HRM501
Mohan Thapa
Module 2:
Strategic HRM
Business Value Discipline
HR Linkage with the Business Value Discipline
Balance Score Card
Perspective of the Balance Score Card
Strategy Maps
Generic Strategy Map Sample
Business Value Discipline
Business Value Discipline
Operational Excellence:
This value discipline focuses on optimizing the production and delivery
of products or services.
This results in products or services that are reliable as well as
competitively priced and delivered with minimal difficulty or
inconvenience.
Ex:- Toyota focuses on operational excellence. In its management
philosophy, the Toyota Way, that is the source for its competitive
advantage, principles related to eliminate waste, to get it right the first
time, and to improve continuously are emphasized
Business Value Discipline
Product leadership:
A product leader focuses on offering leading-edge products and
services to customers that consistently enhance the customer‘s use or
application of the product, thereby making rivals‘ goods obsolete.
It has to be creative and open-minded to new ideas and be quick in
commercializing them.
Ex:- Apple Computer Inc. Apple is open-minded to new ideas (such as
entering the music industry with its iPod and the mobile phone
industry with its iPhone), brings these ideas to market quickly, and
cannibalizes its own products (by replacing their industry leading
products with even more advanced products).
Business Value Discipline
Customer Intimacy:
Companies focused on customer intimacy segment their target
markets precisely and subsequently tailor their offerings to closely
match the demands of those niches.
Companies focus on long-term relationships with its customers instead
of customer transactions. Therefore customer satisfaction is crucial.
Ex:- Dell, through its website customers have the possibility to fully
customize their computer they are about to buy so that it matches
their needs
HR Linkage with the Business Values Discipline
BALANCED SCORECARD
A new approach to strategic management was developed in the early 1990's by Drs.
Robert Kaplan (Harvard Business School) and David Norton.
They named this system the 'balanced scorecard'. The balanced scorecard approach
provides a clear prescription as to what companies should measure in order to 'balance'
the financial perspective.
The balanced scorecard is a management system (not only a measurement system) that
enables organizations to clarify their vision and strategy and translate them into action.
It provides feedback around both the internal business processes and external outcomes
in order to continuously improve strategic performance and results. When fully
deployed, the balanced scorecard transforms strategic planning from an academic
exercise into the nerve centre of an enterprise.
PERSPECTIVES OF THE BALANCED
SCORECARD
The below diagram gives an idea of the complete overview of
Balanced Scorecard:
The Learning and Growth Perspective
This perspective includes employee training and corporate cultural attitudes related to
both individual and corporate self-improvement.
In a knowledge-worker organization, people -- the only repository of knowledge -- are the
main resource.
In the current climate of rapid technological change, it is becoming necessary for
knowledge workers to be in a continuous learning mode.
It describes the organization’s intangible assets and their role in strategy. The intangible
assets can be divided into three categories
• Human Capital
• Information Capital
• Organizational Capital
From HR perspective human capital element is very important
The Business Process Perspective
This perspective refers to internal business processes.
Metrics based on this perspective allow the managers to know how well their business is
running, and whether its products and services conform to customer requirements (the
mission).
The Customer Perspective
Recent management philosophy has shown an increasing realization of the importance of
customer focus and customer satisfaction in any business.
These are leading indicators: if customers are not satisfied, they will eventually find
other suppliers that will meet their needs.
Poor performance from this perspective is thus a leading indicator of future decline, even
though the current financial picture may look good.
The Financial Perspective
Timely and accurate funding data will always be a priority, and managers will do
whatever necessary to provide it.
In fact, often there is more than enough handling and processing of financial data.
With the implementation of a corporate database, it is hoped that more of the processing
can be centralized and automated
Productivity strategy:
•Improve cost structure
•Increase asset utilization
Revenue growth strategy:
•Enhance customer value
•Expand revenue opportunities
Commonly Used Measures
Financial Measures:
Total assets
Total assets per employee
Profits as a % of total assets
Return on net assets
Revenues/ total assets
Gross margin
Net income
Profit as % of sales
Profit per employee
Revenue
Revenue from new products
Revenue per employee
Commonly Used Measures
Customer Measures:
Customer Satisfaction
Customer Loyalty
Market Share
Customer Complaints
Complaints resolved on first contact
Brand Recognition
Sales Volume
Marketing cost as a percentage of sales
Commonly Used Measures
Internal Process Measures:
Average cost per transaction
On time delivery
Average lead time
Inventory Turnover
Down time
Planning Accuracy
Number of Positive media stories
Cycle time improvement
Products and services in the pipelines
Customer Database availability
Commonly Used Measures
Learning & Growth Measures:
Implemented employee Suggest
Average number of training hours per employee
Management Training Course certificate awarded
Employee Satisfaction Survey
Increasing of internal customer orientation
Consistently develop leadership skills and strengthen manager’s role as a coach and as a
mentor
Increasing of internal customer orientation
STRATEGY MAPS
A strategy map is a diagram that is used to document the primary strategic goals
being pursued by an organization or management team.
Organizations create value by connecting strategic objectives in explicit cause and
effect relationship with each other in the four Balance Score Card objectives
i.e. financial, customer, processes, learning and growth.
Generic Strategy Map
Strategy Map of the South West Airlines
Strategy Map of the Pediatric Co.
Group Formation and Exercises
