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Compare/Contrast HR Strategic Measurement Tools

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Compare/Contrast HR Strategic Measurement Tools

Strategic resource management involves the development of plans which ensure that

organizational resources are used effectively. An organization could determine if the resources

have been effectively used using various parameters. The common tools for analyzing strategic

human resource utilization include; the balanced scorecard, economic value added (EVA),

human resource scorecard (BSC), and return on investment (ROI).

Comparison and Contrast of Measurement Tools

The return on investment (ROI) is a measure of profitability that compares the net profit

to the total investment. It shows what the company generates for every one-dollar investment.

This is a good measure of profitability within an organization because it can show the returns for

each department against the amount invested. This will encourage competition leading to optimal

use of assets (Lussier, & Hendon, 2021). Besides, it is possible to compare ROI to the curdle

rate; this will inform the decision of whether the investment is worthwhile or should be

discarded. The investment should be discarded if the ROI exceeds the hurdle rate.

The return on investment is ineffective because of a lack of common agreement on the

term of profit and investment. This is because profit may include profit before tax, profit after

deducting fixed costs, profit before interest and tax, and profit after tax. Besides, investment can

be the book value of assets and the current valuation of the assets and may include or not include

intangible assets. This makes the parameter unreliable. Besides, organizations may not use

similar accounting standards, which makes comparison unreliable.

Economic value added (EVA) is the additional return on the company’s cost of capital. It

is the additional amount of returns generated by an investment from the returns the company

would have if it invested the money in a fixed deposit account (Boon, Den Hartog, & Lepak,
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2019). If the value of EVA is negative, then the investment is not worthwhile because it is not

generating any return but eating up the amount of money invested. On the other hand, an

investment should be considered if EVA is positive because it shows increasing the

shareholder’s wealth.

The advantage of the EVA over the return on investment is that it offers the opportunity

to evaluate the various components of the investment and make changes where necessary. If the

outcome is still negative, then the investment should be abandoned. This is impossible when

using return on investment to reject an investment if the results are lower than the expected cost

of capital. EVA suffers the same limitations like the return on investment because it relies on the

parameter profitability, which is not standard (Lussier, & Hendon, 2021). Profitability can be

after taxes, before taxes, and after interest and taxes. It may also be hard to compare due to

different accounting standards.

Balanced Scorecard (BSC) is a strategic management performance metric used to

measure weaknesses within an organization and propose ways of improving the systems. The

advantage of this performance metric is that it is tedious and thorough, as it involves collecting

data, analyzing it, and taking corrective action where necessary. It is also holistic as it is

informed from the perspective of learning and growth, finance, customers, and business

processes.

The BSC can be used in my current organization to determine the learning and growth of

employees. This involves analyzing their skills and determining how effectively they perform

their duties. The process would provide insight if the employees required training. It also

involves examining business processes and finding ways to improve operations. The financial

perspective is concerned with analyzing the performance of various units and detecting
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variances. The management investigates the variances and takes appropriate action to correct

them. The disadvantage of BSC is that it is complex and difficult to implement. This is because

BSC involves auditing the whole organization (Boon, Den Hartog, & Lepak, 2019). The

undertaking is expensive and may be unrealistic to achieve. Besides, the auditing may be taken

well with employees who may feel that the changes threaten their jobs.

The HR scorecard is a human resource measurement tool used to evaluate and make

recommendations for improving the human resource department. This is necessitated by the fact

that human resources play an integral role in assisting the company in growing. This strategic

performance indicator is good because it helps improve HR KPIs, which directly helps the

company to achieve its objectives. Compared to the balanced scorecard, the HR scorecard only

addresses the human resource part of the organization. This means that it needs to be more

comprehensive (Lussier, & Hendon, 2021). For an organization to achieve efficiency, it needs to

address all aspects. The failure to address a perspective like finance would mean that the

organization would have the right staff but not the required resources to carry out its operations.

Summary

Analyzing the strategic performance tools shows that the balanced scorecard is the most

effective. This is because the perspectives inform it of learning and growth, finance, business

process, and customer perspective. Implementing the BSC makes it possible for the business to

achieve its objectives. Performance measurement tools like return on investment and EVA focus

on the financial perspectives only and raise the issue of compatibility due to using different

accounting standards.
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References

Lussier, R. N., & Hendon, J. R. (2021). Human resource management: Functions, applications,

and skill development. United States: SAGE Publications.

Boon, C., Den Hartog, D. N., & Lepak, D. P. (2019). A Systematic Review of Human Resource

Management Systems and Their Measurement. Journal of Management, 45(6), 2498–

2537. https://doi.org/10.1177/0149206318818718