Are Organisations Ignoring Key HR Risks?

A report by Ernest and Young back in 2008 found that human resource issues ranked among the top five business issues impacting a corporation's results, yet 41 percent of executives surveyed admitted to reviewing these risks on an ad hoc basis or never. E&Y surveyed senior finance, accounting, risk, and HR executives at 150 Fortune 1000 companies about their perceptions of HR risks and the recognition these risks are given within a global organization.

 

The top five individual HR risk areas seen as having a high impact and likelihood of occurrence within an organization are:

 

• Talent management and succession planning (65 percent for impact, 42 percent for occurrence).

• Ethics/tone at the top (64 percent for impact, 23 percent for occurrence).

• Regulatory compliance (51 percent for impact, 21 percent for occurrence).

• Pay and performance alignment (45 percent for impact, 27 percent for occurrence).

• Employee training and development (41 percent for impact, 24 percent for occurrence).

 

Even with the global financial crisis, where you’d think organisations would quickly want to implement practices and policies that would re-focus the organisations strategy and performance for practical sustainable growth in the coming years, I would suggest that these five key human resource risk areas are still not getting the attention they deserve.

 

Succession planning is probably one of the most talked about, yet least implemented business practices in today’s corporate world. For some reason boards, CEO’s and executive teams seem to agree, during a debate, the importance of succession planning and how vital it is to have ‘people’ in waiting, especially for key roles – yet when it comes to implementing ‘proper’ succession planning systems that are all encompassing that link to an integrated human resource strategy, they seem to fall flat.

 

What’s fascinating about the criteria is that they rightly see ethics and ‘the tone at the top’ as a key human resource issue, where these drivers are often assumed to be the responsibility of the CEO and as such are not ‘challenged’ as part of the day-to-day activities at the top.

 

In fact what’s sad about ‘the tone at the top’ as a key risk is that you’ll find where the ‘tone’ is a risk, it’s often because the CEO doesn’t want to discuss it and those that try can find themselves marginalised within the executive team. Recent scandals, including the libor scandal at Barclays, would most likely prove this point.

 

Regulatory compliance still seems to get too little attention and there seems to be a perception within big corporates that they are not to be dictated too (by anyone, about anything) – even when the regulation is there, not only to protect, but also to improve performance.

 

Pay and performance is debated today, as it has been over the last three decades and more, where equality is still the biggest deviation for pay; and poor appraisal systems and techniques are the biggest cause of dissatisfaction and demotivation in relation to performance. Where it still seems that recognition for good performance is the exception rather than the rule.

 

The market for employee training and development has become saturated, partly due to the advert of social media and social networking, and also due to too many suppliers offering what they think organisations need, rather than actively forming collaborative relationships with clients to offer them what they need. That, combined with internal budget cuts, has seen training and development take a back seat – yet again. Thirty years ago business guru’s like Michael Porter, Peter Drucker, etc were telling us then that the last budget to get cut in a crisis should be the training and development budget – not the first. But we seem to be slow learners.

 

So maybe organisations should think about reviewing these five key criteria more formally and more often – you may be pleasantly surprised by the improvements in organisational and operational performance if you do.

 

References:

 

Steffee, S. (2008). HR Risks Are Largely Ignored. Internal Auditor; Vol. 65 Issue 6, p.14-15.