Strategic HRM PDF

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The paper analyses the concept of strategic human resources management. Various tools which include economic value added (EVA), Balanced Scorecard (BSC), Return on Investment (ROI), and HR Scorecard have been discussed. This essay compares and contrasts these four tools, including their advantages, ...

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Running head: ANALYSIS OF TOOLS FOR STRATEGIC HUMAN RESOURCE MANAGEMENT

Analysis of Tools for Strategic Human Resource Management

Southern New Hampshire University

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ANALYSIS OF TOOLS FOR STRATEGIC HUMAN RESOURCE MANAGEMENT 2 Analysis of Tools for Strategic Human Resource Management Human resource professionals and business managers use various tools to convert strategic goals of companies into practices and policies of human resource management. These tools include economic value added (EVA), Balanced Scorecard (BSC), Return on Investment (ROI), and HR Scorecard. This essay compares and contrasts these four tools, including their advantages, disadvantages, and applicability in my specific organization. Comparison Return on investment (ROI) is a financial profitability ratio that helps to calculate the profit of an investor from the cost of investment. As such, it helps to evaluate business progress and to highlight areas that require improvement to achieve various goals. Nevertheless, ROI is a traditional accounting profit tool which disregards switching cost and the cost of capital acquisition. In this regard, the economic value added (EVA) tool helps to overcome the shortfalls of ROI. It succeeded this traditional measure. EVA is an economic profit tool that evaluates the efficiency with which companies utilize resources. EVA is significantly related to the Balanced Scorecard (BSC). The BSC tool also complements the ROI traditional measure. It is a non-financial measure that helps to measure the success of organizations. The supplemental areas of BSC cover three significant perspectives, including customer, internal processes, learning, and sustainability measures. For instance, this tool meets the inability of traditional tools to connect short-term actions with a long-term strategy. The last tool, HR Scorecard, is derived from the BSC. It is a brief measurement method which evaluates the efficiency and effectiveness of human resource management to produce remarkable employee behavior to achieve strategic goals.

Southern New Hampshire University

Page 2

ANALYSIS OF TOOLS FOR STRATEGIC HUMAN RESOURCE MANAGEMENT 3 Differences In this regard, EVA contrasts ROI is some ways. Firstly, EVA is an ideal measurement tool, while ROI is a relative measurement tool. Similarly, EVA is calculated from profit before tax and interest, while ROI is calculated using profit after tax and interest. Furthermore, the calculation of EVA is quite involving due to the challenges of determining the capital charge. Lastly, EVA is a value and superior that ROI, which is a ratio. BSC tool is also unique in some way. When using this measurement tool, any goal can be categorized as strategic. EVA, on the other hand, focuses on a specific goal that would add value to a company. Similarly, BSC significantly differs from the HR Scorecard. The former tool is a typical evaluator for the achievement of key performance indicators, while the latter is just a guide that managers use to computerize and quantify activities of strategic map. Advantages

Return on Investment Economic Value

Balanced Scorecard

HR Scorecard

Added It measures

It creates an

It makes goals

It aligns HR strategies

profitability well.

appropriate mindset.

attainable.

with overall organizational strategy.

It is easy to calculate

It incorporates all parts

Indicates the

It highlights areas of a

and understand.

of a business cycle.

performance of an

department that

organization.

influence the goals of an organization.

It helps in comparison

It enhances teamwork

Presents a clear picture

of asset utilization and

and communication.

of how an organization

Southern New Hampshire University

Page 3

ANALYSIS OF TOOLS FOR STRATEGIC HUMAN RESOURCE MANAGEMENT 4 profitability between

meets its goals.

different business units. It facilitates goal

It provides for better

It improves the

congruence between a

evaluation of decisions

reporting of business

firm and its various

that impact the income

performance.

divisions.

statement and balance sheet.

Disadvantages

Return on Investment Economic Value

Balanced Scorecard

HR Scorecard

Added It focuses on short-

It cannot determine the

It consumes time and

The leadership of a

term profits and

value of return on

is also expensive.

company and the HR

results.

expenses, including

staff can limit its

research and

usefulness.

development. It uses income data

It cannot determine

It causes poor

HR scorecard is

instead of cash flow.

how managers of

employee support.

relatively inaccurate.

capital assets use retained earnings through various Southern New Hampshire University

Page 4

ANALYSIS OF TOOLS FOR STRATEGIC HUMAN RESOURCE MANAGEMENT 5 business ventures. ROI models can

The practicability of

It requires data mining

The measurement of

mislead investors to

calculations to

that can lead to the

intangibles is a

focus on opportunities

determine the real cost

acquisition of wrong

challenge without

that lack significant

of equity is a

information.

imparting subjectivity

profits in the end.

significant challenge.

to HR staff.

The four strategic HRM tools are used in my employer organization, Toyota, to achieve various objectives. Toyota uses its ROI to determine profits from investments to evaluate current performance with the previous years. Similarly, the Company utilizes the EVA tool to gauge its use of innovative technologies to manufacture cars that add value to users. The balanced scorecard tool enables any employee to stop any manufacturing process, which seems to waste the Company's resources. Lastly, Toyota ensures the effective management of human resources to score a fair rating of its HR scorecard.

Southern New Hampshire University

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