Identifying relevant HR system, designing HR Score card evaluation

Once the HR manager knows what the required employee competencies and behaviors are, he or she can turn to the task of identifying the HR activities and policies that will help to produce these employee competencies and behaviors. At Einstein medical, new services delivered was one strategically relevant organizational outcome. To produce this outcome, Einstein’s employees had to be willing to work proactively to find new and novel solutions, so this was one strategically relevant workforce competency / behavior. What HR system policies and activities will enable us to produce those workforce competencies and behaviors. For Einstein Medical the answer included special training programs and changing the compensation plan.

In this step, the important thing is to be specific. It is not enough to say, new training programs or disciplinary processes are needed. Instead the manager must now ask, exactly what sorts of new training programs do we need to produce the sorts of employee competencies and behaviors that we seek? How and to what end should we change disciplinary process? In this step, the HR manager must therefore become precise about the actual form and design of the firm’s HR system. For example, all high-performing companies tend to use incentive pay. However, what precise form should the incentive plan take in this company? What specific behaviors do we want to encourage? Who will decide if the person gets the incentive pay? What percent of total pay should we base on incentives? In other words, to achieve improved organizational performance, HR management needs to align the HR system – the firm’s HR policies and practices with the company’s specific strategic needs.

Designing the HR Scorecard Measurement System:
After choosing strategically required organizational outcomes and employee competencies and behaviors, specific HR system policies and activities there should be some methods to measure these. For example if we decide to improve the disciplinary system, how precisely the company measure such improvement may be in terms of number of grievances. If higher morale is one employee competency /behaviors we want to improve, how will we measure higher morale? Perhaps with surveys that measures attitudes regarding satisfaction with supervision and with pay.

Measures like these serve two functions. First, to the extent that the manager can quantify each of these organizational outcomes, and the employee competencies, and the HR policies/activities, the measures can help the company and HR manager assess HR’s performance, unambiguously and quantitatively. They make it clear whether and to what extent employee morale is up (or down), for instance. Second they can help the HR manager to build a measurable and persuasive business case for how HR contributes to achieving the company’s strategic financial goals. Hopefully, he or she will be able to show, quantitatively, how the firm’s HR activities affect employee behavior, customer satisfaction and therefore financial performance. In one recent study, 86% of HR professional who responded said they expected measurement of the HR function to increase over the next two years, 62% said they already used metrics to assess HR performance, and 72% said they benchmark HR activities (particularly compensation and rewards and equipment and retention and performance appraisal) by comparing their results to other firms.

The HR Scorecard is crucial in this measurement process. It is a visual and/or computerized model that shows the quantitative standards, or “metrics” the firm uses to measures HR activities and to measure the employee behaviors resulting from these activities, and to measure the strategically relevant organizational outcomes of those employee behaviors. It highlights, in a concise but comprehensive way, the causal links between the HR activities, and the emergent employee behaviors and the resulting firm wide strategic outcomes and performance. The HR Scorecard thus helps the HR manager demonstrate how HR contributes to the company’s strategic and financial success. Several consulting firms provide Web based services that make it easier to create HR Scorecards, based on metrics from best practice world class firms.

Periodically Evaluate the Measurement System: The HR manager cannot assume that the HR Scorecard’s various measures (metrics) and links will always stay the same. Perhaps reducing grievances is not having the assumed effect on raising morale. Perhaps the company must drop some firm wide employee measures (such as front desk customer service) and add new ones. Perhaps the measures the HR manager chose (such as number of grievances) are proving too hard to quantify. In any case, the HR manager should periodically evaluate measures and links to make sure they are still valid.