VERIZON COMMUNICATIONS INC.

IMPLEMENTING A HUMAN RESOURCES

BALANCED SCORECARD

Submitted to Dr. Saurabh Pandya

Divyanshu Sharma (b16017)
Nishant Choudhary (b16031)
Purobi Mohanty (b16036)
Shreya Agrawal (b16049)
Shrirang Sinkar (b16050)
Need for the Balanced Scorecard:
In February 1996, the Congress passed the Telecommunications act of 1996, which aimed to make
telephone, cable and internet companies compete in each others market. Few years down the line,
Verizon was created as a product of the merger between GTE and Bell Atlantic. This resulted in a
strategic rethink and now the company aimed to profitably offer a complete bundle of high growth
telecommunication services nationwide. Companies across the segment were suffering with
customer turnover and employee turnover problems. With the increase in this value, led to the
environment changing rapidly, and to adjust to this dynamic environment, the workforce had to be
able to be skilled enough.

The onus now shifted on the Human Resources department to be able to justify their contributions
to the company. A lot of spending had taken place on hiring and training, however no measure was
available as of now to be able to measure the performance of HR. Hence, the company needed a
quantifiable metric to measure HRs performance. In light of this need, GTE decided to take up the
Balanced Scorecard approach which is explained in the next section.

GTEs Strategic Framework

To be able to correctly assess the departments performance, 5 key strategic thrusts were identified,
taking into consideration the overall strategy of the company. These were:

Talent Expanding the employee pool and ensuring the correct mix
Leadership Mentoring high potential employees to become future leaders
Customer Service and Environment supporting employee engagement, analysis of
Support companies products & services
Organizational integration Better sharing of information inside organization
HR Capability Better talent management

Going further, a Planning, Measurement and Analysis (PMA) group was formed to help take these
strategic thrust towards a realistic model. After a lot of research, surveys and deliberations, the
scorecard went live in 1999. It initially consisted of 118 measures. These were organized into four
perspectives:

Strategic Perspective:
It looked at the HR departments role in bringing in the right kind of talent, inculcating a culture of
leadership, identifying future leaders, creating a conducive environment for intra organizations
sharing.

Customer Perspective:
Focused on the ability of HR to project the organization as a great place to work and thereby
attracting the top talent by bringing in the necessary support systems.

Operations Perspective:
Dealt with mainly the support systems and the efficiency of those processes as an overall indicator
of the performance of the HR department.

Financial Perspective:
Focused on firstly controlling the employee churn rate by offering attractive packages and further on
generating the necessary return on these human assets.

The questions/area of concerns mentioned in the respective perspectives were used to set the
various metrics as discussed initially.

Indexing
Further, to be able to quantify these measure the indexing approach was used. Also, to be able to
normalize the performance over various different measures, the indexing was even more important.
Based on the previous periods data (and industry benchmark in one quarter cases), targets were set.
Index was then defined in reference to the target. Achieving the target exactly put the index at 100%
and bettering the target increased the index in the corresponding ratio.

Index= 100% + (-) % increase (decrease) in the target

The weights assigned to each measure was the same initially, with a view to alter the weight to
reflect the changing priorities of the company.

Communication
To effectively communicate the periodic results of the new system, a software called Pv Views was
used. A lot of data points were made available and results were depicted in a visually appealing way.
Color coding (red being under performing, yellow being par and green exceeding expectations) was
used as a signalling mechanism. Furthermore, data was available in a hierarchal fashion, which
allowed the upper management to drill down in depth if needed.

Pros & Cons Analysis of the Framework:

Dual Objectives
Quantitative in nature
View to change weightage
Different ways of setting targets
Effective Communication
Hierarchal Data
Colour Coding
PROS
Helps the organization improve both in terms of targets
achieved as well as change in mindset introduced
This helps reduce ambiguity in the nature of judgment of a
certain parameter
It has been kept in mind that as the company priorities
change, the weightages will be altered
Targets are set in one quarter cases through industry
benchmarks and in rest through previous data. Firstly, this may
bring inconsistency and secondly, either of them may be a
wrong reflection
Centralized communication system has been put in place
wherein periodic results are sent
Upper level staff can go deeper into the results
Helps understand, in a glance, which parameters are struggling
and which are thriving

CONS
No weightage as per complexity Various different parameters are different in terms of difficulty
level to achieve; Hence they need to be assigned different
weightages
Customer Perspective Surveys These parameters were measured basis surveys conducted on
1/12th population across divisions, which could reflect
inconsistency across different periods
Further these statements in some case were too generic to be
able to capture a detailed parameter correctly

Recommendations for Improvement:

Although it has been considered that in future weights would be changed as per the priority,
but there is also another factor at play. Not all of the metrics are equal in elasticity. Like
increasing percentage of female and minority would be much difficult than increasing overall
employees. Hence weights should be differentiated from the beginning itself.
For target setting, a more comprehensive model should be set in place wherein both the
factors industry benchmarks and previous data should be used. In cases either is not
available, then we should proceed with one of them. Additionally, necessary
normalization/offsets must be introduced in such cases.
For the surveys, the total population of the office should be considered to get the precise
data points. For this, more effective and precise surveys would need to be designed that
dont require one to one interviews.
In case sticking to one to one interviews, the population segment interviewed should be
kept constant for a few periods to be able to measure the changes in parameters effectively.
Maybe for different questions different sets of employees can be used, in order to
incorporate everyones opinion.
Implementing the Balance Scorecard as GTE Framework
A simple framework consisting of leading and lagging measures as proposed was then implemented
by the HR team. The implementation process was charted out in three broad categories

1. Review Process
2. Financial Payoffs
3. Link to Compensation

Review of measures by the HR team in consultation with

Business Unit Leaders
Review Process Quarterly Process to undertake the effects of dynamic business
strategy
Weeding out meaningless measures

Attempt at linking the non-financial and financial performance

measures
Major focus areas-
Separation Rate - Attrition rate in other terms
Reducing the churn by about 1% resulted in savings of ~$23.6
million
Cost of Replacing an existing employee was very high (About
150% for an employee at supervisory position)
Implemented Exit interviews to understand the reasons behind
Financial Payoffs the churn-
Highlighted reasons -
Cubicle size
Computer Equipment
Pay
Supervisor Competence
Absence Rate - Absent from work on unexplained reasons
Direct financial analysis gave that about 4% absenteism per day
resulted in about an yearly cost of $800 million to the company

Implementation was linked to the compensation of the HR

employees
50% of the compensation for HRs was linked to the balanced
Link to Compensation
scorecard measures
Greater accountability set in terms of recruitment and the
performance of recruited employees
Snapshot of the Operational Linkages

Customer Service
EEL Internal Quality
and Satisfaction

Loopholes / Disadvantages of Current Implementation Methodology

Process of Reviewing Measures by HR Core Team
Since the HR core team took the final call on inclusion and exclusion of parameters, the possibility of
conflict of interest in review was always there, with the team trying to eliminate measures based on
their own performance on them

Employee Engagement Linkage (EEL) to Internal Quality

Current linkages are focussed on the following four aspects that have improved after the
implementation of GTE framework

Customer Service Assurance (+0.69%)

Customer Service Fulfilment (+0.48%)
Business Service Assurance (+0.821%)
Business Service Fulfilment (+0.17%)

However, these factors do not include the Employee Relative Growth parameter, which will directly
affect the employees performance. Neither a similar measure is included in other linkages. These
parameters become even more critical with companys focus on reducing the separation rate with
the implementation of the GTE framework. Some of the inclusions could be

Half yearly competency scorecard

Expertise Enhancement Score