Balanced Scorecard HR Strategy Development

Using the Balanced Scorecard for Developing HR Strategy

The Balanced Scorecard methodology, originally introduced by Kaplan and Norton, is a comprehensive management strategy designed to translate company ambitions into measurable Key Performance Indicators (KPIs) and metrics. When applied to Human Resources (HR), it helps manage activities and metrics directly impacting workforce allocation and resource management.

Understanding the Four Perspectives of the Balanced Scorecard in HR

The Balanced Scorecard approach includes four perspectives, each offering a different strategic viewpoint to effectively measure and manage HR performance:

• Financial Perspective
• Customer Perspective
• Internal Business Process Perspective
• Learning and Growth Perspective

1. Financial Perspective

This is the starting point of the Balanced Scorecard strategy. From the HR perspective, the critical question is: How does workforce performance impact the company’s financial success?

• Focus on financial efficiency as a predictor of long-term business success.
• Recognize that financial data is typically retrospective but necessary to understand past HR impacts.
• Use financial metrics to align HR strategies with overall business goals.

2. Customer Perspective

This perspective evaluates how HR policies influence the perception and satisfaction of your company’s customers.

• Ask: How do employees contribute to positive customer experiences?
• Recognize the importance of a motivated workforce in delivering exceptional customer service.
• Measure customer retention and satisfaction as indirect indicators of HR effectiveness.

3. Internal Business Process Perspective

Here, the focus is on how efficient and effective internal HR processes support the company’s objectives.

• Questions to consider: How productive are employees? Are internal HR processes aligned with business strategy?
• Track metrics such as process efficiency, productivity rates, and quality standards.
• Evaluate the effectiveness of recruitment, onboarding, and training processes.

4. Learning and Growth Perspective

Arguably the most important perspective for HR, this area focuses on employee development and continuous improvement.

• Ask: What skills and capabilities need to be developed to support future growth?
• Promote a culture of teamwork, knowledge sharing, and innovation.
• Include KPIs related to training effectiveness, employee satisfaction, and talent retention.

Implementing the Balanced Scorecard for HR Strategy

Once data from the four perspectives is gathered, it is integrated into an actionable HR plan. This plan should guide decisions such as:

• Employee development programs
• Compensation and benefits adjustments
• Engagement and retention initiatives

Industry-Specific Examples of Balanced Scorecard Use in HR

• Technology Firms: Focus on learning and growth with metrics on innovation and skill development to keep pace with rapid change.
• Retail Businesses: Emphasize customer perspective by linking employee satisfaction to customer service quality and sales.
• Manufacturing: Prioritize internal process efficiency, tracking production uptime and safety training effectiveness.

Balanced Scorecard HR Strategy Development Checklist

Step-by-Step Guide to Develop Your HR Balanced Scorecard

1. Engage Stakeholders: Collaborate with leadership and HR teams to set strategic priorities.
2. Customize Perspectives: Adapt the four perspectives to your organization’s unique context.
3. Select Relevant KPIs: Choose measurable, realistic indicators that align with your goals.
4. Gather and Analyze Data: Use HRIS data and surveys to collect insights.
5. Develop Action Plans: Create initiatives based on scorecard results.
6. Monitor and Update: Regularly review and adjust the scorecard and strategies.

Leveraging a structured toolkit can simplify this process. Explore the Balanced Scorecard and Strategy Map Toolkit to accelerate your HR strategy development with ready-to-use templates and guides.

For a broader approach, combining the Balanced Scorecard with other strategic resources can boost your HR and business results. Consider tools like the Small Business Growth Strategy Pack or the Finance Profit Growth Toolkit to support comprehensive organizational development.