Volume 17, Number 2 Article by Kuldeep Singh June, 2005
The HR Scorecard: Linking People, Strategy, and Performance : By Brian E Becker, Mark A Huselid, Dave Ulrich and Norm Smallwood, Boston, Harvard Business School Press, 2001, 235 pages :
Even though it has become fashionable for CEOs and HR executives to say that people are their most valuable asset, there is great scepticism about the contribution made by this asset due to the lack of tools and techniques for measuring the value added. The asset said to be most important is the least understood, the least prone to measurement, and hence the least susceptible to management. However, The HR Scorecard provides HR consultants and practitioners with a new generation of tools and techniques to measure and manage the creation of human capital.
The book provides a measurement model to guide the implementation of human capital strategy, the ultimate objective of the model being to align strategy, people and organisational performance. The authors present a new approach to managing a firm’s ‘HR architecture’ as a strategic asset, as well as measuring its contribution to the firm’s performance. The authors argue in favour of a top-down, rather than a bottom-up approach to the implementation of strategy, along with an innovative assessment system to measure HR’s contribution.
The book is organised into eight chapters, each dealing with a specific component of designing and implementing a strategic HR measurement system. Chapter 1 explores the contribution of the HR function to competitive advantage through the creation of an HR architecture, which the authors believe is a prerequisite for a measurement system that can link HR with firm performance. A systems perspective is also a pererequisite for achieving internal and external alignment of the HR system to generate true competitive advantage. The HR architecture has three dimensions: the HR function, the HR system (which is the linch-pin of the architecture), and employee behaviours. The authors stress that the most effective model is a High- Performance Work System (HPWS), in which each element of the HR system is designed to maximise the overall quality of human capital throughout the organisation.
Measurement systems can create value only when they are carefully matched with the firm’s unique competitive strategy and operational goals. Chapters 2 through 6 focus on how to actually create a measurement system for assessing HR’s contribution to value creation in the firm. First the authors present a seven-step process that will lay the foundation for HR’s strategic influence. Next they outline the process of constructing an HR Scorecard. The process encompasses four dimensions, HR deliverables, HPWS, external HR system alignment and HR efficiency to incorporate concepts like cost control, value creation and alignment in the HR measurement system. The authors stress that a well developed HR Scorecard should allow HR managers to do a better job of managing HR as a strategic asset as well as provide a better demonstration of HR’s contribution to firm performance. However, building an HR Scorecard should not be considered a one time or even an annual event and it should be continuously attuned to changes in the downstream performance drivers that HR is supporting.
A chapter is devoted to exploring detailed data collection and analytical methods that can help in assessing whether certain HR interventions will pay off in the short and long run. A step-by-step process to undertake the cost benefit analysis of HR interventions is also outlined. The most appropriate HR ‘doables’ and ‘deliverables’ are identified so that the decision making process can be focused on only the vital few HR activities that really make the difference. On the grounds that what can be measured can be managed best, the principles of good measurement are discussed in some depth. Various problems and challenges associated with measurement in the context of the HR function are covered, including the meaning of measurement; measures versus concepts; measures that matter; measuring causal linkages etc.
Organisational alignment is a topic of interest to HR managers, and the book covers both internal and external HR alignment. While internal alignment has to do with the degree to which HR is perceived by both HR and line managers to be of strategic value, and ensuring that the HR function possesses the necessary competencies and skills, external alignment refers to the degree to which HR deliverables, competencies and skills are able to drive the business strategy of the firm. Extensive models for achieving both types of alignment are provided.
Chapter 7 describes the types of competencies required for HR managers to implement the HR Scorecard based measurement system. The authors argue that the HR profession needs to transform itself in terms of knowledge, behaviours, and ability to deliver specific outcomes, in order to serve as a valuable business partners. This will help to move the profession along the exciting and rapidly changing course it has taken in recent years.
This book, though exclusively focusing on how the HR function can build its credibility to be a strategic partner in the firm, is an invaluable guide for HR academicians, managers, and practitioners interested in designing and implementing human capital strategy for the New Economy firms. The book provides causal models and frameworks to demonstrate the linkages between HR function and business performance, as well as research based evidence to substantiate the arguments put forward by the authors. Using and following the models and guidelines given in the book will ensure that HR is at the table and not on the table.
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