Human resource management concepts and practices

Balanced Scorecard

The intent of balanced scorecards is to translate strategic objectives into tactical strategies and actions. In the area of Human Resource Management, the translating of strategic performance objectives to tactical plans is inherent in how balanced scorecards are designed and implemented (Pangarkar, Kirkwood, 2008). In many organizations the Key Performance Indicators (KPIs) are the basis of incentive programs and the percentage of a bonus attained by each individual employee and by their management (Beatty, Huselid, Schneier, 2003).

The intent of the balanced scorecard approach to managing performance is also based on four specific perspectives. These are the financial perspective, customer perspective, internal process perspective, innovation and learning perspective (Whitaker, Wilson, 2007). Examples of performance measures or KPIs from the financial perspective are Return on Investment (ROI), Return on Invested Capital (ROIC), Return on Equity (ROE). Within this perspective there is the focus on linking each employees' and managers' performance to the broader financial performance of the company (Beatty, Huselid, Schneier, 2003). KPIs or measures of performance from the customer perspective include retention rates by customer group, lifetime customer value, and profitability by customer. From an internal process perspective, critical KPIs are opportunity success rate (Whitaker, Wilson, 2007), and performance gains in critical business processes including order capture rates and percentage of accurate orders fulfilled. The KPIs most critical from an innovation and learning perspective are learning ratios (Bracken, 2006), investment in learning programs ratio to total sales (Pangarkar, Kirkwood, 2008), internal promotions as a percentage of all promotions (Beatty, Huselid, Schneier, 2003), and absentee rates by department.