Is HR a cost or a profit centre?
This has been argued and discussed for a long time whether HR is a cost centre or a profit centre.
The earlier myth can now be demolished and proven that HR can be a profit centre. The question that business leaders would now ask is How? The answer to this is very simple.
In 1996, Dr. Robert Kaplan and David Norton developed the HR Balanced Scorecard. This HR Balanced Scorecard adds Strategic Non-Financial Performance Measures to Financial Metrics.
What is a HR Balanced Scorecard?
1) Balanced Scorecard is a performance management framework used by strategic decision makers to make the right decisions about their business.
2) Balanced scorecard is not only a set of strategic goals; it is also a method for monitoring progress towards the organization’s strategic goals.
Why HR Balanced Scorecard?
1) Balanced Scorecard is Tactical and Concrete
2) Transformation of an Organization’s Strategic Plans and Goals to Execution Plans and Orders
3) Provides Performance Measures and Helps in Identification and Execution
Perspectives of HR Balanced Scorecard:
Financial:
1) Reducing costs related to HR
2) Reducing turnover rates
3) Employee absenteeism
4) Workers’ compensation
5) Employee satisfaction
6) Employee engagement
7) Employee benefits
Internal Perspective:
1) Turnover Rates
2) Manager Performance and Ratings
3) Overall Employee Satisfaction
4) Recruitment/Employee Retention
5) Recruitment Channels and Employee Success
Customer Perspective:
1) Meeting Customer Needs
2) Overall Customer Satisfaction
3) Spreading Word and Bringing New Customers
Learning and Growth:
1) Communication
2) Performance Improvements
3) Staff Development
Implementation of HR Balanced Scorecard in Business:
1) Integration of Scorecards of all Units to achieve Overall Organization Scorecard
2) Full Strategic and Management System
3) Data from IT and Accounting Systems into model to calculate Metrics
4) Comparison of Metrics with Strategic Goals and Plans
As one can note from above, HR is a profit centre if HR Balanced Scorecard is implemented in Business as all parameters can be measured against Financial Metrics. Major organizations across the globe have started implementing HR Balanced Scorecard and have yielded fruitful results.
This has been argued and discussed for a long time whether HR is a cost centre or a profit centre.
The earlier myth can now be demolished and proven that HR can be a profit centre. The question that business leaders would now ask is How? The answer to this is very simple.
In 1996, Dr. Robert Kaplan and David Norton developed the HR Balanced Scorecard. This HR Balanced Scorecard adds Strategic Non-Financial Performance Measures to Financial Metrics.
What is a HR Balanced Scorecard?
1) Balanced Scorecard is a performance management framework used by strategic decision makers to make the right decisions about their business.
2) Balanced scorecard is not only a set of strategic goals; it is also a method for monitoring progress towards the organization’s strategic goals.
Why HR Balanced Scorecard?
1) Balanced Scorecard is Tactical and Concrete
2) Transformation of an Organization’s Strategic Plans and Goals to Execution Plans and Orders
3) Provides Performance Measures and Helps in Identification and Execution
Perspectives of HR Balanced Scorecard:
Financial:
1) Reducing costs related to HR
2) Reducing turnover rates
3) Employee absenteeism
4) Workers’ compensation
5) Employee satisfaction
6) Employee engagement
7) Employee benefits
Internal Perspective:
1) Turnover Rates
2) Manager Performance and Ratings
3) Overall Employee Satisfaction
4) Recruitment/Employee Retention
5) Recruitment Channels and Employee Success
Customer Perspective:
1) Meeting Customer Needs
2) Overall Customer Satisfaction
3) Spreading Word and Bringing New Customers
Learning and Growth:
1) Communication
2) Performance Improvements
3) Staff Development
Implementation of HR Balanced Scorecard in Business:
1) Integration of Scorecards of all Units to achieve Overall Organization Scorecard
2) Full Strategic and Management System
3) Data from IT and Accounting Systems into model to calculate Metrics
4) Comparison of Metrics with Strategic Goals and Plans
As one can note from above, HR is a profit centre if HR Balanced Scorecard is implemented in Business as all parameters can be measured against Financial Metrics. Major organizations across the globe have started implementing HR Balanced Scorecard and have yielded fruitful results.