We believe that developing measurement competency is important, because it can add value at the level of the firm. But few managers (HR or otherwise) have strong competencies in this area. In recent years, HR managers have been asked to learn about finance and accounting. Now, they must hone their measurement skills as well.
You are undoubtedly familiar with assertion that “what gets measured gets managed and what gets managed gets accomplished? But how true is this, really? Can measuring organizational processes provide competitive advantage?
We are not the first to emphasize the importance of measuring business performance from the perspective of strategy implementation, rather than relying simply on financial results.
Robert Kaplan and David Norton’s Balanced Scorecard approach pioneered this concept of moving beyond mere financial measurement. To use this tool, a firm must specify not only the financial elements of its value chain but also the customer business process, and learning and growth elements. Then, it must develop tangible ways to assess each.
The premise underlying the Balanced Scorecard approach is that senior managers have paid far too much attention to the financial dimensions of performance, and not enough attention to the forces that drive those results.
Financial measures are inherently backward looking because “performance drivers? are within management’s control now, the entire Balanced Scorecard measurement system encourages managers to actively engage with the strategy implementation process, rather than simply monitor financial results.
One can conclude by specifying the vital process measures, assessing them, and regularly communicating the firm’s performance on these criteria to employees, managers ensure that the entire organization participates in strategy implementation. The Balanced Scorecard approach thus makes strategy everyone’s business.