of this book is that human resource management can create value by engaging in activities that produce the employee behaviors the company needs to achieve its strategic goals. Today, human resource managers are more involved in partnering with other senior managers in both the design and implementation of the company's strategies. There is an opportunity for human resource managers to demonstrate how human resource planning and development can add value to the organization, and how this contribution can be measured in terms of dollar value.

Chapter one of this book discusses the strategic importance of human resources but recognises the difficulties of measuring the effect of human resource practices on firm performance. The authors discuss the importance of considering appropriate measures of organisational performance. New economic paradigms have altered the roles and activities human resource professionals. Nowadays, human resource professional are required to do more than merely understand the firm's articulated strategy. Being a strategic partner requires that human resource professionals comprehend exactly what capabilities drive successful strategy implementation in their firm, and how human resource management can affect and enhance those capabilities. This chapter discusses the difference between tangible and intangible assets, and how intangible assets generate tangible benefits. It also highlights how human resource strategic functions can shape employee behaviors. The authors note an interesting comparison of human resource management quality measures and how these differences affect firm performance tremendously measures. Chapter one discusses the importance of human resource, but fails to clearly demonstrate how a strategic HR focus can be achieved.

Chapter two introduces the seven‐step process which seeks to clarify and measure strategic influence of human resource management. The authors describe the value creation process which systematically guides the reader through the exercise of value creation recognition and the strategic role of human resource management. This process enables the reader to understand the concept of human resource deliverables and to differentiate between human resource enablers and the human resource performance drivers. The model of value creation identifies seven clear steps: defining a business strategy (step 1); building a case for human resource as a strategic asset (step 2); creating a strategy map (step 3); identifying human resource deliverables within the strategy map (step 4): aligning the human resource architecture with human resource deliverables (step 5); designing the human resource measurement system (step 6) and implementing the new measurement system (step 7). The various factors that influence human resource work remains vague. However, the reader is able to recognize what should be taken into consideration to create a human resource balanced scorecard.

Chapter three discusses the creation of a human resource balanced scorecard, through the development of a human resource measurement system. This measurement system involves the identification of human resource deliverables, the alignment of the human resource system with other facets of the organisation, the high performance work system and measures of organisational efficiency. The authors highlight the skills required to balance cost control and value creation, and to correctly identify which value chain elements are represented on the scorecard. This exercise highlights the role of the human resource function in generating organizational competencies in a cost effective manner. The authors provide many examples of high performance work system measures, human resource system alignment practices, human resource efficiency measures, human resource performance drivers’ measures and human resource deliverables.

Although the authors provide detailed examples of the different measures of human resource required to create a balanced scorecard, the injection of numerous examples challenged the flow of the text. The book provides exhaustive information about the systematic creation of a balanced scorecard. However, further attention could also be given to providing detailed advice about how the various factors within the scorecard could be measured. Further, the balanced scorecard should be a recurring feature of performance management, particularly in light of increasing levels or organisational change and increasingly complex organisational environments.

Chapter four introduces the idea of a cost benefit analysis of human resource management interventions. The authors differentiate between fixed and variable costs and their implications for the human resource measurement. The chapter also discusses the meaning of sunk costs and the financial impact of employee performance.

Chapter five focuses on the issue of measurement, and discusses the factors which need to be considered in measuring human resource outcomes. The various types of data that may be collected are discussed (such as nominal, ordinal, ratio and interval measures). The chapter also demonstrates that organizations can employ measures derived from simple questions, such as: if you increase training time by 20 per cent, how much will that change employee performance and ultimately unit performance? If you reduce turnover among key technical staff in Research and Development by 10 per cent, how long would it take to increase the new product development cycle? This chapter reinforces the message of the authors, advocating that managers must think strategically about performance measurement systems, and must ensure that accurate and useable information will be collected to inform the strategic functions of human resource. Chapter six also considers the application of the top‐down management approach to the alignment between human resource practices and the organisation's strategy. The chapter provides some practical approaches to the application of alignment, and reinforces the concept of external human resource alignment versus internal human resource alignment. The authors also present a systems alignment map. While the authors discuss the process of alignment, the measurement approaches discussed remain comparative and non‐specific.

Chapter seven outlines the core competencies required of successful human resource professionals. The authors discuss the relative importance of human resource competency domains, and the human resource proficiencies of the company. The authors reiterate the importance of the nexus between strategic management and human resource management, and discuss the dimensions of strategic performance management.

In conclusion, Chapter eight provides a series of guidelines for the implementation of a balanced scorecard, and outlines the key processes for initiating change. These guidelines are very helpful for professionals, as they provide tangible advice about the implementation of the process.

The authors of The HR Scorecard, Linking People, Strategy and Performance provide a useful set of guidelines for HR professionals, from Executives to front‐line managers. The book helps professionals to plan change rather than react to it. In an environment where decisions must be made quickly, and adapting to the change is the key to success, the human resource balanced scorecard system presented will facilitate rapid adjustment to factors affecting business, in real time.

This book is a “must read” reference on the human resource Balanced Scorecard previously developed by Kaplan and Norton (1992). The examples used appear to be thorough, but do not fully address the acknowledged weaknesses of other papers in this area. The authors give a clear description of the concept of a Balanced Scorecard and clearly outline the steps to follow. It may have been more beneficial to the reader to include case studies of actual organizations implementing a balanced scorecard approach to managing performance. This would provide the reader with an opportunity to appreciate the continuity of the process, and provide some tangible examples of the relationship between organisational goals, performance and measurement. Finally, I would recommend this book to human resource managers who want to be part of the strategic plan of the company, and who really believe that human resource management is a full fledged part of value creation.