By Charles Cotter, PhD

2023/05

 1. Introduction and Contextualization: The Status Quo of HRM Metrics and -Scorecards

Despite the strategic business imperative and mounting pressure on Human Resources Management (HRM) to transform its operating model to actualize to a Strategic Performance Advisor (SPA), the tangible results and impact, as reflected on the HRM performance scorecard, have been unimpressive and unconvincing. This assertion is supported through authoritative and empirical research conducted in South Africa and globally (CIPD, 2014; Cotter, 2017 & 2020; Deloitte, 2018; KPMG, 2015; LinkedIn Learning Solutions, 2017; McKinsey, 2014; Overton & Dixon, 2016; PWC, 2017; NGA HR, 2018 and IBM, 2021).

Based on the Cotter (2020) survey (N = 3319), the overall mean score of the strategic business impact and value of x13 selected HRM/L&D value chain functions is 61.6% (pegged at a level 2 of strategic maturity – transactional). The purposive sample group included respondents from x13 African countries (Southern, Eastern and Western). Of the x13 HRM/L&D value chain functions surveyed, HRM Metrics scored the lowest average of 55.0% (N = 339).

“Seemingly, current HRM practices are administrative, compliance-driven and transactional and not strategic, commitment-driven and transformational.”

(Charles Cotter PhD, 2020)

2. From Parachuting to Paradigm Shifting – 10 foundational critical success factors to transform to a Strategic Performance Advisor

Having worked directly with 190 different companies and according to Cotter’s (2023) work-based

research, there’s a misperception in the organizational belief system that they can seamlessly transition from performance (corporate performance Scorecard) to human resources (HRM Scorecard) to business intelligence (actionable insights to influence key business decisions), in the absence of a solid foundation. Cotter (2023) refers to this misperception as “parachuting.” He recommends a fundamental “paradigm shifting” to enable that the following 10 foundational critical success factors are present as the bedrock of transformation to a Strategic Performance Advisor operating model:

• #1: Strategic HRM mindset and approach
• #2: Data-driven and Evidence-based HRM philosophy
• #3: Business mindset
• #4: Measurement culture
• #5: Improved skill set and future fitness of HRM Professionals (currency)
• #6: High Performance Organizational (HiPO) Culture
• #7: Performance Management System
• #8: Balanced Business Scorecard and Strategy Mapping
• #9: HRM Metrics Best Practice Principles
• #10: HRM Metrics Process

A synopsis of each of these 10 foundational critical success factors is provided.

2.1       Strategic HRM mindset and approach

“HRM professional leadership credibility and integrity is defined, cemented and reinforced by fulfilling, delivering and exceeding their HRM governance; workplace advocacy; business intelligence and strategic performance advice mandate and these four pivotal roles. The rewarding impact and positive outcome thereof, will result in 1. the mainstreaming of HRM as a core business process; 2. enable the penetration and permeation of the organizational culture; 3. offering business-valued solutions; 4. a strategically relevant proposition; 5. future-proofing of the business operating model and 6. the influencing of key business decisions.”

Based on Cotter’s (2018) research, the anatomy of SHRM comprises of 10 best practice principles. Please refer to the diagnostic survey link https://www.surveymonkey.com to measure the strategic maturity of your organization’s current HRM practices.

From a benchmarking perspective, based on Cotter’s (2020) research, with a mean score of 62.0% (N = 456), it is apparent that the SHRM role is pegged at a level 2 (Transactional) of strategic maturity.

2.2       Data-driven and Evidence-based HRM philosophy

2.2.1    Data-driven HRM

According to Cotter (2019), infusing the HRM architecture with data-driven decision-making processes and an evidence based HRM philosophy throughout the HRM value chain, to generate meaningful business intelligence (through strategic and business relevant HRM metrics and predictive analytics) are the critical success factors to a future focused Strategic Performance Advisor model.

In order to promote decisional optimisation, the configuration of a HRM metrics dashboard should favour lead and not lag key performance indicators i.e. hindsight (10%); insight (70%) and foresight (20%). The cumulative HRM intelligence, as reflected in the HRM Scorecard, should be a manifestation of historical trends and patterns (descriptive analytics); current business priorities and burning issues (diagnostic analytics); future business projections (predictive analytics) and recommended initiatives (prescriptive analytics), respectively. (Cotter, 2020)

2.2.2    Evidence-based HRM philosophy

In order to be feasible, to prosper professionally in 2025 and to be future-fit in a business unusual employment landscape, Cotter (2023) advises that HRM will have to exchange the currency in which they trade from old notes to noteworthy, Industry 4.0 and business relevant denominations and value. Specifically, this change translates from:

• feelings to facts;
• anecdotal to analytical;
• hindsight (descriptive) to insight (diagnostic) to foresight (predictive and prescriptive analytics);
• business tributary to mainstream;
• intuition to intelligence;
• rhetoric to meaningful response;
• best practice (universal) to best fit (organization-specific) to next practice (future-proof) i.e. leapfrogging from imitation to internalization to innovation and ultimately,
• a cost to a profit centre.

Generally, this 8-point transformation means an upgrade to Evidence-based HRM.

2.3       Business mindset

According to Cotter (2023), over many HR management generations, HRM professionals have deservedly and rightly clawed their way into the Boardroom. They have now earned an uncomfortable, yet pivotal seat at the Board table. They have a compelling voice, which is undoubtedly heard, but not always meaningfully understood by key business executives. They need to clearly assimilate, fluently articulate and unequivocally master the language of business. HRM will have to get into business sync. By failing to do so, the HRM profession will sink.

According to Cotter (2021), business executives expect HRM practitioners to fulfil 10 key roles and resultant performance outcomes. Please refer to the diagnostic survey link https://www.surveymonkey.com to measure the degree of compliance to these performance expectations in the 10 key roles.

2.4       Measurement culture

According to Cotter (2017), “HRM will have to migrate from the fundamentals of people science to the complexities of data science.” However, HRM professionals are not expected to be fully-fledged data scientists, but rather must have a good working knowledge to interpret, analyze, apply and convert data into higher order business value e.g. insight; wisdom and impact.

HRM professionals will have to transform to Behavioural Economists who trade in competitive predictive analytics and business intelligence and who have an in-depth and rich understanding of the mechanics (structures, processes, systems and operations); dynamics (culture, values, emotions and attitudes) and analytics (core business performance metrics) and how these influence key business decision-making. Given that there’s a narrative behind the numbers, HRM professionals will have to embrace and adopt a measure culture to enable this transformation. They should not have a phobia for numbers – the numbers are their friend, not foe. (Cotter, 2018)

2.5       Improved skill set and future fitness of HRM Professionals (currency)

2.5.1    Skills set

According to Cotter (2022), the expanded skills set of HRM professionals includes the following core competencies:

• Business literacy (BQ)
• Financial literacy (FQ)
• Digital literacy (DQ)
• Technological literacy (TQ)

2.5.2    Future fitness of HRM professionals

According to Cotter’s future fitness code (2017), future-fit, career-minded HRM consultants will apply x10 strategies in the Gig Economy. Please refer to the diagnostic survey link https://www.surveymonkey.com to measure the degree of your compliance to this future fitness code. From a benchmarking perspective, with a mean score of 66.4% (N = 299), it is apparent that the HRM future fitness score is pegged at a level 3 (Transformational) of strategic maturity.

“The three most important currencies that HRM Strategic Performance Advisors trade in are 1. business intelligence; 2. Innovation and 3. Evidence-based thinking and -practices. The cohesive accumulation of the potency of the trifecta of these currencies will amplify and accentuate the HRM professional integrity and credibility and ultimately, their strategic value proposition will exponentially appreciate in business value.”

(Charles Cotter PhD, 29 April 2023)

2.6       High Performance Organizational (HiPO) Culture

According to de Waal, “A High Performance Organization is an organization that achieves financial and non-financial results that are exceedingly better than those of its peer group over a period of time of five years or more, by focusing in a disciplined way on that which really matters to the organization.”

Furthermore, de Waal states state the anatomy of a HiPO comprises of five strands (building blocks) of success, namely:

• Quality of management
• Continuous improvement and renewal
• Openness and action-orientation
• Long-term thinking
• Employee quality

2.7       Performance Management System (PMS)

According to Cotter (2019) the effectiveness of a PMS is defined by x10 best practice criteria. Please refer to the diagnostic survey link https://www.surveymonkey.com/r/KNJCQJD to measure the degree of compliance of your organization’s current PMS. From a benchmarking perspective, with a mean score of 63.7% (N = 422), it is abundantly clear that PMS is pegged at a level 2 (Transactional) of strategic maturity.

“HRM professionals cannot continue to perpetuate a workplace culture of mediocrity, but have to accelerate to a performance-based culture of meritocracy. HRM professionals must co-create, facilitate and drive the convergence and harmonization of the congruence of the HRM agenda with that of the business management agenda.”

(Charles Cotter PhD, 25 April 2023)

2.8       Balanced Business Scorecard and Strategy Mapping

2.8.1    The four (4) dimensions of the Balanced Business Scorecard

Norton & Kaplan (1992), developed the balanced scorecard and suggest that organizations view four critical perspectives of business, namely:

• Learning, Innovation and Growth
• Business Process
• Customer
• Financial

2.8.2    Strategy Mapping

Strategy maps are communication tools used to tell a story of how value is created for the organization. They show a logical, step-by-step connection between strategic objectives in the form of a cause-and-effect chain. Improving performance in the objectives found in the Learning, Innovation and Growth perspective (which is where the work of HRM resides) enables the organization to improve its Internal Process perspective Objectives, which in turn enables the organization to create desirable results in the Customer and Financial perspectives (Norton & Kaplan, 1992).

2.9       HRM Metrics Best Practice Principles

According to Cotter (2019) the effectiveness of HRM Metrics is defined by x10 best practice criteria. Please refer to the diagnostic survey link https://www.surveymonkey.com to measure the degree of compliance of your organization’s current HRM metrics practices and score carding process.

From a global perspective, Bersin by Deloitte (2015), found that only 4% of organizations are operating at Level 4: Predictive Analytics and 10% at Level 3: Strategic Analytics of maturity.

2.10     HRM Metrics Process

According to Cotter’s model (2019), the HRM metrics process (5 E’s) comprises of the following steps:

• Step 1: Identify where HRM can make a strategic impact in the organization (Exploration)
• Step 2: Develop appropriate metrics around these areas (Examination)
• Step 3: Obtain data relating to relevant metrics (Extraction)
• Step 4: Draw out insight from the data (Evaluation)
• Step 5: Project and take action to communicate metrics and related insights information to provide a robust basis for strategic change and improvement (Extrapolation)

 Conclusion

Seemingly, the diagnosis of the current strategic HRM practices and their future-fit status doesn’t look promising. Therefore, as a matter of urgency, HR managers and -professionals need to seriously address some of the strategic deficiencies throughout the HRM value chain functions and implement improvement strategies to graduate from a transactional (level 2 of maturity) to strategic performance advisors (level 4). Failing this the prognosis of the future-proofing of the HRM/L&D professions appears very bleak.

Based on Cotter’s (2023) research, the next 2 years culminating in 2025 will be a profession-defining time period for HRM practices. In retrospect and reflection, it will either be regarded as a golden era in which HRM was able to transform to a Strategic Performance Advisor (i.e. yardstick of excellence) or worst-case scenario, be the age of HRM extinction (i.e. graveyard of mediocrity). Metaphorically, either Jurassic Park (resting place) or Disney World (podium place).

Dr Charles Cotter, the African Maverick, is an independent global blended learning practitioner and HRM/L&D strategist. He is currently the facilitator of the Labour Guide 2-day HRM Metrics and -Scorecards training programme (Face to Face and/or online).