Verizon Communications, Inc.: Implementing a Human Resources Balanced Scorecard

Overview

This study discusses the four “Perspectives” specified in Kaplan’s and Norton’s Balanced Scorecard framework, focusing on their implementation at GTE4). Subsequently the efficiency of Garret Walker’s and Randall MacDonald’s internal communication strategy is evaluated and in the final chapter a summarizing conclusion is provided.

Introduction

In 1996, J. Randall MacDonald, Executive Vice President of Human Resources at the GTE Corporation was facing the challenge to create an HR strategy supporting GTE's workforce through a major business transformation. Moreover Charles R. Lee, GTE’s CEO wanted to know what the company was actually getting back for the money spent on various HR related activities.

The main problems for GTE and other American based telecommunication companies were high employee and customer turnover rates and the declining quality of customer service. A tight labor market made it difficult to find qualified people. There was no system in place at GTE to measure employee’s performance and MacDonald realized that a quantitative model was needed, showing whether the HR department’s activities contributed to the company’s financial goals. Balanced Scorecard, a conceptual framework to measure a company’s performance, utilizing financial and non-financial measures was selected as a method to quantify “intangible realities” at GTE.

The Balanced Scorecard Perspectives

One of the main challenges for GTE’s Planning, Measurement and Analysis (PMA) group, the project team responsible for the implementation of Balanced Scorecard, was defining the right measures to evaluate the performance of GTE’s human capital. Using feedback from the business presidents, the PMA group and the HR measurement core team defined 118 measures, organized into four “Perspectives”, (i) a strategic perspective, (ii) a customer perspective, (iii) an operations perspective and (iv) a financial perspective.

The Learning and Growth Perspective

The “Four Perspectives” implemented at GTE deviated from those defined by Kaplan and Norton4). Instead of using the “Learning and Growth Perspective”, intended to create a climate that would support organizational change, innovation and growth, a “Strategic Perspective” was selected. GTE thought that “Learning and Growth” would be embedded in all of the four perspectives. Interestingly, GTE’s HR Balanced Scorecard and associated measures did not provide any indication that continuous learning and the creation of an environment that fosters growth and organizational change were actually embedded in any of the four perspectives. Moreover, the case provided no evidence that organizational or cultural change accompanied the implementation of Balanced Scorecard at GTE.

The “Four Perspectives” defined by GTE HR should have encouraged “Learning and Growth” and the creation of a climate of action, introducing the cultural shifts needed to motivate, empower and align the workforce behind GTE’s attempt to adapt to the changed business environment. The degree of readiness for a culture of “Learning and Growth” is reflected in the willingness of a company’s employees to improve and change the processes, followed to perform daily work routines. Measures to evaluate the workforce’s readiness should have been the number of proposals, submitted by GTE employees suggesting work flow improvements, and also the number of proposals actually implemented.

The Customer Perspective

Kaplan and Norton defined the “Customer Perspective” as a strategy for creating value and differentiation from the perspective of the customer. For example Fannie Mae’s Operations and Corporate Service division (OCS), implementing Balanced Scorecard, had intense discussions about the “Customer Perspective”, primarily focusing on identifying who its customer actually was4). As an internal support organization OCS had internal customers. Nevertheless OCS decided to explicitly recognize how it provided value to external customers. The “Customer Perspective” selected at Fannie Mae consequently included internal and external customers4). In contrast, the “Customer Perspective” defined at GTE did not consider external customers but only focused on internal customers, that is, GTE employees. As a consequence the measures associated with GTE’s “Customer Perspective” did not include any data reflecting the perspective of the company’s external customer base, indicating that GTE HR was not interested in measuring the impact of HR activities towards the company’s main, if not only revenue contributor.

To better understand the value that implemented HR activities,