Evaluating Human Resources Management - BDE Corporation - Case Study Example

EVALUATING HUMAN RESOURCES MANAGEMENT Introduction The functions in Human Resources within companies have indicated continuous growth in terms of influence and importance. This is mainly as a result of the increased budgets directed to human resources, the increased ability of utilizing human resources as away of increasing productivity, containing costs, improving quality and satisfying clients and the inclusion of HR in the main organizational functions. With the increased value of Human Resources in organizations, there is need for ensured effectiveness and accountability (Philips, 1996, p. 3). It is in this line that approaches to assess the effectiveness of Human Resource Management. This paper looks at two of these approaches, the HR scorecard and HR auditing. The paper describes the characteristics of each approach and discusses what situations they are used, outlines the advantages and disadvantages of each approach and explains how they are, or would be, used to actually measure different HR activities within a selected organization. The selected organization in this case has been named BDE Corporation. BDE Corporation BDE Corporation is a company based in Australia but which is operational in about 30 other countries around the globe. The company which was established in 1982 engages in the development, licensing and the support of different software services and products. The company is also involved designing and selling hardware as well as delivering online advertisements to clients. BDE has been identified as being one of the most successful and wealthiest companies around the globe. In relation to human resources, BDE is employee driven. While other companies’ success is based on improved technology or manufacturing techniques, BDE’s success is on the basis of employees’ effectiveness. Basically, BDE highly regards their employees and recognizes their importance. The company’s focus on employees makes the company a valuable case for this assignment and in the study of the approaches used to measure human resource effectiveness. HR Auditing Characteristics and Use HR auditing refers to the systematic process through which companies are able to diagnose, do an analysis, evaluate as well as assess the necessary actions to take within the Human Resource Management framework. Phillips (1996, p. 37) defines it as the process of investigating, analyzing and comparing with an aim of assessing how effective the Human Resources function. The scope of this measurement approach is on processes such as operations, production, quality, sales, engineering and data processing (Phillips, 1996, p. 37). HR auditing verifies various processes within the field of HRM and that include job design and analysis, selection and recruitment , placement and orientation, staff training and skill development, job evaluation and performance appraisal, employee remuneration, morale and motivation, communication, participative management, social security and welfare, health and safety, regulation and policies compliance, trade unionisms, industrial relations, disputes as well as their resolutions (Aswathappa, 2006). The significant increase in the use of this approach to measure HR effectiveness is mainly as a result of the companies’ dedication to shift human resources function from the service arena to the current strategic arena (Phillips, 1996, p. 37). The process of HR auditing covers four main areas that include: HR function auditing Auditing of the managerial compliance in terms of personnel procedures, legal provisions and policies. Auditing of the corporate strategy relating to HR planning, remuneration, staffing among other human resource activities. Auditing of the human resource climate in regards to employee morale, job satisfaction and motivation (Aswathappa, 2006, p. 23). The main methods used in the process of auditing and to gather necessary information include observations, surveys, interviews or a mixture of all of these with most auditors preferring to use surveys (Phillips, 1996, p. 37-38). HR auditing Approaches Over the years, HR auditing has continued to evolve into what is now a key tool in decision making in regards to matters related to personnel. It is for this reason that all of the tool’s competencies and functions are continuously expanded a process that has helped in identifying its various components and the various kinds of audits. There are three main approaches as brought out by Davenport (2000, p. 31-33) which include the function based approach, legal approach as well as the strategic kind of approach. The legal form of approach assesses if an organization is acting in accordance with the existing labor laws. This currently focuses on evaluating an organization’s ability and role in preventing risks related to work. The function-approach looks at a company’s application of the various HR policies. A number of measurement techniques have been identified to contain similar basic ideas, that include the implementation technique, assessment of planned- measures and the obtained results. These 2 approaches are however only limited to tactical and operational fields and not on the evaluation of whether human resource management helps in attaining the company strategy. It is for this reason that the strategic approach was established as a way of assessing if HR functions help companies in gaining competitive advantage (Davenport, 2000, p. 57). Walker (1998, p. 7) mentions two approaches to HR auditing: those related to the external aspect and those of the internal aspect. The external aspect refers to the understanding that HR’s effectiveness is measured on the basis of the impact it has on the results of a company. The internal aspect on the other hand values the actions of the human resources on the basis of the undertaken activities and the costs. In this case, the HR’s capability is judged in terms of the ability it has to supply various services to the business at the least cost (Walker, 1998, p. 7-8). HR auditing is regarded as being a key tool in the management of businesses. The tool does not only aim at controlling and quantifying results but it also aims at adopting a greater perspective through which a future course of actions will be defined within the field of HRM. This therefore means that HR auditing has to attain two main functions. First, the tool needs to be an MIS (Management Information System) the feedback through which information relating to the situation is obtained to allow for the establishment of Human Resource and management processes. Secondly, it needs to allow for the control and evaluation of policies being applied and for the developed processes (Fossas & Sastre, 2005, p. 6). Through the HR audit, companies are able to achieve their set goals and to assess how effective their HR functions are. Other than this, a company’s weaknesses and strengths are identified to ensure that necessary action is taken to create a happy and favorable working condition for staff members (Werther & Davis, 1996, p. 105). Basically, an audit is seen as a discovery or learning tool through which organizations get to improve rather than a test. Through it, required baseline data is collected to allow for necessary actions to be taken to enhance the quality performance of the human resource s within an organization (Philips, 1996, p. 37). Advantages of HR auditing HR auditing has a number of benefits that make it a valuable tool to measure HR effectiveness. One such benefit is that through a through analysis HR auditing allows for the necessary improvements within an organization to be identified and necessary actions to be taken for the improvements to be made. It also ensures that every component required for HR program to be effective is as it should be and that it is fully operational (Phillips, 1996, p. 38). Another benefit of HR auditing is that it allows for the evaluation of paperwork as away pf ensuring that records are accurately kept an aspect that is not only important to current but also former employees. HR auditing also makes it easy for key decision makers within the department of human resource to identify areas that need improvements where or where control measures are necessary. Other than this, it allows for a comprehensive valuation of the structure and design of a business to identify what needs to be done to ensure that the business performs better. HR auditing is an efficient way of improving the morale of staff members and motivating them. This is because it ensures that the human resource department is run in the most effective way possible and that it ensures quality working conditions for its employees in terms of the safety of the working environment, benefits given among other employee related issues. By having employees that are satisfied with their job, a business is likely to improve its reputation as satisfied staff members will speak of their satisfaction and are more likely to perform better in their various duties. Good performance from employees in turn improves customer satisfaction an aspect that will in turn increase profits for the business. Through a HR audit, human resource managers are more able to assess the various working positions within the organization, identify the employees that deserve a promotion and who does not as well as the necessary actions that need to be taken in relation to staff members and that will cause business growth. Another crucial advantage of conducting a HR audit is that companies are able to determine if they are functioning in accordance with the legal requirements and guidelines. A businesses’ functioning should be in full compliance with the law hence if non compliance in a particular area is identified during auditing, then improvements in this area is done to ensure compliance (Borbidge, 1998, p. 15). Disadvantages One major disadvantage of HR auditing is that it is likely to consume a lot pf time and money depending ion the person performing the audit, the scope and the efficiency. Any conducted audit should be done based on a created plan towards meeting the specific needs of an organization. Failure to make it practical and timely will result into the expenses outweighing the audit’s value to the company. Another disadvantage of HR auditing relates to its legal liability such that the obtained information given as a written report and which mainly outline any deficiencies in terms of a company’s non compliance to existing laws on the employer’s procedures and systems does not have the assurance of protection from disclosure if a legal claim occurs. The protection is only assured if the report is given on behalf of a company’s legal counsel. This disadvantage makes it important for companies conducting an audit without having legal counsel to put into consideration the documents to be created or report to be written, how the distribution of the documents is going to be controlled and how long the document will be kept as record (Borbidge, 1998, p. 16). Another disadvantage of HR auditing as seen by Phillips (1996, p. 38) is that there is only a slight direct association between the obtained audit information and the company’s effectiveness as a whole. Approach for BDE Generally, through HR auditing BDE Corporation will be a key way of conducting an overhaul assessment on the department of human resources. This will be effective in improving the overall functioning of the department as specific problems are identified in the four main areas earlier identified as those making up the complete audit. Conducting the audits in this area will ensure that all issues are identified and rectified to allow for a smooth running of the business. Through this the HR department will be pleased about their role in the organization, managers will feel satisfied with the work they are doing and staff members will enjoy and appreciate the organization’s operations. An improved HR department will definitely lead to an improved morale among staff members. Additionally, an audit will help BDE Corporations in evaluating the HR’s past performance, look at the present situation as well as determine the necessary actions to be taken in the future to ensure that the goal and mission of the organization in regards to the people is met. Through the strategic approach of HR- auditing, BDE, through the use of systems like the Brown’s human capital- index and the customer-employee benefit- model, will help the management in identifying the real value of its staff members by recognizing them as key resources that are worth optimizing. This idea can however cause mistakes when staff members are considered as company property. The best interpretation should in this case be to regard the employees as the investors and owners of human –capital rather than as human- capital themselves (Davenport, 2000, p. 33). HR scorecard HR scorecard is used as a tool by management to benchmark and evaluate the performance of an employee. It is founded on the balanced scorecard approach developed by Norton and Kaplan and is meant to transform perception of business to HR. This process that is provided by HR can also be used as a tool for development, discipline, promotion or demonstration of an employee’s contribution to an organization. A scoreboard makes the HR department an asset and strategic partner in the development of human capital and business process. It is the key driver for the growing organizations (Kaplan & Norton, 1992, p.75). HR scorecard is a strong organization broad –strategic planning, communication and management system. These strategy based systems align employees work with organization strategy and vision; communicate strategic intention to the external stakeholders and the organization, also provides a basis for better alignment of resources with strategic objectives. Strategic and operational performance information is used by a management and planning HR scorecard system to evaluate and measure how an organization is performing with customer and financial results, organization capacity building and operational efficiency (Yeung, 1997, p.300). Characteristic and use of HR scorecard The HR balanced scorecard, generally makes it possible for the HR managers to identify how to align its strategies with the overall objectives of the business. They also get to explain their performance on the important business strategies as well as what they are tracking. Business objectives, environment and strategies will keep evolving; the HR managers will be more flexible and creative in support of the changes. HR scorecard’s value as a tool to the HR is that it can get it to new measures and goals and through this process change management and continued learning is ensured. (Walker and Macdonald, 2001, p. 368), classify a HR scorecard into four perspectives: a. Operations perspective HR success in operational excellence is measured in this perspective. Focus is paid mainly in three areas: technology, staffing and HR transactions and processes. b. Strategic perspectives In this perspective the organizations success in achievement of the 5 strategic thrusts (leadership, talent, organizational integration, customer support and service and HR capability). c. Customer perspective The perspective measures how the organization’s key customer section views the HR. the customer’s perception to the service and at the same time overall assessment of competitive capability the employee engagement and productivity links is tracked by the survey results. d. Financial perspective The perspective measures the measurable financial value added by HR to the company, inclusive of ROI measures in technology, training, staffing, service delivery cost. The HR scorecard helps the HR organizations to measure and articulate their strategic input basing on the four perspectives. This has proved to be the main advantage to the HR managers and executives who are determined to maximize contributions of their organizations to the larger enterprise’s goals. In addition HR scorecard “drives” cross-business synergies. With the development of corporate scorecard each SBU can develop a long range strategy and scorecard that is consistent with the corporate strategic agenda. HR scorecard ensures hiring effectiveness; HR uses it to track hiring effectiveness. Various measures may be scored such as; duration of time to hire, available open positions, applicants quality and number of applicants in every position. Selection of the appropriate measures can be determined basing on discussions with business leaders, internal stakeholders and the employees. HR scorecard is a tool used to measure turnover and it can provide business leaders and HR professionals with a sign of their capability to keep staff based on involuntary and voluntary departures. Voluntary departures normally indicate issues related to the capability of the organization to offer significant work and reward to employees. Involuntary turnover (terminations and layoffs), this indicate areas in that need improvement- hiring and training. HR scorecard measures the benefit costs, which represent investment on any organization. Control of these costs and at the same time ensuring satisfaction of employees with the provided benefits is a huge challenge for HR professionals. In this case the HR scorecard measures the level of employee satisfaction through the benefits provided, percentage increase or reduction in annual costs by benefit. Advantages of HR scorecard The HR scorecard enables value creation and cost control: it is always expected of the HR to control the cost for the organization as well as fulfillment of its strategic goal, which entails creation of value. The scorecard of HR helps the HR professionals to balance and find optimum solution to the two above. It allows them to drive out the costs where appropriate, and at the same time guard the investments in intangibles and HR by outlining the advantages in solid terms. HR professionals can effectively manage their strategic responsibilities: HR managers are encouraged by the scorecard to pay attention on how their decisions affect the implementation of the organization’s strategy. A clear framework is provided for them to think in a systematic manner. It emphasizes the differences between HR deliverables and do-ables: the HR measurement system should clearly differentiate between the deliverables which influence implementation of the strategy and the do-ables that do not. Policy implementation can not be considered as a deliverable till it has a positive effect on the HR design and creates the appropriate employee behaviors which drive strategy implementation. This type of measurement system encourages the HR professionals to reason both operationally as well as strategically. The HR scorecard assesses contribution of the HR to strategy implementation: an arising question regarding the contribution of the HR to the organization’s performance is answered by the increasing effect of the scorecard’s deliverable measures. Leading indicators are measure by the HR scorecard, the same way there are lagging and leading indicators in the overall “balanced performance measurement system”, there are outcomes and drivers in the HR “value chain” as well. It is therefore important to examine the alignment of HR systems and decisions which drive the HR deliverables. The assessment of this alignment presents feedback on the progress of the HR towards these deliverables; it also lays the HR’s strategic influence foundation. HR scorecard encourages change and flexibility: the scorecards basic nature and its informal emphasis and feedback loops aids in the fight against measurement systems getting too consistent. Consistency is important for the things that do not have a dynamic nature but an organization performance is a dynamic occurrence. Each decision should be made basing on the past and future scenarios. A common problem of measurement system is that of managers who have a tendency of getting skilled so as to obtain the correct numbers the moment they get used to a particular measurement system. The HR scorecard creates change and flexibility since it pays focus on the strategy implementation of the organization, which frequently demands change. The HR scorecard approach, measures becomes the underlying logic indicators which managers accept as legal. It helps the managers look at the larger picture, with the lack of perfect numbers it now gets easier for them to change direction if the need arises (Walker and Macdonald, 2001, p. 365) Disadvantages of HR scorecard Maintenance of HR scorecard is time demanding; the scorecard entails complex metrics which measures the employees in a wide set of task and skills competencies. These tracking items and skill requirements might change over time with the changing needs of the organization. It is important for the scorecard to be reevaluated, changed and updated routinely to make sure that the best of the analysis points are provided. The HR scorecard can be kept through the use of computer software products or done manually. On the other hand scorecard applications that are computer tracked require a great deal of human evolutionary changes and input. A poorly designed HR scorecard limits its use. If there is lack of strategy or it is unclear, HR scorecards ability to put in more value to the organization is challenged. A strategy that is poorly defined will yield data which is not applicable to an organization and hence of no value or use to the stakeholders in an organization. This is an area of the HR scorecard foundation that is usually the primary cause to failure of the scorecard. The HR scorecard relies mostly on human analysis. Thus the strategy should be in line with the preferred financial outcome. Implementation of HR scorecard is a major challenge faced during the process. Acceptance of the scorecard and its plan at all levels of management should be ensured so that the implementation can take place. A stumbling block to getting the scorecard into operation is resistance to change. This is seen as pointless additional work. However, it is necessary to educate the management team on the usefulness and benefits of the scorecard and on how the best team can be developed while aiming for the most efficient result for the organization financially (Owens, 2010, para.1-4). Approach to BDE BDE Corporation has successfully designed and implemented a strategic management system, based on Dr. Robert Kaplan and Dr. David Norton, balanced scorecard model. BDE has used it as a tool to align its unit, institution, and employee performance; achieving results; management of organization on daily basis; facilitating communication the entire year so as to aid discussions on organizational and individual performance are incorporated and ongoing (U.S. General Accounting Office, 2000, p. 6). The HR scorecard was considered with new economy organizational dynamics in mind. A wide range of lagging and leading indicators are used by the scorecard. This indicators include; operational processes, overall strategy, financials and customer perceptions to assess the effectiveness of the initiatives of HR to the bottom line. The HR scorecard provides ways to observe workforce indicators, identify workforce issues, evaluate workforce statistics, calculate negative effects, prescribe solutions, as well as track improvements (Lebas&Euske, 2002, p. 65-66). BDE Corporation believes that in the approaching years the main source of competitive advantage for its business will continue to focus more and more on the talent within the organization, this means that it is very important to manage employee talent in an organization. Whereas management is likely to make decisions on how to invest in human capital, few organizations have an efficient process of measuring the value created by this valuable asset. BDE Corporation believed that value created through investment in employees would be effectively managed by HR. Managers were in the knowledge of how much was paid to train, hire, develop, reward and provision of benefits to employees. Conclusion The above discussion has brought out HR auditing as the process through which companies are able to assess their current position and use their findings as a basis to plan the future. In this case HR auditing makes it possible for companies to assess what actions need to be taken within the HRM framework to improve the company. By using the HR audit as an approach to measuring human resource effectiveness BDE Corporation will be able to identify any existing gaps in human resources using the three main approaches, legal, function and strategic approaches, and in turn be able to identify control measures through which an overhaul improvement on the functioning of the HR will be done. HR scorecard has enabled BDE HR managers to have an understanding of how to align the general business objectives with HR strategy. They are at a capacity to explain what they are tracking and also on the performance of the essential strategies at the business. Business environment, strategies and the objectives will continue develop, the HR managers will be more creative and flexible in support of the changes. HR scorecard’s value as a tool is that it is able to get HR to new measures and goals and through this process there is ensured change management and continued learning. Combining the two approaches, balance scorecard and HR auditing will help in ensuring that gaps left by one approach are covered by the other as well as help in ensuring that the findings or results obtained are true and valid. References Aswathappa, K. (2006). Human Resource Management and Personnel Management, 4th edition. NY: McGraw-hill. Borbidge, R. (1998). Conducting a Human Resources Effectiveness Audit. Point Richmond, CA: Jacob-Cameron Publishing Company. Davenport, T. (2000). Workers Are Not Assets. 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