One of our most popular ever blog posts dates way back to 2013, and we've decided it is time to provide an update because the world of work is constantly evolving. In the world of work and HR best practice, a lot has changed in the last five years. The key risk areas for HR change through time, and the risk areas we identified almost 5 years ago are a little different to those HR Professionals face today. Whilst it is true that there are certain risks that remain a constant in HR operations, it is also fair to say that the changing nature of work introduces new risks all the time. The current pace of change makes it hard for HR to keep up. Outlined below are the 5 key risk areas we believe HR needs to pay attention to right now.
It is all too easy for businesses to get caught up in maximising results and minimising costs at the expense of values, culture, ethics and engagement. Such a narrow focus on results and costs can create fertile ground for potential risks to become actual problems, and by the time those problems manifest in real-time, it is often too late to course correct without serious damage to reputation and balance sheet.
It might surprise you to hear that current research identifies the soft skills of mindfulness, compassion and selflessness as three of the most important factors in workplace engagement, with serious implications for ensuring that the values and culture of your organisation steer the right course. According to Rasmus Hougaard, Founder and MD of Potential Project, who was recently interviewed on Radio National's All In The Mind, 'The crisis that we are seeing in the global workforce today is first of all associated with engagement. I think it is known to most people the Gallup studies finding that 13% of the global workforce is actively engaged in their work. You know, they really do a great job. 24% is actively disengaged. So imagine an organisation is a canoe, 13 people in the front are rowing in one direction, the right direction, 24 are sitting in the back and rowing in the direct opposite direction, and then there's a big group in the middle that are probably not rowing very hard. So there's a massive engagement crisis, and this engagement crisis is coming out of what I would call a leadership crisis.'
In a mix where leadership is lacking essential soft skills and managers are striving to maximise results and minimise costs, is it any wonder that the risks associated with BAU isn't being managed very well. Read or listen to anything from the Financial Services Royal Commission and it is abundantly clear that there are serious risks to operations, and perhaps more importantly to reputation, that are raging, unmitigated, just below the surface of many organisations. Let's take a look at the top five risk areas for HR in the current business environment.
1. Workplace Discrimination
Fairwork Australia and The Human Rights Commission make it abundantly clear that all employers have a responsibility to ensure that their employees, and people who apply for a job with them, are treated fairly and in accordance with the law. Discrimination occurs when a person, (or a group of people), is treated less favourably than another person or group because of their background or certain personal characteristics. Federal discrimination laws protect people from discrimination of the basis of their:
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Race, including colour, national or ethnic origin or immigrant status,
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Sex, pregnancy or marital status and breastfeeding,
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Age,
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Disability, or
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Sexual orientation, gender identity and intersex status.
Discrimination can happen at different points in the employment lifecycle, including:
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When recruiting and selecting staff,
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In the terms, conditions and benefits offered as part of employment,
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Who is considered or selected for training and the sort of training offered,
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Who is considered or selected for transfer or promotion,
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Who is considered and selected for retrenchment or dismissal.
What actually constitutes discrimination? Under discrimination law in Australia, it is unlawful to treat a person less favourably on the basis of particular protected attributes such as a person’s sex, race, disability or age. Treating a person less favourably can include harassing or bullying an individual or group. The law also has specific provisions relating to sexual harassment, racial hatred and disability harassment.
What constitutes bullying? The Fair Work Amendment Act 2013 defines workplace bullying as repeated unreasonable behaviour by an individual towards an employee which creates a risk to their health and safety.
Everyone has the right to work in an environment free from bullying, harassment, discrimination and violence, and yet it still happens. How and why is this so? There are many reasons, often unique to each individual organisation, in which laws are often payed little more than lip service and many discriminatory behaviours are allowed to take place. Critical factors include employee education, values, culture and leadership and recruitment of the right people for the business. However, it would be overly simplistic to assume that these are the only factors contributing to the prevalence of bullying, harassment and discrimination.
Ultimately, employers and HR Professionals need to be aware of their responsibilities under the law, and in the context of the culture, values and ethics of the business to ensure that the working environment or workplace culture is a positive experience for all employees. Employers should develop and implement induction programs, training and ongoing targeted practices to address inappropriate workplace behaviour and deal effectively with any complaints.
2. Ethical Behaviour
Organisational ethics are rules and standards that guide the workplace behaviour and moral principles of all employees. Many organisations establish a 'code of conduct' that sets company expectations regarding ethical issues such as privacy, conflict of interest, discrimination, harassment and workplace diversity. HR Professionals are charged with setting standards that promote ethical behaviour in the workplace, and also with ensuring that everyone, especially leadership, model the type of behaviour that is expected.
In an environment of ongoing scandals and a crisis of trust, it’s not enough to simply espouse company values. EHR and the leadership team need to demonstrate these values in word AND action, articulating them to employees and stakeholders. Embedding this type of stewardship in organisations large and small can have far-reaching effects in the wider world of work. The Business Ethics Institute posits that 'HR as a profession is uniquely placed to embed principled decision-making into daily business practice. Ethics are at the heart of professionalism, and organisations should be encouraging the highest standards from employees. This means challenging assumptions, individual values and priorities, and exploring common goals to bring the organisation’s values to life.'
The CIPD's business ethics factsheet for HR illustrates that:
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Ethics in business is about ‘doing the right thing’ simply because it’s the right thing to do.
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An organisation’s reputation can be easily damaged if it doesn’t embed its core values inside an ethics programme.
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HR plays a vital role in facilitating an ethical culture.
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Organisations need to adopt a principles-based approach to decision-making if they want to apply and develop ethical values.
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Individuals are better equipped to face ethical dilemmas if organisations support a principles-based approach.
Given the consumer shift to a more ethics driven economy, whereby they make choices based on the moral compass of the businesses they purchase from, being ethical is more essential than ever. Ethical cultures are vital in helping businesses shift focus from short-term profits to long-term sustainability, ensuring that work benefits everyone – from employees to shareholders, as well as the environment. Of course, this isn’t solely an issue for HR, but HR does have an important role to play. As the expert on people and organisations, HR has unique access to employees throughout their career, from induction training to exit interviews. Therefore, HR is powerfully placed the drive positive change.
3. Business And Regulatory Compliance
Ensuring legal and regulatory compliance in your business in not an easy feat. The HR Gurus advocate that having the right paperwork in place when you bring people in to your business is one of the most critical success factors. Not only is it critical to provide incoming employees with all the relevant information about their new role and your expectations about their performance, it’s also essential that you are providing a set of robust and flexible expectations that you, as the employer, can enforce. Too often contracts, policies, training and the Onboarding process are not comprehensive enough, which leaves new employees with significant gaps in their understanding of what's required and how to behave, not only under the law, but also in relation to your culture. Your onboarding process needs to illustrate, advocate and instigate 'how you do things around here' so that everyone is crystal clear about their cultural and regulatory responsibilities.
The trouble for many Australian SME’s is that you are required to comply with a complex mix of employer obligations. This includes a range of statutory obligations imposed on you under the Fair Work Act 2009, but it also includes state legislation regulating issues such as workers compensation, public holidays and long service leave. In addition, you may also have a mind-bending range of obligations if you employ individuals across full-time, part-time, contract, enterprise bargaining, casual and gig employment types.
At a minimum, your business needs to ensure that you are fully compliant with:
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Your industry Modern Award.
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Work Health Safety Legislation (effective 1 Jan 2012).
Having the right systems in place to communicate, monitor and record compliance is a critical success factor. HR software makes business and regulatory compliance much more manageable, in addition to providing an audit trail of activities across the entire organisation.
4. Business Systems And Technology
It is fair to say that there aren't many aspects of business these days which aren't managed through a digital business system. However, if doesn't flow seamlessly between and across the digital systems your business uses, you could face multiple points of failure. Many people operate under the assumption that implementing a digital solution to manage processes will ameliorate risk altogether. However, a lack of integration between your systems is a potential trap that could result in heavy penalties for those who get it wrong. It has therefore never been more important to implement an effective and efficient people management strategy, a system to manage that strategy, as well as that system having the capacity to be able to integrate seamlessly with other systems across your business.
A recent InsideHR article listed several key data considerations for HR:
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Up to this point, individuals have been willing to freely hand over personal data to organisations in exchange for a service. However, given the potential risk and abuse taking place, many people are now reassessing data ownership rights.
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New Government legislation is being enacted in many countries to improve the transparency and use of personal data held by organisations.
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Employees will ultimately demand full transparency of their personal data held by their employer and will be empowered to control how that data is used.
5. Talent Acquisition and Management
Last but not least, let us not forget one of the biggest risk factors; the human element. Strategy, culture, morale, productivity, data security and governance all have a significant human component which, if not managed appropriately can all adversely affect an organisation’s performance and future stability. In fact, the 'human factor' is a risk that HR needs to mitigate effectively, because the margin for error will only continue to increase as business becomes more and more 'digital.'
Ernst & Young's Human Capital Risk Management work highlights the following four quadrants as critical to success.
Growth:
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Shortage of key technical and management skills and an ageing workforce,
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Skills gaps in occupations that have serious programmatic impact,
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Millennial (and post-millennial) attraction and retention.
Agility:
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Right-sizing the workforce,
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Balancing permanent and contractor resources,
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Obtaining and retaining the best possible talent in a competitive environment.
Cost effectiveness:
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Balance of quality and quantity of resources for the right cost,
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Understanding internal and external supply and demand,
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Measuring Return on Investment and productivity of talent.
Performance:
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Leadership sustainability,
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Management succession and capability,
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Employee engagement and accountability.
Ultimately, HR Professionals would do well to always remember that people are the biggest sources of risk and most risk exposures include a human element – it is the people, their behaviour and actions that cause risk. People are also critical in managing risk - paradoxically, it is the people and their actions that are the greatest mitigators of risk in your business.
Ready to discover how to mitigate risk in your business? If you want to ensure that your employees are crystal clear about how you do things right from the get go, your Onboarding process is crucial. Subscribe-HR's Onboarding solution is FREE, forever. Try it now by taking a 7-day FREE Trial.
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