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Management ultimately judges the human resource function based on whether it creates value for the company, where value creation means contributing in a measurable way to achieving the companys strategic goals. The human resource managers create value by engaging in activities that produce the employee behaviors the company needs to achieve these strategic goals. The question is how does one formally outline these interrelationships, and attach measurable performance standards to each? Managers often use an HR Scorecard process to apply it.
The HR Scorecard is a concise measurement system, often summarized on a computer screen in a "digital dashboard." It shows the quantitative standards or "metrics" the firm used to measure HR activities, and to measure the employee behaviors resulting from these activities, and to measure the strategically relevant organizational outcomes of those employee behaviors. In so doing, it highlights, in a concise but comprehensive way, the causal link between the HR activities, and the emergent employee behaviors, and the resulting firmwide strategic outcomes and performance.
Three human resource experts, Becker, Huselid, and Ulrich explain the need for such a measurement system this way: In the view, the most potent action HR managers can take to ensure their strategic contribution is to develop a measurement system that convincingly showcases HR's impact on business performance. To design such a measurement system HR managers must adopt a dramatically different perspective, one that focuses on how human resources can play a central role in implementing the firm's strategy.
To create an HR Scorecard, the manager needs three types of information. First, he or she must know what the company's strategy is, because (as at Einstein Medical) the strategy will determine what the important employee behaviors and strategically important organizational outcomes are, and how the firm will measure organizational performance. Second, the manager must understand the causal links between the HR activities, the employee behaviors, the organizational outcomes, and the organization's performance. Third, the manager needs metrics he or she can use to measure all the activities and results involved, specifically the HR activities, the emergent employee behaviors, the strategically relevant organizational outcomes, and the organizational performance.
Step 1: Define the Business Strategy
By creating a strategy-oriented human resource system starts by defining what the company's strategic plans are. For Einstein Medical, they included becoming a comprehensive health care network. Toward the end of this step, management translates its broad strategic plans into specific, actionable strategic goals.
Step 2: Outline the Company's Value Chain
To achieve its strategic goals, any business must engage in certain strategically required activities. For example, Einstein Medical must devise and introduce new medical services. Microsoft must write new computer programs. Each such activity requires certain employee behaviors: Einstein Medical needs employees who have the expertise to help it devise new medical services. The point is any manager who wants to understand what employee behaviors are vital for the firm's success must first understand what the firms' required activities are.
Value chain analysis can be useful for it. Value chain analysis means studying and analyzing the company's value chain. The company's value chain identifies the primary activities that create value for customers and the related support activities. For any business as consisting of a chain of essential activities. Each activity is part of the process of designing, producing, marketing, and delivering the company's product or service. These activities might include bringing supplies and materials into the company's warehouse; bringing these materials to the shop floor and designing the product to customers' specification; and the various marketing, sales, and distribution activities that attract customers and get the company's product to them.
Outlining the company's value chain shows the chain of essential activities. It can help managers better understand the activities that drive performance in their company. In other words, it is a tool for identifying, isolating, visualizing, and analyzing the firm's most important activities and strategic costs. Value chain analysis is more than just a tool for identifying how to do things now. It prompts questions such as how do the costs for this activity compare with the competitors? Is there some way can gain a competitive advantage with this activity? Is there a more efficient way to deliver these services? Have to perform these services in-house or not?
Outlining and analyzing the company's value chain can help the HR manager formulate policies and practices that make sense in terms of the firms' strategy. For example, Dell Computer, phone technician competently and courteously assisting Dell customers with problems is a crucial or core value chain activity. It is a big part of what Dell built its reputation on. The critical nature of this activity would be apparent from any outlining of Dell's value chain. Dell's human resources team might decide that one way for HR to add value is by improving phone technicians' performance, by installing special computerized job aids that show technicians what series of questions to ask when customers call with problems.
Step 3: Outline a Strategy Map
To summarizes the chain of major inter-related activities that contribute to a company's success. It thus shows the big picture of how each department's or team's performance contributes to achieving the company's overall strategic goals. For example, Southwest Airlines pursues a low-cost leader competitive strategy. It tailors all is activities to delivering low-cost, convenient service. It succinctly lays out the hierarchy of big activities required to succeed. At the top is achieving company-wide, strategic financial goals. To boost revenues and profitability, Southwest needs to fly fewer planes to keep costs down, attract and keep customers, maintain low prices, and maintain on-time flights. In turn further down the strategy map, on-time flights and low prices required fast turnaround. And, fast turnaround requires motivated, committed ground and flight crews. This in turn has implications for what human resource policies and practices require.
Step 4: Identify the Strategically Required Organizational Outcomes
Every company must produce strategically relevant outcomes if it is to achieve its strategic goals. At Einstein Medical, a new service delivered was one such required organizational outcome. At Dell, receiving quick, competent, and courteous technical advice by phone is one such outcome. The strategy map helps the manager recognize these core outcomes. Based on understanding of how the company operates, and perhaps an analysis of the firm's value chain, the manager identifies and specifies the firm's strategically relevant organizational outcomes.
Step 5: Identify the Required Workforce Competencies and Behaviors
"What competencies and behaviors must our employees exhibit it our company is to produce the strategically relevant organizational outcomes, and thereby achieve its strategic goals?" At Einstein Medical, employees had to take personal accountability for their results, and be willing to work proactively be generative to find new and novel solutions. A strategy map can help the manager recognize what these competencies and behaviors are.
Step 6: Identify the Required HR System Policies and Activities
Once the Human Resource manager knows what the required employee competencies and behaviors are, they can turn to identifying the HR activities and policies that will help to produce them. For example, at Einstein Medical, these included new training and pay plans. In this step, one should be specific. It is not enough to say, "We need new training programs, or disciplinary processes." Instead, the manager must now ask, "exactly what sorts of new training programs do we need, to produce the sorts of employee competencies and behaviors that w seek?"
Step 7: Create HR Scorecard
By expanding on the strategy map, the manager then consolidates all this information in a visual and or computerized HR Scorecard, such as The Hotel Paris. It highlights, in a concise but comprehensive way, the causal links between the selected human resources activities, and the emergent employee behaviors, and the resulting firm-wide strategic outcomes and performance. The HR Scorecard thus helps the human resource manager demonstrate how the team's policies and practices contribute to the company's strategic and financial success. Several consulting firms provide Web-based services that make it easier to create HR Scorecards, based on metrics from best-practice, world-class firms. Computerized Scorecard packages are available. The HR scorecard may be as simple as the strategy map from which the manager derived it.
Step 8: Choose HR Scorecard Measures
After choosing a handful of strategically required organizational outcomes, and employee competencies and behaviors, and human resource policies and activities, the question is how shall we measure them all? For example, if decide to improve the disciplinary system, how precisely will the company measure such improvement? Perhaps in terms of number of grievances. HR Scorecards always contain a balance of financial and non-financial goals or measures, of short-term and long-term goals, and of external goals such as what the customer thinks and internal goals such as airplane turnaround time. For example, Southwest might measure turnaround time in terms of improve turnaround time from an average of thirty minutes per plane to twenty-five minutes per plane this year. It might measure customer satisfaction with periodic surveys.
Step 9: Summarize the Scorecard Measures in a Digital Dashboard
The saying a picture is worth a thousand words sums up the purpose of the digital dashboard. A digital dashboard presents the manager, via a PC-desktop screen containing graphs and charts, with a bird's eye view of how the human resource management function is doing. It summarizes how core measures from the HR Scorecard are doing. For example, a manager's dashboard for Southwest Airlines might display daily trends for activities such as fast turnaround, attracting and keeping customers, on-time flights, and employee morale. This gives the manager time take to corrective action. For example, if ground crews are turning planes around slower today, financial results tomorrow may decline unless the manager takes action. Perhaps there's a morale problem the HR manager should attend to. Like automobile dashboards, these digital dashboards also usually present information so it grabs the manager's attention, such as by a graph blinking red if turnaround time is trending down. For example, SAS software's Strategic Performance Management package is a web-based system that produces alerts that grab managers' attention when performance is not meeting targets.
Step 10: Monitor, Predict, Evaluate
A great advantage of the HR Scorecard process is that it is predictive. Financial goals such as budgets ware better at telling managers how they've done than how they'll do tomorrow. Monitoring a balanced set of scorecard measures can signal problems ahead. Thus, it might prompt a Southwest Airlines manager to say, our customer service ratings dipped, and, since customer service leads to more customers and in turn to future revenues, we should take corrective action now. The human resource manager can't assume that the Scorecard's measures and relationship will always stay the same. Perhaps reducing grievances is not having the results the manager predicted it would on raising morale. Perhaps the company must drop some employee behavior measures such as front-desk customer service and add others. Perhaps the measures the HR manager chooses such as number of grievance are proving too hard to quantify. In any case, the HR manager should periodically re-evaluate measures and links.
On-the-job training means having a person learn a job by actually going it. Every employee, from mailroom clerk to CEO, gets on-the-job training when he or she joins a firm. In many firms, on-the-job training is the only training available.
The most familiar type of on-the-job training is the coaching or understudy method. For example, an experienced worker or the trainee's supervisor trains the employee. This may involve simply acquiring skills by observing the supervisor, or preferably having the supervisor or job expert show the new employee the ropes, step-by-step. The Men's Wearhouse, makes extensive use of on-the-job training. It has few full-time trainers. Instead, the Men's Wearhouse has a formal process of cascading responsibility for training: every manager is formally accountable for the development of his or her direct subordinates. Job rotation, in which an employee usually a management trainee moves from job to job at planned intervals, is another on-the-job training technique. Jeffrey Immelt progressed through such a process in becoming GE's new CEO. Special assignments similarly give lower-level executives firsthand experience in working on actual problems.
On-the-job training has several advantages. It is relatively inexpensive; trainees learn while producing; and there is no need for expensive off-site facilities like classrooms or programmed learning devices. The method also facilitates learning, since trainees learn by doing and get quick feedback on their performance. But there are several guidelines to follow. Most important, don't take the success of an on-the-job training program for granted. Carefully train the trainers themselves often the employees' supervisors, and provide the necessary training materials. Trainers should know, for example, the principles of motivating learners low expectations on the trainer's part may translate into poorer trainee performance phenomenon researchers have called the golem effect. So, trainers should emphasize the high expectations they have for their trainees' success.
On-the-job training steps involve four steps as following:
Step 1: Prepare the Learner
Put the learner at ease; explain why he or she is being taught; create interest, find out what the learner already knows about the job; explain the whole job and related it to some job the worker already knows; place the learner as close to the normal working position as possible; familiarize the worker with equipment, materials, tools, and trade terms.
Step 2: Present the Operation
Explain quantity and quality requirements; go through the job at the normal work pace; go through the job at a slow pace several times, explaining each step. Between operations, explain the difficult parts, or those in which errors are likely to be made; again go through the job at a slow pace several times; explain the key points; have the learner explain the steps as go through the job at a slow pace.
Step 3: Do a Tryout
Have the learner go through the job several times, slowly, explaining each step. Correct mistakes and, if necessary, do some of the complicated steps the first few times; run the job at the normal pace; have the learner do the job, gradually building up skill and speed; as soon as the learner demonstrates ability to do the job, let the work begin, but don't abandon him or her.
Step 4: Follow Up
Designate to whom the learner should go for help; gradually decrease supervision, checking work from time; correct faulty work patterns before they become a habit. Show why the learned method is superior; compliment good work.
Most people look forward to promotions, which usually mean more pay, responsibility, and often job satisfaction. For employers, promotions can provide opportunities to reward exceptional performance, and to fill open positions with tested and loyal employees. Yet the promotion process isn't always a positive experience for either employee or employer. Unfairness, arbitrariness, or secrecy can diminish the effectiveness of the process. Several decisions, therefore, loom large in any firm's promotion process.
Decision 1: Is Seniority or Competence the Rule?
Probably the most important decision is whether to base promotion on seniority or competence, or some combination of the two. Today's focus on competitiveness favors competence as does the fact that promotion based on competence is the superior motivator. However, a company's ability to use competence as the criterion depends on several things, most notably whether or not union agreements or civil service requirements govern promotions. Union agreements sometimes contain clauses that emphasize seniority, such as in the advancement of employees, employees with highest seniority will be given preference, where sills and performance are approximately equal. And civil service regulations that stress seniority rather than competence often govern promotions in many public-sector organizations.
Decision 2: How Should We Measure Competence?
If the firm opts for competence, how should it define and measure competence? Defining and measuring past performance is relatively straightforward: Define the job, set standards, and use one or more appraisal tools to record performance. But promotions require something more: You also need a valid procedure for predicting a candidate's future performance. Most employers use prior performance as a guide, and assume that based on his or her prior performance the person will do well on the new job. This is the simplest procedure. Others use tests or assessment centers to evaluate promotable employees and to identify those with executive potential. An increasing number of employers take a more comprehensive approach. For example particularly given the public safety issues involved, police departments have traditionally taken a relatively systematic approach when evaluating candidates for promotion to command positions. Traditional promotional reviews here include a written knowledge test, an assessment center, credit for seniority, and a score based on recent performance appraisal ratings. Other departments are adding a personnel records review. This includes evaluation of job-related dimensions such as supervisory-related education and experience, ratings from multiple sources, and systematic evaluation of behavioral evidence.
Decision 3: Is the Process Formal or Informal?
Many firms have informal promotion processes. They may or may not post open positions, and key managers may use their own unpublished criteria to make decisions. Here employees may reasonably conclude that factors like who you know are more important than performance, and that working hard to get ahead - at least in this firm - is futile. Many employers establish formal, published promotion policies and procedures. These have several components. Employees get a formal promotion policy describing the criteria by which the firm awards promotions. A job-posting policy states the firm will post open positions and their requirements, and circulate these to all employees. Many employers also maintain employee qualification databanks, and use replacement charts and computerized employee information systems.
Decision 4: Vertical, Horizontal, or Other?
Promotions aren't necessarily as simple as they may appear. For example, how do motivate employees with the prospect of promotion when the firm is downsizing? And how do provide promotional opportunities for those, like engineers, who may have little or no interest in managerial roles? Several options are available. Some firms, such as the exploration division of British Petroleum, create two parallel career paths, one for managers, and another for individual contributors such as high-performing engineers. At BP, individual contributors can move up to nonsupervisory but senior positions, such as senior engineer. These jobs have most of the financial rewards attached to management-track positions at that level. Another option is to move the person horizontally. For instance, move a production employee to human resources so as to develop his or her skills and to test and challenge his or her aptitudes. And in a sense, promotions are possible even when leaving the person in the same job. For example, the managers can usually enrich the job, and provide training to enhance the opportunity for assuming more responsibility.