5 Risk Areas for HR Managers and How To Mitigate Them

Posted by Mathew French

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18 November 2013

Time and time again we hear the saying “people are your greatest asset”. It may be overused, but the statement remains true. An organisation’s success is largely dependent on the quality and performance of its people, making HR a risk-prone function in any organisation.The post explores an HR best practice approach for HR Managers to manage risk.

A survey report by Price Waterhouse Coopers finds that businesses worldwide seek sustainable growth while their targets become more demanding than ever. With this increase in consumer power, PWC notes that organisations must rethink their talent pipeline and transform their HR function to cope with these priorities and risks.

It is therefore crucial, now more than ever, for HR Managers to be aware of the risks they face in HR operations. We classify these risks into 5 categories:

1. Digital Transformation (or Lack Thereof)

We've spoken a lot about digital transformation over the last few years. In fact, 'digital transformation' became one of those overused phrases that many people talked about but not everyone took seriously. Then most of the people who work in offices across the globe were forced to work from home and it suddenly became very clear just how important it was to be digitally enabled. In KPMG’s 2019 The Future of HR report, only 40 per cent of HR leaders said they had a digital work plan in place at the enterprise or HR level.

You might have been able to get away with managing your employees that way before the global pandemic. But if recent circumstances have taught us anything, it’s that the adaptability of your business (and in some cases its capacity to survive) is directly related to how digitally enabled your employees and your business systems are. Essentially, your capacity to pivot quickly in response to rapidly changing economic, social and health conditions correlates with how far down the path of digital transformation your organisation has progressed.

Looking through the lens of the first half of 2020, it has never been more important to have the tools you need to be able to digitise, automate and optimise your employee lifecycle. If you want to be able to run an agile business that can bend and flex with whatever circumstances demand, you need the right tools to be able to do so.

If you haven't already, the next best time to start your digital transformation is now. As an HR Professional, consider how much easier and more efficient your life would be if you could digitise and optimise these tasks:

2. Ethics and Leadership

People don’t quit jobs, they quit their bosses. Even though this statement is not always true, many have cited their superiors as the reason they leave a company. Because of this, professional ethics and leadership skills are critical to maintain employee productivity. HR managers must take the responsibility to educate all employees of the company’s culture, beliefs and values, while training those who manage others in their leadership skills.

Mitigate risks of ethics and leadership by:

  • Ensure business leaders display necessary leadership skills while being approachable.

  • Educate leaders and managers of the business’ values and ensure they pass these values down to their teams.

  • Create the right culture and set the tone with new recruits from the outset.

Edelman's 2020 barometer reveals that despite a strong global economy and near full employment at the end of 2019, none of the four societal institutions that the study measures; government, business, NGOs and media, are trusted. The cause of this paradox can be found in people’s fears about the future and their role in it, which offer a serious wake-up call for our institutions to embrace a new way of effectively building trust: balancing competence with ethical behaviour. Given the current global pandemic, trust is being tested in extremis and the next 12 to 18 months will provide some very interesting results on the trust continuum. Find out more about the importance of trust and transparency here.

3. Regulatory and Compliance 

HR managers need to be aware of local labour regulations and ensure they are always compliant. As businesses expand in this mobile world, third-party resources become more popular, exposing the business to international labour laws and regulations. HRO Today notes that businesses need to manage their third-party resources carefully as misclassifying workers could subject the business to audits and penalties.

To avoid these risks, HR managers should:

  • Understand local and the relevant international labour laws to follow the basic principles correctly.

  • Regularly audit your HR processes to ensure you comply with these laws.

  • Report on finances quarterly.

4. Pay and compensation

Aside from good leadership, people are motivated to stay in an organisation and perform better if they can be rewarded well for it. Poor compensation packages or errors in goal setting and performance measures will demotivate employees and reduce productivity, and will only hinder the company from achieving its organisational goals.

Manage risks caused by compensation by:

  • Keeping compensation and benefits packages as simple as possible.

  • Build reward programs that link performance to pay.

  • Make sure employment contacts for employees and contractors are up to date and legally sound.

  • Avoid any discrimination – ensure all rewards are awarded based on performance and contribution to the business’ goals.

5. Training and Development

Keeping the right employees in an organisation requires more than just good pay. Driven employees seek to build their careers which means your organisation must provide opportunities for them to grow their skills and progress within the company. However, according to Forbes, creating career paths that are well communicated and understood by employees is not something most companies do well. And therefore, one of the main reasons employees quit is that they don’t see any potential for growth in the organisation.

To avoid these risks, you should:

  • Provide opportunities for your employees to grow through training and skills development programs.

  • Encourage learning and organise for employees to set aside time weekly to learn.

  • Incorporate skill development into the regular performance appraisal process.

  • Hold managers accountable for outcomes.

With a function as critical as Human Resources, risks are always present. HR managers must take the right steps to mitigate these risks in order to help the organisation achieve its goals.

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Topics: Talent Management, HR Manager, Training Management, HR Leadership, Recruitment, HR Culture, Top 100 HR Blogs, HR best practice, HR blog

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