Reviews At most companies, Human Resources is still seen as a paper-pushing department that focuses on administering benefits and issuing

paychecks. But that narrow view of HR can be costly, according to the trio of business-school professors who co-authored this book. "New economic realities are putting pressure on HR to widen its focus from the administrative role it has traditionally played into a broader, strategic role. As the primary source of production in our economy has shifted from physical to intellectual capital, senior HR managers have come under fire to demonstrate exactly how they create value for their organizations. More important, they have been challenged to serve increasingly as strategic partners in running the business." Building on the Balanced Scorecard approach pioneered by Robert Kaplan and David Norton, this instructive book shows HR managers how to turn their departments into key weapons in their companies' competitive arsenal. Highlights:

Details a seven-step plan for transforming the HR function into a strategic asset: clearly define a business strategy; build a business case for HR as a strategic asset; create a strategy map; identify HR deliverables within that map; align the HR architecture with HR deliverables; design the strategic HR measurement system; and implement management by measurement. Examines the challenges associated with implementing an HR Scorecard, and explores seven key success factors for implementing that initiative, starting with "leading change (who is responsible)" and ending with "making it last (how it will be started and sustained)." Advantages:

Co-authors Brian Becker, Mark Huselid, and Dave Ulrich persuasively argue that HR managers shouldn't feel threatened by their measurement-based approach. "Based on our experience, firms frequently under-invest in their people -- and, just as important, invest in the wrong ways ... The most effective way we know to change the calculus is to develop a measurement system designed to link people, strategy, and performance. That is what this book is intended to do." This work bolsters the Balanced Scorecard approach by strengthening an aspect "that Norton and Kaplan themselves acknowledge to be its weakest feature -- the question of how best to integrate HR's role into a firm's measurement of business performance."
CHAPTER 1: HR AS A STRATEGIC PARTNER There is a disconnect between what is measured and what is important.

Def: Strategic Asset: The set of difficult to trade and imitate, scarce, appropriate, and specialized resources and capabilities that bestow the firms competitive advantage. By definition, strategic assets are difficult to copy. Managers must: 1. understand the firms strategy 2. grasp the implications for HR move from a bottom-up perspective to a top-down perspective (strategic) Intangible assets generate tangible benefits [8] Its up to HR to develop measurement tools (accounting tools dont give us what we need) [11] The HR Architecture as a Strategic Asset [12] Focus of HR strategy: maximize the contribution of HR toward business goals, thereby creating value for stakeholders The HR Value Chain: (1) function, (2) system, and (3) employee behaviors The HR Function: HR Professionals with Strategic Competencies HR effectiveness: Technical (delivery of HR basics), Strategic (support implementation of firms strategies) Most HR managers are technically good but strategically weak The HR System: High-performance, strategically aligned policies and practices The High Performance Work System (HPWS) links selection and promotion to validated competency model skill building: timely and effective compensation and performance management (attract, retain, motivate hi performers) Table 1-3 Comparison of High/Low HR Management Quality [16] Strategic Employee Behaviors Def: Strategic Behaviors: the subset of productive behaviors that directly serve to implement the firms strategy [20] Core behaviors: from core competencies Situation-specific behaviors: job related or task specific How to manage strategic behaviors Important Behaviors = contribute to business success We cant affect strategic behaviors directly; they are an end result of larger HR architecture. Why Measure? (1) Decision-making, (2) evaluation of performance How to Measure? (1) clear consistent shared values (2) narrow down to a few measures (3) easy to communicate outside of HR CHAPTER 2: CLARIFYING AND MEASURING HRS STRATEGIC INFLUENCE Balanced Performance Management 1. How to implement strategy in our firm (how the firm generates value) KRAs and Non-Financials 2. What to measure Balanced Tangible AND intangible Financial AND non-financial Customers+ees+ops+technology Leading AND Lagging Indicators HR Deliverables 1. Performance Drivers People-related capabilities/assets (e.g. productivity, ee sat)

2.

Strong financials (lagging) + weak HR measures (leading) = future failure Strong HR measures (leading) + weak financials (lagging) = future success Enablers Reinforce performance drivers (e.g. selection, development, and rewards)

A value creation model [29] Ee skills --> process quality/cycle time --> on-time delivery -->customer delivery --> ROI Learning --> business process --> customer --> financial The 7-Step Model for Implementing HRs Strategic Role 1. Clearly define the business strategy State firms goals so (a) employees understand their roles (b) org knows how to measure success 2. Build business case for HR as a strategic asset Strategy implementation = $$ Strategy implementation is more important than strategy selection 3. Create a strategy map Map the Value Creation Process a. What strategic goals are critical? b. What are performance drivers for each goal? c. How to measure progress to these goals? d. What are barriers to achieving each goal? e. What behaviors employees need to have to ensure reaching goals f. Does HR provide ee competencies and behaviors needed to reach goals? g. If not what needs to change? 4. Identify HR deliverables within the strategy map Where on map can HR create value? Deliverables: Performance Drivers and Enablers 5. Align HR Architecture with HR deliverables Strategy tells us what deliverables to focus on How can HR systems be structured to provide deliverables? rewards, competencies, org design, development program 6. Design the Strategic HR Measurement System a. chose the correct HR performance drivers and enablers b. choose the correct measures 7. Implement Management by Measurement Measurement: Increasing Complexity in Stages Stage 1 Measurement: traditional HR Focused Operational Measures e.g. cost per hire, counting activities Stage 2 Measurement: no clear strategic linkage track intangibles without measuring intangibles e.g. ee sat Stage 3 Measurement: measurement-led management Acting on measures Creation of a strategy map Stage 4 Measurement: Profit relationship measures Estimate HR impact on firms strategy

Chapter 3: Creating an HR Scorecard Why a scorecard? 1. manage HR as a strategic asset 2. demonstrates commitment to firms financial success Scorecard Themes 1. Key HR Deliverables (leading) 2. High-Performance Work System (HPWS) (leading) 3. Extent HPWS is aligned to firms strategy (lagging) 4. Efficiency with which deliverables are generated (lagging) The HR Scorecard emphasizes HR value-creation tempered by attention to efficiency [58] Most of the scorecard should be value-creation HIGH ROI LOW ROI HR do-ables driven by cost control OPERATIONAL HR deliverables disciplined by attention to both benefits and costs Undisciplined attention to valuecreation that misjudges benefits and/or ignores efficiency STRATEGIC

Focus on strategic high ROI Aligned goals: External Alignment: aligned with firms strategy Internal Alignment: elements work together Constructing the HR Scorecard 1. The High Performance Work System Current state vs. desired state 2. The HR system alignment Elements that make contribution to HR deliverables From strategy map --> deliverables 3. HR efficiency: core vs. strategic measures Measures that encourage cost savings 2 kinds a. core. Significant HR expense but little strategy (e.g. benefits, accuracy of HRIS) b. strategic. Investments (e.g. cost per hire, training) 4. HR deliverables; Ways HR system generates value for firm Organizational Capabilities: [68] combine individual competencies with org systems that add value throughout the firms value chain not all deliverables are organizational capabilities nor do they have to be not all the HR deliverables are directly linked to firms success. Sometimes there is just a casual logical link [69] Include these kinds of deliverables 1. Performance drivers 2. HR enablers 3. If appropriate: org capabilities 4. Estimated impact of each deliverable (hypothetical or actual) Benefits of HR Scorecard 1. Distinguishes between HR doables and HR deliverables Deliverables = strategic, doables = not strategic 2. Controls cost while creating value 3. Measures leading indicators

4. 5. 6.

Assess HR contribution to strategy and to bottom line Makes HR more strategically responsible and focused Encourages flexibility and change (view numbers as means to end, not the end itself) [77]

CHAPTER 4: COST-BENEFIT ANALYSIS FOR HR INTERVENTIONS Operational vs Strategic Cost-Benefit Analysis Operational = lower cost (how to improve what you already do) Strategic = help implement firms strategy Which HR Activities should you cost and why? 1. First ask what types/categories of activities to cost 2. Should have these attributes a. Strategic importance (directly influences strategy) (use value-driver analysis Chapter 3) b. Financial significance (significant and ongoing investment) c. Widespread impact d. Links to a business element of considerable variability in outcomes or performance levels (e.g. some perform good, others poor) e. Focus on a key issue, problem, or decision facing line managers (provides answers to key questions or problems) Determining the ROI in HR: A 3-step Process 1. Identify potential costs 2. Identify potential benefits 3. Calculate the ROI of the program using an appropriate index Identifying Costs and Benefits 1. Costs are easy benefits are harder a. Benefits are future, not 100% guaranteed i. Indicate the estimated benefit (e.g. +/x%) ii. Develop a strawman, potential cost/benefit categories iii. Ask experts for estimated benefits and costs Understanding the financial impact of employee performance Managers know the performance levels differ between employees, but dont know how much difference better employees make. What is the relative contribution of an average employee compared to an above average employee? Three Levels of HR Measures Fig 4-1 1. Level 1. Dont measure ROI 2. Level 2. Intuitive or estimate ROI. Measure cost 3. Regularly measure ROI and NPV

Chapter 5: Principles of Good Measurement Why better measurement? [110] 1. Improves decision-making by concentrating on aspects that create value. Provides feedback 2. Justification for resource allocation Using HPWS Creates black box between where we are and where we want to be. Today >> Black Box > > Where we want to be

Black box contains strategic HR architecture and strategy implementation process Measure level and relationship of measures not just A-->B-->C as there is limited use to this kind of diagram Numbers with meaning a. 85% of employee opinion surveys mean nothing b. ask is it good compared to benchmarks c. ask what $ would a score of 90% give us d. what performance would a 90% give us Measures vs concepts/visions a. concepts/visions are important for strategy, but are not the strategy, as they dont guide decisions nor evaluation b. concepts/visions (AKA constructs) are used to determine measures a. sometimes several measures per construct i. example: retain best employees (through development, C&B, supervisory skills) Kinds of Measures 1. Nominal Measures a. Categorize only (e.g. male-female) 2. Ordinal measures a. Rank order (e.g. meets, exceeds, far excceds) b. Says it is better, but not how much better i. The difference between not acceptable and meets is not the same as the difference between meets and exceeds 3. Interval measures a. Assumes intervals equal between measures (e.g. likert scale) 4. Ratios a. Have a zero point, allow comparisons b. Units have inherent meaning ($, hours, etc) c. Easy to collect Ideally, measures show how much to change X in order to make Y change in Z Most hold on to legacy measures: what you always measure Valuable measures are often hardest to measure

CHAPTER 6: MEASURING HR ALIGNMENT Strategy Implementation

HR Competencies ->

<- HR Role -

HR Systems 1. 2. 3. 4. Strategic Implementation (top down) HR Systems ability to deliver HR Competencies in HR professionals and in line managers HR role degree of partnership a. Internally and externally viewed as partners (shared view)

Diagnosing Internal Fit of HR Source of Misalignment 1. Operational focus 2. Focus on consistency-uniformity (tell others what they can and cant do) 3. Too much benchmarking (bottom up focus) Alignment of HR Systems Comp Comp Teams Communication Training -100 = cross purposes 0 = no effect on each other +100 = consistent, enable each other DKN = dont know Example: Table above shows comp system does not support teams but does support communication Teams -60 Communication +50 +60 Training 0 +100 +100 -

Measuring External Alignment [138] Three Parts of Diagnosis 1. HR Deliverables aligned with firms strategy Recruitment Retention High performance Firms strategy Synergy capture 0 0 +100 OD +60 +80 +100 Forecasting +70 +40 DKN Branding DKN DKN DKN 2. HR system alignment with HR deliverables Comp ER Communication deliverables Recruitment -50 +50 0 Retention -60 -50 +100 High performance +20 +50 +10 3. System alignment map SAM [146] Firms Strategies Firms strategies 1 1 2 3 HR Systems A B C Using the SAM 1. 2. 3. 2 3 HR Systems A B C ME MY BOSS Training +50 +100 +60

identify key strategic drivers (e.g. LRP strategies) Identify HR System elements (comp, benefits, training, selection, etc) Ask sample of ees to evaluate distance between these pairs on 0-100 scale i. Example OD strategy is very close to training so gets 80 ii. Example OD is not close to synergy capture so might only get 10

CHAPTER 7: Competencies of HR Professionals [158] See table 7-1 on page 162 Knows the business a. Allows HR to join the mgt team b. Adapt HR and organization to changing business conditions i. Must know Finance-strategytechnology-org capability 2. Delivery of HR Practices a. Experts in HR b. Master theory, adapt to change 3. Management of Change a. Knows the change process b. Skilled change agent c. Able to deliver change 4. Manager of culture [160] a. Keeper of culture 5. Personal credibility a. Lives the firms values b. Builds relationships based on trust c. HR with an attitude i. A point of view about how to win ii. Back up soft stuff with evidence iii. Present innovative ideas and solutions iv. Encourage debate on key issues And now HR must also have Strategic Performance Management Competency (measurement) for each of the above competencies [167] this is not a separate competency by is applied across other 5 competencies. Dimensions of Strategic Performance Management 1. Critical causal thinking how does HR Drive performance??? 2. Understand principles of good management 3. Estimation of causal relationships 4. Communication of HR performance results to Senior Management CHAPTER 8: GUIDELINES FOR IMPLEMENTING HR SCORECARD Effective change = quality X acceptance (EC=Q*A) a. Quality technical aspects of change defined b. Acceptance ensures long-term success of scorecard Airplane pilot checklist for making change happen disciplined approach (Dont fall into smart trap you know it, then you stop) Guidelines for Pilots checklist 1. Org must attend to all seven factors 2. Must use checklist on any project a. Graph b. Plot over time 3. Use to monitor what needs attention 4. Use it to learn new language Keys and Processes for Making Change Happen [186] Key success factors for change Questions for assessing and accomplishing 1.

1. 2. 3.

Leading change a. WHO is responsible Creating a shared need a. WHY do it Shaping a vision a. What will it look like when we are done? Mobilizing commitment a. Who else to get involved Building enabling systems a. HOW will it be institutionalized Monitoring and demonstrating progress a. How will it be measured Making it last a. Making it last (how will it be initiated and sustained

Do we have a leader, owner, champion, getter or resources, investor of time Do ees see reasons, urgency, benefits? Do ees a. understand what behaviors will be required b. get excited c. understand benefits to stakeholders Do sponsors of the change build support? Do sponsors of the change know how to sustain change, recognize technical requirements, get the money needed Do sponsors have way to measure success And plan to benchmark progress and results Do the sponsors of the change recognize the first steps needed to get started, have a short and longterm plan to keep attention focused on change, and have plan for adapting change over time to shifting circumstance

4. 5. 6. 7.