What HR Ratios Are to Be Considered?

Access your KPIs online;
Measure your success;

Navigation: All Balanced Scorecard Articles > Strategic Planning

Evaluation of HR performance is extremely important for huge companies that employ thousands of people. BSC is so far the best tool to be used for performance evaluation and strategic management purposes. Read more on HR ratios in this article. Check additional information about hr ratios.

The recent decade in the business world appeared to be quite ambiguous. Financial meltdown preceded by loan boom crashed hopes of many business owners. A series of bankruptcies sent shock waves in business circles. Even the largest auto maker in the world, GM, turned bankrupt. Many companies still cannot recover after economic crisis, looking for ways to change the situation. There is one critical success factor in post crisis management - effective HR policy. Indeed, employees are the supreme value for any company, especially the one that is fighting against harsh consequences of the financial meltdown.

HRM has become extremely popular in the recent 10 years. It turned out a must have department, especially in huge companies. Very often, businesses spend millions of dollars for HRM and these investments appear to be quite ineffective. It is not a secret that every company as a rule spends a certain amount of money to hire one employee. These costs include agent's fee, advertising costs, salary for HR managers who conduct interviews, process applications etc. Naturally, the company expects an employee to bring profits. What happens in a newly hired employee decides to quit in several months? The company will suffer losses, because it has spent $1000 to hire and train a new employee, while this employee has earned only $300 for the company and then decided to quit for some reason. Optimization of HR performance makes it possible to minimize losses related to HR.

For this reason, numerous companies use Balanced Scorecard. This is a revolutionary performance evaluation system that does not only measure current performance but also communicates operational and strategic management. The problem is that very often strategy remains on paper. It is easy to set ambitious goals and adopt strategies, but it is not easy to put strategy into action. Balanced Scorecard helps transfer strategy into action. This is especially important for HR, as this department does not produce anything and thus does not earn money. That is why inefficient use of funds allocated for HR results in huge losses.

Very often, Balanced Scorecard is implemented in HR department only, and then based on implementation results, company top management makes a decision to use BSC on a company level. That is why it is very important to successfully implement and maintain BSC in HR department, because a negative implementation experience will certainly affect the decision to use Balanced Scorecard on a company level.

What are the most important factors to be considered when using BSC in HR department? Sure, development of a right realistic strategy is one of the most important stages. At that, the strategy must certainly comply with company goals. In other words, everything done in HR department should be somehow related to company strategic goals.

Choice of HR key performance indicators is another important stage of HR BSC implementation. KPIs in HR measure efficiency in hiring, educating and retaining of personnel. Such indicators as average hiring cost or new hire turnover rate will tell much about the way HR department works.

If you are interested in hr ratios, check this link to find out more about hr ratios. Also, you can check other articles in Strategic Planning category.

Balanced Scorecard Toolkit includes step-by-step manuals, documents, presentations, check lists designed to help business professionals with successful development and implementation of Balanced Scorecard. Learn more about BSC Toolkit.