Design and implementation of a Human Capital oriented Balanced Scorecard in an engineering services unit

Table of Contents

1 Introduction

2 Definition of Human Capital

2.1 What separates Human Capital from other assets

2.2 Human Capital - the un-word of the year 2004

2.3 The gap between book value and market value

3 Human Capital Measurement

3.1 Human Capital Accounting

3.1.1 Weighted personnel cost method

3.1.2 Method of future remunerations

3.1.3 Flamholtz’s Approach (Human Resource Accounting)

3.2 Deductive Summarizing Approaches

3.2.1 Market Value to Book Value

3.2.2 Tobin’s q

3.2.3 Calculated Intangible Value

3.3 Inductive Analytical Approach

3.3.1 Intangible Assets Monitor

3.3.2 Intellectual Capital Navigator

3.3.3 Balanced Scorecard

3.3.3.1 Nomen est Omen

3.3.3.2 Perspectives of Balanced Scorecard

3.3.3.2.1 The Financial Perspective

3.3.3.2.2 The Customer Perspective

3.3.3.2.3 The Business Process Perspective

3.3.3.2.4 The Learning and Growth Perspective

3.3.3.3 Human-Resource-Scorecard

3.3.3.4 Human Capital Management Scorecard

3.4 Human Capital Key Figures

3.4.1 Economic Value Added and Human Economic Value Added

3.4.2 Human Capital Value Added and Human Capital Return On Investment

3.4.3 Human Asset Worth

3.4.3.1 Employment Cost

3.4.3.2 Individual Asset Multiplier

4 Profile of the Business Unit “Engineering Services”

5 Design and Implementation of a Balanced Scorcard

5.1 Defining the Vision

5.1.1 Procedure: A journey into the Future

5.1.2 Formulating the Vision for the Engineering Services Business Unit

5.2 SWOT-Analysis

5.2.1 Procedure

5.2.2 Strengths of the Business Unit

5.2.3 Weaknesses of the Business Unit

5.2.4 Opportunities Coming from the Business Unit Environment

5.2.5 Threats Coming from the Business Unit Environment

5.2.6 Supplementary Interviews

5.3 Strategy

5.4 Perspectives and Key Figures

5.4.1 Financial Perspective

5.4.2 Customer and Partner Perspective

5.4.3 Process Perspective

5.4.4 Human Capital Perspective

5.5 Implementing the Balanced Scorecard

5.5.1 General Conditions

5.5.2 Communication and Training

5.5.3 Software Support

6 Conclusion

Objectives and Core Themes

The objective of this dissertation is to develop a management instrument for an engineering services unit based on the Balanced Scorecard approach, with a primary focus on human capital. The study investigates how human capital can be effectively measured and managed to contribute to sustainable business success, moving beyond traditional financial indicators.

• Development of a strategy-aligned Balanced Scorecard for an engineering services unit.
• Evaluation of various methodologies to determine the value of intangible assets and human capital.
• Integration of human capital as a key strategic component in a Balanced Scorecard framework.
• Identification of critical success factors for engineering services through SWOT-analysis and expert interviews.
• Proposal of specific key performance indicators to manage employee contribution and organizational success.

Excerpt from the Book

Summary of Chapters

1 Introduction: Discusses the transition toward a knowledge-based economy and the critical importance of measuring human capital as a primary source of sustainable competitive advantage.

2 Definition of Human Capital: Defines human capital as the sum of skills, knowledge, and attributes of the workforce, emphasizing its role as the key differentiator for modern organizations.

3 Human Capital Measurement: Analyzes various methods for valuing intangible assets, ranging from traditional accounting approaches to deductive and inductive measurement frameworks.

4 Profile of the Business Unit “Engineering Services”: Outlines the strategy and specific environment of an engineering services business unit operating within the digital manufacturing sector.

5 Design and Implementation of a Balanced Scorcard: Details the step-by-step process of building a human-capital-oriented Balanced Scorecard, including vision formulation, SWOT-analysis, and strategy definition.

6 Conclusion: Summarizes the study’s findings and reinforces that the Balanced Scorecard is an effective management tool, provided it is tailored to the specific organizational needs and human capital requirements.

Keywords

Balanced Scorecard, Human Capital, Intangible Assets, Engineering Services, Intellectual Capital, Performance Measurement, Strategy Execution, Human Resource Management, Competitive Advantage, Value Added, Digital Manufacturing, SWOT Analysis, Key Performance Indicators, Organizational Strategy, Employee Development.

Frequently Asked Questions

What is the core focus of this research?

The work focuses on developing a tailored management instrument based on the Balanced Scorecard approach specifically for an engineering services unit, with an emphasis on measuring and managing human capital.

Which central topics are addressed?

Central topics include the definition of human capital, methods for measuring intangible assets, strategic goal setting through the Balanced Scorecard, and the specific application of these tools to engineering services.

What is the primary objective of this dissertation?

The primary objective is to create a management framework that effectively links human capital development to business strategy and long-term organizational success.

Which scientific methods are employed?

The research uses a descriptive and analytical approach, combining literature review on intangible asset measurement with practical workshops and structured interviews to perform a SWOT-analysis and develop specific scorecards.

What is discussed in the main part of the document?

The main part covers the theoretical frameworks for human capital measurement, the development of a Balanced Scorecard through vision and strategy alignment, and the definition of specific financial and non-financial performance metrics.

Which keywords characterize this work?

Key terms include Balanced Scorecard, Human Capital, Intangible Assets, Performance Measurement, Strategy Execution, and Value Added.

How does the author view the gap between book value and market value?

The author argues that traditional accounting fails to capture the real value of a knowledge-driven company, as internally generated intangibles are often expensed rather than treated as investments, leading to a disconnect in financial reporting.

Why is the "Learning and Growth" perspective replaced by a "Human Capital" perspective in the author's model?

The author considers human capital to be the single most important asset for engineering services and therefore elevates it to a standalone perspective to ensure it is systematically measured and actively managed.