5 HR risks and how to manage them

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Building and running a business or an organisation takes a lot of hard work which in return reaps rewards in many forms such as customer loyalty, satisfaction, and increased revenue. Running the organisation or business also comes with risks and the only sure way to avoid these risks is by simply closing down operations. Organisations have the moral and legal obligation to safeguard both the entity and employees from these risks and incorporate risk management strategies at every level of operation.

Managing human resource department risks in the modern workplace plays an important role in streamlining organisational development and operations, especially with the changes being experienced in the workplace such as; shift to the gig economy, blurring boundaries of time and place, the adaptation of Artificial intelligence, focus on soft skills and social media. These new adaptations have changed the nature of work and workplace bringing in new opportunities and posing new threats thus the need to manage risk for the HR department. Below are 5 key risks the Human Resource function needs to consider while coming up with a risk management plan.

  1. Ineffective hiring

Hasty and poor hiring practices such as hiring unsuitable candidates, discrimination, and wrongful hiring can lead to undesired impacts on the organization. Hiring the wrong people has effects such as substandard performance, Low productivity, an increase in training expenses, team demotivation, high turnover rate, and expensive lawsuits. 

To protect organisations from future risks, hiring best practices need to be adopted. Some of these practices include;

  • Standardizing the hiring process, maintaining transparency, and allocating enough time to find and onboard the right employee.
  • Adopting effective interviewing processes such as training interviewers on how to interview for specific roles and involving more people in the hiring process.
  • Conduct pre-employment background checks such as reference checks and background investigations.
  • Having and sharing with new recruits the employee handbook to introduce your culture, mission, and values as well as communicate with the employee what is expected of them and what they should expect from fellow employees and management.
  • Offering training for new recruits to help adapt to the new environment.

2. Digital transformation

COVID-19 global pandemic has over-emphasized the need for digital transformation for the entire workforce. With most employees working from home, how has your organisation adapted to the new normal? The pandemic period has shown us why it’s important for the HR department to have a digital work plan that will ensure human operations continue or pivot quickly in case of economic, health, and natural occurrence. HR teams should be at the forefront of implementing new or existing technological strategies such as artificial intelligence and digital labour. They are in a unique position of realigning the workplace to enhance collaboration between employees and technology.

The HR teams should also play a role in managing change during digital transformation. Workplace culture has been cited as the top barrier to digital transformation, an issue that HR departments need to look into. Most employees are hanging on to the task-oriented way of working rather than embrace innovation. With the disruption that technology is causing in the workplace and workforce,  HR teams should see to it that the necessary actions are taken such as impact communication, training, assessing readiness for change, assessing potential impact before the change is implemented to help, and prepare employees to embrace the transformation.

3. Pay and compensation

The issue of pay and compensation is critical to employers as it enables them to attract and retain the best and to employees as they often look at it as how much the company values them. Many organizations struggle with how to effectively structure employees’ pay which leads to undesirable effects such as losing qualified personnel, increased turnover, and unsafe workplace as a result of over competition.

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The total reward system should be adopted by every HR personnel in order to manage the pay and compensation risk. It comprises 5 key elements that help attract and keep the best talent and also keeps your business ahead of competitors. These elements comprise of;

  • Compensation: It is monetary and in the form of salary, wages, commission, and cash bonus.
  • Benefits: it is non-monetary and in the form of insurance, vacation time, flexible work option, wellness program.
  • Professional development: through ways such as mentoring and training with the aim of developing or improving their skills and knowledge to provide more value to the organisation.
  • Recognition: through creating a program that rewards employees for meeting and/or exceeding set goals as a way of thanking and motivating them. Could include acts like recognition letter, gifts, and Promotion,
  • Work-life balance: through ways such as telecommuting options, flexible scheduling, encouraging employees to use their paid leave days, and have your children at workday.

HR professionals should take into great consideration the issue of equitable pay when it comes to paying and compensation. There should be fairness and consideration between employees in the same industry and in the same organization.

4. Ethics and behaviour

The HR department is the protector of values and should ensure ethical behavior and practices are encouraged. An organisation’s unethical reputation affects the firm negatively in many aspects some directly related to the HR department such as recruitment, employee engagement, and, retention. Some common unethical behavior witnessed in the workplace include; lies, verbal harassment, Corruption, sexual harassment, undue pressure, nepotism, and theft.

Having a proactive approach to address ethics and behaviour is the best way to manage related risk .some of the measures the HR team can take to proactively address ethics and behaviour include;

  • Have a code of conduct given to new recruits together with their contract. The consequences of unethical behaviour should be well stated therein.
  • Encouraging open-door policy to make it easy for employees to present their issues, complaints, and feedback.
  • Having an effective disciplinary committee that is not biased nor influenced by top management.
  • Recruiting staff who will uphold the ethical tone of the organisation.

5. HR Compliance

Human Resource professionals operate under a set of laws and regulations set by the government. It is the duty of HR professionals to understand and uphold these laws and ensure the organisation complies to avoid fines and penalties. Below are ways to achieve these;

HR function should hire personnel who are knowledgeable in HR matters, laws, and with the ability to create policies and procedures within set laws and effectively execute them.

  • Proper training on HR legal requirements and employment laws. This is recommended especially where new laws have been passed and there is a need to equip the professionals with the latest information.
  • HR audits to ensure the organisation complies with employment and labour laws which are ever-changing and evolving. Functions such as recruitment, selection, layoff, and termination should be audited and effectiveness tested to ensure workplace safety.
  • Compliance communication: The HR department should collaborate with top management and department heads to effectively implement the organisation’s compliance program. Comprehensive communication keeps everyone to speed and promotes compliance.

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