How Using the HR Scorecard Creates Long Term Value for Organizations

Shorter Term Targets and the HR Function

Typically, the Human Resources (HR) function is supposed to operate on short-term targets such as the number of people hired for different positions and within the targets set in the short term.

For instance, in most manufacturing companies, it is the norm to ask the HR function to meet the shorter-term demand for labor and resources that are for the immediate requirements.

This is the case with many software and IT (Information Technology) companies as well wherein during the boom periods; the HR staff is under pressure to meet the shorter-term hiring goals. Indeed, in our experience, the HR functions in most organizations work under tight deadlines to meet short-term targets for hiring, training, and payroll.

The Advent of SHRM and the Conception of Human Capital

Having said that, the advent of SHRM or Strategic Human Resource Management paradigms has been a game changer for the organizational practice as for the first time, the HR function was viewed as equal to the production and the operations as well as sales and marketing as far as aligning the overall organizational strategies with the HR strategies was concerned.

In other words, SHRM meant that the HR function was no longer a support and peripheral function in the organization but an integral and essential aspect of the holistic organizational strategies.

What this means is that the HR function became aligned with the broader organizational strategies of developing Human Resources not only with the view to actualizing talent development but also to ensure that such talent was a source of sustainable competitive advantage for the organizations.

In other words, the advent of SHRM meant that resources or the people in the organization were indeed resources and assets that can further the goals of the organization. This is especially the case with services firms such as software and financial services where the people are the main assets and human capital that is above the other capital such as equipment and machinery.

What this means is that organizations started investing in people as the main assets instead of buildings and plants. Indeed, most software and financial services firms often give secondary importance to physical assets and instead, focus on the human capital.

How HR Scorecard Helps Organizations to Measure and Monitor Value

This is where tools and methods such as the HR Scorecard come into play whereby the use of such tools means that there is both data and a specific methodology through which organizations align the HR function with the overall strategic imperatives as well as absorb the HR function into the organizational ecosystem.

Take the example of typical metrics used in the organization when tools such as HR Scorecard are used. To start with, the HR Scorecard ensures that the data about the HR activities are quantified, and a results-based approach is adopted.

This can take the form of collating and reporting data related to hiring and training as well as people enabling and people empowerment. Indeed, once such data is collected and then tallied with the targets as well as the strategies set by the organization; it becomes clear that such targets are not only shorter term in nature but more towards actualizing longer-term value.

To take an example, if the HR Scorecard captures data related to how much value the human resources are bringing to the organization through aligning hiring and performance appraisal parameters, it becomes clear that the Scorecard captures not only how well the HR function met its targets related to hiring but also ensures that the alignment of performance with such targets is aligned to the broader organizational goals.

Next, capturing metrics related to how many people were interviewed versus how many recruited and then measuring them with the number of people who stayed in the firm for say, the next two years, three years, and such would be useful to measure the value that accrues from hiring the right people and then retaining them.

Further, such value also accrues from measuring the money spent on hiring and talent development and then comparing to how much such resources have contributed to the organizations.

Thus, the HR Scorecard helps organizations in both creating and measuring value that accrues from the HR function to the overall organization.

What is Different about the HR Scorecard

Having said that, it is also the case that organizations at all times in history have been an integral part of the overall organizational strategies.

However, what is different with SHRM and tools such as the HR Scorecard is that for the first time, organizations have a methodology to measure and compare data about the value being created by the HR Function.

Apart from this, the HR Scorecard allows organizations to measure and compare data and value for the longer-term since the alignment of longer-term value and the value being created by the HR Function to the overall organization can be tracked and measured.

Conclusion

As is often said, if you can measure it, it means that it works and in this way, organizations can ensure that they have control on what the HR Function is doing and how well it is aligned to the broader organizational goals.

Further, as some industry experts aver, In God We Trust and Everyone Else Has to Bring Data, the use of metrics in the HR Scorecard helps the organizations to monitor how much value is being created in the process.

To conclude, the HR Scorecard helps organizations to take a long-term view of the HR function and how much value it is bringing to the organization.