HR VALUE CHAIN ELEMENTS
The Four elements are termed as HR architecture elements namely,
1. High-Performance Work System.
2. HR system alignment.
3. HR efficiency.
4. HR deliverables.
The first are two leading indicators and second two are lagging indicators for HR performance.
Measuring the High-Performance Work System lays the foundation for building HR into a strategic asset. A High-Performance Work System maximizes the performance of the firmâ€™s employees. The problem is that the performance dimension tends to get lost in the attention most firms give issues of efficiency, compliance constraints, employees relations etc none of which is part of HRâ€™s strategic role. This is a mistake. The performance dimension needs to have prominence if a firm wants to enjoy the financial benefits that the Scorecard approach makes possible. Therefore, every firmâ€™s HR measurement system should include a collection of indicators that reflects the â€œperformance focusâ€? of each element in the HR system.
Weâ€™ve seen, measuring HR system alignment means assessing how well that the HR system meets the requirements of the firmâ€™s strategy implementation system, or what we have â€œexternalâ€? alignment. We have also mentioned â€œinternalâ€? alignment, defined as the extent to which each of the elements worked together rather than in conflict with one another. We do not give equal emphasis to internal alignment in our measurement system because, if the HR system is uniformly focused on strategy implementation, the elements should tend toward internal alignment. In other words, if HR managers can manage external alignment, then internal misalignment will tend to disappear. A focus on internal alignment becomes more appropriate as an initial diagnostic for those firms that have not adopted a strategic HR perspective. Internal misalignment, therefore, is much more likely to be a symptom of an operationally focused HR system.
HR efficiency reflects the extent to which the HR function can help the rest of the firm to generate the needed competencies in a cost-effective manner. This does not mean that HR should try to simply minimize costs without attention to outcomes, but neither should they â€œthrow money off the balcony.â€? The metrics included in this category should reflect that balance.