VERIZON COMMUNICATIONS

Summary
Verizon Communications is recognized as an exemplary exponent of the HR
scorecard methodology. It serves as a best-practice role model for other HR functions
taking the scorecard route.
The scorecard was rst built within GTE (which in 2000 merged with Bell Atlantic to
create Verizon) to support GTE's business strategies.
Within this case study, Verizon's senior HR manager Garrett Walker explains the
process by which the HR scorecard was built and implemented. He explains how 17
key questions were articulated to focus scorecard creation onto compelling and
strategically critical business imperatives.
Introduction
US-headquartered Verizon Communications is the largest provider of wireline and
wireless communications in the US. It also has a presence in 44 countries within the
Americas, Europe, Asia and the Pacic. In scal 2000 it reported revenues of $65
billion, generated by 261,000 employees.
The corporation, which is also the world's largest provider of print and on-line
directory information, was, as of 30 April 2001, the 18th largest company in the
world, with a market capitalization of almost $150 billion. This position was secured
through the July 2000 merging of the US-headquartered telecommunication providers
GTE and Bell Atlantic. About 1200 people work within HR.
Aligning HR with Business Strategy
Verizon's HR scorecard strategy map is shown in Figure 8.5. However, scorecard
usage can be traced back to work that was initiated in 1998 within the then GTE.
The chain of events that led to GTE's HR scorecard creation commenced when Randy
MacDonald, then executive vice president of HR, challenged the HR organization to
clearly articulate how HR actions aligned to business strategy and, from that, to
develop a robust set of indicators to measure how HR helped the organization deliver
to its business strategies.

Garrett Walker, director of HR planning, measurement and analysis, who was charged
with leading this denition/measurement project, recalls the environmental and
competitive backdrop to Macdonald's challenge:
"The business was in the throes of moving from a regulated, monopolistic
environment to one based on competition. We knew the business environment was
going through a dramatic transformation and that our organization would have to
adapt rapidly to the new situation."
To gain a complete picture of the change pressures ahead, GTE undertook an in-depth
study into how its markets were changing and what this meant to the corporation. The
study, known as 'Leadership 2000', identied a number of threats and opportunities,
including:
- technology acceleration
- shareholder pressures
- expanding market opportunities
- more demanding and price-aware customers
- mergers and acquisitions
- the emergence of non-traditional customers
- low US unemployment rates
- difculties in identifying and attracting specialist talent.
In short, the telecommunications industry was probably facing more intense change
pressures than any other industry pressures that had a signicant people dimension.
From this understanding emerged a set of national and international strategies focused
on protecting current markets, leveraging present products, creating strong national
'data world' capabilities and taking advantage of global telecommunications growth.
'Data world' refers to the diverse data and information technology products provided
by Verizon as complete solutions to residential and commercial customers, including
voice, video, data, web hosting and virtual private networks.
People Imperatives

With strategies claried, the next step was strategy implementation. As part of this, an
HR team, led by Walker, undertook a major analysis of what the business would need
from its people which it called its 'people imperatives' in order to deliver to the
strategy. Walker recalls:
"We conducted an evaluation of the skills and competencies within our human capital.
We looked at that carefully to determine what it would take to succeed in the current
business environment, where we thought the business would evolve in three year and
ve to ten year timeframes."
Using leadership development as one example, Walker recalled that a series of focus
groups were held where the HR team facilitated discussions with business leaders and
HR subject experts as to the sort of leadership skills that the company required now
and into the future.
From these focus sessions, it became clear that there was concern that the type of
leaders coming through the ranks may not possess the requisite skills, competencies
and experience to lead the company in a market-place tomorrow that may be
signicantly different from that today.
Based on these interviews, the HR team compiled a three-level articulation of skills
sets required of GTE's people:
- current (skills/competencies already existing at GTE)
- enhanced (skills/competencies that existed but required some sharpening)
- new (skills/competencies to be developed).
Current Skills/Competencies
Current skills and competencies include:
- network management skills (management of the telecommunications infrastructure)
- customer support skills
- leverageable international skill base
- nancial/operational control.
Enhanced Skills/Competencies

Enhanced skills and competencies include:

- leadership capabilities
- partnering with unions
- customer support, service expertise and relationship management skills
- global capabilities
- business awareness at all levels
- learning and innovation focus
- team-working capabilities.
New Skills/Competencies
New skills and competencies include:
- shared mindset toward achieving business results
- marketing and distribution capabilities
- data skill technical and functional
- partnering/alliance management capability
- integration capability.
Returning to the leadership development example, these levels show that there is a
clear focus on developing leaders who have the basic skills set required of any
manager/leader, such as nancial/operational control competencies. The basics would
then be enhanced through development of skills sets such as 'customer support,
service expertise and relationship management skills'. From this would be the
development of new skills that would be of fundamental importance in developing
leaders of a global organization, such as partnering/alliance management capability.
HR's Strategic Thrusts
With the organization's leadership recognizing the importance of its 'people
imperatives', it then became incumbent on HR to help facilitate the inculcation of

those skills sets. As Walker recalled, once the skills sets were identied, HR would
deliver the real value by directly linking the skills development to HR strategy.
To do this, MacDonald and his leadership team identied ve key strategic thrusts.
These ve thrusts talent, leadership, customer service and support, organization
integration and HR capability are shown, with their sub-components in Figure 8.6.
This gure shows how the thrusts support GTE's strategic goals by 'positioning GTE
to become a leading worldwide player in telecommunications'.
It is clear how these thrusts capture the skills requirements of the people imperatives.
For example, note that an 'enhanced' skill is a 'learning and innovation focus', which is
captured through the talent thrust component, 'build an environment that fosters
creativity and innovation'. Furthermore, the new skill of 'integration capability' is
encapsulated in the strategic thrust 'organization integration'. And going back to the
leadership example, leadership is also a strategic thrust.
However, although the strategic thrusts were clearly dened and their link to GTE's
'people imperatives' were evident, there was, recalls Walker, a missing link; one that
is typical in HR organizations. He describes this as "how to measure the effectiveness
of our strategic execution". He adds, "and that's where the scorecard came in."
Although creating the measurement link to strategy was missing, this is not to say that
performance data was new to GTE's HR organization. Indeed, most of the data that
would make up the 80-plus metrics within GTE's rst HR scorecard could already be
found within the organization, but, as Walker recalls, they were not being pulled
together into a simple and focused framework.
Moreover, GTE's then measures were not necessarily providing valuable information
on HR's performance. Speaking in an article that appeared in the January 2000 edition
of the US-based HR Magazine, Walker stated:
"HR would record 250,000 hours of training and conclude that they must have been
doing a good job. In fact, it indicates you were busy, not whether your employees
were satised and more effective in their jobs."
The Seventeen Key Questions
In early 1998, and following HR leadership deliberation, the balanced scorecard was
chosen as the most effective way to implement, measure and communicate HR's
performance.

To ensure that the objectives and measures that were to be housed within its balanced
scorecard were indeed driving the right performance outcomes, a list of 17 businessfocused questions were articulated.
Led by Walker's HR planning, measurement and analysis team of four (responsible
for designing and deploying the scorecard) and a core team of 12 subject-matter
experts from throughout HR (charged with reaching out throughout the function to
explain the scorecard process, engage the various HR groups and get the data) these
questions evolved from the business leader/HR specialist interviews indicated above.
As Figure 8.7 shows, these questions are articulated through GTE/Verizon's four HR
scorecard perspectives:
- strategic
- operational
- customer
- nancial.
This is important it is answering the questions that GTE's HR function delivers to its
scorecard objectives.
These 17 questions translated almost exactly into the 17 objectives that appeared on
GTE's 1999 HR balanced scorecard. The scorecard was re-scoped for 2000 and then
again following the merger. Note, however, that the original ve strategic thrusts still
serve as the objectives within the strategic perspective of Verizon's HR scorecard:
- talent
- capability (build strategic competencies)
- enable performance based culture/climate
- organizational integration
- leadership.
The only slight difference is the redenition of 'customer service and support' with
'enable performance-based culture/climate'. Both objectives are concerned with
building a performance culture.

Talent Management
From the strategic perspective, note the importance of talent. Verizon places great
emphasis on ensuring that it recognizes, develops and keeps its best people. Talent
management has become a key issue for most organizations. Verizon has specied
metrics for tracking its 'high potentials' generally, and also directly for women and
minorities. As a measure of the success of the latter, in 1999, Hispanic
Magazinenamed GTE as one of the top 100 organizations for recruiting and
developing from the Hispanic community.
Walker states that the high potentials should be moving twice as often as the general
population. Speaking in a March 2000 edition of the US magazine Workforce, Walker
said:
"If we had the next Jack Welch [the highly regarded boss of General Electric] in our
organization, and they were an early-career professional, we would need to identify
them and engage them in order to maximize their value.
"We can compare how frequently we're moving them through developmental
assignments as compared to the rest of the organization . . . it should be at a more
frequent rate because, for future senior leaders in the company, we have already
created a development plan and we need to move them through jobs to gain
experience. We don't want them to end up in a job for three years that they could have
learned in six months."
Monitoring the development of leaders through the scorecard enables an early
signalling of any growing discontentment within this key employee population and so
intervenes through executive education, job movement and so on.
Leading Performance Indicators
It is this 'signal' of problems ahead through leading performance indicators that
provides one of the key strengths of the scorecard, according to Walker. A leading
indicator essentially provides an 'early warning signal' of future, or lagging results.
For example, customer satisfaction is typically a leading indicator of customer
retention, but in this case is a lagging indicator. However, customer retention is itself
typically a leading indicator of nancial results.
Walker explains that it is understanding and capturing the leading performance
indictors that enables positive HR interventions before they impact the bottom line.
For example, Verizon benchmarks its cost of service (against data from The Saratoga
Institute, see Measuring, Comparing and Improving HR Efficiency. This is a leading

measure in that it impacts the lagging measure 'HR cost factor indices'; a top level
aggregated measure within the Verizon HR scorecard customer quadrant.
This lagging measure in turn impacts the 'low cost provider' customer objective. So, if
HR costs are found to be high versus the benchmark then it is launching interventions
to lower the cost that will eventually feed through the lagging measure to the 'low cost
provider' objective.
Moreover, from the operations perspective, a measure of 'programme development
cycle time' lags 'percentage of programmes executed' which impacts the objective
'develop and enhance world-class programmes'.
Of course, improving measures and objectives also requires robust action initiatives
and Verizon placed great emphasis on ensuring that it is driving performance
upwards. Examples of 1999 initiatives launched by the then GTE included the
following:
- For the strategic thrust 'talent':
strategically attract key schools [ie universities/business schools] that match
business needs and workforce diversity objectives

strategically redeploy talent in early, mid and advanced career.

- For the strategic thrust 'leadership':

accelerate leadership 360-degree feedback and expand participation

examine use of educational sabbaticals for leaders.

- For the strategic thrust 'customer service and support':

expand utilization of selection methodology that more rigorously tests for
customer focus
involve the GTE leadership team in recognition of customer contact employees
create deliberate communication strategy/campaign to promote service heroes.
- For the strategic thrust 'organizational integration':

create partnership task team to investigate work and family issues

 create better methods and systems for sharing data and information across
business units.
- For the strategic thrust 'HR capability':

identify key HR competencies

accelerate shift to employee self-service.

Success Examples
This case study now considers success examples from the HR scorecard. Returning to
the original set of 17 questions, from the customer perspective, one question is, "is HR
viewed as providing effective support systems to employees?". These support systems
are based around talent acquisition, training delivery, work environment and
employee relations. In the rst quarter of 1999, 64 per cent of employees proffered a
positive response (ie overall they were happy with system provision). This rose to 74
per cent by the nal quarter.
A question from the nancial perspective is, "are we managing the cost of
turnover/churn?". This impacts processes surrounding talent acquisition,
training/development, retention and selection methods. Using three customer-focused
centres as examples, Table 8.1 shows that the 'percent regretted turnover' (the people
they do not want to leave the company) fell from 1998 to 1999. Reducing
separation/churn has a signicant effect on organizational overhead costs; for the then
GTE, one year's cost savings amounted to more than $23 million.
Centre

Business Sales
Customer Care
Customer Contact

Regretted
Regretted
turnover 1998 turnover 1999
%
%
39
26
27
24
38
26

Table 8.1: Regretted Turnover in Three GTE Centres 1998/1999

SBU Scorecards
Walker continues that a notable strength of the HR scorecard is when it is devolved to
strategic business unit (SBU) level. This occurred within GTE in 1999. He says:

"In creating the HR scorecard, our real focus was to build scorecards for each of our
nine lines of business. Each business will have their own strategies and it is important
to ensure that the HR scorecard reects the strategic goals of that business. There are
certain strategic measures at the overall corporate level that appear in each devolved
scorecard but in the business there will be distinct measures to support the unique
strategies."
As with a classic balanced scorecard line-of-sight process, the SBU scorecard rolls-up
to the overall HR scorecard.
No Corporate Scorecard
However, what is unusual from a 'conventional' balanced scorecard design process is
that the HR scorecard was not created as part of a classic cascade process from
enterprise level through divisions, business units to functions, for example. Indeed,
Verizon (as with GTE before it) has not built an enterprise-level scorecard.
In their seminal work The Strategy-Focused Organization, the originators of the
balanced scorecard concept Drs David Norton and Robert Kaplan, recalled how they
rst doubted the wisdom of creating a scorecard only at this level but that they were
soon convinced by GTE's approach. They write:6
"At rst we were sceptical about launching the balanced scorecard from the HR
group. It seemed unlikely that such a group would be able to understand the skills,
knowledge and competencies required from their hiring, training retention and
promotion decisions without having explicit guidance from the strategies
communicated in business unit, divisions and corporate scorecards. But the HR
scorecard in GTE was in fact constructed with just those strategies in mind. GTE had
recently completed an extensive strategy exercise to reposition itself in the rapidly
evolving telecommunications industry. The new strategy was communicated with
extensive documentation (but no new measurement system) to everyone in the
organization. The strategy included 'people imperatives', specic requirements for
what the business strategy required of GTE's people [the skills requirements listed
above]."
They continue that as GTE's strategy was so explicit and the people capability
requirements so well dened, it was possible for the HR group to craft an informative
and credible HR scorecard.
Communication

Alongside its efcacy as a strategy implementation framework, Walker also stresses

the scorecard's power within Verizon as a communication tool. He says:
"The scorecard is used at management meetings that focus on performance and it is
certainly used in meetings to brief executives from other parts of the business as to
how we are doing.
"One of the biggest successes we had here was that we positioned the balanced
scorecard as a communications tool rather than principally a results tool."
HR publishes a quarterly HR operating statement, in paper and electronic formats.
This is accessible by most employees through the intranet, and is made available to
the board of directors, all business leaders and all HR professionals.
On this statement, HR's performance against the scorecard is published as a high-level
indexed percentage score for each perspective. On the electronic systems, a drill-down
mechanism enables an analysis of performance against individual
initiatives/measures, both at an overall HR level and at line of business level. Using a
trafc light colour system of red, amber and green to describe whether a measure has
exceeded, met or fell short of target, HR professionals can see their unit's performance
and so plan any improvement initiatives for the subsequent quarter.
On the rst page of the quarterly balanced scorecard statement there are 'quick stats'.
These comprise two calculations:
1.

Human capital value added:

revenue (operating expense (compensation cost + benet cost))
total FTE [full time equivalent]

This is the prime measure of people's contributions to an organization. It answers the

question 'what are people worth?'.
2.

Human capital ROI:

revenue (operating expense (compensation cost + benet cost))
compensation cost benet cost

This is the ratio of dollars spent on pay and benets to an adjusted prot gure.

These are nancial calculations of the efcacy of HR's work. These gures are
benchmarked against comparators from Saratoga's benchmarking database
(see Measuring. Comparing and Improving HR's Efficiency).
Scorecard Challenges
What challenges were faced in implementing the scorecard, rst within GTE and
more latterly across Verizon? An early cultural challenge was the signicant change
that a quantitative measurement system posed for the HR organization. In the past,
HR had primarily measured performance through basic volume measures and
anecdotal and subjective descriptions of service delivery. The HR scorecard, explains
Walker, provides for a more rigorous and disciplined approach focused solely on
performance which drives business results. He says:
"This is innitely more valuable than the previous status quo. However, it also
requires a performance-driven culture and a set of competencies that must evolve
within the HR organization. The skills and competencies are to not only understand
how HR actions are performing but also to actively diagnose, and to prescribe
solutions to workforce issues affecting the bottom line."
Regarding Verizon, Walker states that Bell Atlantic was in the early phases of
scorecard usage so they had been exposed to it, albeit to a lesser degree than the HR
people within GTE. A large amount of the work in selling the benets of the scorecard
was therefore unnecessary.
Moreover, Walker claims that just having the scorecard in place and refocusing it for
the merged entity helped overcome much of the confusion and uncertainty that is
endemic in a typical merger and acquisition exercise. He says, "it gets people focused
on what we can deliver going forward rather than looking back at what's been left
behind".
Thinking back to the original scorecard creation process in GTE, Walker stresses the
fundamental importance of the commitment of HR's executive vice president, Randy
MacDonald:
"He really made this one of his top priorities. He was highly effective at saying 'the
balanced scorecard is a quantitative measurement model and it is going to be the
single most important tool that we will use to determine how effective the HR
organization is in delivering to the business needs'."
Walker stresses that this helped avoid any potential resistance from the rest of HR's
senior management team to the scorecard concept. Some of these may have been

uncomfortable with the concept of measuring HR's performance and may have been
concerned that the measures would be used as 'a stick with which to beat HR', rather
than a performance improvement and communication tool.
Scorecard Key Benets
According to Walker, building and implementing the HR scorecard has led to
signicant benets for the HR organization. He says:
"The use of the scorecard has really enhanced our credibility. Just holding ourselves
accountable in a quantiable way went a long way to securing this enhancement. But
it also allows insight to business leaders on how well HR is performing in managing
the investment we are making in our people."
Conclusion
Walker states that the critical success factors in succeeding with an HR scorecard are
as follows:
"Number one would be senior leadership support. Without that you cannot make this
work. You need your senior HR people to buy into this, especially as it is such a
major cultural change for HR."
He reflects the widely-held conclusions that building an HR scorecard, as with the
creation of a corporate scorecard, requires the full support of the senior leadership
team. Only they have the power to demand the scorecard is used throughout the
function and if they are not committed to working with the scorecard, it will soon
wither and die. Says Walker:
"You also need your senior business people to buy into this, as they are the people you
are setting out to deliver value to and they must help dene the objectives and
metrics."
This is another key observation. An HR scorecard essentially sets out to demonstrate
how HR services deliver value to the business and manage that service delivery. If
business leaders are not interested in the scorecard, it will have only limited value.
Walker continues:
"You also need a high-performing HR function up-front. This transformation cannot
take place unless you are playing with the 'A' team for HR. They have to know the
business and their professional skills very, very well."

As a nal point, Walker stresses that you also need the supporting technical and data
architecture to do this, "if you can't get your hands on the data and the measures in the
rst place, then it won't be particularly useful".
For an HR function, it may mean spending the time to ensure the requisite data is
available. At GTE this was not a problem, as it already had many measures and
requisite data feeds in place, prior to creating the scorecard.
Key Learning Points
1. The rst steps towards HR scorecard creation began with the then executive vice
president for HR challenging the HR organization to demonstrate, through robust
measurement, how it supported business strategies. From the outset, the goal was to
reposition HR as a value-adding function.
2. With the telecommunications industry in the throes of rapid change, the then
GTE articulated a set of 'people imperatives' to drive business performance. These
were articulated as existing, enhanced and new skills. An HR team went to the
business to identify these skills needs. Therefore, the HR scorecard focused squarely
on delivering to strategically critical people needs.
3. The HR leadership team articulated ve HR strategic thrusts that would drive the
business forward. Out of these thrusts and from interviews with business leaders, 17
questions emerged that captured the key people concerns of the business.
Consequently, a line-of-sight was ensured from the scorecard measures through HR
strategies to business requirements/strategies.
4. The scorecard is communicated quarterly in both paper and electronic formats to
the HR organization and business leaders. The HR function thus demonstrates that it
is accountable to the business for its performance.
Verizon's Approach to Building and Implementing an HR Scorecard
- Step 1. Planning and alignment:

project planning

select team

dene scope and objectives

educate key stakeholders

ensure alignment of strategic direction action plans with measurement project.

- Step 2. Assessment:

review business and HR strategies

identify measurement criteria

assess existing measures

assess technology and data source infrastructure.

- Step 3. Development:

identify critical strategic goals

develop measures

test with key stakeholders

establish targets and tracking mechanism

identify system requirements and develop system.

- Step 4. Implementation:

implement balanced scorecard

implement supporting tools

communicate to target audience

test, evaluate and improve.