Putting HR on the Score Card
Their charter? To do work that had never been done before at GTE: to create and implement a tool that would measure HR’s contribution to the business.
To accomplish this, they'd have to fold HR’s vision and strategy into GTE’s business objectives, integrate them in all the company’s work units, and then measure their effectiveness.
It wasn’t going to be easy.
The team, made up of members from each HR functional area, knew it was an immense task that would have far-reaching impact. First, they had to understand how to measure success in human terms. Then they had to find out if there was a tool that could be used to measure success.
The group identified their areas of concern and learned what they could from already available tools. They couldn’t find an overall model that quantitatively measured the bottom-line impact of HR services, so they began to construct one of their own.
"Our senior HR leaders understood from the business strategy that we needed to deliver a lot of new skill sets to help our employees become more competitive in the current environment," says Walker. That drove HR strategies. "Once those were defined and we knew what our actions were going to be, we needed to know, quantitatively, if HR was delivering on the strategy. We needed a state-of-the-art way of measuring the effectiveness of HR."
They ultimately came up with the "HR Balanced Scorecard," a strategic measurement system that would use hard data to demonstrate HR’s contribution to the bottom line. Based on the model created by David Norton and Robert Kaplan of Harvard Business School in "The Balanced Scorecard: Translating Strategy into Action" (Harvard Business School Press, 1996), it would measure and continually monitor activity over the entire enterprise, and gauge whether the activities were driving the company toward success.
The HR Balanced Scorecard would allow managers to react to the data, predicting problems and focusing their energy on solutions for those problems rather than symptoms. Another benefit of this system is that it underscored the culture change within GTE where functions were no longer working within silos to an environment where they were sharing information across the organization to improve productivity.
All of this was becoming increasingly important because the world in which GTE operates was changing dramatically. Since the Telecom Act, their industry had been deregulated, and there were increased pressures from investors as well as competitors. Accelerating technology had brought about vast changes in the services that telecommunications companies could offer, global expansion offered new opportunities, and customers had become very savvy, wanting more choices and expecting outstanding quality.
Finally, the workforce had also changed. All of these factors created an eagerness to excel--and to be able to use hard information to make sure the company was meeting its goals.
Let’s take it from the top.
The team began its work in April 1998. First, it met with upper HR management to develop key questions that would become the framework of a measurement model. It began with identifying subject matter experts and asking them what they thought was important and how they suggested collecting data to measure it. They wanted to discover the ways and information already available, but also wanted to think in new, creative modes.
"We’ve taken general business strategy and translated that to HR strategy. Then we created an instrument to use hard quantitative measures to translate that into basic actionable metrics," says Walker. "It’s the first time ever within our company that a support unit, such as human resources, can actually use an instrument to see how you are contributing to business success."
The team had five targets to measure:
1) managing talent
2) developing world-class leadership
3) customer service and support
4) organizational integration
5) HR capability.
Then, from August through November, came the process of interviewing dozens and dozens of individuals in HR to collect data. "It was a grueling process," says Walker. "Data collection is always a challenge in a company, especially one as large as GTE. But we wanted to challenge our colleagues to think through the measures that would be most valuable to them and then work backwards to see how to go about finding the information."
By January 1999, the HR Balanced Scorecard team had taken the next step. They linked the measurement system to performance criteria for the broad-based incentive pay program, which was followed quickly by a phased communication to explain the process throughout the HR organization.
Next, the group made the HR Balanced Scorecard and in-depth explanations (called the HR Briefing Book) available via the HR Web site, and allowed employees to view quarterly results.
How does the scorecard work?
After the major areas of focus are defined, divisions within the company answer questions and enter data into the scorecard based on key issues. After the information has been calculated and interpreted, it’s posted on the company’s intranet site so that all HR professionals have can see how well the company is doing in its key target areas.
For example, take the area of leadership development, a high priority for GTE. The strategic questions would be, "Does the company have the talent needed to be successful in the future? Does it have leadership ‘bench strength’?"
The scorecard would measure the acquisition of talent, the diversity of the workforce, targeted capabilities, and the ability to retain these individuals. Detailed measurements would be collected on two fronts--is GTE doing well in its recruiting and are these individuals the correct ones? The raw data each unit feeds into the scorecard illustrate the effectiveness of HR’s efforts in this critical strategic area.
Furthermore, through the scorecard measurements, management can see exactly what high-potential individuals are doing. They can quantify what key jobs high-potentials are filling and how they’re doing. They track retention of these major contributors.
"If we had the next Jack Welch in our organization and they were an early-career professional, we would need to identify them and engage them in order to maximize their value," says Walker. "We can compare how frequently we’re moving them through developmental assignments as compared to the rest of the organization. [In this case,] it should be at a more frequent rate because for future senior leaders in the company, we have already created a development plan and we need to move them through jobs to gain experience. We don’t want them to end up in a job for three years that they could have learned in six months."
Seeing is believing for GTE’s HR accountability.
Through the information that the units provide for the scorecard, HR is able to watch the movement and development of these people on a quarterly basis. If greater executive education is desired, for example, that will become apparent quickly. This way, it drives accountability into human resources, and it also provides a way to communicate HR’s contributions to the overall business.
"There was some resistance within the organization and we needed to go out and sell the project," says Walker. "It was important that we had established a good track record of credibility as we had been developing the product. However, we couldn’t point to another company and say, ‘That’s what we’re doing.’ It was brand-new stuff--a concept and a theory."
But when they were finally able to produce the scorecard, people were surprised, and saw that it was very effective. Every quarter, the group publishes the results, not only to the 2,000-plus HR staff but to GTE’s business leaders, as well. The results are a fundamental way to see how the company is performing against its strategic objectives.
While it is not a full transformation, the team believes that GTE has made a quantum leap toward a quantitatively accountable culture.
"Although it seems cutting edge right now, we’re at the very beginning of the journey here within HR. We’re using it as a tool for cultural transformation and to drive accountability into human resources," says Walker. "As HR professionals, we are no longer a back room transaction-based necessary evil. We are a partner, experts helping the company maximize the value of people."
Workforce, March 2000, Vol. 79, No. 3, pp. 94-98.