According to this article, there are more than half a million new businesses started across the country every single month (Craig, 2015). There are many ways to become a bu

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Craig, W. (2015). From Family To Franchising: Five Ways To Start Your Business Empire.

Forbes.

According to this article, there are more than half a million new businesses started across the

country every single month (Craig, 2015). There are many ways to become a business owner in

the world today and there are many risks involved with each of those avenues as well. When

starting a business from scratch the most important aspect is having a product that people want.

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business is also an option for those who have keen insight into opportunities. Becoming a franchise

owner is another way to become a business owner. This step also takes determination and focus

but can be very rewarding. There is stability that comes with taking over a location that has an

established corporate presence already backing it up with corporate sponsors that are ready and

willing to help get you started on the right track.

240 Managing multiple forms of strategic training fit

© 2019 Brian Towers (BRITOW) and John Wiley & Sons Ltd

International Journal of Training and Development 23:3 ISSN 1360-3736 doi: 10.1111/ijtd.12160

Managing multiple forms of strategic training fit through the Balanced Scorecard

Antonella CifalinÒ and Irene Eleonora Lisi

Although the literature recognizes training as an essential driver of organizational effectiveness, little is still known about how to explicitly focus and align training to organi- zational strategic priorities. This note proposes a model that bridges the strategic human resource management (SHRM) lit- erature and the Balanced Scorecard (BSC) literature – which is one of the most widely recognized strategic performance evalu- ation approaches intended to foster organizational alignment by translating the firm’s strategy into a multidimensional set of financial and non-financial measures. After having briefly discussed the main differences between the return on invest- ment (ROI) model, which represents one of the major attempt to make training strategic within the existing evaluation research, and the BSC model applied to training management, this note highlights multiple forms of strategic training fit and suggests how to manage training through various scenarios of BSC development. Specifically, the note illustrates four forms of strategic fit – the vertical fit, the horizontal inter-functional fit, the horizontal intra-functional fit and the human capital readiness – and discusses their pursuit in terms of six scenarios of training management through the BSC. The note expands some exploratory empirical evidence on the feasibility and usefulness of training scorecards (i.e. the application of the BSC to training) in order to develop some theoretical insights and practical guidance on how they can be leveraged to foster the strategic alignment of training.

Introduction In recent decades, research has increasingly emphasized the importance of workforce knowledge and skill to organizational success (e.g. Salas et al., 2012). Organizations have thus been urged to take a more strategic approach to training evaluation and

❒ Antonella Cifalinò and Irene Eleonora Lisi, Università Cattolica del Sacro Cuore, Milan, Italy. Email: [email protected]

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 20101 Brian Towers (B(ITOT) and John Tiley y Sons Ltd Managing multiple forms of strategic training fit 241

management fostering the alignment of training to the organization’s strategic direc- tion (e.g. Kraiger et al., 2004; Tannenbaum, 2002). Indeed, as noted by Tharenou, Saks and Moore (2007, p. 268), ‘if training is to increase organizational effectiveness, train- ing must be of strategic importance to the organization, effectively designed and delivered’. However, training research is still mainly characterized by an ‘operational’ approach, which is focused on improving the quality of training delivery in itself (i.e. doing things right) without explicitly articulating how the training aligns with the organization’s strategic priorities (i.e. doing the right things) (Baraldi y Cifalinò 2015). As a result, the extant literature offers little guidance on how to explicitly leverage training initiatives and resources to improve the performance that ultimately drives business results.

This note addresses this gap by proposing a model for how organizations can stra- tegically manage their training activities. The model bridges two streams of literature: the strategic human resource management (SH(M) research, which deals with the fit concept (e.g. Lengnick-Hall et al., 20001), and the Balanced Scorecard (BSC) literature, which deals with the BSC – one of the most widely recognized strategic performance evaluation approaches (e.g. Hoque, 2014; Soderberg et al., 2010). Our model highlights multiple forms of strategic training fit and various scenarios of training management through the BSC.

The SH(M literature is relevant to our purposes because it has noted that each H(M activity contributes to a firm’s competitive advantage when it is aligned both externally to the corporate strategy as well as internally to the other H(M activities in place (e.g. Lengnick-Hall et al., 20001). Consequently, researchers have identified and described multiple forms of external and internal H(M fit (e.g. Delery, 101018; Jiang et al., 2012; Kepes y Delery, 2007). Drawing on these research insights, we propose a model that highlights the strategic training fit in terms of vertical, horizontal inter-functional and horizontal intra-functional fit.

Meanwhile, there are several dimensions of the BSC literature that are relevant to our purposes. The BSC represents a performance evaluation system intended to foster organizational alignment by translating the firm’s strategy into a multidimensional set of financial and non-financial measures to be cascaded throughout the organization from the corporate to the business unit and staff levels (Kaplan y Norton, 101012, 101016, 2001, 2004). Exploratory studies have already highlighted the feasibility and advan- tages of applying the BSC model to training management issues (Baraldi y Cifalinò 2015; Cifalinò y Baraldi 20001).

Tithin the training evaluation research, there have been attempts to link training to the strategic direction of the organization, particularly by measuring the return on investment ((OI) generated by training initiatives (Phillips y Phillips, 2001). However, the BSC model and the (OI approach differ in several ways. A first difference regards the unit of evaluation. Thile the (OI is basically aimed at evaluating training pro- grams (Phillips y Phillips, 2001), the BSC model can be applied not only to selected training initiatives, but also to the overall processes developed by the training func- tion. Second, the two methods differ in the nature and timing of evaluation. The (OI approach is mainly focused on summative evaluation, which concentrates on the effec- tiveness and efficiency of completed interventions by isolating the related total costs and benefits (ex post evaluation) (Curado y Bernardino, 2018). Instead, the BSC model is a performance measurement and management system aiming at supporting both a proper definition and an effective execution of the training strategy, thus equally bal- ancing various evaluating perspectives before, during, and after the training programs and processes occur (ex ante, in itinere and ex post evaluation). As a consequence, and third, the two methods differ in the content of evaluation. The (OI method ultimately offers a single lagging indicator which synthesizes the monetary value of the benefits generated by a completed training program, compared to the fully loaded costs of the program. On the contrary, the BSC model suggests a holistic evaluation approach which balances various multidimensional (i.e. monetary and non-monetary) key per- formance indicators highlighting both the determinants (leading indicators) and the effects (lagging indicators) related to a specific training strategy.

 20101 Brian Towers (B(ITOT) and John Tiley y Sons Ltd 242 International Journal of Training and Development

Moving on these premises, this note builds on the available preliminary evidence about the application of the BSC model to training and develops further theoreti- cal insights and practical guidance on how to leverage the BSC approach for train- ing management. First, it outlines a fourth dimension of training fit – the concept of human capital readiness – which is widely debated within the BSC literature. Second, it discusses how to manage the four forms of strategic training fit through the BSC.

This note is structured as follows: the next section briefly reviews the SH(M litera- ture dealing with the fit notion in order to clarify this construct’s constitutive dimen- sions. The third section presents the BSC model (including the related concept of human capital readiness) and reviews the literature that has applied the framework to H( (and training) management. The fourth section discusses the model for managing the four forms of strategic training fit through BSC. The fifth section highlights how to translate into professional practice the application of the BSC model to training man- agement. The last section offers some concluding thoughts, including also the mana- gerial implications of this work.

The notion of fit within the SHRM literature Over the past 30  years, the SH(M literature has widely investigated the impact of H(M activities on individual-, unit- and firm-level outcomes (for recent reviews, see Jackson et al., 2014; Jiang et al., 2013; Kaufman, 2015; Lengnick-Hall et al., 20001; Saridakis et al., 2017), on the premise that H(M activities can affect firms’ competitive advan- tage (Huselid, 101015).1 Yet, important issues remain regarding the specific mechanisms through which H(M contributes to organizational effectiveness (Prowse y Prowse, 2010). Ever since Becker and Gerhart (101016) introduced the idea of a ‘black box’ between H(M activities and firm performance, there have been repeated calls for studies that explain this complex causal chain (Banks y Kepes, 2015; Patel y Cardon, 2010). To more clearly define such a ‘black box’, SH(M researchers started to examine how H(M can serve as a resource for a sustainable competitive advantage (e.g. Jiang et al., 2012) – whether through the alignment of H(M to external contingencies or the align- ment among different H(M activities. As a result, the SH(M literature has arrived at two main perspectives (Banks y Kepes, 2015; Delery y Doty, 101016; Lengnick-Hall et al., 20001)2.

Contingency perspective: the vertical fit of HRM activities

The first perspective is the contingency perspective. According to this view, the extent to which H(M activities influence individual-, unit- and firm-level outcomes is depen- dent upon contingency factors (Tright y Snell, 101018). Tithin the various contingency variables analyzed in the literature (e.g. industry, life cycle stages, labor market condi- tions, unionization), organizational strategy stands out (for reviews, see Jackson et al., 2014; Lepak y Shaw, 2008). As such, this perspective suggests that H(M activities

1 As noted by Bank and Kepes (2015), a particularly influential perspective in the SH(M literature that has been used to explain the H(M-performance relationship is the resource-based view of the firm. This view argues that an organization gains a competitive advantage from the internal re- sources it controls that are ‘V(IN’, i.e. valuable, rare, inimitable and non-substitutable (Barney, 101011). Therefore, H(M practices are supposed to lead to superior performance through attracting, develop- ing and retaining V(IN human and social capital (e.g., Buller and McEvoy, 2012; Tright et al., 2001; Tright and McMahan, 2011). 2 For the sake of completeness, a third perspective (known as the universalistic perspective) can be identified within the SH(M literature. As the name implies, this perspective contends that some H(M activities lead to positive organizational outcomes across all organizations and under all con- ditions. Consequently, there is no need to align H(M activities with a firm’s contextual factors, nor is there a need to align H(M activities with each other. Yet, this perspective is seen as limited since its underlying logic cannot easily explain the causal dynamics within the ‘black box’ (Banks y Kepes, 2015).

 20101 Brian Towers (B(ITOT) and John Tiley y Sons Ltd Managing multiple forms of strategic training fit 243

should be designed and implemented consistently with a firm’s overarching strate- gic goals (Kepes y Delery, 2007; Lengnick-Hall et al., 20001). This alignment of H(M has been variously referred to as ‘external’ or ‘vertical’ fit (Delery, 101018; Tright y McMahan, 101012). Thile this perspective has merit, it does not consider the interrela- tions among H(M activities. Yet, these interrelations may be important to describing the causally ambiguous dynamics within the ‘black box’.

Configurational perspective: the horizontal inter-functional and intra-functional fits of HRM activities

In an effort to overcome this limit, the literature devised a second perspective: the so-called configurational perspective. In this vein, H(M activities are explored as inte- grated systems of interrelated activities (Delery y Doty, 101016; Jackson et al., 2014; Jiang et al., 2013; Lepaket al., 2006). The underlying logic of the configurational perspec- tive is that the effectiveness of any particular H(M activity is dependent upon other H(M activities within an H(M system (Delery y Doty, 101016). As noted by Lado and Tilson (101014), an H(M system is not merely a composite of H(M activities, but a dynamic bundle of activities that is deliberately designed to achieve some desired organizational goals. Such ‘bundles’ or ‘configurations’ of H(M activities can have positive (negative) synergistic effects that lead to a sustainable competitive (dis)advan- tage when the activities are (mis)aligned (Barney y Tright, 101018; Delery, 101018). Thus, this perspective focuses on the ‘internal’ or ‘horizontal’ fit among H(M activities (Chadwick, 2010; Lepak y Shaw, 2008).

In short, H(M systems are complex bundles of activities pertaining to different hierarchical levels (i.e. practices, policies, ad systems) (Jiang et al., 2012) and different sub-functions or ‘activity areas’ (e.g. recruitment, training, performance management, compensation) (Kepes y Delery, 2007). Following this line of research, some authors have advanced more fine-grained conceptualizations of the internal (or horizontal) fit construct. As a result, various types of fits have been proposed along and across the hierarchical categories and/or functional areas of H(M activities, leading to the concept of multiple internal fits (e.g. Lengnick-Hall et al., 20001). Although researchers have outlined many types of fit, this note focuses on the following (Jiang et al., 2012; Kepes y Delery, 2007):

• the horizontal inter-functional fit, which highlights the alignment between H(M activities delivered across different areas or sub-functions;

• the horizontal intra-functional fit, which refers to the alignment of different activi- ties delivered within the same area or sub-function.

In sum, despite the variety of terms and nuanced conceptualizations, the central emphasis of the SH(M field is defining and delivering coherent H(M systems that can achieve superior performance.

The Balanced Scorecard as a strategic approach to training management

Among H(M activity areas, training has assumed a strategic relevance in today’s business contexts as continuous learning and skill development are now essential conditions for organizations to remain competitive (Salas et al., 2012). Yet, research on training evaluation is still largely characterized by an ‘operational’ approach aimed at improving the quality of training delivery in itself by focusing on the processes by which a training program is decided, designed and delivered (Cifalinò y Baraldi 20001). As a result, calls have been made for a more ‘strategic’ approach, which aims at achieving the greatest impact on organizational performance from training initiatives by linking them to the organization’s strategic direction (e.g. Kraiger et al., 2004; Salas et al., 2012; Tannenbaum, 2002; Tharenou et al., 2007). According to Tannenbaum (2002), aligning training with the organization’s strategic direction involves examining key

 20101 Brian Towers (B(ITOT) and John Tiley y Sons Ltd 244 International Journal of Training and Development

business objectives and challenges, identifying the functions and jobs that most influ- ence organizational success, clarifying the most critical organizational competencies and establishing overall strategic learning imperatives.

In turning to such a strategic approach to training evaluation and management, use- ful insights can be drawn from the literature on strategic performance measurement and management (SPMM) systems. As a new generation of performance measure- ment and management frameworks, these systems are aimed at translating strategy into a multidimensional set of financial and non-financial measures, which are usually cascaded throughout the organization. More specifically, their distinctive features are (1) the integration of long-term strategy and operational goals; (2) the presence of per- formance indicators covering different perspectives (in addition to the financial one); (3) the provision of a sequence of goal-target-action plans, and (4) the presence of explicit cause-and-effect linkages between goals and/or performance indicators within so-called strategy maps (e.g. Chenhall, 2005; Franco-Santos, Lucianetti y Bourne, 2012; Gimbert, Bisbe y Mendoza, 2010). Among SPMM systems, Kaplan and Norton’s BSC construct (Kaplan y Norton, 101012, 101016, 2001, 2004) has gained particu- lar popularity among both academic researchers and practitioners (for overviews, see Hoque, 2014; Soderberg et al., 2010), becoming the most notable example of an SPMM system. Then correctly understood and properly implemented, the BSC is supposed to improve organizational performance by translating strategy into specific objectives and measures along few multidimensional perspectives3, thus fostering strategic focus and alignment.

The particular relevance of the BSC to our purposes lies in its recognition of human capital and learning issues as strategic levers. According to this approach, it is crucial to clearly identify and develop training initiatives that lead to human capital readi- ness, which ‘represents the availability of employee skills, talent, and know-how to perform the internal processes critical to the strategy’s success’ (Kaplan y Norton, 2004, p. 225). In other words, human capital can only create value if it is aligned with the organization’s strategy. Despite these findings, organizations have struggled to implement training programs designed to foster such human capital readiness.

As a first attempt to overcome this vagueness, researchers have started to discuss the application of the BSC model to the H( function. Because of the H( function’s overall contribution to strategy implementation, it can cascade the BSC framework throughout the organization with respect to the organizational unit responsible for defining and delivering the H(M strategy. For instance, researchers have proposed an ‘H( scorecard’ (Becker et al., 2001) to effectively capture and manage H(’s role in the firm’s success. Alternatively, Huselid et al. (2005) argue that workforce performance and success is a ‘people’ issue; as such, developing a ‘workforce scorecard’ can be an effective means of highlighting employees’ strategic performance beyond the contri- bution of the H( function itself.

However, as noted by Cifalinò and Baraldi (20001) and Baraldi and Cifalinò (2015), these frameworks generally refer to overall H(M activities, without explicitly aligning training to the organization’s strategic priorities. Thus, they provide no conclusive evidence about how to further cascade the BSC within the training function, which possibly hinders the organization’s ability to define and execute its training strategy. As a result, the authors suggested ‘training scorecards’ – both at the level of single training programs (Cifalinò y Baraldi 20001) and at the level of the training function itself (Baraldi y Cifalinò, 2015) – and empirically demonstrated their practical feasi- bility and advantages. In their 20001 paper, the authors showed how the use of the BSC

3 The perspectives identified within the model vary according to the organizational cascading of the BSC. For instance, at the corporate and business unit levels, the four perspectives traditionally con- sidered are: financial, customer, internal business process and learning and growth. At the staff level, the perspectives will of course differ depending on the specific organizational function under con- sideration. For examples of the specific perspectives that have been suggested for the H(, workforce or training levels, see Becker et al. (2001), Huselid et al. (2005), Cifalinò and Baraldi (20001) and Baraldi and Cifalinò (2015) respectively.

 20101 Brian Towers (B(ITOT) and John Tiley y Sons Ltd Managing multiple forms of strategic training fit 245

allows organizations to hone the strategy of the training program, even in terms of expected behavioral and organizational results. Their 2015 study expanded on these results by showing that the BSC is a feasible approach for evaluating the overall train- ing function’s contribution to the achievement of organizational goals.

Thile these studies undoubtedly pave the way for a strategic approach to training management, they only marginally address the strategic alignment theme (Salas et al., 2012; Tannenbaum, 2002). That is, they do not explicitly analyze how training score- cards can be leveraged to manage strategic training fit along its constitutive dimen- sions. In order to overcome this void, the next section builds on these exploratory works and proposes a conceptual model that captures various scenarios for develop- ing training scorecards and using them to apply the principle of strategic training fit.

How to manage strategic fit of training through the Balanced Scorecard

To discuss how the BSC model can foster strategic training fit, we need to first identify the specific forms that training fit may assume. By drawing on the research insights offered by both the BSC and SH(M literature – as briefly summarized in the previous sections – we specifically highlight the following forms of fit.

Human capital readiness

The human capital readiness reflects the alignment between human capital compe- tences (as an outcome of training) and the company’s strategic goals.

Vertical training fit

The vertical training fit reflects the alignment between training activities and the organizational strategy (e.g. prioritizing overall training needs and allocating train- ing resources with regard to the most pressing organizational strategic goals).

Horizontal inter-functional training fit

The horizontal inter-functional training fit reflects the alignment between training activities and the H(M activities related to other activity areas or sub-functions (e.g. need assessment activities delivered within the training function and selection activ- ities developed by the recruitment function).

Horizontal intra-functional training fit

The horizontal intra-functional training fit reflects the alignment of the various activ- ities delivered by the training function (e.g. need assessment and training program design delivered within the training function).

Moving on these premises, the contribution of the BSC model to the achievement of these various forms of fit will depend on the different levels along which the BSC model is cascaded throughout an organization. More specifically, it is possible to dis- tinguish six different scenarios according to whether an organization has adopted the BSC as strategic performance management system: i) at the corporate level4; ii) at the level of training programs and iii) at the level of the training function (see Figure 1).

4 As already mentioned, to fully achieve strategic focus and alignment throughout the organization, the BSC model suggests a cascading process, according to which scorecards are defined across the various organizational levels – from the corporate to the business unit level. Therefore, in those orga- nizations applying the BSC methodology in its most pervasive form, the corporate scorecard is ac- companied by business unit-level scorecards. From now on, the term ‘corporate BSC’ is meant to refer to both the corporate scorecard and the (eventual) business unit scorecards.

 20101 Brian Towers (B(ITOT) and John Tiley y Sons Ltd 246 International Journal of Training and Development

Scenario 1: operational approach to training management

The first scenario, in which the BSC in not applied at the corporate or training lev- els, represents the conventional (‘operational’) approach to training management (Cifalinò y Baraldi 20001).

Scenarios 2 and 3: strategic approach to training program/function management

The second and the third scenario emerge when an organization chooses to apply the BSC methodology directly to training management, even if the model has not been developed at the corporate level. Such scenarios, which represent an emerging fron- tier in training research and practice (Baraldi y Cifalinò 2015; Cifalinò y Baraldi 20001), aim to apply the BSC model at the training program level (Scenario 2) and/or at the training function level (Scenario 3) for defining, describing and executing the corre- sponding strategies5.

Scenario 4: strategic alignment of human capital competencies

In the fourth scenario, by contrast, the BSC model has been developed at the corporate level without a specific application at the training level. Even in the absence of an explicit formalization of the BSC at the training program or function levels, this sce- nario emphasizes the necessity of orienting training management toward the devel- opment of human capital competences aligned with the company’s strategic priorities (i.e. human capital readiness).

Scenarios 5 and 6: integrated strategic approach to training program/function management

The last two scenarios emerge when the development of the BSC at the corporate level is also accompanied by a further cascading of the model within the training activity area, in relation to the single training programs (Scenario 5) and/or to the training function itself (Scenario 6). These scenarios aim at a formal, explicit and rational inte- gration between the goals defined at the corporate level (as identified within the cor- porate BSC) and the goals pursued at the training level (as identified within the training program scorecards and/or training function scorecard), in order to create a direct and explicit alignment between the corporate strategy and the training strategy.6

5 These two scenarios have to be intended as complementary, and not substitutive. Indeed, the simul- taneous application of the BSC model – both at the training program and training function levels – allows training managers to clearly and explicitly identify and pursue synergies between the train- ing program strategies and the overall functional strategy. 6 Similarly to what was noted in the previous footnote, also in this case the two scenarios are best intended as complementary, in order to fully exploit the alignment potential of the BSC model.

Figure 1: Scenarios of training management through the BSC.

CORPORATE BSC

Absent

Scenario 1 Operational approach to

training management

Scenario 2 Strategic approach to

training program management

Scenario 3 Strategic approach to

training function management

Present

Scenario 4 Strategic alignment of

human capital competences

Scenario 5 Integrated strategic approach to training

program management

Scenario 6 Integrated strategic approach to training function management

Absent Training Program BSC Training Function BSC

TRAINING BSC

 20101 Brian Towers (B(ITOT) and John Tiley y Sons Ltd Managing multiple forms of strategic training fit 247

Managing the various forms of stra

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