Organizations need tools that measure the effectiveness of their people management strategies and their performance models. Researchers have developed tools like the balance scorecard that monitors organizational growth and productivity and measures the effectiveness of their practices. According to Kaplan and Norton, the brains behind balance scorecard concept," The balanced scorecard is a strategic management system that channels the energies and abilities held by people in the organization towards achieving organizational goals".

In most organizations HR is no more just a cost center, it is a strategic business partner. To succeed in this attempt HR has to justify its strategic importance and establish itself as an asset. Most leaders ignore HR, as its contribution to business cannot be quantified. The advent of HR scorecard (a concept similar to the balanced scorecard) has shattered this myth.

HR scorecard relates business, people and their contribution to organizational success. It measures HR functions and outcomes. Moreover, it provides a systematic analysis of the effect of HR outcomes on business performance. It aligns HR systems with the company's overall strategy and links HR results to financial measures like profitability and shareholder value.

The HR scorecard establishes a direct relation between the capabilities of the workforce and results. It thus communicates the effectiveness of people management strategies. With a HR scorecard companies can align their business strategies and compute their HR operations better.

The design of a HR scorecard has five stages.

Step 1: Defining strategy

With the top management's approval HR should draft a clear plan of action and communicate it to all the employees. HR should first analyze business strategies and the implications of HR on it.

Step 2: Defining the measures

The initial search and analysis help formulate a HR strategy. Based on this analysis the goals and metrics to be measured must be defined. While doing so HR should link each of the HR practices to other organizational goals and their outcomes.

Step 3:

At this stage HR defines the roles and responsibilities of the employees. To secure the information, access must be restricted to a few employees. Moreover, it should be user-friendly.

Step 4: Final

HR must now seek approval from other departments and business units. Also the goals, the information and the benchmarks must be realistic.

Step 5: Measuring success

HR must ensure effective communication and appropriate implementation. Communication generates the feedback critical for the success and enhancement of a project.

Examples: Tata Engineering

Tata Engineering implemented the balanced scorecard at a business unit level and called it The Business Unit Balanced Scorecard. Tata integrated it with their TBEM (Tata Business Excellence Model) process for internal assessment. The TBEM process fosters an environment of high performance, learning and sharing. The balanced scorecard acted as a guideline for developing similar scorecards for other support functions.

Tata Engineering realized that HR perspective must also be highlighted. This would integrate the HR activities with various aspects of business and help achieve the organization's end-objectives. HR can thus contribute significantly to the business. The balanced scorecard at Tata addressed the following HR perspectives:

Financial: HR concentrated on ROI on the human capital employed.

Customer: HR developed the resources necessary to meet internal and external customers. It incorporated and trained employees in areas of customer satisfaction and customer services.

Internal processes: The HR at Tata used the resources developed to restructure their HR processes.

Learning and growth: The HR team was equipped with the resources to deliver the programme.
The HR scorecard at Tata defines the overall strategic priorities and guides the HR activities.

Employee engagement: Effective contribution of an employee can be assessed using HR scorecard. This assessment helps managers to estimate an employee's involvement. Thus, employee satisfaction can be gauged.

HR scorecard helps in measuring the effectiveness of the talent management process. It keeps track of the HR and recruitment practices in managing the in- house talent.

The changes in business create a need for new skills. Web enabled tools; organizational performance and productivity models help in creating a common platform for skills available in an organization. With the HR scorecard organizations can identify the skill gaps and plan for better recruitment and training for the employees.

Business measures: HR scorecard facilitates measurement of employee productivity (revenue per employee), customer satisfaction and performance of each employee.

HR's function today is more customers oriented. HR scorecard identifies the strengths and weaknesses in the areas of customer satisfaction and service. This data is critical for the improvement of business and productivity.

HR scorecard numerically represents the key performance indicators. It assesses employees' performance better with the data received from the managers.

HR scorecard provides retention rates and employee engagement rates besides categorizing them as high or low. The graphic representation helps identify business trends and people policies and practices.

HR scorecard helps manage other responsibilities of HR like payroll processing, pension activities and healthcare schemes. The effectiveness of these programmes provides inputs for future proposals. HR scorecard makes managers aware of individual assessments and data required to improve employee performance.

A company (name withheld) dealing in air-conditioners and electronics was consistently losing customers to its competitors. This resulted in talent depletion. The major reasons were poor employee relations and internal conflicts. HR realized that the solution lay in installing a new culture, strong management and good HR practices. The objective was to quantify and justify HR's contribution to business outcomes.

The VP-HR of the company introduced HR scorecard. The HR department designed a programme linking HR improvements and practices to the business performance. It also introduced schemes to enhance employee relations.

Employee / customer satisfaction and productivity improved. Soon the sales of the company doubled from USD 30 million to USD 60 million. Within two years the company began making profits again.

The HR scorecard influences an organization's bottom line and augments HR's strategic importance. The HR scorecard is a viable option for organizations desirous of assessing their ROI, improving their performance models and implementing better people management practices and productivity.