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Role of Balanced Scorecard in Strategic HR A Case Study

A. Ajay Shankar Gupta * Dr. V. Sita**

Abstract
The premise that people provide organizations with an important source of sustainable
competitive advantage is established. The effective management of human capital as determinant
of organizational performance is thus accepted. The successful organizations are using human
resources as a strategic partner investing them with far reaching transformational roles and
responsibilities. Termed as Strategic Human Resource Management (SHRM), in the current
HRM literature, this activity involves making the function of managing people the most
prioritized action in the organization and integrating all HR programs and policies within the
framework of the organizational strategy. Empirical literature linking HRM with the firms
strategy and performance and the processes that operate leaves a significant gap to conceptualize
the ground realities and provide a direction to manage people. Managers deploy various tools to
strategize and support HR processes. One of the tools available for the HR manager is the
Balanced Scorecard concept. This paper examines the HR strategies, HR processes and the
performance measures to monitor the implementation and effectiveness of the HR Strategies
using the BSC concept in a case study format. More specifically, the critical issues relating to the
identification of measures for a successful strategy deployment and the results achieved through
these strategies would be focused. The study confirms that the use of Balanced Scorecard
concept in strategic HR helps the organizations to align & manage its people effectively.
Key Words:
HR Strategy, Human Resource Management, Balanced Scorecard, HR Scorecard, SHRM,
Strategic HR, Strategy Deployment, Strategy Map, HR KPIs,
JEL Classification:
JEL: O15 Human Resources; Human Development; Income Distribution; Migration OR
JEL: M12 Personnel Management
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Introduction:

The current business environment is challenging for the Indian Organizations in the globalized
era. Globalization requires that organizations increase their ability to learn, collaborate and to
manage diversity, complexity and ambiguity. Profitable Growth requires companies to seek and
acquire new customers and develop new products. Creativity and innovation coupled with the
free flow of information and sharing learning among employees assumes significance. This
demands creating entirely a new role and a new agenda for HR. HR is thus defined by what it
delivers. This mandates HR to partner with partner with senior and line managers in strategy
execution (Ulrich, 1998). Earlier, personnel management literature was more prescriptive than
analytical (Boxall, 1991). The role of HR in the contemporary business environment had shifted
from Personnel to HRD and then to SHRM. The practice of SHRM has outpaced the academic
work leaving a clear black box between HR and firm performance. The integration of HR with
strategy implementation needs different architecture for SHRM (Becker and Huselid, 1999).
Dave Ulrich (1998) says that Successful organizations will be those that are able to quickly turn
strategy into action; to manage processes intelligently and efficiently; to maximize employee
contribution and commitment; and to create the conditions for seamless change. The need to
develop those capabilities brings us back to the mandate for HR. Let's take a closer look at each
HR imperative in turn: Becoming a Partner in Strategy Execution - Strategy is the responsibility
of a company's executive team - of which HR is a member. However, HR executives should
impel and guide serious discussion of how the company should be organized to carry out its
strategy. An evidence of this can be seen General Electric in the aftermath of downsizing. It
then became increasingly clear that organizations need a distinctive human resource core
competency for sustained competitive advantage (Hodgetts, 1996).

Need of Balanced Scorecard Concept for SHRM:
The strategic alignment and execution at the firm level is significant, which automatically
becomes a challenge for HR. A tool that is available for the organizations is the Balanced
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Scorecard Concept. The balanced scorecard is a strategic planning and management system
that is used extensively in business and industry, government, and nonprofit organizations
worldwide to align business activities to the vision and strategy of the organization, improve
internal and external communications, and monitor organization performance against strategic
goals (Robert S. Kaplan and David Norton, 1996). A new phase in the evolution of the
Balanced Scorecard concept is the emphasis on its integration role, aligning strategy with
operations (Kaplan and Norton, 2008). The Balanced Scorecard is presented as a key
organizational enabler of strategy execution, which in itself is presented as an organizational
capability. The book of Kaplan The Execution Premium made it more popular. Balanced
Scorecards highlights the knowledge, skills and systems that the employees would need (learning
and growth) to innovate and build the right strategic capabilities and efficiencies (internal
processes) that deliver specific value to the market (customer) which will eventually lead to
higher shareholder value (financial) (Kaplan and Norton, 2001).

The Balanced Score Card is a multidimensional framework that gives top managers a fast but
comprehensive view of the business. The BSC allows CEOs to look at the business from four
important perspectives. The four perspectives are:
1. Financial Perspective- To satisfy shareholders, what are the financial objectives that need
to be accomplished?
2. Customer Perspective-To achieve financial objectives, what are the customer needs must
serve?
3. Internal Process Perspective- Which internal processes the organizations should excel to
satisfy shareholders and customers?
4. Learning and Growth Perspective- How should organizations learn and innovate to achieve
the goals? Intense global competition requires that companies make continual improvements to
their existing products, processes and have the ability to introduce entirely new products with
expanded capabilities.

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Organisation level Strategy Map:

Strategy Map is a pictorial presentation of strategy showing logical sequence with cause and
effect relation among the strategies. It provides the visual framework for integrating the
organizations strategies in the four perspectives of a Balanced Scorecard. It provides a single-

Fig. 1: ORGANISATION LEVEL STRATEGY MAP
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page view of the strategy. A properly constructed strategy map tells the game plan / strategy
story of the organization (Kaplan, R. S. and D.P. Norton , 2003).

Different Tools/ Methodology may be adopted by Company in developing its strategy, but the
strategy has to be validated by putting into BSC perspectives and establish Cause and Effect
relation among these Strategies. In this process company has to identify new strategies (It was
observed in more than 25 workshops on BSC, in which more than 100 teams formulated strategy
by doing SWOT analysis and taking into account the different Stakeholders requirements etc, but
every team had to identify few more strategies and drop few strategies to establish cause & effect
and Balance it to Prepare Strategy Map). A sample Organisation level strategy map is shown in
Fig. 1.

Organisation level Balanced Scorecard:

The intent of the strategy has to be translated into operational language as Strategic Measures/
Key Performance Indicators to know whether the strategy is being deployed or not and whether
the expected benefits are accrued or not. This helps in focusing the activities by all to deploy
strategy (Kaplan, R. S. and D.P. Norton , 2000). A sample BSC is shown in Fig. 2. This shows that
for every strategic goal there is a KPI which helps in understanding the intent of the strategy and
focusing on it by operational team. For every KPI there will be an unit of measure, targets and
the initiatives will be identified to achieve the targets.


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FIG 2: ORGANISATION LEVEL BALANCED SCORECARD
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Strategic Alignment by HR Team:
HR Team has to align their strategies and KPIs to the organisational strategy by analyzing their
support/ contribution to these organisational strategies. A typical example is that, if a company
strategies to enter new markets and increase sales, the organization needs to align the HR
strategy and KPIs for Chief of HR and the HR Manager. Table 1 depicts a typical organization
strategy deployment in HR.

TABLE 1: TYPICAL ORGANISATIONAL STRATEGY DEPLOYMENT IN HR
Organisational
Strategy
HR Strategy Chief HR KPIs with UoM HR Manager KPIs with UoM
Entering into new
markets and
increasing sales
Developing New
Marketing Team
Marketing Executives
Recruited
Nos
Cycle time for recruiting marketing team
Days
Marketing Executives Recruited
Nos
Training on marketing skill
enhancement
Training Man Days
Training Marketing Team on New Products
being developed
Training Man days
Training on communication/ presentation skills
Training Man Days
Training on Foreign Language
No. of Employees covered
Designing new
policies for
marketing team
Designing Incentive
Scheme for marketing team
Target date
Marketing executives received incentive
Nos
Incentive amount paid to marketing team
Rs Lakhs
Developing Hr Policy for
International Marketing
Target Date
Marketing executives covered under
International Marketing
Nos
Incentive amount paid to international
marketing team
Rs Lakhs

Against this, when the organization aligns the HR strategies with Organisational Strategies and
prepares a HR BSC, the typical sample looks like the one shown in Table 2.




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TABLE 2: TYPICAL HR BSC
BSC
Perspective
Organisational
Strategic Goal
HR Strategy HR Departmental KPI
Financial
Perspective
Increase Turn over &
Profits
Enhance Employee
Productivity
Turnover per employee per month.
Cost Reduction /
Optimization
Optimise Direct Employee
Cost
Wage Cost per MT production.(FTE)
Admn. Cost per MT production
Optimise Contract Labour
Cost
Contract Labour Cost per MT production (workmen
supplied through Contractors)
Total Cost Reduction
Customer
Perspective
Customer Satisfaction
Enhance Internal
Customer Satisfaction
Internal Customer Satisfaction Index
Internal
Processes
Perspective
Process Improvement
Facilitate Implementation
of Performance
Improvement Projects
Total PIPs Registered
Total PIPs completed
Effective Asset
Management
Improve Contract Labour
Management
Supply of contract workers for operations.
Cycle time to process Labour Bills
Improve Recruitment
Process
Recruitment Cycle Time
Availability of FTE(Full Time Employees)
Implement ISO9001 Compliance to ISO9001 activities plan related to HR
Implement 5 S Concept 5 S score
Learning &
Growth
Perspective
Developing
Competancy based
talent Mangt.
Developing Competancy
based talent Mangt.
Depts.Covered for Competencies List.
Foster High
Performance work
culture .
Developing Multi Skills Persons Trained for multiskill jobs.
Training of employees
Training Programmes Conducted
Evaluation of Training Effectiveness
Training To employees
Enhancing Empl.
Engagement
Implement Suggestion
Scheme
Suggestions Received & Rewarded
Exit Interviews Exit interview Rating
Welfare activities
Complaints related to facilities (canteen,Transport
etc).
Errors related to Salary Statement.
Improving Industrial
Relation
Statutory Compliances
No of non compliance notices received from
Statutory authorities.
Grievance Handling
Grievances/ Complaints received from employees
Grievences Resolved within TAT
CSR Activities No of CSR activities .

Conclusion:
HR has assumed a new role and in strategy terms, is described as SHRM. HR Managers aligning
HR Strategy with Organisational Business Strategy and then deploying it find the activity very
challenging. The best tool for the organizations is the Balanced Scorecard Concept. The HR
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Strategies are identified in line with Organisational Business Strategies and the supporting HR
processes & KPIs are identified. HR Strategies are thus translated into HR Balanced Scorecards
that measures the effectiveness of HR Strategies and the results achieved with those strategies.


References
1. Boxall (1991), Strategic Human Resource Management, Beginning of a new Theoretical Sophistication
2. Becker B.E & Mark A. Huselid, Strategic Human Resources Management: Where do we go from here?
3. Kaplan, R. S. and D.P. Norton (1996) The Balanced Scorecard: Translating Strategy into Action, Boston:
HBS Press.
4. Kaplan, R. S. and D.P. Norton (2003) Strategy Maps, Boston: HBS Press
5. Kaplan, R.S. and D.P. Norton (2000) The Strategy-Focused Organization: How Balanced
Scorecard Companies Thrive in the New Business Environment, Harvard Business School Press
6. R.S. Kaplan and D.P. Norton, "The Balanced Scorecard: Measures that Drive Performance,"
HarvardBusiness Review (January-February 1992): 71-79.
7. Robert S Kaplan and David P Norton. (2004), book The Execution Premium: Linking Strategy to
Operations for Competitive Advantage
8. Ulrich (1998), A New Mandate for Human Resources, Harvard Business Review, January- February 1998

Details of Authors:
* Ajaya Shankar Gupta Ainapur is currently a Research Scholar in the School of Management
Studies, University of Hyderabad. He is a Mining Engineer with MBA in Technology
Management. He has 19 years experience in Tata Steel and 11 years as Management Consultant
in the areas of TQM, Balanced Scorecard, Business Excellence Models etc.
Email ajaygupta@ainapur.com

**Dr Sita Vanka is currently Dean, School of Management Studies, University of Hyderabad,
Hyderabad, India. She is a teacher, trainer, consultant and researcher in the areas of Management
HRM, Educational Management, Public Policy Management and Womens Studies.
Email. Sita_vanka@yahoo.co.in