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Hr Scorecard Becker

In a sentence

A measurement-driven framework for transforming human resources into a strategic asset by aligning the HR architecture with firm strategy and quantifying HR's contribution to firm performance.

Drawing on more than a decade of academic research spanning nearly 3,000 firms and extensive consulting work, Becker, Huselid, and Ulrich argue that human resources can be a prime source of sustainable competitive advantage and a key driver of value creation—but only when firms stop treating HR as an administrative cost center and start managing the 'HR architecture' (the HR function, the HR system, and strategic employee behaviors) as a strategic asset. Building on Kaplan and Norton's Balanced Scorecard, the authors introduce the HR Scorecard, a seven-step measurement system that embeds HR within the firm's strategy implementation process and links HR results to measures line managers and executives respect—profitability and shareholder value. The book equips HR professionals with the tools to build causal strategy maps, distinguish HR 'doables' from strategic 'deliverables,' conduct cost-benefit analyses, measure alignment, master principles of good measurement, develop new competencies, and implement the Scorecard as a disciplined change effort.

The four lenses

  • Science
  • Statistics
  • Systems
  • Strategy

The model

A causal-path model in which HR architecture design levers and alignment conditions drive psychological and behavioral states (a strategically focused workforce), which in turn enable successful strategy implementation and, ultimately, firm financial performance and shareholder value. Measurement systems moderate/enable the strategic management of the HR architecture.

High-Performance Work System (HPWS)design lever

An internally coherent HR system in which each element—selection, promotion, development, compensation, performance management—is designed to maximize the quality of human capital and reinforce a high-performance, strategically aligned workforce.

HR Function Competenciesdesign lever

The knowledge, skills, and abilities of HR professionals across five domains—knowledge of the business, delivery of HR practices, management of change, management of culture, and personal credibility—plus a strategic HR performance management competency, enabling HR to design and manage a strategic architecture.

HR Strategic Alignmentcontextual condition

The degree to which the HR system and its deliverables are externally aligned with the requirements of the firm's strategy implementation process, and internally consistent so that HR system elements reinforce rather than conflict with one another.

Knowledge Management Systemcontextual condition

A comprehensive organizational system that both generates knowledge and effectively distributes it throughout the firm, supporting strategy implementation and reinforcing employee strategic focus.

Balanced Performance Measurement Systemdesign lever

A performance measurement system that incorporates both financial and nonfinancial measures and both leading and lagging indicators, reflecting the causal flow of value creation and encouraging active engagement with strategy implementation.

Employee Strategic Focuspsychological state

The extent to which employees understand how their jobs contribute to the successful implementation of the firm's strategy and have the opportunity to apply that knowledge—described as the ultimate HR performance driver and linchpin of strategy implementation.

Strategic Employee Behaviorsbehavioral pattern

The subset of productive employee behaviors—including core competency-driven behaviors and situation-specific behaviors at key value-chain points—that directly serve to implement the firm's strategy.

HR Deliverablesoutcome metric

Outcomes of the HR architecture—both performance drivers (core people-related capabilities like productivity or stability) and enablers (that reinforce performance drivers)—that serve to execute the firm's strategy, in contrast to efficiency-focused HR doables.

HR Efficiencyoutcome metric

The extent to which the HR function generates required competencies and deliverables in a cost-effective manner, encompassing core efficiency (expenditures not tied to strategy) and strategic efficiency (efficiency of activities producing HR deliverables).

Strategy Implementationbehavioral pattern

The organizational process of executing the firm's chosen strategy—articulating the value-creation story, communicating goals throughout the organization, and aligning systems—identified as more important than strategy content in differentiating successful firms.

Firm Financial Performance and Shareholder Valueoutcome metric

The ultimate outcome measures that matter to CEOs—including profitability, sales per employee, accounting returns, and the ratio of market value to book value (shareholder value)—which the HR architecture influences through strategy implementation.

How they connect

  • high performance work system → predicts hr deliverables
  • high performance work system → predicts firm performance
  • hr function competencies → influences high performance work system
  • hr deliverables → influences employee strategic focus
  • hr strategic alignment → predicts employee strategic focus
  • knowledge management system → predicts employee strategic focus
  • balanced performance measurement → predicts employee strategic focus
  • employee strategic focus → predicts strategic employee behaviors
  • strategic employee behaviors → predicts strategy implementation
  • strategy implementation → predicts firm performance
  • hr efficiency → influences firm performance
  • hr strategic alignment → mediates hr deliverables
  • balanced performance measurement → influences strategy implementation

The story

The reader An HR manager or executive who wants to be recognized as a genuine strategic partner in the business—'at the table, not on the table'—and to demonstrate that HR creates measurable value.

External problem

HR's influence on firm performance is difficult to measure, so senior executives remain skeptical of HR's strategic role and HR risks being outsourced or marginalized.

Internal problem

The HR professional feels frustrated, undervalued, and unable to prove that what they do makes a real difference to the business.

Philosophical problem

In a knowledge economy where human capital drives value creation, it is simply wrong for the most important asset to be the least understood, measured, and managed.

The plan

  1. Clearly define the business strategy.
  2. Build a business case for HR as a strategic asset.
  3. Create a strategy map that describes the firm's value chain.
  4. Identify HR deliverables within the strategy map.
  5. Align the HR architecture (function, system, employee behaviors) with HR deliverables.
  6. Design the strategic HR measurement system (the HR Scorecard).
  7. Implement management by measurement as a disciplined change effort.

Success

  • HR is respected as a strategic partner that demonstrably drives profitability and shareholder value.
  • Managers throughout the firm understand exactly how people create value and how to measure that process.
  • HR investments are made wisely, balancing cost control with value creation, yielding a firm surging ahead of competitors.
  • A strategically focused workforce executes the firm's strategy faster and more effectively.

At stake

  • HR remains a skeptically viewed administrative cost center vulnerable to outsourcing.
  • The firm underinvests in—or invests wrongly in—its people, wasting much-needed potential.
  • Managers make poor decisions (like layoffs for short-term cost savings) that ultimately destroy value.
  • The company merely keeps pace with, or is overtaken by, competitors.

Questions this book answers

How can HR be transformed from an administrative function into a strategic asset that drives firm performance?
How can HR's contribution to firm performance be measured in terms that CEOs and line managers understand and respect?
What is the HR architecture and how should it be aligned with a firm's strategy implementation process?
How do you build and implement an HR Scorecard?
How do you quantify the return on investment of HR interventions?

Glossary

High-Performance Work System (HPWS)
An internally coherent set of HR policies and practices in which each element is designed to maximize the overall quality of human capital and reinforce a high-performance, strategically aligned workforce.
HR Function Competencies
The knowledge, skills, abilities, and personality characteristics of HR professionals that directly influence their job performance and enable HR to serve as a strategic partner.
HR Strategic Alignment
The degree to which the HR system and its deliverables are aligned externally with the firm's strategy implementation requirements and internally consistent among HR system elements.
Knowledge Management System
A comprehensive organizational system that generates knowledge and distributes it effectively throughout the firm to support strategy implementation.
Balanced Performance Measurement System
A measurement system that incorporates financial and nonfinancial measures and both leading and lagging indicators to reflect the causal value-creation process and guide strategy implementation.
Employee Strategic Focus
The extent to which employees understand how their jobs contribute to successful strategy implementation and have the opportunity to apply that understanding—the ultimate HR performance driver.
Strategic Employee Behaviors
The subset of productive employee behaviors—core competency-driven and situation-specific—that directly serve to implement the firm's strategy.
HR Deliverables
Outcomes of the HR architecture—performance drivers and enablers—that serve to execute the firm's strategy, as distinct from efficiency-focused HR doables.