HR Scorecard and HR Management
The modern HR Management is supported by the measurement of main HR Processes and trends in the area of the people management. The HR Scorecard is a modern HR reporting tool for measuring the progress, identifying gaps and communicating successes. The HR Scorecard has to be widely used for the communication with the top executives and line managers. The scorecard provides the almost instant and immediate feedback about the performance of HR in the organization. It provides the basis and foundations for discussions about the HR Development.
Most HR Functions measure the performance of the operational and transactional HR processes. They report number of open job vacancies, they measure the number of job contracts issued within the defined period and they measure the fluctuation and turnover. They measure, because it is modern to measure processes. They do not add value.
The HR Scorecard reports the main HR measures defined in the HR Strategy and the business strategy. The scorecard supports the strategic initiatives and projects of the organization and Human Resources.
The strategy and needs of the organization define the main priorities for Human Resources. The role of HR is finding the right measures to be populated across the organization. It is not just a role of HR to work on the improvement of measures. The measures are usually influenced by line managers and they have to be aware of the measurement. They have to understand the measurement philosophy and methodology. They have to understand the necessary steps to improve results.
The HR scorecard usually measures several main areas or elements important for the entire organization:
- Alignment with the business strategy
- HR Practices
- HR Employees
The workforce element is about measuring the real contribution of the workforce results to the success of the organization. It shows the alignment of the performance management with the business strategy. It indicates discrepancies in the goals set to employees and the real financial results of the company. The workforce part shows the main areas of issues in the workforce management in the organization.
The alignment of HR with the business strategy measures the alignment of HR practices with the business strategy. It indicates the alignment of Human Resources with the basic needs of the organization. These measures are heavily important for the top management as the top management rely on the right alignment of HR and the needs of the organization. The alignment with the business strategy indicates adjustments in policies and procedures required by different business functions.
The HR Practices element measures the performance of the HR practices in the organization. The HR Benchmarking is quite common in this area. As HR promises to implement the world-class HR practices, they need to be measured against the performance of the main competitors. The top management usually monitors this area to have a clear idea about the performance of individuals in the HR team.
The costs are usually the most difficult area for the HR scorecard. Even the top management is not unified around the investments into the workforce. The financial guys push for the significant cost cuts, other push for the unlimited workforce investments in their units. This part of the scorecard represents the trends in real investments into the workforce. It shows healthy and unhealthy trends in the organization. The definition of this part of the scorecard is extremely difficult as finance guys want to take over reporting in this area (and to show it their optimized and best way).
The last element of the scorecard is about professionals in Human Resources. It is focused on skills and competencies of the HR team. The measures do not change quickly and significantly. This part of the scorecard represents the long term development of the HR team and its contribution to the overall results of the organization.