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УДК 669:65.012
Petro. G. Pererva
Doctor of Economics, Professor,
Dean of Economic Faculty, NTU «KhPI»
Roman O. Poberezhnyi
Assistant of Business Administration and
Personnel Management department, NTU «KhPI»
USING HR SCORECARD FOR DEVELOPMENT
OF THE STRATEGIC POTENTIAL
OF MACHINE-BUILDING ENTERPRISES
The methodological approaches using the balanced scorecard, the strategy development for
the engineering enterprises are described in the article. Particular attention is paid to the
system of indicators that use a wide range of «leading and lagging» indicators within the
overall strategy, operations, customer perception, financials indicators to measure the
effectiveness of HR initiatives. HR Balanced Scorecard allows you to monitor the
performance of staff, analyzing his stats, diagnose problems, make decisions and monitor
changes.
В статье рассмотрены методологические подходы с использованием системы сбалан-
сированных показателей, при разработке стратегии для машиностроительных пред-
приятий. Особое внимание уделено системе показателей, которые используют широ-
кий спектр «руководящих и отстающих» индикаторов в рамках общей стратегии,
операционных процессов, восприятия клиентов, финансовых показателей для оценки
эффективности HR инициатив. HR Balanced Scorecard позволяет контролировать по-
казатели персонала, анализировать его статистику, диагностировать проблемы, при-
нимать решения и отслеживать изменения.
У статті розглянуто методологічні підходи з використанням системи збалансованих
показників, при розробці стратегії для машинобудівних підприємств. Особливу увагу
приділено системі показників, які використовують широкий спектр «ведучих і відста-
ючих» індикаторів в рамках загальної стратегії, операційних процесів, сприйняття клі-
єнтів, фінансових показників для оцінки ефективності HR ініціатив. HR Balanced
Scorecard дозволяє контролювати показники персоналу, аналізувати його статистику,
діагностувати проблеми, приймати рішення і відстежувати зміни.
Keywords. Balanced Scorecard strategic management, enterprise development,
measurement of achievements, training, human resources, leadership
Ключові слова. Збалансована система показників, стратегічне управління, розвиток
підприємства, вимір досягнень, навчання, людські ресурси, лідерство
Ключевые слова. Сбалансированная система показателей, стратегическое управле-
ние, развитие предприятия, измерение достижений, обучение, человеческие ресурсы,
лидерство
Introduction. The problems of strategic management, how to evaluate and
formulate strategic directions of development potential, and problems of methodological
of predicting outcomes of development strategies are important for modern enterprises
and are analyzed through various aspects in a number of scientific works.
The employees in companies — their «human capital»—are one of the key drivers of
their competitive advantage. It is widely believed that in the next ten years the primary
source of competitive advantage for most businesses will continue to increasingly focus
on the talent within the organization, which means that the ability to effectively manage
the employee talent within the organization is becoming more critical every day. While
management makes decisions continuously about how to invest in human capital, few
companies have an effective process to measure the value created by this «most
valuable» asset.
The long-term effective operation of any company, including an engineering firm,
requires that its growth and development are determined by the right choice of strategic
© Petro. G. Pererva, Roman O. Poberezhnyi, 2014
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guidelines that allow the best way to realize the potential human capital and other
resources of the enterprise. The strategy that the company selects must ensure
sustainable economic growth and development of the company, increasing its
competitiveness [6]. Therefore, engineering firms are now faced with the task of
development of effective management, including strategic management, in order to take
the lead.
The Balanced Scorecard [5] provides a system that leverages the traditional financial
and efficiency measures. Available currently for Human Resources with metrics of
performance from three additional perspectives — customers, internal business
processes, learning and growth.
The balanced scorecard (BSC) is one of the most highly touted management tools
today [2, 9]. The editors of the Harvard Business Review (HBR) identified the BSC as
one of the most significant management ideas of the past 75 years [7]. The BSC is now
being listed as a value methodology along with cost–benefit analysis and return on
investment [3]; it is being used to help change organizational culture [8]; and several
companies have reported improved operational efficiency and profitability as a result of
using the BSC [1, 4]. Researchers have clearly stated that companies of all sizes are
good at developing mission statements and strategies but poor at implementing
operational strategies to achieve them, and that they are poor at measuring whether they
are achieving their mission and strategy. The BSC addresses this problem by linking the
mission to strategy and then translates the strategy into operational objectives and
measures.
Research Aims. Aim of research is to identify what the current investments in
employees match the strategic objectives of the business. The HR is organization a
partner with the business to manage employees as assets. Management needs to pay
attention that more information not just simple cost figures, but and need to track
financial results while monitoring progress in developing our human capital and
acquiring the talent and capabilities we will need for business success. Necessary
research results on the formation and development of the components of Balanced
Scorecard (BSC), namely component «development of personnel».
Results of the research. It must be noted that modern enterprises for sustainable
development should be considered as a condition of the internal environment, as well as
constant and variable conditions of an unstable external environment. At the same time
we believe that the strategic development of the company has properties:
— cyclicity — a property that is to move from quantity to quality, new quality gives
the further development, etc.;
— helicity — the property that is the change of the spiral, with different influences
in the development of the object. Direction can be positive or negative for object
development. There are both upward and downward spirals of development.
Consider the development of the organization as a positive impact of development,
so that a negative effect or a negative development will lead, ultimately, to the
liquidation of the company.
The overall system organization as shown in Figure 1 represents a set of elements of
the internal environment that characterize the capabilities and limitations of a company,
which through the development and implementation of strategic and operational
decisions form the elements of the scope of the enterprise, describing the organization’s
activities in the environment of operation.
Informing about the possibilities of HR Scorecard all the organization’s management
and business partners is an important aspect of the successful implementation of the
strategy of development of the staff.
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External environment
The internal
environment of the
organization (elements)
Field of organization’s
activity (elements)
HR activities
Talent &
Leadership
HR Capability Organizational
Integration
Customer
Service &
Support
Invest in people
growth and
leadership
opportunities
Invest in
development and
technologies
Structure rewards
to foster
integration
Creating the
conditions for
employees and
support of loyalty
Source: own development
Figure 1. HR activities in system of the organization
To use the HR Scorecard special attention should be given to planning, measurement
and analysis job. Should be developed systematic approach to communication and
management training in accordance with the new management tool. Emphasis on the
scorecard should focus on cost characteristics of tools and resources that are provided in
connection with the strategy of business optimization. It also served as a tool, which
allows predicting and anticipating possible problems. Measuring effectiveness is an
important component in the decision-making attachment to the results of the HR
Scorecard.
Internal elements of the enterprise environment affect the formation of element areas
that allow for better internal environment elements. The properties of the organization
reflect the cyclical and helical development.
The elements of internal environment that characterize the capabilities and
limitations of this company, in our view, should include:
— Raw materials (their quality, quantity, price, etc.);
— Technology (existing in the enterprise);
— The means of labor (fixed assets, their characteristics);
— Company personnel (structure, quantity, quality characteristics, etc.);
— Financial resources (equity and debt, generating funds, investment, etc.);
— Structure of the enterprise (the division of responsibilities and work, hierarchy,
degree of freedom in decision making, etc.);
— Management system (principles and tools of management, planning, organization,
control, motivation, coordination and forecasting);
— System information (database, characteristics, information security, etc.);
— The process of converting raw materials into a finished product (value chain,
cost, etc.).
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Development of the elements of the internal environment of the organization
increases the possibilities and reduces limiting on the activity of the company, and thus
contributes to the development of reasonable and timely strategic and operational
decisions, which in turn creates and develops the scope of activity of the enterprise.
The scope of the enterprise, which characterizes the activities of the organization in
its environment functioning includes, in our opinion, the following elements:
— Finished product (the quality, price, consumer value, etc.);
— The market and consumers (market share, new markets, old and new customers, etc.);
— Position within the industry (competitors, suppliers, distribution system and sales, etc.);
— Technology (technology applied, innovation, novelty, etc.).
Development of the elements of the business sector enables a company to more
effectively set strategic and operational objectives, increase productivity and efficiency
of activities of the organization, and provides opportunities for the development of its
internal environment.
For their existing conception about the state of the implementation of selected goals for
objective measurement of the results of implementation strategy, the management of many
Ukrainian machine-building enterprises has used the traditional system of financial-
accounting indicators. In our opinion, in today’s conditions of development, which has
replaced the earlier industrial competition, now it is the time of information competition,
meaning that reconsideration is needed of approaches to the formation, control and efficient
allocation of financial, industrial, intangible and labor assets of the company. Enterprises
need an additional evaluation system, which is linked to accurate and reliable financial
evaluation of such intangible assets as market promotion of new products and services,
potential ability, experience, interest in employee flexibility, customer loyalty, innovation
projects, investment in production and workers, and other assets.
In order to satisfy the needs of Ukrainian enterprises, we are proposing to use the
method of Balanced Scorecard (BSC) [5]. BSC complements the financial parameters
system which reflect the results of grading the development prospects system of
enterprises. Objectives and indicators of the system are formed depending on the
ideology and strategy of each organization and consider its activities on four criteria:
financial, customer relationship, internal business processes, as well as training and staff
development [1].
Figure 2 shows the relationship and subordination between the components of BSC
by shapig the strategy of development of a modern engineering enterprise.
This vision is based on the proposed dual structure of potential strategic development
of industrial enterprises (including engineering), which combines the current state of the
underlying potential and the ability of companies to develop, i.e. the effectiveness of
innovative potential.
Thus, in our view, the modern industrial enterprise faces two major tasks: first,
creation of a system of indicators, and second, its use as an integrated system of
strategic control for their development.
One of the main methods of management for the development potential of industrial
enterprises is to develop a system of evaluation and development of methods of
assessment on development potential and its prediction to identify the priority capacity
of a development enterprise environment.
Linkages between business processes and value chains to human resource actions
and services were clearly defined as the HR Scorecard became a business tool
understood and used across the HR organization. Not only are human capital initiatives
needed to increase employee value delivered to the business, they are vulnerable to
business process changes and the measures taken in isolation can be misleading.
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- Current (base) potential
- Potential for innovation development
EXTERNAL
ENVIRONMENT
Strategic Perspective
(business goals)
T
he client
C
om
ponent
K
ey custom
er segm
ents
HR Component
Motivated and skilled employess
Innovation & Productivity
Component of internal business processes
Fi
na
nc
ia
l C
om
po
ne
nt
In
ve
st
m
en
t s
ou
rc
es
Figure 2. Relationship between components of BSC in the formation
of Strategic Perspective
Source: own development
Importance of HR Scorecard is to obtain information that is contained in the
scorecard, and helps to take timely measures promoting business efficiency.
As an example, can be chosen as one of the most important areas of management,
from the point of view, the cost of personnel for the company — staff turnover, labor
turnover is critical to productivity and cost control. High turnover results are reflected in
the poor performance requires higher costs for training. Impact is in all directions and
affects the profitability of the business. Using the HR Scorecard, HR professionals
monitor and analyze statistical data on turnover, determine the causes of turnover,
calculated negative financial consequences, make decisions, monitor the trend of
improvement.
As a result, there is a need for quantitative and qualitative assessment of the current
(base) potential and capacity for innovation development to guide the process of
formation of competitive advantage and provide evaluation and formulation of strategic
directions of engineering enterprises.
Conclusions. The HR Balanced Scorecard has made it possible for HR managers to
understand how they align to business objectives. They are able to explain not only what
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they are tracking but also how they are performing on essential strategies for the business.
Business environment and the objectives and strategies will continue to evolve, and HR
managers will continue to be flexible and creative in supporting the changes. The value of
the HR Scorecard as a tool is that it can get us to the new goals and measures and through
the process ensure continued learning and change management. The analysis of the
dynamics of integrated indicators characterizing the use of strategic capacity development
for local engineering industry indicates the following:
— the existence of negative trends, which is evident in the decline of manufacturing
engineering products that are competitive on the domestic and foreign markets;
— formation of negative trends associated with the influence of a rapidly changing
external environment and the lack of a clear strategic program for long-term business
development in machine-building enterprises and of strategic management of its
potential;
— strategic development potential is the most important factor for the economic and
strategic security of an engineering enterprise and defines the base for creating a long-
term competitive advantage.
— the balanced scorecard approach can provide accurate and timely information
about the current (base) potential and the potential for innovative development of
engineering enterprises.
We believe that this information will allow for more efficient shaping of
competitive advantages and improve strategic decision making at engineering
companies. HR Scorecard will allow managers to actively engineering enterprises to
improve productivity and achieve strategic goals. In HR Leaders now have a tool
that supports the focus on tactical excellence, ensuring alignment with business
strategy.
References
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5. Kaplan, R.S., & Norton, D.P. (1996). The Balanced Scorecard: Translating
strategy into action. Boston: Harvard Business School Press.
6. Poberezhnyi, R. (2013) Forming the strategic potential for development of
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Miskolc: Theory, Methodology, Practice, Volume 9, Pages 79-83
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Стаття подана до редакції 16.07.2014р.