Professional Documents
Culture Documents
AN HR SCORECARD
Verizon HR has effectively designed and implemented a strategic management system, ivhich is
hased upon the Inilanced acurecard model of Dr. David Norton and Dr. Robert Kaphiii nf
}lanard Business School. The HR Ralanced Scorecard was conceived with New Economy
organizational dynumics in mind. The scorecard uses a broad range of "leading and lagging"
indicators—overall strutegy. operational processes, customer percepti<nis, umlfinanciak to evubi-
ute the effectiveness ofHR initiatives to the bottom line. The HR Balanced Scorecard provides
the means to monitor workforce indicators, analyze workforce statistics, diagnose workforce
is.siies, calculate the negative financial impact, prescribe solutions, and track improvements.
© 200/ John Wiley & Sons, Inc.
Human Resource Management, Winter 2001, Vol, 40. No. 4. Pp. 365-377
'L 2001 John Wiley S Sons, Inc.
HlMW RESOLHte Winter 2001
figures. We in management need to track our paring lo transform the company into a mar-
finuncial results while monitoring progress in ket-focused organization that would he the
de\i'Iopino our human capital and ac(|uiring communications provider of choice to targeted
the talent and capjibilities we will need lor customer markets. Signiticant empliasis on
business success. The Balanced Seorecard new markets and additional services was part
(Kiiplan & Norton, I99f>) pro\ ides a system ofthe strategy. The teleconimunicatinns world
that leverages the traditioniji finaneiiil and following deregulation was turhulent. Fech-
efficiency measures we have tuailahle cur- nolog) acceleration, emerging customer needs,
rently for Human Resources with metrics ol and data and \ ideo transmissions were chang-
performance fr()m three addilioniil perspee- ing how business operated. GTE s customers
tives—eustomers, internal husiness processes, were ht'coniing price sensitive and eould now
and learning and growth. demand superior service and advanced sup-
port. The competition was in price, products,
Background and technology New mergers and partnerships
were heginning to oeeur; brand preferences
In 1996, J. Randall MacDonald, Executive and aggrcssi\e tactics from nontraditional
\1ee President—Hunnin Resources o( C,T\L competitors were all part of the mix. G I t
Corporation, v\as facing the biggest chiillenge Business Strategies were glohal in scope and
of his career—to create the HR strategy and translated directly to clearly communicated
plans to support GTE's worklorce through a targeted husiness results (see Figure 1).
major husiness triinslormation. Ihe leletom-
munications Act was transforming the regu- Workforce Environment
lated world t)f protected markets and estah-
lished profit margins into a turbulent, highK .Additionally, the workforce environment was
competitive husiness environment tor the tele- dramatically different and highly competili\ e.
communications giant. CME faced the lowest United States' unem-
Historiciilly, GTli had emphasi/cd a locus ployment in 24 years. The employer-em-
on infrastructure quality and customer ser\ ice. ployee relationship had changed; employees
Now CiTE s senior husiness leaders were pre- were less Mkely to remain with a single em-
Business Goals*
• Revenue growth of 10% (compared to
acluai revenue growih of 7% m 1996
and an average ol 2% in 1993-1995)
• Earnings per share growth of 13%
to 15%.
• Increase of in-franchise wallet share
from 3 1 % to 38%.
• $5 to S6 billion in new businesses-
outside o' our traditional services.
•This IS a soaosnol ol *fiere we were in 1997. Because this is a fasl-moving mduslry. Ihings hare clearly changed
snca ihen. but itie HR Balanced Scorecard is designed lo adapt anil produce value m a cofiimuously cnangmg
enviranment. Fot currerl informatJon link lo htlil /; wwft.ven^on com
HR Strategic ThrusI 1
HR Strategic Tiirust 5
Taient
' Grow the talent pool HR Capabiiity
' Invest in our people
• Provide growth • Invest in our growth
and deveiopment
opportunities
' Leverage diversity • Organize to deiiver
> Buiid an environment excalient service
tnat fosters creativity • Enhance technoiogical
and innovation capabiiities
^ The Challenge
IT ^ ^ ^
Positioning Verizon to become a
Leading worldwide player in
Telecommunications
HR Strsiegic Thrust 4
HR Strategic Thrust 2
Organizationai
Leadership
Integration
Leverage totai - GTE
' Invest in leadership
capat)ilities
growth HR Strategic Thrust 3
Partnership with our
' Define ieadership Customer Service
unions
competencies And Support
Foster business unit
' Structure rewards to
teaming
foster ieadership ' Create an environment
Structure rewards to
behavior that supports empioyes
foster integration
engagement
• locused on measuring vvbal matters to enable better decision making and resource allocation
Key Responsibilities
• Responsible for overseeing target setting process for your functional area
Delermining HR Detiverahtvi
Workforce Requirements
Oiilpul:
"Wiifll must HR deiLver C 'ompetitivc Capability RL'quirc
to cnabie liic business to
achieve its goais'.'"
Figure 3. Initial model used to align HR Strategy and Actions \o Business Strategy.
ers to determine the key questions to be an- measures. For example, one of the financial
swered for the business and to determine what objectives. Minimize HR Cost, was ex^ieeted
key drivers of the business would translate into to be an outeome of the HR Strategy. To cre-
clear people requirements. The outcome was ate a clear line of sight across the perspec-
an understanding of what questions need to tives, we linked Minimize HR Cost back to
be ansv\ered and of the competitive capabili- objectives in the Customer, Operations, and
ties required for current and future business Strategic Perspectives that were performance
success. This provided the detail to build a drivers for these outcomes. This cause and
strategy map which would support the design effeet relationship described that if HR inte-
and development of the HR Balaneed grated the organization, implemented technol-
Scorecard. Figure 4 describes the proeess fol- ogy enablers and optimized service delivery
lov\ed to determine people requirements and through streamlined processes the costs for
business drivers. service delivery would decrease and reduce
The people requirements defined the HR overall HR expense.
Strategy that then translated into specific HR Once we had defined the link from our
initiatives that should directly support the at- financial objectives, we now focused on the
tainment of HR Strategy. Having this alignment critical human capital requirements defined
allowed us to develop a strategv' map which il- by the business. Previously our HR Perfor-
lustrated the cause and effeet linkage between mance measurement had focused solely on
I IR Strategy and business objectives. Using the improvement of administrative and transac-
strategy map as the guide, we were then able tional efficiency such as the error rate in em-
to evaluate the strategic objectives in terms of ployee benefit processing and the number of
measures and outcomes (see Figure 5 on page training hours delivered per month. Now the
372). We could then further refine these into foeus was expanding to inelude new processes
lagging measures (which tell how well a eom- for the HR tirgani/ation to develo]> best in class
pany has already done) and leading measures serviee delivery and increased employee value
(which are indieators of future performanee). while ensuring a focus on cost and value.
In addition to aligning the scorecard mea- As v\e developed the measurement model
sures to the husiness objectives, we developed to support the business s people requirements,
causal links between the objectives and the the process naturally led to objectives and
and Implementing an HR Scurecard
measures forTalent, Leadership, and Organi- Historically, HR had a difficult time com-
zationai Capability (see Table II). We recog- municating to the business and maintaining
nized our employees would need to expand their focus on the investments and initiatives
their skills and increase their productivity to designed to build employee eapability. Strate-
provide the new products and services that our gic skill development, leadership development,
business would provide. Our sales represen- and employee development programs were all
tatives needed to be able to serve as our cus- diseussed with business leaders and generally
tomers'telecommunications solution provider. accepted as valuable. When financial pressure
Our customer service representatives also was applied, howcv er, these types of programs
\\ ould need ready aeeess to customer account were the first to go. Now with measures, whieh
information and be trained to quickly recog- link leadership development with competitive
nize possible customer needs and to commu- capability, people can see the relationship be-
nicate optima! mixes t)rproducts, services, and tween investing in these programs and
price plans to customers. We needed new in- achievement of long-term business goals.
centive systems to encourage the new behav-
ior and skill acquisition as well as retention Early Results
plans for eritical skill employees. Providing
workforce solutions and ensuring alignment An early benefit of the HR Scorecard work
and a strategy-focused workforce all contrib- was that it provided a process for the senior
ute to a more capable and skilled employee
HR team to focus on a clear and common
population, who will then drive profitability.
objeetive: to establish a common strategy tor
RtSOVIHk MAMCEMIM . WinUT 2001
Financiol
Customer
Organ
Heoilh 4 Com pori rive
Capobrlily
Operotions
•-:---?
Sirategrc
-i- -\
Enable o Psrformanca
Bai«d Culture/
Climcrte
ServcB Deliver/ Dniign • CulHure thai Va\uei ExWrnol Trend Dole Invest m Leadership Growth
I Gfow thfi TolenI Pool
Select. Aisimibie & t • OrgoniiolionolC hongo Skillj Re t u b - HR Ben leoderihip CompeKnciei
- Staffing EipflOoiions PioWieei/Bi eoklhiooghi Structure Rewards lo Foster
Key Talon I
Design Inlet veniioos Open Comrtiunicahoru Inlernol Employe* DaW
Otgonijodonal Bene
Hi Polon'iol DovBtepm . Provide Koinferconient • Climate thol w h i b i t t i Dh
• Rolationship Building Flaxibifity ' Orgaoiia'ionol Sfrolegy
' Reduce Turnovoi
• Hfi Planning . Clarity • Industry Tronds
• Performance Monogoment Standards • Intogroted Tectinology
• Wbrllocce Planning InlrasiriiCturs ISAP]
Cl Business Portner [Strategic Support) J Rating oo Corporate Service Agreamanis Employee Engagement Index
C2 World CloM Standards -1 Ranking of HR Practice Comporotive Analysis Results
-•
Davelopmenl/Audit [vs Benchmork) Hi Tech. RBOC's, IT Peergraups
C3 - Ratpontiva Quality Servica J Employee Satisfaction Survey Rasolli Hawitt Averoge Time to Rejolve
•ft
3 -1 Benefit Canter Satisfaction Parcant Fidelity Percent Resolved 1 st Coll
C4 - Low Cost Provider -1 HR Cast Foctor Indices COSI of 5arvica v j . Benchmark
Ol - Align HR Ptanning with Businejs Priorities .J % of HR Strategic Plans Impiamenled Time Sjjent with Enaculivas
O2- Provide Quality Con iulla live Advice J % of HR Customized Recommendations % Service Covaroge/Client
-'
Implemented
O3- Ensura a Sliategy Facusad ViferkForce J % Productivity Improvament Gods EsKiWished % Porticipation in Goal Setting Pioces»
'-*
SUO
Tracking lc«y linanCKd HR mWrict anablH u> to Fol socK p«ripacliva. ta 1 ore d«picl*d gioptiically Thi allowi
UI to tarn a companion i ivfml mor* »atily and how rho
OiH HG plaiu and program* arm compal ptfrForm compared to or
Our HR dallvary ti coit •Hucliva
HR il monaglng (ho coil of tumovat/chu
Vvrizon ii ganlng raluin or invatlmanl in
Staffing Activily
71
Th« traHing loclior rsptaHnH metrici which rsflocl Vorlion'i hiring octivtfy
Hiring ii plannsrf rtralegkally to luppori iha •upanbion gooli D( our butinait
ai th«y link lo itaHing qnd arganizalionol octivitiu Tranuiclion volumai and
coit par hira maaiuiai liock how sKwrnvaly we ar« abl* fo maa! iha butinait
neadi arvd aitF'^^'altaAA OrowiH rote ondftaporol^ofiroMi hava Qvt impoct
on iha laval at tlaftng ond Idol hiring eoUi Planning iha cjctioni nrKt
moaiuring Iha odiviFy arA aKpanie ol tha staffing opafolioni ar« imporlanl
ilTotsgic buiinaii aciioni
A performanc* maaiuramant lyilam luch ai tha HR Bdanead Scoraccrd complimantt finarcipl maoiuras ol pail parlormar>ca with maoturoi ol
drivmi of Iwlvfa parlorrnanca
6b)
Unlilw Irodtlional tinanciat accounting m<idali, iha HR Babncad Scoiecord ir^oiponiMi voluatian of i company') iniongibk and inta^lwitual oua»,
luch ai higlvquality producli ond Mrvkai, moiivalad and ikillad ampJoy**t. laiponiiva mlstnol procauei, latiihod custornari
Implsmanhng an HR maoiuramant lyitam anablai ut ta diractV I'nlt the HR itralagy anii vision lo kay HR procati ond parformonc* indicolori Tha
HR Uod«r»hlp taom will u » rha HR Soloncad Scuraeard lo battar undBntond whal i> truly driving HR luccali
Tha itralagic partpacliva includai objacKvai ond mwuut** cWvad fraoi tha HR
Kinction't viiion ond Uiolagy - in our COM, lh« diraci octioni which lupport
ochieving buiinaii gooli MaoiUTSt luch ot Laadarihip Banchitranglh, Gloii
Cailing, Parcant Divertity Raciuilmanl halp ui Farui on our ilrologic drivari
CuiMmar Panpadrva
the managers and tbeir departments on tbis this tool. For example, one of the most impor-
new management too!. Tbe emphasis on the tant areas to manage in terms of cost is em-
scorecard was on tbe value tbe tool provided ployee turnover or " c h u r n " . Turnover,
in communicating strategy and alignment to particularly w itbin target front-line workforce
tbc business. It also sened as a tool that pro- centers, is critical to productivity and expense
vided proactive solutions to employee issues control. Higb turnover results in lower pro-
before a negative impact could occur to tbe ducti\ity, bigber training, and staffing and oc-
bottom line. I'erlormance measurement was cupational healtb costs. The impact is across
also an essential component, und all in tbe tlie board and affects business profitability.
HR organization bad tbcir incentive compen- Starting in 1^98, witb a new disciplined
sation tied to tbe results ol tbe IIH Scorecard. process using tbe HR Scorecard. HR profes-
Training and communication material was sionals tracked and analyzed turno\cr statis-
used extensive!) to reinforce understanding of tics, determined reasons for turnover,
the new management tool. An inleracti\o calculated tbe negative financial impact, pre-
teaching tool was developed to train HR pro- scribed solutions, tracked improvement
fessionals to use tbe !!R Scorecard results in trends, and sbowcd dramatic results. In part-
problem-solving workforce issues. ncrsbip witb the business leadcrsbip in tar-
Measures do not manage, and simply geted call centers, significant costs were
trackingresults wasnot tbe only intended use avoided by reducing the regretted turno\er (see
of tbc MR Scijrecard. Tbc value was to use Kigure 7).
the information provided in the scorecard and Linkages between husiness processes and
take action to influence and improve business value cbains to human resource actions and
performance; tbis was the real value added lor services were clcarlv defined as the HR
Saparation/Churn
Separaiion/Cnurn consUlules onB ol lhe majw cosis Ol running our otganization
Retail Markets
I9SB
Targeted CrlilcalWorkfofce Centee
Turnover .n our largeled fronl-line worklorco cenrers .S cnlical lo producHvity and e^penso conltol High lurnover resulls in lower
producliuity. higher iratnmg, slaHing and occupational health costs. The .mpaci is across lhe tward and aHecis business proMability.
Estimaied savings using GTE Corp Human Resource Financial Repon - 1999 and Saratoga Institute GTE Business Ahalysis
This screen is
called a "briefing
book." It allows us
to see the "big
picture" in easy-to-
read charts and
graphs that track
relationships and
illllllll trends in the data.
V
Soum:
Scorecard became a business tool understood vealed tbat si.\ months prior a significant ex-
and used across the HR organization. Not only pense reduction elfort had been put in place
are buman capita! InitiiUives needed to in- for tbis call center. HR responded lo the re-
crease employee value delivered to the i)usi- quired reduced expense by cbanging talent
ness. tbey are vulnerable to business process pools and reducing the investments in selec-
cbanges and tbe measures taken in isolation tion methods. T his action kept costs low while
can be misleading. For example, in a regional bringing in applicants wbo were ready to start
call center, our external business measures ol t|uickly but were barder to train and keep. It
customer satisfaction were trending downward was a bad trade-off. It made sense to accept a
and accelerating. W ben MR reviewed tbe call longer cycle time and more eost to ensure tbe
center resuits from tbe liR Scoreeard, tbere rigbt person was put in the right Job.
was no single indicator tbat sbowed any di- Drill down capability below tbe summary
rect relationsbip to tbe customer satisfaction level results of tbe HR Seorecard is enabled
issue; bowe\er. tbe measures., togetber witb tbrough a technoiogy architecture, whicb at
input and analysis by HR professionals and the top level uses a Web-based application to
line management, pointed to botb an issue and deploy and communicate to tbe desktop HR
solution not readily apparent. I be HR metrics Scorecard results in a "virtual briefing book".
showed a ver>' low cost per bire, a very quick Figure 8 illustrates the HR Scorecard user
cycle time to fill jobs, and an average employee interface which is available on-line to all HR
separation rale. On tbe surfaee notbing un- professionals. The "virtual briefing book*' is
usual^in fact tbe staffing metrics sbowed a easy to use and uses color (green, yellow, and
higb efficiency and cost control. Drilling red) to indicate wbether a metric bas exceeded,
deeper sbowed a bigb cost of training, a \er\' mel, or fallen below target.
higb separation rate for sbort service employ-
Tbe underlying teebnology supporting tbe
ees, and declining employee satisfaction for
"virtual briefing book" provides links to CRP
long service employees. Furtber analysis re-
systems (SAP and PeopleSoft) and a data ware-
.376 }1LM\\ 200J
bouse using a data-mining tool to drill down To fully appreciate the value of the HR
below^ tbe H R Scorecard results to analy/e and Scorecard within Verizon, il is important to
model cause and effects. Predictive modeling understand bow it served as a catalyst lo pull
to evaluate workforce decision impacts (posi- together the two 11R leadership teams during
tive and negative) prior to execution is tbe the merger integration planning. The process
primar\ objective of tbis investment in tech- of defining the role and strategy of HR in the
nology. Figure 9 illustrates tbe technology ar- new company provided a common objective
chitecture. Sheban Xavier, the key architect for integrating tbe HR leadership team. .Ar-
tor tbe teebnology platform, describes tbe ticulating a common strategy and business
value to tbe business. alignment for HR sen ices provided a positive
perspective—a clear focus on tbe eustomer
Tbe Employee Data Warehouse provides and a shared sense ofthe enormous potential
the intelligence behind tbe measures to deliver worid class programs.
tracked b\ the HR Scorecard. Our HR pro- The newly merged company faces a
fessionals have access to a rich base of em- highly competitive environment where a com-
ployee data integrated from 16 ilillcrcnt 11R petitive cost structure, consistent revenue
systems including 20 years of historv. Us- growth, controlled expense, and excellent
ers ha\c a suite ot reporting tools that en- investment management are criticai to win
able tbem lo perform sopbisticated multi- in tbe market place. I be V'erizon HR
dimensional workforce anahsis and predic- Scorecard continues to pro\ ide the forum for
ti\e modeling. Hidden eorrelation between \\W leaders to actively discuss performance
measures to prove or disprove what busi- and future targets. HR leaders now have a
ness managers previousiy knew only tool which supports a focus on tactical e\-
through hypotheses or hunches can mm cellenee \\hile ensuring alignment with busi-
hf determined. ness strategy.
MuU-dlmanalof
Drill dowtl
Sagmentillon Sagmentatlon
Tbu HR Balanced Scort'tard bas niadc it gics will continue to evolve, and HR manag-
possible lor HH manaj^crs to understand bow ers will continue to be llexibic and creative
they align to business objectives. They arc in supporting tbe cbanges. Tbe value of the
able to explain not only ubat tbey are track- HH Scorecard as a tool is tbat it can get us to
ing but also bow tbey are performing on es- tbe new goals and measures and tbrougb tbe
sential strategies for tbc business. Business process ensure continued learning and
environment and tbe objectives and strate- cbange management.
J. R.WDAl I MAC DO.V\I_» joined IBM in .August 2000 as senior viee president, human
resources. In this position he is responsible for the human resources practices and
policies of the organi/atiori ;ind repiirls lo the (_ hairnian and C'EO, I oiiis V. (ierstner.
Jr. Prior to joining IBM. Mr. MacDunald was the executive vice president oi human
resources and administration for GTE (now Verizon Communications). He serves
on the Board o\' Directors of Covanee. formerly known as Corning Pharmaccutieiil
Services. He is n nu-mber of Cornell Lni\ersit\'s Center for Advanced Humiui Ke-
sources Study and is Chair of its Executive Board: the Ccmdriek group; the Person-
able Rounthable: the Eabor Policy Association and serves on its Board of Directors
as \ Ice C liairman.
REFERENCE
Kaplan. R.S,. & Norlun. D.P. (!996).'Hu- Balanced Scoretaril; IranslHtingstratcg\ into action. Boston: Manard
Business School Press.