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Designing and Measuring Human Capital Key Performance Indicators: The Balanced Scorecard Approach

Designing and measuring human capital Key Performance Indicators (KPIs) enable organizations to effectively measure their workforce and calculate the Human Capital Return of Investments (ROI). It helps align the human capital goals to the organization’s strategic objectives and identify, track and measure the key human capital performance drivers till the operational level, following a top-down approach.

In this white paper, we look at the Balanced Scorecard (BSC) approach of measuring human capital. The BSC is a strategy performance management tool that gives managers a fast but comprehensive view of the business. Organizations can use a system that identifies a number of financial and non-financial measures, and attach targets to them, which are reviewed to determine whether the current performance “meets expectations.” This is the main characteristic of the BSC.

The BSC identifies the links between leading inputs (human and physical), processes and lagging outcomes and focuses on the importance of managing these components to achieve the organization’s strategic priorities. Measuring and reporting the KPIs listed below on the lines of the BSC will help business leaders get real-time insights on the performance of their workforce.

The ten KPIs for organization, workforce and people performance measurement:

  • Human Capital ROI: Calculates the returns in dollar terms for every dollar invested in human capital for an organization and helps them to objectively calculate the net profitability.
  • Employee Satisfaction Index: Measure the satisfaction of employees and helps to objectively identify the top satisfiers and dissatisfiers of an organization’s workforce.
  • Compliance Score: Check the compliance of the HR organization with internal policies and local and national regulations in areas like health and safety and training.
  • Span of Control: Refers to the number of subordinates that a manager or supervisor can directly control.
  • Attrition Rate: Is the degree of losses of personnel due to various causes within a specified period of time.
  • Paying for Performance: Is a financial reward system for employees where some or all of their monetary compensation is linked to performance assessment against stated targets.
  • Resource Competency Index / Gap: Is the difference between the current competency level (CCL) and the required competency level (RCL) of employees.
  • Employee Engagement Score: Is a measurable degree of an employee’s positive or negative emotional attachment to his/her job, colleagues and organization that profoundly influences his/her willingness to learn and perform at work.
  • Absenteeism Rate: Refers to the total number of unplanned days of absence for employees for a particular time period.
  • Employee Capability Score: Is the organization’s ability and readiness to deliver in the specific areas that contribute to engagement.

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