Benchmarking is focused on external practices that the organization can use to improve its own processes and practices. One way companies can effectively measure their strategic performance and HR practices involves using the balanced scorecard. In this course we'll take a look at both.
Benchmarking is the process of comparing an organization's business results to industry standards or best practices. When implementing benchmarking, managers should be careful to find organizations with similar contexts, cultures, operations, and size so that comparisons are realistic. While benchmarking helps a firm compare its results to those of other organizations, it does not provide the reasons behind the findings. Thus, benchmarking is only a starting point, not the endpoint, for improving HR practices.
The balanced scorecard is a framework organizations use to report on a diverse set of performance measures. This method balances financial and non-financial measures so that managers focus on long-term drivers of performance and organizational sustainability. As shown here, the Balance Scorecard measures performance in four areas customer relations, financial measures, learning and growth activities, and internal business processes.
Customer relations is about customer satisfaction, loyalty, and retention, which are important to ensure that the organization is meeting customer expectations and can depend on repeat business from its customers. Traditional financial measures such as profit and loss, operating margins, utilization of capital, return on investment, and return on assets are needed to ensure that the organization manages its bottom line effectively. Learning and growth activities refer to employee training and development, mentoring programs, succession planning, and knowledge creation and sharing, providing the necessary talent and human capital pools to ensure the future of the organization. Internal business processes refer to the product and service quality, efficiency, and productivity. Conformance with standards and cycle times can be measured to ensure that the operation runs smoothly and efficiently.
Results in each of these four areas determine if the organization is progressing towards its strategic objectives.