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Summary HRM3704 - Study Unit 5
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- University Of South Africa (Unisa)
HRM3704_Study Unit 5_Measuring human resource management within organisations
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HRM3704 Contemporary Issues in Human Resource ManagementStudy Unit 5 - Measuring human resource management within organisations
The Balanced Scorecard
Developed by Robert S. Kaplan and David P. Norton in the early 1990s. Balanced Scorecard approach Kaplan and
Norton allow managers to look at the business from four important perspectives:
• a customer perspective – how do customers see us?
• an internal perspective – what must we excel at?
• an innovation and learning perspective – how can we continue to improve and create value?
• a financial perspective – how do our shareholders see us?
Balanced Scorecard forces managers to focus on only a handful of measures that are most critical. To activate the
scorecard, managers translate the company goals relating to the four perspectives into specific measures that reflect
the factors that really matter.
• A customer perspective. The question pertaining to the customer perspective is: how do customers see us?
Managers can obtain the answer by measuring lead times, quality performance, service, and cost. To do this,
companies articulate goals for the components of time, quality, performance, service, and cost. Translate
these into specific measures. Goals for customer performance can include the following (in order to track the
performance on any of these goals, the company can obtain the information either internally or externally
from customers):
o To get standard products to the market sooner
o To improve customers’ time to the market
o To become the customers' supplier of choice through partnerships with them
o To develop innovative products tailored to the customers' needs.
• An internal perspective. What must we excel at? What must the company do internally to meet its customers'
expectations? Managers can obtain the answer by determining the processes and competencies that are most
critical for the company, and specifying measures for components such as cycle times, quality, employee skills,
and productivity. They the translate these goals into specific measures for each. Goals for this component can
include, e.g.:
o To obtain a capability in submicron technology
o To obtain excellence in manufacturing
o To obtain productivity in design
o To introduce new products
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Summary by L Petzer
, HRM3704 Contemporary Issues in Human Resource Management
As much of the activity to achieve these goals takes place at the lower levels of the organisation, the company
must bring the measures for these goals to the attention of the employees at these levels. The company will
ensure that the employees at these levels have clear targets for actions, decisions, and improvement activities
that will enable the company to achieve its overall mission. The availability of information systems within an
organisation can play an important role in monitoring progress in this regard.
• An innovation and learning perspective. Can we continue to improve and create value? The previous two
components of the Balanced Scorecard identified the parameters that the company should consider most
important for competitive success. Continual improvements need to be made to existing products and
processes, and companies have to have the ability to introduce entirely new products. One of a company's
measures in this area could be the percentage of sales from new products. If sales go down, the company can
establish whether this fall is due to the design of the product. (Note that some organisations replace the
innovation and learning perspective with a broader human-capital or people perspective.)
• A financial perspective. How do we look to shareholders? Managers can obtain the answer by measuring cash
flow, quarterly sales, growth, operating income by division, increased market share by segment, and return on
equity. Companies articulate goals for these components. Typical financial goals have to do with profitability,
growth, and shareholder value. They then translate these goals into specific measures. Financial-performance
measures indicate whether the company's strategy, implementation, and execution are contributing to
bottom-line improvement.
Compiling the Balanced Scorecard - who is responsible?
A Balanced Scorecard team should be responsible. What will this team look like?
Some of the important stakeholders in the team will undoubtedly be members of top management. Besides this group
the higher the level of people an organisation can assemble from across the business units within it, the better. The
advantages of this approach are obvious: with rank comes experience, knowledge, credibility, and the ability to interact
with the most senior executives at regular intervals.
Besides senior representatives from the business units within an organisation, senior members from support groups
such as Human Resources, finance, and Information Technology (IT) will also be necessary. Niven - conflict is at the
heart of Balanced Scorecard development.
One trait all team members must possess is the ability to work comfortably in an atmosphere of conflict. Every team
needs a leader. The Balanced Scorecard process is no exception; The leader can be called the Balanced Scorecard
champion." Responsibilities of this person will include:
• scheduling meetings,
• tracking results,
• ensuring the distribution of materials,
• interacting with top management, and
• providing guidance on tough issues.
Implementing the Balanced Scorecard within an organization.
The process of compiling the Balanced Scorecard has been completed, the organisation needs to implement the
Balanced Scorecard, i.e. cascade it down the organisation to all levels. This process is not simple; often, not only have
employees never heard of the term ‘Balanced Scorecard,' but they also do not have a working knowledge of it. For
successful implementation, organisations need to undertake some staff training.
Sessions can address issues such as the origins of the scorecard, the four perspectives, and the implementation
principles. Proper communication between everybody is absolutely essential. No scorecard can work unless managers
link it to the budget of the company.
The linkage of the employees' pay to performance will also play an important role. The organisation should review and
frequently discuss scorecard results throughout the organisation to achieve long-term success. It is clear that use of
the Balanced Scorecard has a number of advantages, namely:
• It brings together many of the competitive elements e.g. becoming customer oriented, improving quality, and
emphasising teamwork
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Summary by L Petzer
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