How to Create an HR Scorecard for Your Small Business

The HR department has a lot to deal with, and human resources professionals wear a lot of hats. Despite the wealth of responsibilities, though, the HR department is often seen as not contributing to business growth. That’s why you need to track performance so you can demonstrate exactly what you’re doing to help move your company forward.

Harnessing the power of the enormous amounts of data you already collect will enable you to create an HR scorecard that objectively demonstrates your value.

Overview: What is an HR scorecard?

An HR scorecard is a visual way of representing key performance indicators (KPIs) that your human resources department is tracking. These HR scorecard metrics are an important way of measuring performance and reporting on the successes and failures of your policies and processes.

4 things to include on your HR scorecard

Your scorecard should include key HR deliverables that you need to track to be able to accurately measure how well your human resources department is performing and where you can make improvements.

Overall costs

For the HR department to run efficiently, you need to understand where the money is going and be able to explain the budgeting process.

These are the internal costs to keep the HR department running rather than costs for aspects of the business that the department controls -- for example, training and development programs for other departments. These other costs will be covered later on.

Internal costs include:

• HR software
• HR department salaries and benefit packages
• Training and recruitment for HR staff
• Recruitment costs
• Overall benefit packages

Recruitment

Recruitment is a key function of HR. Attracting, proactively sourcing, and screening applicants in the right way means you’ll get access to the top tier of talent and hire candidates who fit your culture and will stick around for years to come.

The recruitment metrics you should track on your HR scorecard include:

• Time to hire
• Applicants by source and channel
• Candidate satisfaction
• Time spent in each recruitment stage
• Dropouts by stage

Zoho Recruit’s range of recruitment and human resources dashboards helps you keep track of these metrics while adding any custom attributes you need to report on.

Zoho Recruit helps you track key recruitment metrics. Image source: Author

Satisfaction

This is a relatively new metric to include on an HR scorecard. HR scorecards have been around for decades, but they didn’t always focus on employee satisfaction. However, as workplaces have evolved, businesses and HR managers have realized the importance of keeping employees happy and creating a work environment that is conducive to productivity and well-being.

Employee satisfaction is not only linked to retention. It’s also tied to customer satisfaction. Happy employees perform better in all ways, including serving customers.

One key employee satisfaction metric you should include on your HR scorecard is the Employee Satisfaction Index (ESI). To measure your ESI, you ask employees three questions, which they rate on a scale of 1-10:

1. How satisfied are you with your current workplace?
2. How well does your current workplace meet your expectations?
3. How close is your current workplace to the ideal one?

Turnover

Tracking your employee turnover rate is important because a high turnover rate indicates that there is a problem with some aspect of your business that you need to address. This section should not report on the turnover rate in isolation. You also need to track the reasons why employees leave.

To do that, you should create an offboarding process that captures key information before an employee leaves. This could include:

• A formal exit interview
• An anonymous survey
• Informal chats and feedback sessions

HR solution BambooHR provides a customizable checklist to help you go through different tasks, including celebrating the employee’s new opportunity and collecting data from each one.

BambooHR helps you carry out offboarding tasks. Image source: Author

How to create an HR scorecard

Your scorecard will depend on your HR architecture, meaning the framework that you used to create your departmental best practices, processes, and procedures. But there are some common principles that every business should abide by when creating a workforce scorecard.

1. Link every aspect to a business outcome

HR has traditionally been seen as a cost center. The human resources department often wasn’t given a seat at the C-suite table because business leaders struggled to see how it fit and the value it brought.

An HR scorecard focused on the right metrics can change that. For example, link the number of hires in a certain period or time-to-hire to better hires and increased business productivity or sales.

Note that this metric doesn’t have to show that a faster time-to-hire is possible. If your metrics indicate that a slower, more measured approach gets the best results and leads to lower employee turnover rates, then make that clear in your scorecard.

2. Get buy-in from senior management

You don’t want to spend a lot of time creating a detailed scorecard only for it to be dismissed or disregarded by your senior management team. While linking every aspect to a business outcome helps, you need to get buy-in before you even start creating the scorecard.

Here are some steps you can follow:

• Communicate the value of an HR scorecard by walking senior managers through what you’ll be doing and how it will add value to the business
• Give examples of other companies that are already successfully using HR scorecards (even better if you can find examples from your competitors)
• Show them a template with dummy data of what the HR scorecard will look like so they can visualize the results

3. Analyze your HR processes and best practices

If you want your scorecard to be effective at driving business change, you need to identify issues and improvement opportunities.

If you are monitoring and measuring the different HR functions, such as recruitment, onboarding, talent management, employee satisfaction, performance management, and offboarding, then you can easily get the insight you need.

Take stock of the metrics you’re measuring at the moment and think about what they mean for your business. For example, if you measure performance management and find that employees are regularly failing to hit their goals, include that metric since it’s a major issue and is linked to a business outcome (poor overall performance or poorly set goals).

4. Adapt it to your business needs

There’s no one-size-fits-all scorecard that will work for all businesses. You need to understand the direction your company is heading so you can create a scorecard that keeps track of metrics to support your overall HR department goals.

If your company is expanding its product line and needs to hire for some highly technical roles, then you need to focus on recruitment or on tracking the performance of your training programs to see if they are effective at upskilling employees. If you want to work on productivity, then tracking performance management makes sense.

You can also keep in mind what is achievable with your level of resources and experience rather than trying to track and improve everything all at once.

Adjust your scorecard to stay in line with your business

When your company switches focus, when your goals change, or when your business grows (or even shrinks), you’ll need to overhaul your HR scorecard approach. You might start tracking new metrics or use even more granular KPIs to determine success. It’s important for an HR department to be agile so you can make sure your scorecard is fit for the purpose.