Lean Six Sigma in Human Resources – The HR Performance Scorecard

In our last column, we debunked the myth that people perceive Lean is a manufacturing process improvement tool… that it couldn’t be applied to a department such as Human Resources. This month we will show how to kick off a Lean Six Sigma project.

The First Step of Lean Six Sigma – Measuring Performance

The first step of a Lean implementation is to make sure you are linking the project to improving measureable performance. Lean should not be done to "make the workplace better," "improve employee satisfaction," or any other number of unquantifiable slogans. Therefore, the first step is to make sure the area you are streamlining has a working Performance Scorecard.

To demonstrate how to create a Performance Scorecard we will use an HR department at a large hospital. HR at this hospital was not meeting its goals in recruiting timeliness. We found that there was no true goal, just lots of people’s opinions.

The Purpose Statement

Before determining the performance measures on your scorecard, you need to make sure that everyone is clear on the organization’s purpose. This is sometimes called the Mission Statement. It is the reason everyone comes to work, besides the paycheck.

This human resource department came up with the very elegant statement: "Assure an Effective Workforce."

Measures of Success

Once the purpose is clear, you can measure whether you are achieving that purpose. "Few measures in the hands of the many" is better than "Many measures in the hands of the few." Therefore, this human resource department selected only five measures, which, as we will show below, were widely distributed amongst the department employees.

These measures are balanced and represent how the human resources department assures that the hospital has an effective workforce.

· percent vacancies filled within 90 days

· Employee retention rate

· percent of supervisors completing 20 hours per year of supervisory training

· percent of disciplinary actions completed in 3 weeks

· percent of employees who complete 16 hours per year of non-mandatory training

Weighting the Scorecard

The next step is to prioritize these measures. This creates further focus for department employees. Not only have they created a few key measures, but they’ve prioritized them from most to least important.

Setting the Performance Levels

The last step to creating the Scorecard is to determine the performance levels. These are the targets that represent great, acceptable or poor performance. We use a three level system to make sure that performance measures aren’t all of nothing. The three levels are represented with a color system:

· Green (at or above) = Great Performance

· Yellow (between green and red) = Expected Performance

· Red (at or below) = Unacceptable Performance

The Scorecard Action Plan

Perhaps the most important part of the Performance Measurement System is the Action Plan. This is a list of projects that are happening in the department. This action plan has action item owners and expected completion dates. You should limit the number of action items/projects to 5 or fewer. The fewer actions the department is working on at one time, the more likely they are to get them done. Below is the human resource department’s Action Item List. Note how all action items are linked to specific performance measures.

By having an action item list, you will make the scorecard more than a communication tool. It will tell associates in the department how they are doing, but more importantly, what the department is doing to improve performance.

It is also a tool that the HR Director used to communicate with the Hospital Executives. She would sit down with the Executive Team to make sure they knew what she was doing and also to ensure they weren’t giving her department tasks to complete that was not going to improve the department and hospital performance. Executives have a way of asking their subordinates to do things for them, without thinking through if it is a "nice-to-do" or "critical-to-performance."

Human Resource Department – Performance Action Item List

When one action item is complete, they can add another, so at all times they are working on five projects to improve performance. We also made a list of projects-in-waiting that the human resource department will initiate when they finish current projects.

Using the Performance Scorecard

The Performance Scorecard must be put into action. To make the system effective, the human resource department reviews the scorecard with all employees each month at a 15-minute performance review meeting. This meeting is quick and effective. It reviews actual performance and an update on action items. It gives the human resource team a performance update and status of action items. No one is in the dark!

The Performance Scorecard and Executive Management

A very important part of making the Performance Scorecard effective, is to get buy-in from Executives. At this hospital we needed their agreement that these measures and goals were correct. Most importantly, we needed their promise not to add new projects to the human resource department without making sure that the current list was getting closed-out.

This ensures that new projects will directly improve their key performance measures. It is hard to limit tasks and projects in most organizations. Without visibility, Executives and Managers tend to add tasks without making sure they are completing what they started. However, if implemented correctly the Performance Scorecard System creates focus, both for the employees of the department and for the top management.