The balanced score card was a measure taken by the Human Resource department, towards assessing the quality of their own operations. The head of marketing J. Randall McDonald thought of referring to the framework for the Balanced Score Card (Datar & Epstein, 2001), as set by Kaplan and Nortan in their book, to assess the performance of the HR and both in term of quantitative and qualitative measures.
The implementation of the balanced score card approach, for the performance measurement, was strategically implied by GTE. The HR department outlined five factors to categorize the measure to be included in the score card. They were (Datar & Epstein, 2001);
Talent: To invest and advocate in a diverse and talented workforce.
Leadership: Groom the prospective leaders, assess their contributions and attributes. Holding them responsible and giving them incentives for tasks accomplished.
Customer service and support: Train the customers with the complete knowledge of the company’s products and services. Foster a customer-oriented approach.
Organizational integration: Establishing healthy relations with the internal customers/employees and supporting the free flow of information.
HR capability: Investing in the necessary technologies to improve the productivity of the employees (Cascio, 2002) and assess the performances of individuals for job rotation and enrichment.
To develop certain performance measures, for the balanced score card, the HR department formed a team named ‘PMA’. This team was responsible for assessing the overall situation and categorizing different developed as well as suggested performance measures under the five categories defined above.
The feedback from the presidents of the different divisions of the company had a huge amount of questions gathered to be answered. These questions involved issues regarding (Datar & Epstein, 2001);
The competencies of the workers
Placement of workers at the correct job
GTE’s concerns towards encouraging g a participative environment
Productivity and efficiency of the Human resource of the organization
Cost effectiveness of providing services to customers
Cost of employees’ turnover
Employees’ reward and compensation scheme
Justification and Cost-Benefit analysis of the investment in the HR by the company
Some of the questions posed in ‘Exhibit 2’ (Datar & Epstein, 2001) which seem superfluous are;
Are we investing in growing our HR? Of course they are, in fact that is the reason why they initiated to develop such a scorecard.
Are we using technology to improve HR efficiency? Yes, the company is already investing and employing technology in improving the work performance of its employees.
Some of the questions that should have been included are;
How can the company ensure that employees really get the advantage of the investments done on them?
How to make the employees realize that the company really cares for their development?
Are we recruiting the right people for the company?
What makes the employees, existing as well as prospective, to fit in the company?
The number of existing as well as prospective employees should always be balanced against the revenues.
However, the non-financial measures also play a vital role in the assessment of the performance of the employees. As per the works of the authors Christopher D. Ittner and David F. Larcker, the activities performed should be directly linked to the operations, productivity, costs (reductions) and revenues of the company; when linking the non-financial measures with productivity and performance of the employee(s) special care should be taken (Christopher & Larcker, 2003). Making inefficient use of controls to measure employees’ performance might instead lead to employees and customers’ dissatisfaction. As identified by the two authors, Ittner and Larcker, out of the four mistakes GTE was making the ‘First’ and the ‘Third’ one.
First Mistake: Not linking measures to strategy.
By developing the scorecard, the HR only attempted to justify these investments against the short tem incentives such as increase in sales and/or productivity. However they did not analyzed, at any stage, whether there move was consistent with the overall corporate strategic objectives (Gareth & Charles, 2005). This can be proved by the forecasted increase, by the managers, in the revenues from 1997 through out till 2006 at 10% per annum. This seemed ridiculous when the figures of high employees’ turnover and low customer retentions were revealed.
Third Mistake: Not setting the right performance targets.
Mr. MacDonald needed to have set the right targets to be achieved by each individual that he hired, trained and placed within the organization. When defining their roles and responsibilities, Mr. Randall should have taught the workforce to better understand their targets in correspondence with their positions.
Thus in the end we can say that GTE, despite being the largest local landline telephone provider in the U.S., had the difficulties with its employees, which are an asset to any company. The company should exercise a more participative approach, to be successful. It was estimated, as per the article, that 1% increase in the Employee Engagement Index (EEI) reflected a direct increase of 0.48% in the level of customer satisfaction, which is a positive result.
Datar Srikant & J. Epstein Marc (2001) Verizon Communication INC, Implementing a Balanced Scorecard: Harvard Business Review.
D. Ittner Christopher & F. Larcker David (2003) Coming Up Short on Nonfinancial Performance Measurement: Harvard Business Review.
Gareth R. Jones, Jennifer M. George & Charles W. L. Hill (2005) Principles of Management.: McGraw-Hill
Cascio Wayne (2002) Managing Human Resources: Productivity, Quality of Work Life, Profits: McGraw-Hill/Irwin