Exam 2: Human Resources Strategy and Planning

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One effective approach to measuring strategic performance of organizations, including their HR departments, is to use the balanced scorecard. The balanced scorecard is a framework organizations use to report on a diverse set of performance measures. Organizations that did not use a balanced scorecard recognized that focusing strictly on financial measures only limited their view. The balanced scorecard balances financial and nonfinancial measures so that managers focus on long-term drivers of performance and organizational sustainability. The balanced scorecard measures performance in four areas:
• Financial measures: Traditional financial measures such as profit and loss, operating margins, utilization of capital, return on investment, and return on assets are needed to ensure that the organization manages its bottom line effectively.
• Internal business processes: Product and service quality, efficiency and productivity, conformance with standards, and cycle times can be measured to ensure that the operation runs smoothly and efficiently.
• Customer relations: Customer satisfaction, loyalty, and retention are important to ensure that the organization is meeting customer expectations and can depend on repeat business from its customers.
• Learning and growth activities: Employee training and development, mentoring programs, succession planning, and knowledge creation and sharing provide the necessary talent and human capital pool to ensure the future of the organization.
Organizational results in each of these areas determine if the organization is progressing toward its strategic objectives. Using the balanced scorecard requires spending considerable time and effort to identify the appropriate HR measures in each of the four areas mentioned earlier and how they tie to strategic organizational success. The balanced scorecard should align with company goals and focus on results.