Balanced Scorecard. The Challenge of Measurement in Human Resource Management


Seminar Paper, 2011
19 Pages, Grade: 2.0

Excerpt

Table of Contents

Executive Summary

List of Abbreviations

List of Figures

1. The Balanced Scorecard
1.1. The Concept of a Balanced Scorecard
1.2. The Benefits of a Balanced Scorecard
1.3. The Balanced Scorecard as Measurement based Management Instrument

2. The Balanced Scorecard for Human Resource Management
2.1. HR-BSC – Financial perspectives
2.2. HR-BSC – Business perspective
2.3. HR-BSC – Customer perspective
2.4. HR-BSC – Learning & Growth perspective

3. The Measuring Challenge in Human Resource Management
3.1. Human Resource Performance Management
3.2. How to Measuring Performance in Human Resource Management
3.3. Benefits of Human Resource Performance Management

4. Advantages and Limitations using a Balanced Scorecard in Human Resource Performance Management

ITM Checklist

Bibliography

Executive Summary

As people are the most important and valuable assets a company has, the human resource management (HRM) has a strategic role to play. However, not always this importance of HRM is seen and human resources (HR) as an organization have in some companies a minor standing.

In order to measure the contribution of HRM to the corporate results a measurement system has to be established. This measurement system, the balanced scorecard (BSC), breaks down the corporate strategy to each level of a company and describes measures accordingly which finally makes the HRM role measureable.

This assignment provides some background information about the balanced scorecard approach in general and for human resource management in particular. The information covers the different perspectives of a BSC as well as some possible measures.

Further on, the performance measurement in HRM is described dealing with an explanation why it is not straight forward and were difficulties are. The chapter deals also with the benefits and how to measure them. As a summary the advantages and limitations in using a balanced scorecard in the HRM are given. The work is closing with the ITM checklist providing a holistic overview of using the BSC approach inside a company and in HRM.

List of Abbreviations

illustration not visible in this excerpt

List of Figures

Figure 1: Balanced scorecard

Figure 2: Simplified illustration of HR value creation

Figure 3: HR-PM from three different perspectives

Figure 4: Targets and benefits of HR-PM from three different perspectives

1. The Balanced Scorecard

The concept of a balanced scorecard (BSC) was developed by Robert Kaplan and David Norton in the late 1980’s as an enhancement for corporate finance controlling. In 1992 the idea was firstly published by Kaplan and Norton in a Harvard Business Review article[1] which was the basis for their bestseller, "The Balanced Scorecard: Translating Strategy into Action", published in 1996.

The idea of the BSC is to use it as an instrument to associate corporate numbers from the past with future oriented perspectives (Groetzinger 2001, page 45ff). The BSC is a complex controlling and management system which can be used to define company strategies, to put them in action and to communicate and render them more precisely.

1.1. The Concept of a Balanced Scorecard

The BSC method is a strategic approach which enables a company to translate their objectives and strategies into implementation. The idea behind is to describe global corporate strategies not only verbally but also to priories and weight them. A BSC consists of four perspectives, the financial, the customer, the business process and the learning and growth perspective which are centered around the corporate vision and strategy as shown in Figure 1.

illustration not visible in this excerpt

Figure 1: Balanced scorecard[2]

The concept of a BSC supports to monitor the present performance and tries further to evaluate how the company will be positioned in the future. One key feature of the balanced scorecard is to choose measures and targets by a process of abstraction that narrows down the search space for a measure by informing about a particular objective, for instance the customer one, rather than simply finding a measure for 'Customer' (Balanced scorecard, 17.01.2011).

Four fields in each perspective of the BSC are “scored”:

- Objectives
- Measures
- Targets
- Initiatives

The four fields are describing the goals to be achieved and the measurement parameters accordingly. Further on, target values for the measures are specified and projects are described to be initiated in order to meet them.

1.2. The Benefits of a Balanced Scorecard

Using a BSC has several advantages. Based on this method a company for instance can focus and monitor on a few key topics which are relevant to increase their performance. The concept also helps to integrate corporate programs and to break down from the top level strategic measures thus lower levels, line managers as well as employees, can see what's required to achieve corporate goals at their level.

1.3. The Balanced Scorecard as Measurement based Management Instrument

The methodology of a balanced scorecard is based on key concepts and previous management approaches such as the Total Quality Management (TQM). The focal point of this method is a measurement based management and feedback possibility which includes parameters such as customer defined quality and continuous improvement on the one hand side and employee empowerment on the other (Kaplan, Norton, 1996, page 8).

2. The Balanced Scorecard for Human Resource Management

The BSC in the HRM environment, commonly referred to as HR-BSC, represents HR as an organizational unit with an controlling approach. Unlike the BSC, the HR-BSC aims for a human resource strategy as highest measure. From this point of view the measures from the BSC has to be translated into the field of HR.

Using the BSC in the field of human resource management the previously discussed four perspectives could contain the following parameters:

- Financial perspective
- Cost of employees
- Cost of trainings
- Cost of recruitment
- Cost of HR organization
- Business Process perspective
- Recruitment of new staff
- Talent management
- HR change management
- Layoff of employees
- Customer perspective
- Supply of service to employees
- Supply of service to business units
- Supply of service to subsidiaries
- Learning & Growth perspective
- Training of employees
- Moderating corporate culture and attitudes
- Development of leadership

2.1. HR-BSC – Financial perspectives

The HR-BSC still contains financial data as originally defined be Kaplan and Norton in the concept of the BSC. Accurate HR funding data is still a key parameter managers have to provide and analyze. The financial perspective is providing information about recruitment and employees cost as well as costs for training and costs of the HR organization itself.

Typical objectives would be for instance to maximize the shareholders value and to minimize the costs of human resources whereas the corresponding measures would be the revenue per employee and the cost of labor.

2.2. HR-BSC – Business perspective

The business process perspective is containing information about how an organization or company is operating. With respect to HRM, processes about recruitment and layoffs are included as well as the ones dealing with talent and change management.

Aligning global HR planning with the company strategy or development of employees would be typical objectives in this field. The recruitment time for instance could be used as a measure.

[...]


[1] The Balanced Scorecard - Measures that Drive Performance

[2] http://www.balancedscorecard.org/Portals/0/images/balancedscorecard.jpg

Excerpt out of 19 pages

Details

Title
Balanced Scorecard. The Challenge of Measurement in Human Resource Management
College
University of applied sciences, Munich
Course
MBA
Grade
2.0
Author
Year
2011
Pages
19
Catalog Number
V233248
ISBN (eBook)
9783656494836
ISBN (Book)
9783656495338
File size
798 KB
Language
English
Tags
HR, Balanced Scorecard, HRM, MBA, Human Resource Management
Quote paper
Matthias Beer (Author), 2011, Balanced Scorecard. The Challenge of Measurement in Human Resource Management, Munich, GRIN Verlag, https://www.grin.com/document/233248

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