appears to be a season of scorecards and cockpits. I was
questioned at the recent Colombo Conference if the HR Scorecard
will fly at all. The reference was to the HR Scorecard -
by Brian Becker, Mark Huslid and Dave Ulrich (Harvard Business
school Press, 2001). The person who asked me the question
had already implemented the Balanced Scorecard (Robert Kaplan
and David Norton - Harvard Press -1996) and it was strange
that he should have doubts. I told him that the promise
of HR Scorecard is great and is a step bridging an important
gap in the BSC. But the question lingers in my mind - will
HR Scorecard fly at all? For that matter what have been
the critical experiences with BSC?
I must recall that it all started with Bob Kaplan and David
Norton. They initiated us into looking at company performance
from a wider perspective than merely the Return on Investment
and other financial measures. Following this, we have been
suddenly catapulted from the bicycle seat to an aero plane
cock-pit. The bottom line has been a fixation for decades
for all and now it looks like we had only been riding a
bi-cycle along a narrow path. The Balanced scorecard gave
us a powerful logic to develop four simultaneous perspectives:
a. Financial perspective;
b. Customer perspective;
c. Internal-Business-Process perspective; and
d. Learning and Growth perspective.
one of these perspectives had to be blown up into several
parameters or measures and the result could be as large
as a 20-metered dashboard. For instance, The Learning and
Growth Perspective alone can have 5 measures such as: Employee
Satisfaction; Revenue per Employee; Strategic Job Coverage
Ratio; Strategic Information Availability Ratio; Personal
Goal Alignment %.
The analogy is of the cockpit of a modern craft. Carrying
this further some entrepreneurial consultants have also
come up with designing brick and mortar simulators for top
management with all the metrics which look like the simulators
of the A-320. Fashionably, some have started calling this
approach as "cock-pit management". If this does not sound
too nice for any reason, one may call this as MBD (Management
by Dashboard). Of course, Becker, Huslid and Ulrich have
another term for this - Management by Measurement (MBM)!
(If Henri Foyal were alive he would probably say Excuzes
Moi - was this not what the now-out-of-fashion industrial
engineers used to do with big mechanical watches, piles
of log sheets, pencils and erasers! ).
Notwithstanding the unavoidable cynicism, hundreds of progressive
companies throughout the world have found a great value
in adopting the multi-focal perspective. This surely is
a great shift to elevated thinking from "navel gazing".
The need for the three additional perspectives was probably
consequent to developments in the 80's and the early 90's.
First, has been the Business Process Re-engineering movement
to ensure that there are clear responsibilities, better
quality, and reduced cost. BPR, which appeared initially
as a one-time project, has proved to be an ongoing challenge
for all companies. If the re-engineering were of the tangible
assets, it surely would have seen a terminal point in the
critical path. But BPR involved great amount of re-engineering
the intangible. Thus, if quality is a "journey and not a
destination", BPR has been a bumpy ride in this journey
which is just as long. That is why the Internal Business
Perspective became important and relevant.
Simultaneously, industry structures have proved that there
is value migration. The total value generated in any industry/product
line seems to be shifting from the primary stage to the
secondary and the tertiary. This value migration has been
increasing along the value chain with increasing intensity
of customer involvement. The structural changes brought
about by value migration and hyper competitiveness has indeed
made the customer king. The extent of customer base, its
retention and expansion have a major role in competitive
advantage and survival of the company. Given this realization,
the Customer meter has become important on the dashboard.
The role of knowledge and learning in creating and sustaining
strategic advantage was realized probably with the seminal
work of Peter Senge (Fifth Discipline) along with the growth
of the Information Technology and techno-savvy service sectors.
Consequent to this, human resource has suddenly come centre-stage
and this is reflected in the fourth dimension in the BSC
- Learning and Growth.
The BSC has held the promise of aligning the corporate strategy
down the line. In fact, Management By Objective (which actually
is still used by the majority of companies in US), an erstwhile
rave, also aimed at such an alignment of corporate objectives
with that of the Managers through the Key Result Area/ Key
Performance Indicator system. The excitement with the four-dimensional
perspective is the context, the more defined frame and the
menu of measures all of which can be administered electronically.
Several companies have reported good results of such alignment.
Admittedly, amidst this happiness, there are some tension
areas with BSC. The greatest challenge in implementing BSC
has been in relating the perspectives and measures to individual
roles and performance. All roles are not amenable to assumptions
along all these four dimensions. Obviously, while the pilot
can have all the four perspectives, the catering man would
not be bothered about how the fuel gauge looks like. Likewise,
the maintenance guy probably has no clue of the in-flight
catering or crew arrangements. Consequently, that each manager
must have a complete picture of the strategic objectives
is a sound idea. But force-fitting all four perspectives
for all roles has created a tension area in their impact
on job designs. How much of the role should be re-designed
to match the four-perspective formula is the question.
The second area of tension I suspect is the issue of inter-se
weightages among the perspectives and measures. Should the
pilot give more weight to the fuel gauge than the temperature
control? Should the airhostess give the same weights as
the pilot to various measures - I hope not. After all, she
cannot treat a passenger (customer) with the same importance
as the maintenance man treats the ground staff (his customer).
In the corporate world this issue becomes contentious as
we traverse down the hierarchy to very focused jobs. If
a single perspective receives, a large proportion of weightage
for a particular job, the logic of multi-dimensionality
suffers to an extent.
The third area of tension is the relationship with performance
management system. Giving up the existing performance appraisal,
which may be MBO centric or descriptive, is difficult for
any company, as it may have been accepted over the years
despite the occasional crib. Relating this system to the
BSC is a tough challenge. If the company chooses not to
relate the two, the benefits of BSC may not be as expected
as there will be a perceived disconnect. The BSC reckons
a reward system with weights but the change from the old
one is tough unless one treats this as an add-on, which
implies higher costs. "Buy-in" of new reward criteria in
place of old ones has always been a struggle unless there
is incentivisation. The question then is whether the cost
of transition is worthwhile.
Apart from these tension areas, I hear murmurs of tremendous
information - overload, computer space and time and a doubt
whether all the information being generated is being used
well at all. As the format takes over and is computer driven,
generating loads of data, there is a lurking danger for
the complacent. If the companies are not alert and thinking,
such tools will bring in what exactly is the fight against
- like a Trozan horse. A modern version of Taylorism and
broader bureaucracy can set in.
Good that we are well set and trained to read the meters
and be watchful of too glued. But who will start the engine
and fly? All good measures, show the conditions or results
of various activities which are interconnected but meters
don't drive. The man behind will still have to make decisions
- BSC will not give the decision criteria. Decisions happen
when the individual is able to interrelate the measures
and exercise trades-off. I repeat exercises trades-off.
If he doesn't do that, he will be playing tennis - keeping
his eyes on the scoreboard and hoping that the score moves.
Joining this new found enthusiasm for measurement and aligning
is the HR Score Card. It tries to bridge what has been acknowledged
as the weakest link in the BSC. The measurement of the Learning
and Growth Perspective. The authors of the BSC note the
limited progress that most organizations have made in linking
employees and organizational alignment with their strategic
The HR scorecard promises to develop a HR measurement system
by identifying the HR deliverables, measuring the high performance
work system (HPWS); identifying HR system alignment and
HR efficiency measures. The scorecard believes in managing
the numerator as well as the denominator i.e. help control
cost as well create value simultaneously,. The scorecard
promises to reinforce the distinction between HR "doables"
and HR deliverables. It measures not merely the lagging
indicators (those constructed after the events) but also
the leading measures. The effort of HR scorecard in sum
is to develop a range of measures relating to HR which are
quantifiable and also reinforce the multi dimensionality
of sustainable performance. It is a powerful thought and
a good supplement to the BSC. It will make some of the HR
people who have been happy with the "touchie-feelie" stuff
to start measuring, tracking and aligning. Or at least speak
in these terms.
What would be the likely impact of these scorecards? For
prognosis, we can draw from our experience with the longer
standing HR Accounting. It has been powerful as a concept
and was adopted by a few progressive firms at least for
the Annual Report purposes. The impact on the practice of
HRM or its connectivity to financial performance or shareholder
value has been rather uncertain.
In the end why did we take so long to impress companies
on the need to measure despite the cliché "you cannot manage
what you can't measure"? And that performance is multi-dimensional
and not just one number or output? The fact is that these
have been part of management practice for decades but took
a back seat especially during the last decade in our country.
Remember the efforts of the industrial engineers who had
made the very same efforts in the manufacturing and mining
sectors? For instance, the philosophy behind the multi-factor
incentive plans (incidentally, there is little reference
to this in the BSC and the HRSC) is multi-dimensionality
of outcome. They recognized the pitfalls in the vanilla
type Scanlon, which create adverse effects in the pursuit
of one type of performance. Thus, we needed to define performance
so as to make it more comprehensive and valid for the company's
long-term competitiveness. These dimensions needed to be
aligned, standardized, measured, and most importantly, rewarded.
But then, in the 60s and 70s, there were no software programs,
there were strong unions which insisted on collective bargaining
of everything, and little flexibility.
Hopefully, the scorecards will fly long if they have some
mid-air fuel of learning from old crafts in their future
versions. We don't want to see grounding of such powerful