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ADDRESSING HUMAN CAPITAL RISKS

By Kastuv Ray 

Introduction

It is widely believed that people are the true assets of an organisation. In fact, many organisations have the following corporate goal stated in their Strategic Plan:

The aim of the organisation is to promote and provide a positive working environment for its employees.

In addition to this, employers at job interviews and staff meetings emphasise the following:

·        Staff are viewed as a resource and not a commodity

·        We promote from within

Reality

How much of what has been stated is really true?

Many individuals think they have found their dream job until they start at the workplace. It is amazing how many times employees tell the new recruit that they have made the wrong choice.

There are plenty of managers who make job promises that they have no intention of keeping. Typical examples are pay rises, promotions, types of clients and assignments. Usually an employee has to stand their ground and “”fight” for their pay rise or promotion. If this fails, the employee either “stays put” or they join another company where (hopefully) they are rewarded justly and quickly promoted. The ultimate loser is the employer. By not keeping their promises, they lose their key assets. The former employee may not talk about them in a positive light when their name is mentioned. This may not seem to have a major impact but if they sit back and think how news travels these days, this can have some sort of effect on the employer/company’s reputation.

Summarised below is an Action Plan on how an organisation may address Human Capital Risks:

Action Plan 

Corporate Level

The organisation should have the following aim/goal in its Strategic or Corporate Plan:

“To promote a positive, safe and ethical working environment for our employees.”

“To achieve this we aim to:

·        Reduce staff turnover

·        Encourage staff to stay longer with the organisation

·        Reduce sickness/absenteeism levels

·        Promote ethical standards

·        Reduce workplace conflict”

Targets

Targets and performance indicators need to be established and monitored. The targets have to start from the top (i.e. the Strategic or Corporate Plan)

and have to be cascaded down into the departments as part of the departmental plan. Performance needs to be monitored through personal development plans for employees, departmental meetings, departmental plans and committee/board meetings.

Reduction of Staff Turnover/Retention of Staff

In any organisation, employees leave at some point in time and a key risk to any organisation is succession planning because individuals leave with the intellectual capital in their minds. The way to address staff turnover may lie in the initial recruitment phase. Listed below are some ideas for keeping hold of employees:

·        Establish a structured recruitment/succession plan.

·        Recruit the right people (this is achieved by screening out employees not exhibiting the desired values or skills required for the role).

·        Use work related exercises or psychometric tests as part of the recruitment process.

·        Ask structured interview questions.

·        Record details of what has been discussed at interviews e.g. salary, study leave, bi-annual review, pension, flexi-time, benefits (e.g. gym membership), market supplements and relocation packages.

·        Induction period for new employees.

·        Managers should sit down and agree a Personal Development Plan (PDP) with new employees and set realistic targets and goals. This should be signed and agreed by both employees.

·        The PDP should be reviewed every 6 months and be subject to a “grandfather review”.

·        Reward the employee wherever possible. This can be anything from a bunch of flowers for a job well done to a pay rise.

·        A system could be introduced where if an employees carries out an action, which benefits the organisation, this is translated into a reward point. These are then added up at the end of the year and are translated into pay rises or gifts.

·        Develop staff through training courses covering negotiating skills, presentation and handling difficult customers. This process should be subject to proper authorisation.

Reduction of Sickness/Absenteeism Levels

If an employer doesn’t make the working environment bearable, employees will not want to come into work and exploit some loophole in the system.

To overcome this problem management need to undertake the following:

·        Promote a positive sickness management approach

·        Provide a free confidential advice line to staff (this includes counselling)

·        Establish a Stress Committee and hold stress workshops

·        Pre-employment screening

Promotion of Ethical Standards

This is easier said than done. To achieve this, the Chief Executive would have to lead by example and adopt the mantle of the Corporate Champion.

Some ideas are listed below:

·        Establish an Ethical Code

·        Promote and communicate ethical values

·        Maintain an Ethical Violations Register

·        Suggest tough penalties for unethical behaviour

·        Annual declaration of compliance with ethical standards

Reduce Workplace Conflict

Conflict occurs nearly everyday in the workplace. This is a very difficult risk to address, but the organisation can introduce the following:

·        Harassment policies

·        Health and Safety Policies

·        Incident Reporting Procedures

·        Health and Safety Committee

All of the four areas listed above are subject to audit and it is Internal Audit’s role to tell us how the system is functioning and whether or not it can be improved.

Conclusion

Human Capital Risks are very difficult to address and there is no right or wrong way in how we should try to resolve them. The article therefore only provides suggestions.