What recommendations should Amy make for modifying the BSC process? and Based on the summary of the employee survey results for 2006 provided in Exhibit 11, discuss any trends that you see in the data when comparing the development of the performance measurement system. Are any results contrary to your expectations? If so, do you have any ideas about what may be causing the unexpected results?

IMA EDUCATIONAL Case Journal Case Study ISSN 1940-204X Financial Services Corporation: Implementing an HR Balanced Scorecard Laurie Burney Mississippi State University Amy Paul HR Measurement Coordinator at Financial Services Corporation INTRODUCTION suddenly shifted to a meeting that the new HR CFO had just scheduled to discuss the status of HR's BSC. Amy is asked to provide some background on the BSC process within HR, but more importantly to be prepared to discuss recommendations for improving the BSC process. Amy identifies her critical tasks in preparation for the meeting as: identifying the strengths and weaknesses of the current BSC process and relating the BSC to employee survey results collected by FSC. Amy Paul, Measurement Coordinator for the Human Resources (HR) Division of Financial Services Corporation (FSC)1 , was responsible for developing the division's balanced scorecard (BSC). Amy commented, \"Our BSC implementation process is giving us valuable experience regarding the issues and considerations that arise when adopting a management innovation. It's unusual in that it involves the human resources function of an organization. At FSC, as in most organizations, the HR function has not traditionally collected many measures, because HR is viewed as a transactional cost center. So, HR finds it difficult to quantify itself as a valueadded partner in the organization's pursuit of its strategy. The BSC implementation is changing the thinking on this issue within FSC, because it is helping to clarify HR's role in relation to FSC's objectives.\" FSC was undergoing changes in anticipation of an upcoming merger. On July 15, 2006, however, Amy's focus was COMPANY BACKGROUND FSC is a large, national financial services institution headquartered in Atlanta, Georgia. The Corporation employs approximately 70,000 individuals in its offices and financial centers that are geographically dispersed, although primarily along the east coast. FSC's culture is one that adapts to frequent change because of a number of mergers and acquisitions over a ten-year period. In 2006, FSC announced its largest mergera merger of equalsthat is several months from consummation. 1 The situation is real; however, the company's name, location, and the names of individuals have been disguised at the organization's request. I M A E D U C AT I O N A L C A S E J O U R N A L 1 V O L . 1 , N O . 2 , A R T. 2 , J U N E 2 0 0 8 Burney, L., & Paul, A. (2008). Financial Services Corporation: Implementing an HR balanced scorecard. IMA Educational Case Journal, 1(2), article 2. Reproduced with permission. THE JOURNEY BEGINS Exhibit 1. The HR Organizational Structure 2004 At the request of the bank's president, FSC conducted an internal quality process assessment in 2002 that was based on the Malcolm Baldrige National Quality Award methodology. The assessment highlighted several weaknesses within the HR Division that management felt needed to be addressed: Difficulty in translating strategy at every level Need for definable, measurable results Lack of meaningful indicators in the design of projects and processes Lack of in-process measurements that indicated how well a current process was working Few meaningful indicators for day-to-day operations Lack of benchmarking for key processes or functions Overall, no integrated or uniform methodology existed for defining and measuring performance across the HR Division. Furthermore, none of these systems was tied to an overall, organizational strategic plan. In addition, the HR Leadership Team, which consisted of the HR CFO and managers of the various HR departments, did not regularly review departmental metrics or indicators; rather, it relied on anecdotal information from colleagues and internal customers relating to how the HR Division was performing. Although HR was not facing any immediate demands to demonstrate its value to the organization or to report its performance against strategic goals, the process assessment did bring a realization that HR had the potential to significantly improve. Having identified a need to improve HR measurement processes and a desire to determine HR's contribution to corporate strategy, in 2004 the Leadership Team decided to use the balanced scorecard concept. Not all HR employees were happy with the idea of an HR scorecard. In response to the announcement of the scorecard process, an employee in HR Training said, \"We seem to always change processes to follow the latest trends. Many of the changes are beneficial. However, sometimes I feel as if we change so often that I would be better off waiting until management shifts to the newest fad and using my limited time on other, more pressing issues.\" Nevertheless, the HR Division BSC process began with two objectives: 1. to consolidate the numerous existing measures into an effective toolthe product, and 2. to engage the Leadership Team to use this tool in strategic activitiesthe process. Chief Executive Officer Other Divisions (i.e. Commercial Banking) Human Resources Division HR CFO Group Financial Planning & Analysis Risk Management HR Measurement HR Enterprise Services Shared Services Compensation Payroll and benefits HR Client Services Training Community Involvement Recruiting According to Amy, \"Historically our corporation's overall measurement emphasized customer service and financial reporting rather than a strategy-related or a formal measurement solution. Our focus was on revenue growth, expense control, corporate core values, and employee satisfaction. However, because of the economy, competition, and increased emphasis on shareholder value, measurement for all aspects of the business is a growing interest of FSC's senior leaders.\" HR DIVISION ORGANIZATIONAL STRUCTURE After a five-year period involving several changes in its structure, in 2004, HR once again redesigned itself by consolidating its functions into three key areas: the HR CFO Function, Enterprise Services, and Client Services. The HR Division's clients included all divisions within the corporation (Exhibit 1). This organizational structure downsized the HR Division from a workforce of around 1,500 in 2003 to approximately 1,200 employees now. In this 2004 organizational structure, the HR CFO Group emerged with a renewed corporate focus on expense control. The HR Division, realizing that it was a key cost center, sought to understand how the HR Division helped the corporation achieve its strategic goals. The Division also wanted to better understand performance of human capital in the corporation as a whole. I M A E D U C AT I O N A L C A S E J O U R N A L 2 V O L . 1 , N O . 2 , A R T. 2 , J U N E 2 0 0 8 1 Burney, L., & Paul, A. (2008). Financial Services Corporation: Implementing an HR balanced scorecard. IMA Educational Case Journal, 1(2), article 2. Reproduced with permission. SCORECARD IMPLEMENTATION: PRODUCT AND PROCESS To build a culture of accountability within the HR Division To improve communication, collaboration, and morale among employees in the HR Division To make it easier for people to do business with HR (simple, accurate processes and highly skilled customer service deliverers) \"Based on these strategic priorities, we established six goals,\" said Amy. \"They include: To position FSC as an employer of choice; To build exceptional individual and organizational strength; To strengthen trust, relationships, and pride throughout the organization; To ensure sound HR practices that minimize company risk; To provide highest quality HR service at the smartest cost; and To ensure highly skilled, just-in-time talent.\" Several attempts were made to create a scorecard, but no one had the time or expertise to make it happen. The process really began in 2005 when Amy Paul was hired as a Measurement Coordinator in HR's Financial Planning & Analysis Department. Previously, she worked with the BSC system in the Retail and Commercial Call Center Division at FSC. As HR Measurement Coordinator, she reported to the Measurement Manager within the HR CFO Group. Her first task was to accumulate all the resource documents, including several metrics the HR Division was already tracking. The measures collected in HR departments covered a vast array. According to Amy, \"Over time, each department within HR had developed its own system for measuring and evaluating performance. With no overall HR strategy or measurement system, the diversity in the quality and extent of measurement was extensive.\" HR's measures included raw data for more than 75 items regarding headcount, FTE (full-time equivalent) employees, terminations, new hire data, employee survey data, exit interview data, diversity scorecards, and some benchmarking data. Amy started the scorecard development with the measures that were being collected by the various HR departments. At this stage, a BSC was not used across the entire HR Division. Because some areas were traditionally better at measurement (e.g., recruiting and training), HR management decided to pursue BSC implementation in those areas first. \"Our thinking behind this decision was that successful BSC implementation in these select areas would serve as an excellent model for other HR areas,\" said Amy. The 2005 scorecard was a compilation of metrics that were categorized using several methods. The BSC was organized using 1) the four perspectives recommended by Kaplan and Norton (financial, customer, business process, and employee learning/growth) and 2) HR's nine strategic priorities at the time. The strategic priorities were the following: To be the best-in-class recruiting organization To improve employee commitment and retention To drive efficiency through employee/manager selfservice To build an integrated HR Division (common process, products, and systems) To execute an effective Business Partner Model To deliver on performance promises I M A E D U C AT I O N A L C A S E J O U R N A L The 2005 scorecard was presented to the HR Leadership Team; however, it presented several challenges. \"This first iteration of the scorecard was so frustrating at times. The scorecard initiative was a stated priority for HR and management voiced support for the process, but there was no accountability for its success. With the many changes taking place in HR, the scorecard was relegated in priorities and, as a result, I encountered several delays in moving the scorecard process forward. Whenever I needed to schedule time with management concerning the scorecard, other commitments often took priority,\" said Amy. She continued, \"Our discussions over this iteration of the scorecard identified several concerns of the Leadership Team members. First, the Team did not collectively agree upon the purpose of the BSC. In addition, a major contention that members of the Leadership Team deliberated about was whether the BSC would track indicators of HR Division performance or human capital metrics for the corporation as a whole. Another point of debate among the Leadership Team members was the lack of clarity of exactly how the scorecard would influence and be influenced by the HR Division's strategy. Members also voiced concerns about whether the measures in the scorecard adequately encompassed the strategic objectives. Based on this feedback, we decided that a massive re-work of the scorecard was needed.\" 1 For FSC's purposes, the \"smartest cost\" encompasses the efficient and effective use of corporate resources. 3 V O L . 1 , N O . 2 , A R T. 2 , J U N E 2 0 0 8 Burney, L., & Paul, A. (2008). Financial Services Corporation: Implementing an HR balanced scorecard. IMA Educational Case Journal, 1(2), article 2. Reproduced with permission. A NEW APPROACH This BSC Team included members of the HR Leadership Team, HR Business Planning, HR Data Management and other measurement professionals. The purpose of the BSC Team was to provide ongoing feedback during the BSC development process and to create a sense of ownership and accountability for the metrics. In addition, an external best practice consultant was engaged to assist with the process. A vital step in moving us forward was the BSC Team agreeing to collectively sponsor and be actively involved in defining and setting the purpose for the scorecard as well as developing guiding principles and establishing the overall framework for it. This approach was different from what we had done previously, when responsibility for the BSC was entirely mine,\" Amy concluded. To fulfill its responsibility, the BSC Team developed a new approach. It acknowledged the need for innovation by leveraging creative metrics, rather than simply measuring what was already collected. In addition, it recognized the need to engage technology where possible. Further, the new approach attempted to keep the scorecard simple by focusing on only a few critical performance indicators. Finally, the new approach The decision was made to continue work on a BSC, but with a new approach. The Leadership Team decided to continue to produce HR Statistics and Staff reports that included raw HR data and to learn from the difficulties of the 2005 BSC iteration in creating the new version. According to Amy, \"Several key decisions were made to enhance the scorecard process. First, a cross-functional BSC Team was established. Exhibit 2. FSC's HR Scorecard \"Path to Success\" 1. Build the foundation for the HR Scorecard a. Definition b. Purpose 2. Identify the questions an HR Scorecard would attempt to answer 3. Identify the measures that would answer these key questions 4. Establish targets 5. Capture data Exhibit 3. HR Scorecard Strategic Questions Financial Perspective 1. 2. 3. How is the HR Division adding the greatest value at the smartest cost? How is the HR Division proactively managing HR related financial How is HR maximizing ROI on special projects, initiatives, etc. Operations Perspective Customer Perspective 1. 2. 3. 1. What is the overall quality of HR's customer responsiveness, reliability, and problem resolution? How user-friendly and accessible are HR's tools, products, and processes? How satisfied are HR's clients with their business partnerships? 2. 3. How efficient, effective, accurate, timely, and relevant are HR's key processes? How effectively does HR leverage technology to improve its business processes and customer interactions? Are HR's processes compliant with government and company? Employee Perspective 1. 2. 3. How is HR developing the talent and diversity needed to be successful now and in the future? How is HR developing the leadership bench strength needed to be successful now and in the future? How is HR building a workplace that results in employee commitment and retention? I M A E D U C AT I O N A L C A S E J O U R N A L 4 V O L . 1 , N O . 2 , A R T. 2 , J U N E 2 0 0 8 Burney, L., & Paul, A. (2008). Financial Services Corporation: Implementing an HR balanced scorecard. IMA Educational Case Journal, 1(2), article 2. Reproduced with permission. included the purpose of building a meaningful process to complement the HR scorecard product after its completion. A \"path to success\" was developed from the ideals of the new approach. This \"path\" was designed to provide the systematic process that would be used to create the scorecard. Exhibit 2 shows the \"path to success\" that was identified by the HR BSC Team. communicate performance to HR leaders and employees, and reinforce HR's strategic priorities by updating key performance indicators to align with the HR scorecard. Amy said, \"The Leadership Team wanted the scorecard to be used by HR employees to improve knowledge about and application of the BSC to HR Division functions. Employees would be able to evaluate tangible metrics of HR performance and trends based on the work that they contributed. The scorecard was established as a management framework within HR and as such it would not be used as a performance assessment tool.\" Ultimately, this decision meant that the HR Division would not tie employee performance evaluations or rewards systems to the outcomes of the BSC. SCORECARD PURPOSE AND DEFINITION The HR BSC Team began by defining the scorecard and determining its purpose. The stated purpose was to: review HR Division performance, identify best practices, identify potential action plans or interventions to influence performance, Exhibit 4. Flow of Strategic Questions to Metrics BSC Employee Perspective Example Strategic Question Develop Talent How is HR developing the talent and diversity needed to be successful now and in the future? Key Objectives Develop Skills and Competencies Detailed Measures Training Utilization HR Orientation Participation I M A E D U C AT I O N A L C A S E J O U R N A L 5 Training Hours per HR Employee % HR Employees Receiving Training V O L . 1 , N O . 2 , A R T. 2 , J U N E 2 0 0 8 Burney, L., & Paul, A. (2008). Financial Services Corporation: Implementing an HR balanced scorecard. IMA Educational Case Journal, 1(2), article 2. Reproduced with permission. Exhibit 5. Screen Shot of On-line HR Scorecard Software HR Scorecard Total Company Actual Target Index Owner --100.9% Admin Customers Employees Financials Total Company Actual Target Index Weight Owner Total Company Actual Target Index Weight Owner Total Company Actual Target Index Weight Owner --105.5% 25.00% Admin --91.4% 25.00% Admin --97.0% 25.00% Admin Total Company Actual Target Index Weight Owner --109.7% 25.00% Admin receiving training,\" became the key metrics to measure the objective. Exhibit 4 shows an example of this linkage. HR STRATEGIC QUESTIONS THE METRICS \"Just like the game of Jeopardy, our next step was to identify the questions that the HR scorecard would seek to answer,\" Amy said. These questions were selected by the HR Leaders to communicate an understanding of HR performance. Three questions per perspective were written. The questions were to create a linkage between the objectives and HR's priorities. Considerations in choosing the metrics were whether the measures reflected HR's priorities, and also were available, cost effective, and reliable. Exhibit 3 shows the strategic questions asked in each perspective. Once the questions were created, objectives were developed for each question. Next, detailed metrics were identified that linked to those objectives. For example, a key question in the Employee Perspective was, \"How is HR developing the talent and diversity needed to be successful now and in the future?\" A key objective in this perspective was to develop skills and competencies of employees. Therefore, detailed measures outlining training utilization, such as \"training hours per HR employee\" and the \"percentage of the total of HR employees I M A E D U C AT I O N A L C A S E J O U R N A L Operations Amy explained how the metrics were determined: \"The HR BSC Team used criteriawe call them filtersto determine which metrics would make their appearance on the final scorecard. The filters included: Does the metric have a strong linkage to the HR Division's Strategic Priorities? Are quality data available? And, is there strong linkage to the corresponding BSC perspective?\" The BSC Team acknowledged that the measures would change over time as the business changed. The 2006 BSC was narrowed from a potential list of 200 measures to over 80 measures. After the metrics were established, the HR leaders embarked upon a journey to define targets for the metrics. Amy explained, \"The BSC Team first identified the difference between the actual, ongoing performance targets and 'ideal' targets, the desired levels as envisioned by the BSC Team. They used historical data and external benchmarks, such as those from the Saratoga Institute, as a resource to set the targets.\" Once the targets were established, the Team 6 V O L . 1 , N O . 2 , A R T. 2 , J U N E 2 0 0 8 Burney, L., & Paul, A. (2008). Financial Services Corporation: Implementing an HR balanced scorecard. IMA Educational Case Journal, 1(2), article 2. Reproduced with permission. Exhibit 6. 2006 HR Scorecard Executive Summary - 2Q 2006 Exhibit 7. Financial Perspective Summary of Performance The Financial Perspective of the HR Scorecard addresses the following questions: Financial Perspective The financial perspective looks great this quarter. In keeping with our expense control objective, HR total costs are down. Customer Perspective We continue to excel in all areas of our customer perspective. The majority of metrics met or exceeded target. 1) Employee Perspective The employee perspective still continues to have opportunity for improvement.The reported number of employee training hours and the percentage of employees reported receiving training both are declining. 2) 3) Operations Perspective Migration to self-service continues to rise. Paperless transactions increased for the thrid quarter in a row. HR Score Overall Q2: 102% How is the HR Division adding the greatest value at the smartest cost? How is the HR Division proactively managing the HR-related financial risk? How is HR maximizing the company's investment in human capital? The overall score for the Financial Perpective in the 2nd Quarter is 75%. Financial Perspective SCORECARD MEASURES Greatest value Proactive Management Q2: 75% Human Capital Improves Productivity Customer Perspective Operations Perspective User-friendly and accessible HR Cost per Full-time unit Headcount HR's Key Processes Responsiveness, Reliability, and Problem Resolution Q2: 105% LeverageTechnology Q2: 120% HR Cost as percentage of Full-time unit expense Business Partnerships HR Employee Perspective HR Operating Cost per Hire Talent and diversity Leadership Benchstrength Q2: 108% Employee Commitment and Retention HR Cost perTraining Participant Needs Improvement