Marc Friedrichsen

The most frequently identified area of concern […] revolves around human-resources issues(1)", as 57 percent of respondents revealed in a survey about current business concerns in the hotel industry conducted by the Centre For Hospitality Research at Cornell University. As we experience with most of our clients, the traditional Human Resources Function is in a phase of transition from a traditional administrator - spending up to 60 percent of its time on administrative activities - to a service provider, contributing to value generation and productivity.

Exhibit 1:Time spent of an average HR resource

While slowly following this path of transition, Human Resource Managers are facing questions, such as the following:

  • What are the key value drivers of the HRM function contributing to corporate performance in the hotel industry?
  • How can we best benefit from and leverage our intellectual capital?
  • How can we find, develop and retain skilled and talented people?
  • How can we best realize B2E - Business to Employee - by creating a win-win situation for both, people and company?
  • How can we ensure a real work-life-balance for our people?

It all comes down to the key issue of turning HRM into a strategically focused value generator, perceived by the management as the basis for value generation in the company.

Exhibit 2: HRM: Transformation from Administrator to Service Provider for growth and productivity

To do so, strategic Human Resource Management is asked to pursue three main themes:

  1. Value Contribution - HRM must clearly focus on both, activities generating value for the company and optimising HRM costs at the same time
  2. Aligning human capital on corporate strategic objectives - HRM must develop, promote and retain human capital in line with corporate strategic objectives
  3. Managing Change - HRM must anticipate change and support company-wide change initiatives with necessary processes, methods and instruments.

None of those should be done independently but in the context of an integrated service delivery model creating the infrastructure for effective and efficient HR services.

First, all services along the HR value chain are aligned with and clearly focused on the companies' and HR strategy, with primary attention to value contributing services.

Second, it's not only about identifying and defining but also about measuring value contribution. In other words: Define precise strategic objectives and make them measured and analysed in a continuous management process.

Third, measuring and analysing alone doesn't help if your companies' resources are not aligned with and focused on the achievement of your strategic objectives. Your internal activities and projects must be defined to clearly supporting your objectives.

What sounds easy in theory is slightly more complex in reality, since strategy execution goes beyond lofty statements and objective setting but process integration and - if possible - system implementation. Remember the initial question currently put at the top of HR management agendas: How can the HR function become a value generator for each individual hotel, hotel chain or property owner? The challenge is now to move from theory to practice.

Strategic Human Resource
Management with the Balanced Scorecard

For the last 12 years, broad experience has been gathered across service- and so called "people-intensive industries" with the Balanced Scorecard as a management instrument, helping the HR management to create a strategy focused function.

With the Balanced Scorecard, human resource managers are getting an effective instrument to both focusing HR on value-adding activities - aligned with the companies' strategy - and making their value contribution measurable.

The HR Balanced Scorecard takes into consideration strategic HR objectives not only from a financial perspective, but along the essential HR business perspectives, such as people development objectives, HR process objectives, internal and external client objectives and financial objectives. This will ensure that HR managers will measure, analyse and manage key value drivers along the HR value chain.

By focusing on the essential strategic objectives, the Balanced Scorecard will avoid an oversupply of management information but deliver information relevant for effective leadership. To enhance the value of the Balanced Scorecard, strategic objectives will be measured by a balanced set of leading and lagging key performance indicators (KPI), thus giving management the chance to identify deviations from the expected development and take corrective actions in a timely manner.

  • To ensure the achievement of objectives, the HR management team will allocate strategic projects to each objective. This does not mean to make existing programs or projects redundant, but it is often a valuable opportunity to review you project portfolio in view of a clear strategic focus.
  • The Balanced Scorecard will further serve as communication instrument, enhancing the understanding of the role and business impact of the HRM function amongst employees and management.
The iterative and modular implementation approach

In practice, the implementation of the Balanced Scorecard has been proven most successful if it was developed in modular units (see exhibit 3). As a whole, all modules together ensure a sustainable integration of the Balanced Scorecard into the organization.

Exhibit 3: IBMs' MIS-Balanced Scorecard Implementation Approach

1. Management Content

The first module comprises the development of the scorecard itself. The management team is developing the Balanced Scorecard in four individual workshops.

  • Workshop One: Developing Strategic Objectives
  • Workshop Two: Developing the Strategy Map
  • Workshop Three: Deriving Key Performance Indicators (KPIs)
  • Workshop Four: Reviewing existing and developing new strategic projects

Previous to those workshops, the initial decision upon the Balanced Scorecard perspectives depend upon whether the HRM function is considered as Profit Centre or Cost/Service Centre, thus pursuing different output objectives.

(See exhibit 4). Furthermore, particular attention is paid to the question: Who are our strategic clients? Employees? Business Units? Hotel guests? Other external clients? Do we have to comply with particular Service Level Agreements? Those questions are particularly challenging in view of the fact that the Balanced Scorecard is supposed to focus exclusively on strategic issues.

2. Information Requirements

To use the Balanced Scorecard as management instrument for the HRM function, it is of vital importance to integrate the Balanced Scorecard into the management processes. It's about linking strategic and operational planning with the Balanced Scorecard to ensure top-down planning and bottom-up reporting and analysis.

Exhibit 4: Balanced Scorecard perspectives for Profit Center HR-BSC vs. Cost Center/Service Center HR BSC (illustrative content)

The second module often starts with a review of the existing planning and management processes. Most difficulties are related to limited strategic planning experience, non-integrated process flows and inconsistent data. However, hotels with fairly advanced Property Management Systems tend to be better prepared due to sophisticated reporting processes and better data quality.

Exhibit 5: The HR Strategy Map - translating your strategy into clear objectives (illustrative content)

The extent of process design and process integration depends upon each individual requirement. To start with, the Balanced Scorecard is often used to first implement regular strategy and Balance Scorecard review meetings, not yet linked to operational planning. Only at a later stage, the design of and integration into HR strategic and operational planning processes will take place. In case of a superior General Management or Corporate Scorecard, the planning processes will be aligned to ensure consistent strategy translation, maybe even all the way down to Management by Objectives (MbO).

3. System Integration

The decision, whether the Balanced Scorecard will be supported by a specific IT application, depends upon two related questions: First, what is the benefit of a system integration for HR management? Second, how big is the maintenance effort of such a system?

A stand-alone Balanced Scorecard with little system integration possibilities might be well served with an Excel-supported solution. Whereas if the existing Property Management System already disposes of a solid range of data, a Balanced Scorecard software might be more likely and beneficiary for the hotel, hotel chain or property owner.

Exhibit 6: Integrating the Balanced Scorecard into the strategic and operational planning process

Particularly in view of reporting and drill-down requirements, the introduction of a specific Scorecard IT application and its integration into the ERP / PMS has shown great value to the management of the organization.

Marc Friedrichsen worked as consultant in the Performance Management group of PricewaterhouseCoopers. He was involved in a variety of Balanced Scorecard projects. Since the merger between PwC Consulting and IBM Business Consulting Services, he works in the solution area "Strategic Change Solutions" for IBM BCS, where he is focusing on strategic controlling and performance management. Mr. Friedrichsen holds a diploma in banking and is a graduate from Ecole Hotelière de Lausanne.

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