hr scorecard presentation

HR SCORECARD

•DINESH CHANDRA KANDWAL• DIPAYAN PALIT•RITURAJ•J.RAJENDER

HR ROLEHR ROLE

UNDERWENT A PARADIGM SHIFT IN THE PAST CENTURY

HR ROLE: HR ROLE: TRADITIONAL TRADITIONAL PERSPECTIVEPERSPECTIVE

PURELY ADMINISTRATIVE

HR ROLE: HR ROLE: IN 90’sIN 90’s

STRATEGIC ASSET

HR ROLE: HR ROLE: NEW PARADIGMNEW PARADIGM

HOW PEOPLE CREATE VALUE WITHIN THE FIRM, THE METRICS BY WHICH THE CREATION OF VALUE BE MEASURED & ULTIMATELY OPTIMISED.

HR SCORECARDHR SCORECARD

HR SCORECARD MATCHES BUSINESS STRATEGY AGAINST HR DELIVERABLES AND OBJECTIVES TO PROVIDE STATISTICAL BASIS BY WHICH HR EFFICIENCY & CONTRIBUTION TO STRATEGY IMPLEMENTATION CAN BE MEASURED.


A MANAGEMENT TOOL WHICH ALLOWS THE BUSINESS TO :

1. MANAGE HR AS A STRATEGIC ASSET & SOURCE OF COMPETITIVE ADVANTAGE2. QUANTITATIVELY DEMONSTRATE THE THE HR’s CONTRIBUTION TO THE FIRMS FINANCIAL RESULTS AND PROFITABILITY.3.CREATE & MEASURE THE DEGREE OF ALIGNMENT BETWEEN THE STRATEGY OF THE BUSINESS AND ITS HR ARCHITECTURE.


WHEN USED EFFECTIVELY, HR SCORECARD LINKS THE THINGS PEOPLE DO WITH THE STRTEGY OF THE COMPANY. THE HR SCORECARD ALSO ALLOWS A HR ARCHITECTUR TO EVOLVE WHICH IS MANAGEMENT MANAGED & SYSTEMATIC. HR SCORECARD ALLOWS THE HR FUNCTION TO FILLS A STRATEGIC ROLE IN THE BUSINESS.

THE SEVEN STEP MODEL FOR USING HR A STRATEGIC BUSINESS ASSET

1. CLARIFY AND ARTICULATE THE BUSINESS STRATEGY 2. DEVELOP A BUSINESS CASE FOR HR AS A STRATEGIC ASSET 3 CREATE STRATEGY MAP FFOR THE FIRM: BUSINESS INDICATORS FOR THE FIRM-LEADING & LAGGING RESULTS – TANGIBLE & INTANGIBLE.4. IDENTIFY HR DELIVERABLES WITHIN THE STRATEGY MAP 5. ALLIGN HR ARCHITECHTURE WITH HR DELIVERABLES: HR FUNCTION HR SYSTEM STRTEGIC EMPLOYEE BEHAVIOR 6. DESIGN THE STRATEGIC MEASUREMENT SYSTEM: HR SCORECARD RESULT MEASUREMENT – TANGIBELE & INTANGIBLE 7. EXECUTE MANAGEMENT BY MEASUREMENT

CLARIFY AND ARTICULATE THE CLARIFY AND ARTICULATE THE BUSINESS STRATEGYBUSINESS STRATEGY

BEFORE FOCUSING ON IMPLEMENTING, THE BUSINESS STRATEGY MUST BE STATED CLEARLY, CONCISELY & FREE OF AMBIGUITIES FOR THIS HR ARCHITECTURE IS REQUIRED THAT HAS THREE DIMENSIONS:1. HR FUNCTION2. HR MANAGEMENT SYSTEM3. STRETEGIC EMPLOYEE BEHAVIOR

DEVELOP A BUSINESS CASE FOR HR DEVELOP A BUSINESS CASE FOR HR AS A STRATEGIC ASSETAS A STRATEGIC ASSET

WHY & HOW HR CAN SUPPORT BUSINESS STRATEGY? THE OVERRIDING THEME OF THIS BUSINESS CASE SHOULD BE

IMPLEMENTATION OF THE FIRM’s STRATEGY, & HR’S CONTRIBUTION TO IMPLEMENTATION THROUGH:

CREATING VALUE THRU GOOD HR ALIGNMENT. CONTROLLING COST, THEREBY ENHANCING OPERATIONAL EFFICIENCY. A GOOD HR BUSINESS CASE WILL TYPICALLY INCLUDE: MEASURES WHICH QUANTIFY HR CONTRIBUTION TO AS MANY OF THE FIRM’S

STRAT PERF DRIVERS AS POSSIBLE. CAUSAL IUNFERENCES AND LINKAGES ( IN COMETENCY “X” REV ) MULTI LEVEL BUSINESS ANALYSIS DISTINCTION BETWEEN LAGGING & LEADING VARIABLES NEW MEASURES: DEVELOPED TOP-DOWN RATHER THA BOTT0M-UP.* EMPHASIS MORE ON STRATEGY IMPLEMENTATION & LESS ON CONTENT.

REQUIRE GOOD STRAT FOCUS THAT INTERN DEPENDS ON AN EFFECTIVE KNOWLEDGEMENT SYSTEM.ALIGNMENT OF THE HR ARCHITECTUREA BALANCE PERFORMANCE MANAGEMENT SYSTEM

CREATE STRATEGY MAP FOR THE FIRM:CREATE STRATEGY MAP FOR THE FIRM:BUSINESS INDICATORS FOR THE FIRM-LEADING & LAGGINGBUSINESS INDICATORS FOR THE FIRM-LEADING & LAGGING

RESULTS – TANGIBLE & INTANGIBLE.RESULTS – TANGIBLE & INTANGIBLE.

STRATEGY MAP DETAILS WHICH ORG. PROCESSES AND CAPABILITIES DRIVE FIRM PERFORMANCEINDICATORS ARE SPECIFIED WHICH EITHER DRIVE PERFORMANCE (LEADING) OR MEASURE RESULTS (LAGGING)

SPECTRUM OF RESULTS ARE INCORPORATED: BOTH TANGIBLE & INTANGIBLE

IDENTIFY HR DELIVERABLES WITHIN THE STRATEGY MAPIDENTIFY HR DELIVERABLES WITHIN THE STRATEGY MAP

IDENTIFY HR DRIVERS, ENABLERS OR DELIVERABLES WHICH EXIST WITHIN THE STRAT MAP AND DEV. & DEPLOY HR POLICIES THAT WILL ENHANCE THESE FACTORS.

(BUSINESS UNDERSTANDING IS A PRE-REQUISITE)

Typical Strategy MapTypical Strategy Map

Employee Skills

Process quality Process cycle time

On time delivery

Customer loyality

Return on capital invested in the business

Learning & Growth

Internal/Business process

Customer

Financial

ALLIGN HR ARCHITECHTURE WITH HR DELIVERABLES:ALLIGN HR ARCHITECHTURE WITH HR DELIVERABLES:HR FUNCTIONHR FUNCTIONHR SYSTEMHR SYSTEM

STRTEGIC EMPLOYEE BEHAVIORSTRTEGIC EMPLOYEE BEHAVIOR

TO ALIGN THE HR SYSTEM WITH THE FIRMS STRAT IMPLEMENTATION SYSTEM, A COMPETENCY MODEL AND DP WILL BE NEEDED TO GENERATE THE REQUISITE HR DELIVERABLES.

THIS WILL REQUIRE INTERNAL(THE ABILITY & POTENTIAL FOR THE FIRM TO USEHR AS A STRAT

ASSET) & EXTERNAL (THE EXTENT TO WHICH THE

HR SYSTEM IS DESIGNED TO IMPLEMENT FIRMS STRAT) ALIGNMENT

To illustrate, identifying the HR To illustrate, identifying the HR deliverables…deliverables…

Higher pay

Promotion opportunities

Employee stability

Improved productivity of the firm

HR Deliverables Strategy Map

DESIGN THE STRATEGIC MEASUREMENT SYSTEM:DESIGN THE STRATEGIC MEASUREMENT SYSTEM:HR SCORECARDHR SCORECARD

RESULT MEASUREMENT – TANGIBELE & INTANGIBLERESULT MEASUREMENT – TANGIBELE & INTANGIBLE

A VIABLE HR STRAT MEASUREMENT SYSTEM:MEASURE THE CORRECT HR PERFORMANCE DRIVERS & ENABLERSCHOOSES THE CORRECT MEASURES FOR EACH DELIERABLE.IDEALLY SCORECARD WILL ACCURATELY MEASURE THE IMPACT OF OF ALL HR POLICIES ON THER FIRM PERFORMANCE & CAPTURE THE FULL IMPACT OF HR. THE MORE SOPHISTICATED & DETAILED THIS MEASUREMENT IS THE GREATER AND POTENTIAL BENEFITS ARE.

A WELL THOUGHT OUT HR SCORECARD A WELL THOUGHT OUT HR SCORECARD HAS FOUR BASIC DIMENSIONS.HAS FOUR BASIC DIMENSIONS.

1. HR DELIVERABLES THEASE HELP YOU IDENTIFY THE CAUSAL RELATIONSHIPS THROUGH WHICH HR GENERATES VALUE IN THE FIRM, WITH AN EMPHASIS ON HR PERFORMANCE DRIVERS AND HR ENABLERS. IDEALLY, HR DELIVERABLES WHOSE ACTUAL IMPACT ON THE FIRM’S PERFORMANCE CAN BE MEASURED SHOULD BE USED. THE ACID TEST FOR WHETHER THE HR DELIVERABLE ARE CLEARLY STATED IS LINE MANGERS WILL UNDERSTAND THEM AND BE WILLING TO PAY FOR THEM.

2. THE HIGH-PERFORMANCE WORK SYSTEM HIGH PERFORMANCE WORK SYSTEM (CONSISTING OF HR POLICIES, CPROCESSES AND PRACTICES) IMPLEMENTS THE BUSINESS STRATEGY AND GENERATES THE DELIVERABLES SPECIFIED.

CONT…..CONT…..

3. EXTERNAL HR SYSTEM ALIGNMENT MEASURES THIS DIMENSION MEASURES HOW WELL THE HR SYSTEM IS ALIGNED WITH THE FIRM’S KEY PERFORMANCE DRIVERS. THE HR SYSTEM SHOULD BE MAKING A DEFINABLE AND SIGNIFICANT CONTRIBUTION TO THE VALUE CREATION PROCESS. REGULAR MEASURES SHOULD BE INCORPORATED, SO IF ALIGNMENT SLIPS THE APPROPRIATE ACTION CAN BE TAKEN QUICKLY AND APPROPRIATELY.

CONT…..CONT…..

4. HR EFFICENCY MEASURES THESE ARE THE METRICS BENCHMARKS AND STANDARDS BY WHICH THE HR SYSTEM’S PERFORMANCE WILL BE GAUGED AND EVALUATED MOST HR MANAGERS DIVIDE THEIR KEY EFFICIENCY METRICS INTO TWO CATEGORIES.

CORE EFFICIENCY MEASURES- SIGNIFICANT EXPENDITURE ITEMS, WHICH MAKE NO DIRECT CONTRIBUTION TO THE FIRM’S STRATEGY IMPLEMENTATION. EXAMPLES: BENEFIT COSTS, WORKERS COMPENSATION COSTS AND PERCENTAGE OF CORRECT ENTRIES ON DATA INPUT SYSTEMS.

STRATEGIC EFFICIENCY MEASURES- HR ACTIVITIES AND PROCESSES DESIGNED TO PRODUCE HR DELIVERABLES FOR DIRECT APPLICATION IN STRATEGY IMPLEMENTATION.

CONT…..CONT…..

THE HR SCORECARD SHOULD, SHOW WHAT THE ACTUAL IMPACT OF HR DELIVERABLES IS ON THE FIRM’S PERFORMANCE. THAT WAY, THE HR MANAGER SHOULD BE ABLE TO CONFIDENTLY MAKE STATEMENTS LIKE; “HR DELIVERABLE -------- INCREASED------- BY 20 –PERCENT WHICH IN TURN REDUCED ------BY 10 –PERCENT; RESULTING IN A 3% INCREASE IN SHAREHOLDER VALUE FOR THE FIRM IN THE FINANCIAL YEAR ENDED-----

SO SPECIFICALLY WHAT ARE THE SO SPECIFICALLY WHAT ARE THE BENEFITS OF CONSTRUCTING AND BENEFITS OF CONSTRUCTING AND MAINTANING A GOOD HR SCORECARD?MAINTANING A GOOD HR SCORECARD?

IT DISTINGUISHES CLEARLY HR DOABLES FROM HR DELIVERABLES. HR DELIVERABLES INFLUENCE THE FIRM’S ABILITY TO IMPLEMENT STRATEGY WHILE HR DOABLES DO NOT.

IT EMPOWERS HR MANAGERS TO CONTROL COSTS AND CREATE VALUE. HR WILL ALWAYS BE ENCOURAGED TO CONTROL COSTS AS EFFECTIVELY AS POSSIBLE BUT THE HR SCORECARD ALSO DETAILS HR’S COMPLEMENTARY STRATEGIC ROLE AS A VALUE CREATOR. INFACT HR SCORECARD MAKES IT POSSIBLE FOR THE HR PROFESSIONALS TO BALANCE THE TWO OBJECTIVES REALISTICALLY.

CONT…..CONT…..

IT MEASURES THE FIRM’S LEADING INDICATORS. THE HR SCORECARD LINKS HR DELIVERABLES WITH IMPLEMENTATION OF THE FIRM’S STRATEGY THE HR MANAGEMENT SYSTEM WILL HAVE PERFORMANCE DRIVERS, MEASURES (LEADING & LAGGING) AND PREFERRED OUTCOMES. THE HR SCORECARD MEASURES HOW WILL ALL OF THOSE FACTORS ARE ALIGNED AND PROVIDES ONGOING FEEDBACK.

CONT…..CONT…..

IT CLARIFIES HR’S CONTRIBUTION TO PROFITABILITY. HR SCOREBOARD ENABLES A HR MANAGERTO ANSWER THE QUESTION, “WHAT IS HR’S CONTRI BUTION TO FIRM PERFORMANCE?”WITH MEASURES THAT ARE CREDIBLE, RELEVANT AND MEASURABLE

IT ALLOWS HR PROFESSIONALS TO MANAGE BETTER HR MANAGERS CAN ASSESS PRECISELY HOW HR DECISIONS WILL IMPACT ON THE IMPLEMENTATION OF THE FIRM’S STRATEGY. THE SCORECARD HEIGHTENS THE HR MANAGER’S STRATEGIC AWARENESS AND FORCES THEM TO THINK SYSTEMATICALLY.

CONT…..CONT…..

IT ENCOURAGES FLEXIBILITY AND ONGOING CHANGE. WHEN A PERFORMANCE MEASUREMENT SYSTEM BECOMES INSTITUTIONALIZED. IT IS MORE INHIBITED RATHER THAN ENCOURAGE ADAPTABILITY AND CHANGE. AS A FIRM’S STRATEGY EVOLVES IN RESPONSE TO CHANGING MARKET CONDITIONS, THE MEASURMENT SYSTEM NEEDS TO MOVE WITH THOSE CHANGES IF IT IS TO REMAIN RELEVANT. THE HR SCORE CARD ACTUALLY ENCOURAGES FLEXIBILITY AND CONSTANT EVOLUTION BECAUSE IT ENCOURAGES PEOPLE TO FOCUS ON UNDER LYING STRATEGY.

APPLICATION OF HR SCORECARDAPPLICATION OF HR SCORECARD::ININ DR REDDY’SDR REDDY’S

Objective Measures Target Wt.Manpower cost as a % of Sales 18%Variable Pay as a % of Total Cost Not Less Than 10%Number of identified redundant positions eliminated / positions scaled down in terms

> 30 5%

Voluntary Attrition Rate – Overall India < 15% 5%Proactive HR sensing on people issues

0Offer to acceptance ratio > 90% 5%% of manning within specified lead times > 80% 5%

Industrial Relations Man-days lost due to IR problems < 0.05% 5%Succession Planning for De-risking Business

Successors identified and developed 90% of critical positions 5%

Building pipeline of Top end talent for de-risking business

Positions filled by external persons NMT 50% 10%

Due diligence in M&A, Geographic expansions, new plants, closures, etc

Business Impact Business Impact 5%

Strengthening HR systems, policies and processesSOX complianceHigh performance and distinctive work culture

OCS TRIM index > 80 5%

% attrition of identified critical positions / high perfomers (EC)

< 2% 3%

% employee base identified for PIP and its consequence management

Coverage to bottom 5% 2%

No. of people covered Pharma Mgt – 40Effectiveness of program Project Mgt – 30

IPM – 50Program rating NLT 4 out of 5

Internal Trainers Number of certified internal trainers 15 5%Improvement in competency baseline based on PerfECT

% people covered as % of expressed training needs in PerfECT process

60% 5%

Fin

anci

alManpower cost

20%

Manpower Rationalization

Cu

stom

er

Satisfaction of VPs and above Satisfaction index NLT 50% 5%

Talent Acquisition

Bu

sin

ess

Bu

ildin

g

Audit Report Favourable Audit report 5%

Org

aniz

atio

n an

d C

apab

ilit

y B

uild

ing

Performance enhancementStrategic Capability Building Programs

5%

HR SCORE CARD - API BU - 2005-06

Outcomes Goals Target WTG

Manpower Cost Global API manpower cost as % of sales (with Variable Pay NLT 10%) of total cost

< 7.5%10

> Ensure all costs are within budget

Manpower Optimization 1) Workmen/unionized employees to be reduced from API

3010

> Ensure the process takes by proactively managing the local union leaders> Motivate workmen to apply and accept to work in Generics

2) Number of identified redundant positions eliminated/positions scaled down in terms of skills (2A and above)

Reduction in total CTC by Rs. 1.00 Cr

Retention Voluntary Attrition Rate < 8% annualized 5

> Sense proactively and act> Monitor trends

Financial Outcomes


Proactive HR sensing Proactive HR sensing and actions on people issues up to satisfaction of GBU management & Plant Management

4 out of 5 on 5 point feedback scale

10> Open Houses at all locations> Personal Touch> Building Informal Networks> HR Execution Effectiveness> Dipstick Survey

Recruitment process lead time

Coordinate with TMT In 90% cases - recruitment within deadlines 10

> Assist line in manpower planning> Ensuring smooth relieving and acceptance of identified internal personnel from other businesses> Follow-up with TMT for external candidates

> Support TMT in the selection process

Man days lost due to IR issuesMinimization 0.05% 10> Completion of wage settlement in Unit VI.> Workmen's promotion process to be completed> Management of external union leaders > No workday

lost due to unrest

> API IR strategy for the forthcoming wage settlements at unit I & II

> Successful negotiation in Unit VI> Definitive plan for other units

Customer Outcomes


De-Risk Business 1) Succession Planning Successors identified for 90% of critical positions 10

> Leadership Identification and Development

2) Building pipeline of top-end talent NMT 50% positions filled by external candidates

Sustainable Results 1) Strengthening HR systems, policies 10> Strengthen the PerfECT process in API

2) SOX Compliance3) Statutory Compliance

No Critical Audit Observations

Business Building


Critical Capability Building Developing Second Line for Critical Positions 80% 10> Gap Analysis > Developmental Plan & Execution

Strategic Capability Building Programmes

Number of API Employees identified and covered Project Management - 5, MBA - 10, IPM - 10 5

Improving Competency Baseline

% of people covered as % of expressed training needs in the PerfECT process

60%10

Organization & Capability Building

EXECUTE MANAGEMENT BY MEASUREMENTEXECUTE MANAGEMENT BY MEASUREMENT

IMPLEMENTING THE HR SCORECARD IS MORE THAN JUST ONE OF EVENT. IT’S ALSO MORE THAN SIMPLY KEEPING A RUNNING TOTAL OF HR RESULTS. INSTEAD, A WELL CONSTRUCTED HR SCORECARD ALLOWS HR MANAGERS TO MONITOR THEIR INPUT INTO THE FIRMS RESULTS ON AN ONGOING BASIS AND MAKE PERIODIC ADJUSTMENTS TO ENSURE THE HR ARCHITECTURE REMAINS ALIGNED WITH THE EVOLVING BUSINESS STRAT OF THE FIRM.

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