Short answer – almost everywhere. Long answer – read on.
Many progressive organizations worldwide have implemented a balanced scorecard to help them execute their company’s vision and strategic imperatives. The balanced scorecard provides a management and measurement framework that evaluates how the organization is performing against its strategic goals.
The tall foreheads behind the balanced scorecard are Dr. Robert Kaplan and Dr. David Norton, who developed the framework in the early 1990s as a way to look at organizational performance across an array of indicators, not just financial performance.
Already sounds pretty appealing to HR doesn’t it?!
Kaplan and Norton wanted to move beyond just financial performance indicators, which are retrospective, to look at three additional key areas of organizational focus and develop measurement for each of them – translating strategy into execution and measuring results.
Here are the 4 components of the balanced scorecard* and the specific questions the organization must answer to implement its strategy.
- Financial, which asks: “To succeed financially how should we appear to our stakeholders?”
- Customer Focus, which asks: “To achieve our vision, how should we appear to our customers?”
- Internal Business Processes, which asks: “To satisfy our shareholders and customers, what business processes must we excel at?”
- Learning and Growth, which asks: “To achieve our vision, how will we sustain our ability to change and improve?”
* Adapted from Robert S. Kaplan and David P. Norton, “Using the Balanced Scorecard as a Strategic Management System,” Harvard Business Review (January-February 1996): 76.
Let’s consider each perspective and supporting questions in reverse; and the importance of human resources and talent strategy mapping, to ensure success in each area.
“How will we sustain our ability to change and improve?”
The learning and growth aspect focuses very specifically on how human capital drives corporate performance and forms a foundation for success. Consider the latest research from Bersin & Associates that shows companies with strong learning cultures are 92% more likely to innovate.
- What learning programs does the organization have in place to drive competitive differentiators develop key competencies, entrench corporate values and culture and support innovation and growth?
- Do you have metrics in place to measure the alignment of personal goals to organizational outcomes?
- Is there an established profile for key technical or expert talent you need to hire?
These are just a few of the ways that the learning and growth aspect can map to the organization’s strategy and vision.
“What business processes must we excel at?”
You can see that the internal business processes facet is clearly impacted by the organization’s HR and talent strategy. Once the most critical business processes are established by the organization, critical HR initiatives like the establishment of core competencies, talent pools and development programs can be aligned to each.
For example, does the organization need to excel at product innovation? Reducing cycle times? Cross-selling? What type of leaders and team members do you need to support each of these business process excellence areas?
HR should also understand the metrics in each of the key business process areas, because they give the leadership team insight into how well the business is running.
“How should we appear to our customers?”
There’s no shortage of management reading that addresses the growing importance of customer focus and satisfaction. It’s no secret that customers will eventually demonstrate dissatisfaction with their wallets. And unlike financial performance which tells the story of past events, customer satisfaction can be considered a leading indicator of future performance.
So it’s important to understand what measures the organization has in place for customer satisfaction. Is the key measure Net Promoter Score? Or customer response times? Is it product up-sells and renewals? And now, which HR tactics can support this perspective? For example:
- Is every employee in the organization aware of these metrics and recognized/rewarded for achieving them?
- Are the metrics set as organizational objectives that each team member can align their efforts to?
- Is customer focus a core competency in the organization that each employee is assessed against?
All great questions in determining if customer strategy can be effectively executed.
“How should we appear to our stakeholders?”
From the financial perspective, the organization articulates not just whether revenue targets were hit, but overall financial health based on the specific metrics that matter to the shareholders.
- Is the revenue mix broad enough?
- Are margins where they should be?
- Is operational efficiency high on the priority list?
- Or is it simply market share growth?
And what measures can be taken via talent strategy execution to move the levers on any of these areas? Since human capital is an intangible asset, it’s a little more difficult to demonstrate direct impact of HR efforts on financial performance.
But a wealth of research demonstrates the link between employee performance and corporate performance. A strategy map of the talent management initiatives, which are meant to improve employee performance, can show a step by step link to each of the other perspectives.
When you consider these it becomes obvious how an improvement learning and growth objectives can readily impact the business process perspective, in support of the customer objectives, and ultimately the financial results of the organization.
For other resources and thoughts on how the balanced scorecard applies to HR, read our case study from Mount Sinai Hospital whose leadership team implemented Halogen’s talent management solutions in support of the organization’s balanced scorecard initiative.
You might also want to check out the topic by searching our HR Blog search tool – there are some great HR thinkers who have plenty to say on the subject.
Has your organization implemented a balanced scorecard? And if so, how is HR mapping its talent strategy to scorecard perspectives?