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Developing a HRM Governance Framework: Principles, Processes & Best Practices

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Developing a comprehensive Human Resources Management (HRM) Governance Framework: Principles, Processes and Best Practices

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Developing a HRM Governance Framework: Principles, Processes & Best Practices

  1. 1. DEVELOPING A HUMAN RESOURCES MANAGEMENT (HRM) GOVERNANCE FRAMEWORK: PRINCIPLES, PRACTICES AND PROCESSES CHARLES COTTER PhD, MBA, B.A (Hons), B.A www.slideshare.net/CharlesCotter MILLENNIUM BUSINESS CONSULTING ACCRA, GHANA 11-13 MARCH 2019
  2. 2. TRAINING PROGRAMME OVERVIEW (DAY 1) • Defining Corporate Governance, HRM Governance and SHRM • King IV Report on Corporate Governance: Applying the 17 principles to HRM • Applying Cotter’s (2018) R-E-D- C-A-R model of HRM Governance • The role of HR governance within corporate governance • Applying the 5 elements of HRM functional Governance
  3. 3. DAY TRAINING PROGRAMME OVERVIEW (DAY 1) • Developing a HRM Governance Framework • Aligning HRM Governance with business strategy • Applying the Strategic Performance Advisor model (Cotter, 2019) • Diagnosis of current, Strategic HRM practices (Gap Analysis) • HRM transformation • Applying the 5-step HRM Risk Management
  4. 4. AGREE OR DISAGREE? WHY?
  5. 5. • Individual activity: • Complete the statement by inserting one (1) word only. In order for HRM to be fully compliant with HRM governance principles, HR managers/professionals need to/to be.……………………………….………………………………….. • Now find other learners with the same word as you. • Jot these words down on the flip-chart. • Each learner will have the opportunity to elaborate on their chosen word. INTRODUCTORY ACTIVITY
  6. 6. OBJECTIVE #1: THE FUNDAMENTALS OF CORPORATE AND HRM GOVERNANCE AND STRATEGIC HRM
  7. 7. DEFINING CORPORATE GOVERNANCE • Defining corporate governance, “the purpose of corporate governance is to promote integrity, transparency, accountability and disclosure, with a view of protecting investors and enabling improved relations with various stakeholders.” • Corporate governance provides the foundation to mitigate and manage risk. • Corporate governance concerns itself with the company as a corporate citizen. • Corporate governance focuses mainly on the probability of the company by guarding finances, making sure there is compliance and accountability. • Corporate governance is regarded as the rules that govern the behaviour of a vehicle (corporate citizen).
  8. 8. KING IV (2016) REPORT ON CORPORATE GOVERNANCE – 4 CORPORATE GOVERNANCE OUTCOMES • #1: Ethical Culture • #2: Good performance • #3: Effective Control • #4: Legitimacy
  9. 9. KING IV (2016) REPORT ON CORPORATE GOVERNANCE – 17 PRINCIPLES AND CORRESPONDING OBJECTIVES • Principle #1: Leadership - “The governing body should lead ethically and effectively” • Principle #2: Organizational ethics - “Govern the ethics of the organization in a way that supports the establishment of an ethical culture” • Principle #3: Responsible Corporate Citizenship - “Ensure that the organization is and is seen to be a responsible corporate citizen” • Principle #4: Strategy and performance - “The governing body should appreciate that the organization’s core purpose, its risks and opportunities, strategy, business model, performance and sustainable development are all inseparable elements of the value creation process” • Principle #4: Reporting - “The governing body should ensure that reports issued by the organization enable stakeholders to make informed assessments of the organization’s performance, and its short, medium and long-term prospects” • Principle #6: Primary roles and responsibilities of the governing body - “The governing body should serve as the focal point and custodian of the corporate governance in the organization”
  10. 10. KING IV (2016) REPORT ON CORPORATE GOVERNANCE – 17 PRINCIPLES • Principle #7: Composition of the governing body - “The governing body should comprise the appropriate balance of knowledge, skills, experience, diversity and independence for it to discharge its governance role and responsibilities objectively and effectively” • Principle #8: Committees of the governing body - “The governing body should ensure that its arrangements for delegation within its own structures promote independent judgement, and assist with balance of power and the effective discharge of its duties” • Principle #9: Evaluation of the performance of the governing body - “The governing body should ensure that the evaluation of its own performance and that of its committees, its chair and its individual members, support continued improvement in its performance and effectiveness” • Principle #10: Appointment and delegation to management - “The governing body should ensure that the appointment of, and delegation to, management contribute to role clarity and effective exercise of authority and responsibilities” • Principle #11: Risk governance - “The governing body should govern risk in a way that supports the organization in setting and achieving its strategic objectives” • Principle #12: Technology and information Governance - “The governing body should govern technology and information in a way that supports the organization setting and achieving its strategic objectives”
  11. 11. KING IV (2016) REPORT ON CORPORATE GOVERNANCE – 17 PRINCIPLES • Principle #13: Compliance governance - “The governing body should govern compliance with applicable laws and adopted, non-binding rules, codes and standards in a way that it supports the organization being ethical and a good corporate citizen” • Principle #14: Remuneration governance - “The governing body should ensure that the organization remunerates fairly, responsibly and transparently so as to promote the achievement of strategic objectives and positive outcomes in short, medium and long term” • Principle #15: Assurance - “The governing body should ensure that assurance services and functions enable an effective control environment, and that these support the integrity of information for internal decision-making and of the organization’s external reports” • Principle #16: Stakeholder - “In the execution of its governance roles and responsibilities, the governing body should adopt a stakeholder–inclusive approach that balances the needs, interests and expectations of material stakeholders in the best interests of the organization over time” • Principle #17: Responsibilities of Institutional Investors - “The governing body of an institutional investor organization should ensure that responsible investment is practiced by the organization to promote the good governance and the creation of value by the companies in which it invests”
  12. 12. DEFINING HRM GOVERNANCE • The concept of HRM governance is becoming an emerging organizational practice that enforces HRM to design their functionality and strategy within a governance framework. By doing so the HRM function contributes to the overall company’s performance. • HRM governance is the human capital dimension of the corporate governance framework. • HRM Governance is the effective leadership of the HR function in an ethical and sustainable way. • HRM Governance focuses on the rules that govern the main components of the corporate entity referred to as the people. • “The need for an HR governance system that could assist in dealing with many of the HR problems and challenges encountered by South Africans, such as HR risk management and corporate ethics, which appear to arise from ineffective corporate governance.” (SABPP, 2009) • HRM governance is a systematic approach that creates a legitimate platform to achieve the HRM strategy and objectives, that are directly aligned to achieve business objectives. • This golden thread of governance informs the operational capability of HRM to achieve and deliver on its outcomes.
  13. 13. 6 OBJECTIVES OF HRM GOVERNANCE • HRM governance is the act of leading the HRM function and managing related investments to the following 6 objectives (Mercer): • #1: Optimise performance of the organisation’s human capital assets; • #2: Fulfill fiduciary and financial responsibilities; • #3: Mitigate enterprise HRM risk; • #4: Define stakeholders and their expectations; • #5: Align the function’s priorities with those of the business; and • #6: Enable HRM executive decision making.
  14. 14. HRM GOVERNANCE – R-E-D-C-A-R (Cotter, 2018) • Risk management • Ethics • (Workplace) Democracy • Compliance (legislation, policy and procedure) • Auditing • Reporting
  15. 15. THE ROLE OF HRM GOVERNANCE WITHIN CORPORATE GOVERNANCE • Differentiating between corporate governance and HRM governance • Defining governance • The link between HRM and the Six Capitals of Business
  16. 16. THE LINK BETWEEN HRM AND THE SIX CAPITALS OF BUSINESS • The Six Capitals employed by business are described as: • Financial • Manufactured • Intellectual • Human • Social and Relational • Natural
  17. 17. THE LINK BETWEEN HRM AND THE SIX CAPITALS OF BUSINESS • A strong HRM focus can be found in at least three of the Six Capitals, namely: ❑ Intellectual - with the knowledge created and held by the people of the organization. ❑ Human - relates to the actual resources or people of the organization and that create the productivity and sustainability of the business. ❑ Social and Relationship - drives the point that without people this is not sustainable. • The business is built on the capacity and relatedness of people and is an important element of an organization’s success. • People create value, and since three of the Six Capitals are people-dependent, the importance of the HRM function expanding its focus to embrace governance is clear. • The significance and inclusion of HRM governance in King IV is very visible. The message to drive HRM governance is an important part of the business strategy.
  18. 18. THE INTEGRATION AND ALIGNMENT OF HRM GOVERNANCE AND BUSINESS STRATEGY • “GRC (governance, risk and compliance) provides a perfect opportunity for CHRO’s (Chief HR officers) and HR organisations to move beyond their traditional administrative role and a seat at the strategy table - providing HRM with a level of credibility and respect that is long overdue.” (Deloitte, 2008) • HRM governance should be a strategy within HRM. Linking back to the Mercer model, by creating structure and accountability with effective council, the HRM governance strategy allows for inclusion and effective delivery towards the business strategy. • The implementation of a corporate governance strategy enables HRM to create methods of delivery that are measured within a governance structure. • The strategic intent will then be achieved through HRM governance with regards to culture, performance, controls and legitimacy. • By understanding the integration and relationship between HRM and corporate governance, they function in support of one another and not in isolation. • By aligning the HRM governance to that of organisational activities, HRM creates an interrelated relationship with business that forms the basis of its operating model and governance structure.
  19. 19. LEARNING ACTIVITY 1 • Group Discussion: • Review the King IV 17 principles of Corporate Governance; the 4 Corporate governance outcomes; the 6 HRM governance objectives and the 6 Capitals and describe the role, contribution, alignment, integration and relation between HRM Governance and Corporate Governance.
  20. 20. STRATEGIC HUMAN RESOURCES MANAGEMENT (SHRM) • SHRM is defined as an approach to managing people that deals with how the organization’s goals will be achieved through its human resources by means of integrated HR strategies, policies and practices (Armstrong, 2016). • SHRM propositions: ❑ The HR of an organization play a strategic role in it’s success ❑ Human capital is a major source of competitive advantage ❑ It is people who implement business strategy ❑ A systematic approach should be adopted to planning and implementing HR strategies ❑ HR strategies and plans should be integrated with business strategies and plans
  21. 21. 6 HIGH PRIORITY STRATEGIC HRM OBJECTIVES AND RELATED ROLES (Cotter, 2019) • #1: Attract, acquire and select top talent - promote a competent and competitive workforce i.e. quality of hire; Role: Cognitive and Intelligent Talent Broker • #2: Transform to a digitally-enabled HRM operating model, stimulate collaborative intelligence and design an automated Knowledge Management System; Role: Strategic Performance Advisor (SPA) • #3: Future-proof the organization, by developing a measurement culture and generating real-time predictive business analytics and –intelligence; Role: Digital Futurist and –Analyst • #4: Develop an agile High Performance Organization (HIPO) culture and a high level of employee engagement; Role: Behavioural Economist • #5: Mainstream HRM into core business processes, by offering business valued solutions to key organizational problems and Role: Innovative solutions architect • #6: Develop a HRM Governance framework, processes, principles and promote an ethical organizational culture, espousing and enacting core company values. Role: Advocate, Custodian and Steward of governance and ethics
  22. 22. BUSINESS INTELLIGENCE (Level 3 of strategic HRM maturity – transformational) HRM STRATEGY (Level 4 of strategic HRM maturity – strategic) HRM GOVERNANCE (Level 1 of strategic HRM maturity – traditional) WORKPLACE ADVOCACY (Level 2 of strategic HRM maturity – transactional) STRATEGIC PERFORMANCE ADVISOR (Cotter, 2019) STRATEGIC TRANSACTIONAL CURRENT FUTURE-FOCUSED
  23. 23. STRATEGIC PERFORMANCE ADVISOR (SPA) – 4 PIVOTAL POINTS (COTTER, 2019) • HRM Strategy (e.g. embedding HR strategy into business strategy; the use of strategy maps; adopting a strategic mindset and applying strategic management principles and processes) - strategic/future-focused; • Business Intelligence (e.g. competitive predictive HR metrics and analytics; future- proofing the business model; creating HIPO; applying evidence-based HRM; knowledge management and collaborative intelligence and trouble-shooting solutions architects) strategic/current; • Workplace Advocacy (e.g. Employee engagement; employee voice; employee retention; succession planning; creating a workplace culture of ambassadors; mainstreaming HRM and future-fit employees) - transactional/future-focused and • HRM Governance (e.g. HR policies and procedures; HR/people risk management, compliance with ethics and King IV corporate governance principles and -Human Capital reporting and HR Auditing) - transactional/current.
  24. 24. DIAGNOSIS: 10 BEST PRACTICE GUIDELINES FOR SPA • https://www.surveymonkey.com/r/BXRKRXG • #1 Embedding HRM strategy in business strategy and able to translate that strategy into deliverable actions • #2 Well-defined, implemented and reported HRM performance and ROI metrics (creating credibility and accountability) • #3 Generating business intelligence e.g. predictive and strategic analytics (that shapes, informs, guides and ultimately, influences strategic business decisions) • #4 Offering a professional, value-adding business proposition sensitive to and supportive of business needs, interests and strategic priorities • #5 Ongoing line management consultation, engagement, coaching and building trusting, collegial and mutually beneficial business relationships
  25. 25. DIAGNOSIS: 10 BEST PRACTICE GUIDELINES FOR SPA • https://www.surveymonkey.com/r/BXRKRXG • #6 HR Management and practitioners possess business and industry knowledge, acumen and insight • #7 HRM collaborates with line management to broker meaningful and impactful business solutions • #8 HRM processes, systems and practices are horizontally integrated (bundled), agile, responsive and stream-lined (that enhance productivity and efficiency) • #9 HRM is a transformational initiator, driver and implementer of business change • #10 HRM is technology-savvy innovator, enabling and leveraging best practices (e.g. CoE; Shared Services and e-HRM)
  26. 26. LEARNING ACTIVITY 2 • Individual Diagnostic Activity: • Critically review and evaluate your current HRM processes and function against the ten (10) best practice criteria. Refer to the link: https://www.surveymonkey.com/r/ BXRKRXG • Group Discussion: • Identify gaps. Recommend improvement strategies. • Refer to the research findings: https://www.slideshare.net/CharlesC otter/measurement-and-diagnosis- of-the-strategic-impact-and-value-of- selected-african-hrmld-practices-a- surveybased-studyresearch-findings
  27. 27. HRM STRATEGIC MATURITY MODEL (Cotter, 2017) Level 4: Strategic HRM/L&D (80%+) Level 3: Transformational HRM/L&D (65-79%) Level 2: Transactional HRM/L&D (41-64%) Level 1: Traditional HRM/L&D (0-40%)
  28. 28. STRATEGIC PERFORMANCE ADVISOR “To be a future-fit, Strategic Performance Advisor, who practices evidence-based Human Resources Management (HRM) and who optimally leverages business intelligence for strategic business impact, effectively harnessing Artificial Intelligence (AI) is an imperative for African HR managers and - professionals.” (Charles Cotter PhD, 17 March 2019)
  29. 29. 0 10 20 30 40 50 60 70 STRATEGIC PERFORMANCE ADVISOR - FREQUENCY DISTRIBUTION 11-20 21-30 31-40 41-50 51-60 61-70 71-80 81-90 90-100
  30. 30. STRATEGIC PERFORMANCE ADVISOR (SPA) – WIDEST COMPLIANCE GAPS Range Median Mean Standard Deviation 11-100% 54% 57% 17% BEST PRACTICE CRITERIA RELATIVE DIFFICULTY RANKING MEAN SCORE Q2: Your organization's HRM function has well-defined, implemented and reported HRM performance scorecards and ROI metrics (creating credibility and accountability) 1 50% Q3: Your organization's HRM function generates business intelligence e.g. predictive and strategic analytics (that shapes, informs, guides and ultimately, influences strategic business decisions) 2 50% Q10: Your organization's HRM function is technology-savvy innovator, enabling and leveraging best practices (e.g. CoE; Shared 3 53%
  31. 31. STRATEGIC PERFORMANCE ADVISOR (SPA) – MOST COMPLIANT CRITERIA BEST PRACTICE CRITERIA RELATIVE DIFFICULTY RANKING MEAN SCORE Q4: Your organization's HRM function offers a professional, value-adding business proposition sensitive to and supportive of business needs, interests and strategic priorities 10 65%
  32. 32. OBJECTIVE #2: DEVELOPING A HRM GOVERNANCE FRAMEWORK
  33. 33. THE SIGNIFICANCE OF HRM GOVERNANCE • The impact that the management of both the organization’s people resources and the management of its HR function has on the effectiveness of corporate governance is becoming better appreciated as the realization dawns that ‘people risk’ is a key element of many of the major risk categories concerning the typical business today. • HRM is the people, policies and process portfolio that falls in line with the corporate governance framework of the organization. However, the clear connection is missed as “Human Resource Management (HRM) was established to prevent, limit or mitigate the risks and associated with non-compliance” i.e. governance. • Corporate and HRM Governance are strategically related due to the fact that an improvement in the employee performance will automatically translate into an improvement in organizational performance. • By having a proper HRM governance structure in place can even impact the way the organization does business and makes decisions at the highest levels – right up to and including its board of directors.
  34. 34. ELEMENTS OF HRM GOVERNANCE • Structure and accountability • Effective councils • Philosophy and operating principles • Core management activities • Performance monitoring
  35. 35. HRM GOVERNANCE IMPLEMENTATION (GROBLER, 2014)
  36. 36. HR LEADERSHIP WITHIN THE GROBLER (2014) MODEL • HR Risk Management • HR internal controls and HR quality assurance • The recommendation of HR audits both internally and externally is supported • Performance monitoring will be in line with the HR governance • HR process management • HR transformation
  37. 37. HR PROCESS MANAGEMENT • HR process management looks at the reporting structure within the HR department, as well as the centralization and decentralization of functions. • HRM delegations are important to note in order to address: ❑Anomalies and concerns; ❑Quality and speed of service delivery; ❑Empower/motivate and develop managers within HR and the institution.
  38. 38. HRM TRANSFORMATION • “One of the required transformations is that HR professionals should build their own capacity and competence into executive business and HR strategies. In particular, higher HR skill is required in the areas of leadership, governance, remuneration and training.” • Ulrich’s (2017) competencies • Cotter’s I-Q-P-A-C (2018)
  39. 39. ULRICH’S 9 HR COMPETENCIES (2017) • Core competencies: ❑ Strategic positioner ❑ Credible activist ❑ Paradox navigator • Organization enablers: ❑ Culture and change champion ❑ Human capital curator ❑ Total reward steward • Delivery enablers: ❑ Technology and media integrator ❑ Analytics designer and interpreter ❑ Compliance manager
  40. 40. ULRICH’S HR COMPETENCIES (2017)
  41. 41. CHANGE MESSAGE TO HR MANAGERS (Cotter PhD, 2018) "HRM must be instrumental in and at the forefront of the I-Q-C-A-P drivers of business performance, namely: Innovation; Quality; Compliance; Agility and Processes (to optimize productivity), in their quest to transform and actualize to become strategic performance advisors."
  42. 42. STRATEGIC CHANGE AGENDA - IMPROVEMENT RECOMMENDATIONS – HRBP (COTTER, 2017) • #1: Transition from transactional to transformational HRM; • #2: Transition from a cost to a profit centre; • #3: Acquisition of more advanced, business relevant skills by HR Professionals; • #4: Migration from manual to automated/digital HRM – 1G to 4G technology; • #5: Migration from fundamentals of people science to the complexities of data science and • #6: Transition from administrative expert to strategic performance advisor.
  43. 43. ACTION STEPS/PLAN TO TRANSFORM HR INTO A HRBP • Step 1: Strategic Review and Analysis • Step 2: Strategic Role Clarification and Contracting • Step 3: Formulation and Development of Transformational Strategies • Step 4: Implementation of Transformational Strategies • Step 5: Measure and evaluate business impact and results
  44. 44. CRITICAL SUCCESS FACTORS THAT DRIVE THE HRM GOVERNANCE FRAMEWORK WITHIN ORGANIZATIONS • Cascading of governance outcomes • Leadership buy-in • A key element that drives HRM governance is the strategy - the strength of the HRM strategy depends on the governance it incorporates • Effective leadership, sustainability and corporate citizenship are key aspects of the HRM governance system • Effective leadership should ensure that the company is compliant in governance as a whole, however encourage, advocate and support HRM governance to the employees • The other aspect is that of aligning effective leadership as part of the overall HRM strategy
  45. 45. CRITICAL SUCCESS FACTORS THAT DRIVE THE HRM GOVERNANCE FRAMEWORK WITHIN ORGANIZATIONS • Through proper processes and policies, the governance of performance monitoring and metrics can be achieved, and function within the HRM governance framework • The code also brings to the fore, the role of ethical and effective leadership. • Corporate citizenship beckons HRM professionals to look beyond the internal environment, but to look into the impact of the organisation on society and the environment • HRM governance will ensure that this is upheld in areas of transformation • Sustainability - Triple bottom-line (King)
  46. 46. SUSTAINABILITY - 3 P’S OF THE TRIPLE BOTTOM (KING)
  47. 47. CRITICAL SUCCESS FACTORS THAT DRIVE THE HRM GOVERNANCE FRAMEWORK WITHIN ORGANIZATIONS • Integrated thinking which promotes the connectivity and interdependence between a range of factors that enable an organisation to create value. • This mindset ensures that HRM governance and corporate governance are integrated. • Alignment between HRM and Business
  48. 48. LEARNING ACTIVITY 3 • Group Discussion: • By reviewing the elements of HRM Governance; the Grobler (2014) of HRM governance implementation and the key elements of HRM governance, determine the degree of efficiency, effectiveness and compliance of your organization’s current HRM Governance framework. • Identify gaps and discuss strategies to close these gaps.
  49. 49. CURRENT STATUS OF HRM GOVERNANCE • Human Resources ❑ According to the Institute of Internal Auditors of South Africa – 2016 Corporate Governance Index, 26% of the respondents “strongly agreed” that their organisations had suitable Human Resources. ❑ Only 17% of all respondents “strongly agreed” that human capital is being used optimally. ❑ 46% “somewhat agreed”. ❑ Using these statistics as guidance, the room for HRM to increase its impact on the organisation’s effectiveness is considerable.
  50. 50. CURRENT STATUS OF HRM GOVERNANCE • Leadership Performance ❑ Only 39% of respondents “agreed” that the executive team functioned optimally in delivering the strategy of the organisation. 40% “somewhat agreed”. • International Perspective ❑ HRM is largely excluded from the formal American Corporate Governance discussion due to the fact that HRM professionals in America are not considered professionals as their finance and legal counterparts (Leblanc). ❑ This is due to not belonging to a Professional Body or being compelled to comply with a set of standards or audit requirements. ❑ These comments may provide insight for the failure to formally recognise the contribution of the HRM Profession within King IV as well as that many Boards in South Africa don’t appoint HR Talent in a Non-Executive role as often as Legal and Finance Professionals.
  51. 51. HRM GOVERNANCE IMPROVEMENT STRATEGIES • Understand the difference between Corporate Governance and HR Governance. • Review models of HRM governance and adapt the most suitable for your organization. • Create alignment to the organization’s governance framework with HR policies, procedures and issues e.g. Code of Ethics. • Understand that HRM governance enables the HRM strategy and function. • Create the councils that develop, maintain and support HR governance and hold them accountable to the governance implemented. • Performance monitor and measure your outcomes within the governance strategy. • Create a communication strategy that assists in informing the company about the HRM Governance plan. • Drive company culture by being a leader in governance.
  52. 52. HRM GOVERNANCE IMPROVEMENT STRATEGIES • Do not work in isolation, share information with other departments and assist in their governance strategies. • Ensure King IV elements are included and upheld within the strategy and implementation. • Research the implications of compliance vs non-compliance - mitigate the risks of non-compliance. • Train your Board and employees. • Hold your leadership accountable for governance - both corporate and HR governance. • Audit your HR portfolio and measure it. • Report on HR Governance at Exco and Board.
  53. 53. OBJECTIVE #3: HR Risk Management
  54. 54. THE FUNDAMENTALS OF HR RISK MANAGEMENT • Defining Risk and Risk Management • Defining HR Risk Management • The purpose and objectives of HR Risk Management • Corporate/HRM Governance principles • Applying Risk Management to HR • Benefits of HR Risk Management
  55. 55. DEFINING HR RISK MANAGEMENT • HR risk is any people, culture or governance factor causing uncertainty in the business environment that could adversely impact on the company’s operations. ❑What are the HR risks that could jeopardize management in achieving its business objectives? ❑How serious are these risks, i.e. what are the impact of these HR risks? ❑What can we do about it, i.e. how can we mitigate the HR risks? • HR Risk Management is a systematic approach of identifying and addressing people factors (uncertainties and opportunities) that can either have a positive or negative effect on the realization of the objectives of an organization. (SABPP)
  56. 56. PURPOSE AND OBJECTIVES OF HR RISK MANAGEMENT • To increase the probability and impact of positive events and decrease the probability and impact of negative events caused by people factors on the achievement of organizational objectives • To ensure appropriate risk assessment practices and procedures relating to people factors are embedded within the organization • To ensure appropriate risk controls are designed and applied to HR activities and interventions • To contribute in creating and sustaining a risk culture in an organization which also encourages innovation and creativity • To align HR and people management practices within the governance, risk and compliance framework and integrated reporting model of the organization
  57. 57. CORPORATE/HRM GOVERNANCE (KING IV - 2016) • Chapter 4: Principle 11 (Risk Governance): ❑“The governing body should govern risk in a way that supports the organisation in setting and achieving its strategic objectives” • Chapter 4: Principle 14 (Remuneration Governance): ❑“The governing body should ensure that the organisation remunerates fairly, responsibly and transparently so as to promote the achievement of strategic objectives and positive outcomes in short, medium and long term”
  58. 58. APPLYING RISK MANAGEMENT TO HR • “The role of HR is to decrease the HR risk profile of the organization.” (Leon Steyn) • “A key risk in future – just like today – is people risk. We live in a country with a dearth of skills. So a key test of entrepreneurship is how you develop people. One of the big lessons from Bidvest is that you grow by growing people and working together. You rarely find bad people in business. The problem is usually a bad fit. Give people the right opportunity, the right tools and training, and they will perform.” (Brian Joffe) • “People represent a cause of operational risk that is as important (if not more important) than other causes such as failed systems, processes and information flows.” (Gilbert Renel)
  59. 59. BENEFITS OF HR RISK MANAGEMENT
  60. 60. BENEFITS OF HR RISK MANAGEMENT
  61. 61. RESEARCH-BASED REALITY CHECK • Human Capital is the biggest concern for CEOs (Pwc CEO study); • Only 18% of CEOs feel confident that they have the right people to execute business strategy (Corporate Executive Board); • Strikes cost South Africa R200 million a day; • South Africa is losing R12 billion a year due to absenteeism; • World-wide only 13% of employees are actively engaged (Gallup) and • Human capital is the biggest business risk in South Africa (Human Capital Institute Africa).
  62. 62. HUMAN CAPITAL INSTITUTE RESEARCH
  63. 63. GUIDELINES FOR MANAGING HR RISK • #1: Redesign your organization’s HR plan to include HR risk management. • #2: Read more about risk management to gain a proper understanding of the importance of risk management and governance in the workplace. • #3: Arrange a meeting with your organization’s CRO or head of risk. • #4: Ensure that key staff members in your organization have the proper training and education for managing risk. • #5: Liaise with line managers to explore opportunities where you can help to create and nurture a risk management culture in your organization.
  64. 64. GUIDELINES FOR MANAGING HR RISK • #6: Check whether your organization’s risk register has a record of HR risks and assist the CRO and line managers to identify risk management strategies to deal with these risks. • #7: Excellent people and talent management are the best bulwarks against HR risks. • #8: Support the board by ensuring that the company appoints a highly competent CRO and other risk managers for different business units. • #9: Introduce robust HR risk controls, monitoring systems and respond appropriately to any HR risks by using early warning systems before an HR risk starts to threaten the sustainability of the organization. • #10: Consider holding regular meetings with staff members to discuss HR risk factors that may affect business operations.
  65. 65. LEARNING ACTIVITY 4 • Group Discussion: • By means of a cost-benefit analysis, build a business case for efficient and effective HR Risk Management. • Indicate whether you believe that people risk is a serious/priority risk and a strategic imperative in your organization. Substantiate your answer. If not a priority/strategic imperative, describe how HRM can transform this process. • By referring to the 10 guidelines to HR Risk Management (paragraph 4.7), critically review and evaluate current HRM Risk Management practices. Identify gaps and recommend improvement strategies.
  66. 66. STAKEHOLDERS INVOLVED IN THE RISK MANAGEMENT PROCESS • King IV Report on Corporate Governance ❑Chapter 5 - Principle 16: “In the execution of its governance roles and responsibilities, the governing body should adopt a stakeholder–inclusive approach that balances the needs, interests and expectations of material stakeholders in the best interests of the organisation over time” • Key Stakeholders – Professional Associations e.g. South African Board of People Practice (SABPP)
  67. 67. POWER-INTEREST MATRIX
  68. 68. A HR RISK MANAGEMENT CONCEPTUAL FRAMEWORK
  69. 69. ISO 31 000:2009 RISK MANAGEMENT FRAMEWORK
  70. 70. THE HR RISK MANAGEMENT PROCESS (AON HEWITT)
  71. 71. PREPARATION
  72. 72. STEP 1: IDENTIFY HR RISKS • The identified risks must be recorded and documented in a HR risk management register. • This process will be guided and defined by the organizational Risk Management procedure. ❑ Identify the HR risks that you'll either need to manage or accept ❑ List all of the likely HR risks (internal and external) that your organization faces • Refer to list of typical, prominent and research-based risks • Every activity of an organization poses a risk, so brainstorm and document the risks. Consider both the general risks and the risks specific to your organization. • Tip: Involving staff, volunteers and board members in the risk identification process will give you a comprehensive picture of the risks based on different people's involvement in different areas of the organization.
  73. 73. PROMINENT HR RISKS • Compliance with legislation • Understanding trends in the business environment • People and corporate culture • Implementing business strategy • Carrying out operations
  74. 74. SABPP RESEARCH
  75. 75. BUSINESS PROCESS MAPPING (AON HEWITT)
  76. 76. STEP 2: ANALYZE HR RISKS • The chart allows HR Managers to rate potential risks on these two dimensions. ❑The probability that a risk will occur is represented on one axis of the chart ❑The impact of the risk, if it occurs, on the other. • HR Managers can use these two measures to plot the risk on the chart. • HR Managers can then decide what resources they will allocate to managing that particular risk. • Risk Impact/Probability Chart.
  77. 77. STEP 3: PRIORITIZE HR RISKS
  78. 78. STEP 4: RISK RESPONSE AND IMPLEMENTATION • When you have decided which risk management strategies will be the most effective & affordable for your organization, practically outline the steps and who is responsible for each step in the risk management plan. • Provide training for all organizational staff and volunteers so they understand the rationale of the risk management plan as well as the expectations, procedures, forms etc. • Communicate the plan and ensure that there is buy-in from all who are involved in the organization.
  79. 79. STEP 4: RISK RESPONSE AND IMPLEMENTATION
  80. 80. STEP 4: HR RISK MANAGEMENT ACTION PLAN TEMPLATE
  81. 81. STEP 5: RISK EVALUATION • Risk Monitoring ❑Is your plan working? ❑Have your risks changed? ❑Have you expanded or reduced your programs and services? ❑Are changes or updates required? ❑Are staff and volunteers following the risk management plan? ❑Do they need re-training on the details? ❑Do we need to better communicate the plan? • Tip: Risk management is an evolving field. Therefore, it is a good practice to keep current and re-evaluate your organization's risk management system on an annual basis. • Risk Control
  82. 82. LEARNING ACTIVITY 5 • Group Discussion: • Apply steps 1- 5 of the HR Risk Management process to a selected organization.
  83. 83. CASE STUDY: HR RISK MANAGEMENT NEDBANK
  84. 84. LEARNING ACTIVITY 6 • Group Discussion: • Identify and discuss the critical success factors that Nedbank applied in terms of HR Risk Management. • Indicate how the ISO (2009) standard on risk can be applied to Nedbank HR Risk Management strategies. • What best practice guidelines and lessons can be drawn from Nedbank?
  85. 85. TRAINING PROGRAMME OVERVIEW (DAY 2) • The fundamentals of HRM policy development • The purpose, relevance of and need for HRM policies • Mastering the 6-step HRM policy development process • Ensuring compliance to HRM policy and labour legislation • HRM as the custodian of organizational ethics
  86. 86. OBJECTIVE #4: HRM Policies and Procedures
  87. 87.  A policy is typically described as a principle or rule to guide decisions and achieve rational outcome/s.  A purposive course of action based on societal values, followed in dealing with a matter or concern, and predicting the outcome that would result from the achievement of the purpose.  Policy can be considered as a "Statement of Intent" or a "Commitment.“ For that reason at least, managers can be held accountable for the "Policy“ DEFINITION OF POLICY
  88. 88. DEFINITION OF HRM POLICY • Human resource policies are the formal rules and guidelines that businesses put in place to hire, train, assess, and reward the members of their workforce. • These policies, when organized and disseminated in an easily used form, can serve to preempt many misunderstandings between employees and employers about their rights and obligations in the business place. • Having policies written is important so that it is clear to all what the policies are and that they are applied consistently and fairly across the organization. • Moreover, when issues concerning employee rights and company policies come before the courts, it is standard practice to assume that the company's human resource policies, whether written or verbal, are a part of an employment contract between the employee and the company. • Without clearly written policies, the company is at a disadvantage.
  89. 89. PROCEDURE VS. POLICY • A procedure tells members of the organization how to carry out or implement a policy. • Policy is the "what" and the procedure is the "how to". • Policies are written as statements or rules. • Procedures are written as instructions, in logical steps.
  90. 90. ILLUSTRATION: CASCADING OF POLICY AND PROCEDURAL LEVELS
  91. 91. FUNCTIONS OF POLICY • Communicate values and expectations for how things are done at your organization • Keep the organization in compliance with legislation and provide protection against employment claims • Document and implement best practices appropriate to the organization • Support consistent treatment of staff, fairness and transparency • Help management to make decisions that are consistent, uniform and predictable • Protect individuals and the organization from the pressures of expediency
  92. 92. ADVANTAGES OF FORMAL HUMAN RESOURCE POLICIES • Communication with employees. • Communication with managers and supervisors. • Time Savings. • Curbing litigation.
  93. 93. SCOPE OF HR POLICIES
  94. 94.  #1: Authoritative  #2: Enforceable  #3: Flexible and adaptable  #4: Feasible  #5: Clear  #6: Transparent  #7: Consultative 7 DISTINCTIVE CHARACTERISTICS OF HRM POLICIES
  95. 95. MAP OF THE HRM TERRITORY
  96. 96. CONSEQUENCES OF HRM POLICIES • The overall competence of employees, • The commitment of employees, • The degree of congruence between the goals of employees and those of the organization, and • The overall cost effectiveness of HRM practices. • In the long run, striving to enhance all four Cs will lead to favorable consequences for: ❑Individual well-being, ❑Societal well-being, and ❑Organizational effectiveness
  97. 97. LEARNING ACTIVITY 7 • Group Discussion: • By referring to the distinctive characteristics of policy, as well as the Map of the HRM territory, how effective would you rate the current level of HRM policy management performance at your organization? • Identify gaps and recommend improvement strategies.
  98. 98.  PHASE 1: INITIATION ❑ Step 1: Agenda-setting/issue (problem) identification ❑ Step 2: Policy instruments ❑ Step 3: Policy analysis ❑ Step 4: Stakeholder engagement, consultation and co-ordination  PHASE 2: GENERATION ❑ Step 5: Policy formulation, decision-making and policy drafting  PHASE 3: IMPLEMENTATION ❑ Step 6: Policy implementation  PHASE 4: EVALUATION ❑ Step 7: Policy monitoring and evaluation HRM POLICY DEVELOPMENT PROCESS
  99. 99. LEARNING ACTIVITY 8 • Group Discussion: • What HRM policy adjustments/amendments have taken place recently at your organization? What initiated this HRM policy change i.e. the reason and/or source? • What has been the impact at strategic, operational and functional levels within your organization? • From your HR management experience, outline/sketch the HRM policy development process at your organization. Would you regard these processes as efficient and effective i.e. do you as a HR manager foresee any procedural shortcomings – both during HRM policy development (drafting) and implementation stages?
  100. 100.  Process of identifying policy issues/problems, which require the attention of a legislator  Process wherein the members of society identify their needs, desires and demands and wherein a legislator decides to place these issues on the agenda for deliberation  The setting of the policy agenda allows a legislator to become sensitized to some of the critical policy requirements that affect society.  Issue identification can be conducted by forecasting the future with the use of extrapolative techniques such as the Delphi technique, brainstorming and scenario sketching  The origin/source of the various organizational policy-related issues  Prioritization of issues STEP 1: AGENDA-SETTING/PROBLEM IDENTIFICATION
  101. 101. • Taxation (the budget) • Persuasion (and public pressure) • Inspection and audits • Minutes of meetings • Provision of services • Newsletter, media briefings, community meetings, social media and public discourse • Legislative records • Legislation and government policy and priorities STEP 2: HRM POLICY INSTRUMENTS/SOURCES
  102. 102.  Step-by-step way of unpacking and understanding policy choices and comparing possible outcomes  Policy analysis needs to explore as rationally and honestly as possible the implications and possible outcomes of adopting policy  The importance and value of continual policy analysis  Policy analysis is an attempt to determine the costs and benefits of various alternatives or to evaluate the validity of existing policies e.g. Force field analysis  Policy analysis is an attempt to bring about and transform information pertinent to particular policies to resolve problems pertaining to those policies STEP 3: HRM POLICY ANALYSIS
  103. 103. ROLES OF THE HRM POLICY ANALYST • The primary role of the Disability policy analyst is to analyze and evaluate this and other HRM policies. • It is the responsibility of the policy analyst to advise the HRM policy-maker on the best course of action to resolve HRM policy inadequacies. • The HRM policy analyst is performing both a policy analysis and a policy advocacy function. In doing so, the policy analyst will follow one of three courses of action or a combination thereof: ❑ Objective technician (SCIENTIST) ❑ Issue and Client's (ADVOCATE) ❑ Viable, feasible and organizational- fit policy (POLITICIAN)
  104. 104. ROLES OF THE HRM POLICY ANALYST
  105. 105.  #1: Identify the underlying values and aspirations  #2: Understand the problem in its context  #3: Identify the alternative courses of actions  #4: Decide which dimensions of the problem are most important  #5: Predict the likely outcomes of different courses of action  #6: Measure the chosen courses of action against important values and aspirations 6-STEP HRM POLICY ANALYSIS PROCESS
  106. 106.  Objective: To ensure accountability, responsiveness and openness and upholding the right to access to any information held by the state  Constant interaction with society  Extensive consultation and co-ordination between the various stakeholders  Interest groups e.g. civic society; associations and lobbyists  Public participation STEP 4: STAKEHOLDER ENGAGEMENT, CONSULTATION AND CO-ORDINATION
  107. 107. LEARNING ACTIVITY 9 • Group Discussion: • PHASE 1: INITIATION • By referring to step 1 of the HRM policy development process, identify a current and/or imminent HRM-related issues and/or problems at your organization that requires HRM policy review of formulation. Prioritize these issues in order of their relative importance. • By referring to step 2 of the HRM policy development process, conduct a thorough HRM policy analysis of the most pressing issue identified in the preceding step.
  108. 108. LEARNING ACTIVITY 9 • Group Discussion: • By referring to step 3 of the HRM policy development process, identify the most relevant policy instruments/sources for the identified HRM policy development issue. • By referring to step 4 of the HRM policy development process, identify the most prominent internal and external stakeholders. As a HR manager, describe how you will engage and what methods will be used to consult with these stakeholders.
  109. 109.  Factors to consider: ❑ Policy recommendations are normally drafted by senior managers and then referred to higher management authority for deliberation, approval and adoption ❑ It remains the responsibility of the highest decision-making authority (executive powers) to approve or reject a particular policy recommendation ❑ The matter could be referred back to management for further investigation ❑ A policy-maker or decision maker has to be sure of the ability of officials to actually execute a policy - administrative, operational and managerial capacity to implement the decision STEP 5: HRM POLICY FORMULATION AND ADOPTION
  110. 110. HRM POLICY FORMULATION – THE POLICY TRIANGLE
  111. 111. 5 FACTORS TO CONSIDER PRIOR TO FORMULATION OF HRM POLICY • Scope • Principles • Rights • Content • Process
  112. 112. HRM POLICY CONTENT/TEMPLATE • A purpose statement • An applicability & scope statement • Introduction & Background • Definitions • An effective date • A responsibilities section
  113. 113. HRM POLICY CONTENT/TEMPLATE • Policy statements - indicating the specific regulations, requirements, or modifications to organizational behaviour that the policy is creating. The statement is the actual rule or standard the policy needs to communicate. • Questions • References • Approval
  114. 114. TIPS FOR DRAFTING THE HRM POLICY • Use straightforward clear language and avoid jargon and legal speak • Check that the content and wording is unbiased and encourages fair, consistent treatment. • Use terms consistently and define any special terms • Be sure that there is only one possible meaning to the standard or rule set by your policy • Consider a few “what if” scenarios and see if the policy still fits, keeping in mind that most policies will not, and should not, cover every possible circumstance • For most policies you will want to allow for exceptions to the rule. Use terms like “generally”, “usually”, and “typically” and avoid terms like “always” and “never” • Include a statement like “this is intended as a guide only” • There are a few situations where you want to be absolutely clear that the standard set by the policy will apply in all situations. • If using a sample policy or draft, tailor the policy for your specific workplace
  115. 115. LEARNING ACTIVITY 10 • Group Discussion: • PHASE 2: GENERATION • By referring to the content items of a HRM policy document and by following the guidelines, draft a policy for the identified HRM policy issue at your organization, discussed in the preceding learning activity.
  116. 116. STEP 6: HRM POLICY IMPLEMENTATION • The implementation of the policy will have to be overseen and managed by HR management • Every functional field will employ appropriate technology for the implementation of such policy • Every official concerned with the making and the implementation of policy will always have to be on the look-out for techniques which could be used to improve the performance of the functions involved • It is necessary to mention that the institutions and functionaries concerned with the implementation of a policy should market their implementation plans, programmes/projects • The marketing activities should be approached as a continuous process and adapted to answer the questions asked about the implementation activities. • An effective information service should be available to the functionaries charged with the policy implementation. • After the executive authority has accepted a particular recommendation, the policy has to be translated into action. • A Disability policy-maker should never get involved in the physical execution of policies, because it is the responsibility of the line management/officials to implement this policy.
  117. 117. STEP 7: HRM POLICY MONITORING AND EVALUATION (M&E) • Disability policy-makers should however, request periodical feedback as to monitor the implementation of its decision • It is important for managers to ensure that they receive regular and accurate feedback on the perceived success of the organizational Disability policy from officials in this particular department. • Managers would be able to adhere to the accountability and transparency prerequisites required of all HRM governance action. • After physical implementation, it is important for a HR manager to evaluate the efficiency and effectiveness of the Disability policy. • In order to determine if a policy has any shortcomings or to determine if there is room for improvement, officials should be requested to submit quarterly reports on the performance aspects of the Disability policy. • These reports will determine if corrective steps should be taken. If so, these will be channeled into the Disability policy process and the process will repeat itself.
  118. 118. LEARNING ACTIVITY 11 • Group Discussion: • PHASE 3: IMPLEMENTATION AND PHASE 4: EVALUATION • Describe how the adopted HRM policy will be implemented at your organization. Focus on the methods that will be used. • Also explain how HR and line management will ensure that the organization has the administrative, operational and managerial capacity for HRM policy implementation at your organization. • Describe how the implemented HRM policy will be monitored and evaluated at your organization. Focus on the methods, systems and processes that will be used.
  119. 119. DEFINITION OF ETHICS • Ethics is a branch of philosophy which seeks to address issues related to concepts of right and wrong. It is sometimes referred to as moral philosophy, including applied ethics e.g. business ethics • Moral principles or values that govern and regulate a person's behaviour or the conducting of an activity.
  120. 120. CREATE A CULTURE OF E-T-H-I-C-A-L HRM PROFESSIONALS • Exemplary • Transparency • Honesty • Integrity • Consistency • Accountability • Legitimacy
  121. 121. CREATE A CULTURE OF M-V-P HRM PROFESSIONALS • Morals • Values • Principles
  122. 122. ALL H-A-I-L THE HRM PROFESSIONAL
  123. 123. BENEFITS OF A CODE OF ETHICS • Help maintain a moral course in times of fundamental change, cultivate strong teamwork and productivity, and support employee growth; • Help ensure that policies and procedures are legal and ethical; • Potential ethical issues and violations can be detected early in order that they can be reported or addressed; • Help manage values that are associated with quality management, strategic planning and diversity management; • Promote a strong public image for business and • Legitimize managerial actions, strengthen the coherence of the organization’s culture, improve trust in relationships between individuals and groups, support greater consistency in standards and quality of products and cultivate greater sensitivity to and awareness of the company’s vision and values.
  124. 124. AGREE OR DISAGREE? WHY?
  125. 125. DIMENSIONS OF DIVERSITY
  126. 126. DIVERSITY MANAGEMENT STRATEGIES • Fully accept diversity • Recruit broadly and select fairly • Provide orientation and training programs • Sensitize team members • Strive to be flexible
  127. 127. DIVERSITY MANAGEMENT STRATEGIES • Seek to motivate individually and support valuable team membership • Reinforce employee differences • Encourage interaction and engagement • Trouble-shoot diversity problems
  128. 128. LEARNING ACTIVITY 12 • Group Discussion: • As the custodian of organizational ethics, describe HRM’s role in in developing an ethical code and culture as well as their oversight role in ensuring that organizational behaviour complies with legislation, policy and this ethical code. • Describe how HRM can leverage employee voice strategies to advocate for and promote workplace democracy and stimulate innovation. • Describe HRM’s role in developing diversity improvement and inclusivity strategies for your organization.
  129. 129. TRAINING PROGRAMME OVERVIEW (DAY 3) • Performance Management best practice principles • Performance Monitoring - HRM Metrics of HRM performance • Diagnosis of current, HRM Metrics and Analytics practices (Gap Analysis) • Human Capital Reporting • Defining HRM Auditing, scope and purpose thereof • The governance business case for HRM Auditing • 8 Critical success factors of HRM Auditing • Diagnosis of current, HRM Auditing practices (Gap Analysis) • Development of HRM Audit toolkit – primary, secondary and tertiary tools • Applying the 3-step HRM Auditing process
  130. 130. OBJECTIVE #5: Performance Reporting and HRM Metrics and Analytics
  131. 131. PERFORMANCE MANAGEMENT BEST PRACTICES • https://www.surveymonkey.com/r/3GXW72Z • #1: The Performance Management System (PMS) of your organization is directly linked to the strategic goals of the institution. • #2: The PMS of your organization is (horizontally) integrated with the other HRM functions and also the core business processes (finance, customer & operations) of the institution. • #3: The PMS of your organization adapts from only management performance expectations to management, customer and other (internal and external) stakeholder expectations and is agile and responsive to environmental change, global best practices and future trends. • #4: The PMS of your organization is balanced in terms of focusing on improving both short-term outputs or results and also in the medium to long-term future i.e. future- proofing the business/operating model. • #5: The PMS of your organization encourages full participation and wide engagement and extensive consultation, focused on measuring quality standards.
  132. 132. PERFORMANCE MANAGEMENT BEST PRACTICES • https://www.surveymonkey.com/r/3GXW72Z • #6: The PMS of your organization is user-friendly, simple and understandable for all users. • #7: The PMS of your organization provides an opportunity to recognize performance excellence. • #8: The PMS of your organization is vigilant and efficient in identifying and correcting poor performance levels and under achievement of performance goals and standards. • #9: The PMS of your organization is line management- driven with active support and business partnering from the human resources department. • #10: The PMS is a continuous process that accurately identifies multi-level (individual, team and organizational) performance and skills gaps i.e. generates crowd-sourced (360-degree) performance intelligence and –analytics, which is effectively leveraged as a performance development and - improvement management tool.
  133. 133. LEARNING ACTIVITY 13 • Individual diagnosis: • In your capacity as a HR Administrator, review and rate the efficiency and effectiveness of the current performance management process in your organization. Refer to the above Best Practice criteria checklist. Refer to the SurveyMonkey link for the online survey: https://www.surveymonkey.com/r/3GX W72Z • Group discussion: • Identify gaps and recommend improvement strategies.
  134. 134. 0 5 10 15 20 25 PERFORMANCE MANAGEMENT SYSTEMS – DISTRIBUTION FREQUENCY 21-30 31-40 41-50 51-60 61-70 71-80 81-90 90-100
  135. 135. PERFORMANCE MANAGEMENT SYSTEMS – WIDEST COMPLIANCE GAPS Range Median Mean Standard Deviation 22-100% 61% 62% 14% BEST PRACTICE CRITERIA RELATIVE DIFFICULTY RANKING MEAN SCORE Q6: The PMS of your organization is user-friendly, simple and understandable for all users. 1 56% Q10: The PMS is a continuous process that accurately identifies multi- level (individual, team & organizational) performance & skills gaps i.e. generates crowd-sourced (360-degree) performance intelligence & - analytics, which is effectively leveraged as a performance development & -improvement management tool. 2 57% Q8: The PMS of your organization is vigilant and efficient in identifying and correcting poor performance levels and under achievement of performance goals and -standards. 3 58%
  136. 136. PERFORMANCE MANAGEMENT SYSTEMS – MOST COMPLIANT CRITERIA BEST PRACTICE CRITERIA RELATIVE DIFFICULTY RANKING MEAN SCORE Q7: The PMS of your organization provides an opportunity to recognize and (financially and non-financially) reward performance excellence. 10 69%
  137. 137. HRM SCORECARD • Refer to Annexure A • Given that the HRM function is often the steward of the people elements of the strategy, the HRM function is often charged with overseeing and guiding the key people measures i.e. the return on investment in people for the organization. • HRM measures should be ones that help the HRM function in its stewardship role of maximizing the people equity of the business. So, the first thing on the radar of the HRM team should be the key people measures from the organization’s scorecard. • The second class of measures should be the HRM measures – the key drivers that HR guides or controls that directly influence the key people measures. • Becker et al (2001), define the four essential elements of the HR scorecard as HR deliverables, a high-performance work system, HR system alignment and HR efficiency. This reflects a balance between the twin HR imperatives that have been previously mentioned – cost cutting and value creation. • These last three elements of the HR architecture trace a value chain from function to systems to employee behaviours.
  138. 138. EVIDENCE-BASED HRM • Evidence-based HR refers to a process in which the organization evaluates any decision or process against data, real experience, expert opinions, and/or other types of information to ensure the decision is likely to have the desired outcome. • For this to work best, the “evidence” used should be purposefully sought out. • When data is taken from multiple sources, ensure it’s applicable within your context.
  139. 139. 7-POINT HRM TRANSFORMATION (COTTER PhD, 11 JANUARY 2019) • "In order to be feasible, to prosper professionally in 2019 and to be future-fit, HRM will have to exchange the currency in which they trade from old notes to noteworthy, Industry 4.0 and business relevant denominations and value. Specifically, this change translates from: • 1. feelings to facts; • from 2. anecdotal to analytical; • from 3. hindsight to foresight; • from a 4. business tributary to mainstream; • from 5. intuition to intelligence; • from 6. best practice (imitation) to next practice (innovation) and ultimately, • from 7. a cost to a profit centre. • Generally, this 7-point transformation means an upgrade to Evidence- based HRM."
  140. 140. DEFINING THE FUNDAMENTAL CONCEPTS Metrics are simply measurements. Metrics track activity, but don’t necessarily show a causal relationship. HRM Metrics - Measurements used to determine the value and effectiveness of HR strategies. Differentiation between People and HRM Measures Human capital analytics examine the effect of HRM metrics on organizational performance. In more general terms, analytics look for patterns of similarity between metrics. By using analytics over time, HRM can become predictive.
  141. 141. THE FUTURE OF HRM METRICS & ANALYTICS? “HRM will have to migrate from the fundamentals of people science to the complexities of data science.” (Cotter, 2017)
  142. 142. 10-POINT FOUNDATION AND “STARTER-PACK” FOR STRATEGIC HRM METRICS https://www.surveymonkey.com/r/XBSFY53 #1: Adopt a strategic mindset #2:Change management must run parallel to HRM Metrics in “business unusual” environment #3: Streamline and systematic HRM metrics process #4: HRM Metrics is not a “desktop” exercise #5: Adopt a measurement culture & build capacity & skills for digital literacy
  143. 143. 10-POINT FOUNDATION AND “STARTER-PACK” FOR STRATEGIC HRM METRICS https://www.surveymonkey.com/r/XBSFY53 #6: Re-inject scientific principles, processes and tools & credibility into HRM Metrics e.g. 3 E’s #7: Drill down & segment HRM metrics #8: Apply the 4 C’s to HRM Metrics Reporting #9: Don’t adopt a “Big Bang” approach – start small, think big and scale up #10: Automation - utilize a 4-G digital data analysis solution
  144. 144. LEARNING ACTIVITY 14 • Individual activity: • https://www.surveymonke y.com/r/XBSFY53 • Please rate your organization’s current degree of compliance on a 10-point scale (with range of 1 = absolutely non- compliant and 10 = 100% compliant) • Group Discussion: • Identify gaps and recommend improvement strategies.
  145. 145. 0 10 20 30 40 50 60 70 HRM METRICS AND ANALYTICS - FREQUENCY DISTRIBUTION 21-30 31-40 41-50 51-60 61-70 71-80 81-90 90-100
  146. 146. HRM METRICS AND ANALYTICS – WIDEST COMPLIANCE GAPS Range Median Mean Standard Deviation 22-100% 53% 52% 13% BEST PRACTICE CRITERIA RELATIVE DIFFICULTY RANKING MEAN SCORE Q6: Your organization has re-injected scientific principles, processes and tools and credibility into HRM Metrics e.g. 3 E’s - evidentiary, empirical and ethical. 1 46% Q10: Your organization harnesses automation, utilizing a 4-G HRM digital data analysis solution. 2 50% Q3: Your organization has streamlined and systematic HRM metrics processes 3 52%
  147. 147. HRM METRICS AND ANALYTICS – MOST COMPLIANT CRITERIA BEST PRACTICE CRITERIA RELATIVE DIFFICULTY RANKING MEAN SCORE Q9: Your organization starts small, thinks big and systemically scales up over time, as opposed to adopting a large-scale “Big Bang” HRM Metrics approach. 10 58%
  148. 148. HRM ANALYTICS MATURITY MODEL (BERSIN BY DELOITTE)
  149. 149. Source: The State of Workforce Analytics and Planning 2014 Survey Report
  150. 150. HRM ANALYTICS PROCESS
  151. 151. 5-STEP HRM ANALYTICS PROCESS Step 5 Project and take action to communicate metrics and related insights information to provide a robust basis for strategic change and improvement Step 4 Draw out insight from the data Step 3 Obtain data relating to relevant metrics Step 2 Develop appropriate metrics around these areas Step 1 Identify where HRM can make a strategic impact in the organization
  152. 152. THE 5 E’s OF HRM ANALYTICS • Exploration • Examination • Extraction • Evaluation • Extrapolation
  153. 153. STEP 1: IDENTIFYING WHERE HRM CAN MAKE A STRATEGIC IMPACT (EXPLORATION) • This process step focuses on determining the areas where HRM can make a strategic impact within the organizational context. • It enables HRM management team to identify priority areas for measurement which are aligned with organizational goals and strategies. • Identify capability opportunities or problem areas from a business partner perspective. • Sources for information collection, retrieval and analysis.
  154. 154. SOURCES FOR INFORMATION COLLECTION, RETRIEVAL AND ANALYSIS • Employee and management surveys and interviews (for employee contentment, communications, rewards system) • Performance appraisals (to measure productivity, attendance) • HR records (to track communications, turnover, recruiting efficiency, retention, promotions, and succession planning) • Employee files (to research productivity, attendance, training)
  155. 155. STEP 1: EXPLORATION • A critical first step is to ensure that HRM is measuring the right things. • The design and development of relevant HR metrics requires reflection and discussion in order to determine what it takes for the organization to succeed and to understand how HR can add value. • Identify organizational burning issues • Three issues underpin effective measurement (CIPD, 2011): ❑ Aligning measurement with goals ❑ Take a business partner perspective ❑ Adding value by focusing on building capability
  156. 156. STEP 2: SELECTING APPROPRIATE METRICS FROM WHICH ORGANIZATIONAL INSIGHTS CAN BE DRAWN (EXAMINATION) • HRM Measures: ❑ Efficiency (10%) ❑ Effectiveness (20%) ❑ Impact (70%) • Categories of HRM Metrics: ❑ First Tier (most valued) ❑ Second Tier (lesser valued) • Commonly used HRM Metrics • Refer to Annexure A: HRM Scorecard Template
  157. 157. STEP 2: EXAMINATION - HRM MEASURES
  158. 158. BROAD CATEGORIES OF HRM MEASURES ❑ Workforce Demographics ❑ HR Efficiency ❑ Remuneration ❑ Skills Development, Training & Education ❑ Productivity ❑ Provisioning and Recruitment ❑ Risk Analysis ❑ Staff Retention
  159. 159. FREQUENTLY USED HRM METRICS (PWC)
  160. 160. 10 TYPICAL STATISTICS OBTAINED IN COMPILING HRM METRICS ❑ Revenue factor, which is company total revenue divided by the amount of full time employees ❑ Human capital value added (revenue minus operating expense and cost of compensation/benefit divided by the total amount of full time employees) ❑ Human capital return on investment: Revenue minus operating expenses and cost of compensation benefit divided by cost of compensation/benefit ❑ Total compensation revenue ratio which is cost of compensation/benefit divided by revenue ❑ Labour cost revenue ratio, which is cost of compensation/benefit plus other employee costs (bonuses, mileage paid, incentives) divided by revenue
  161. 161. 10 TYPICAL STATISTICS OBTAINED IN COMPILING HR METRICS • Training investment factor equals the total cost of training divided by total amount of training attendees • Cost per hire, which includes advertising, agency fees, relocation, and others divided by operating expenses • Health care costs per employee (total health care cost divided by total amount of employees) • Turnover costs, which is equal to hiring costs plus training costs plus other costs (turnover rate during first year of employment is key) • Voluntary separation rate is the total number of people who quit or retired divided by the total amount of employees
  162. 162. AGREE OR DISAGREE? WHY?
  163. 163. STEP 3: OBTAIN DATA RELATING TO RELEVANT METRICS (EXTRACTION) • The top performing companies were using a variety of drilled-down metrics, having the people to analyze them, and communicating them effectively. • This process step focuses on how HRM can most effectively communicate the insights drawn from metrics to inform action and hence enable HRM to deliver maximum strategic impact. • Effective decision-making, based on robust measures and metrics, therefore, requires HR professionals to think carefully about the relationships that need to be established to enable appropriate information-sharing of these insights.
  164. 164. STEP 3: EXTRACTION – PROCESS STEPS • #1: There is the initial “harvesting” or gathering of unstructured data from the web. • #2: The normalization stage—preparing harvested data for analysis. Normally, a relational database such as MySQL is used, but NoSQL can also be used. • #3: The data is given additional structure with metadata, or tagging. Analytics can then be presented through a dashboard. • The process of collecting and updating the data from the myriad of internet sources has to be automated. Advanced Programming Interfaces (APIs) can enable different digital platforms to share dynamic data and feed it into other applications, such as a company’s own database.
  165. 165. STEP 3: EXTRACTION – CHALLENGES CONFRONTED • Struggling to use unstructured data • Difficulty tying talent acquisition data to business results • Problems with storing, retrieving and integrating data • There is rarely a systematic approach to integrating disparate systems. Legacy data systems often don’t talk to each other. There are missing links between ATS and HRIS systems. • The data exchange is often clumsy at best, requiring rekeying of data and manual interventions. • The successful transfer of data from multiple sources, such as an ATS, a recruiting site or a social network with an HRIS System is the most problematic part. • Failure to get the most of ATS
  166. 166. STEP 4: DRAWING OUT INSIGHTS FROM DATA (EVALUATION) • The HRM function and measurement capability • HR professionals have long been data collectors, amassing and keeping track of employees’ personal information, salary rates and the annual number of retirements. But to grasp the potential of HR analytics, HR managers need to become data interpreters. • Top performing companies invest in personnel who have analytic and process-oriented capabilities, those people who can install the necessary methodological disciplines necessary to use the information effectively. • Identify root causes and cause-effect linkages and -relationships • Action planning – interventions and solutions • Reporting at appropriate levels of the Knowledge Hierarchy
  167. 167. STEP 5: PROJECT AND TAKE ACTION TO COMMUNICATE METRICS AND RELATED INSIGHTS INFORMATION TO PROVIDE A ROBUST BASIS FOR STRATEGIC CHANGE AND IMPROVEMENT (EXTRAPOLATION) • Projection of data – forecasting (PREDICTIVE ANALYTICS) • To communicate HRM Analytics, tell a story (NARRATIVE) • “Data is abundant, but if you don’t give it context, it’s just a bunch of numbers.” • Internal benchmarks (to compare their business units to others in the organization) • Support comes after results are delivered, not before. “It really comes back to how credible you are. You get buy-in when you show up repeatedly with accurate numbers and you can relate the story to how the company’s performing.”
  168. 168. STEP 5: EXTRAPOLATION - REPORTING • HR analytics reporting • How the information is communicated to the organization, particularly the C-suite, is critically important. • Companies simply produce spreadsheets that offer no easy and timely way to present what is happening in the business. • Like any good research report, it is vital to present meaningful information and identify actionable insight that can be used to make positive change. • Tactically, the best practice organizations, distribute multiple reports to multiple levels. Tailored reporting to address the specific needs, and ideally focuses on very specific business impacts. • If the metrics being shown convey business impact, quarterly reporting of 5-10 of the most critical, agreed-to KPIs is warranted.
  169. 169. HR METRICS REPORTING – 4 C’S • COSTS • CAUSES • CONSEQUENCES • CURE
  170. 170. LEARNING ACTIVITY 15 • Group Discussion: • Apply steps 1-5 of the HRM metrics process.
  171. 171. OBJECTIVE #6: HRM Auditing
  172. 172. THE FUNDAMENTALS OF HRM AUDITING • Defining a HRM Audit • The purpose, objectives and functions of HRM Auditing • Benefits and costs (drawbacks) of HRM Auditing • Critical success factors of HRM Auditing • Key principles of HRM Auditing
  173. 173. ORIGIN OF THE WORD, “AUDIT” • The word audit originates from the Latin word ‘audire’ which means to “listen”. • An audit is a systematic, objective risk management tool for how well the workplace is complying with regulatory and policy requirements.
  174. 174. DEFINING HRM AUDIT • An HR Audit as “an intensely objective look at the company’s HR policies, practices, procedures and strategies in order to protect the company, establish best practices and identify opportunities for improvement.” (SHRM) • A Human Resources Audit is a review of current Human Resources practices, policies, procedures, documentation and systems and will assist you to identify strengths and needs for improvement. • It will provide direction and recommend the courses of action to be taken to ensure compliance with ever-changing laws, rules and regulations. • A HR audit is a way to diagnose problems in a company’s HR department. • Auditing is evidence based.
  175. 175. PURPOSE OF HRM AUDIT – V-C-R • Value • Compliance • Risk
  176. 176. MAIN GOALS OF HRM AUDIT • The goal is the independent and objective evaluation of the efficiency and quality of a company´s HR management, including its compliance with the legal requirements of employment. • Determine whether company's employment-related materials and practices are complying with the law and the employer's own policies; and • Identify and bring into compliance, any area that may not be in compliance. An audit should identify what the employer is doing right or wrong, as well as grey areas that could use improvement.
  177. 177. 5 C’s – THE KEY BENEFITS OF A HRM AUDIT • Compliance + • Competitive + • Cash + • Credibility + • Competence = Clean HRM Audit
  178. 178. V-I-P HRM AUDITING • Valid (accurate & correct Measurement) • Interrogative (3rd degree) • Protective (against HR, people & reputational risks)
  179. 179. 8 CRITICAL SUCCESS FACTORS OF HRM AUDITING • #1: Organizational readiness for HRM Auditing • #2: Adequate resources • #3: The right people • #4: The audit requires the support of all trade unions and key role players in the SBU • #5: Guided by a policy • #6: Under the supervision of a subject matter expert. • #7: The auditing of HR should be put in the HR calendar and should synchronise properly with other business processes in the organization • #8: Senior management commitment and support and the general co-operation of key stakeholders
  180. 180. 10 KEY PRINCIPLES OF HRM AUDITING • https://www.surveymonkey.com/r/B3PYYCT • #1: Need for independence; • #2: Audit activities should be budgeted for properly; • #3: Acknowledgement that there are many types of audits; • #4: Each type of an HR audit has its own purpose and objectives; • #5: Establish timeframes for every phase/step of the audit;
  181. 181. 10 KEY PRINCIPLES OF HRM AUDITING • https://www.surveymonkey.com/r/B3PYYCT • #6: Training of auditors is a must; • #7: Set standards for the HR Audits; • #8: Agreement on reporting template; • #9: Auditors should sign a confidentiality agreement; and • #10: Auditors should agree beforehand on communication strategy.
  182. 182. 70-20-10% APPROACH TO HRM AUDITING • Primary - HRM Audit conducted by HRM department (70%) • Secondary – HRM Audit conducted by internal/external audit (20%) • Tertiary – HRM Audit conducted by external verifier and/or professional authority e.g. SABPP (10%)
  183. 183. LEARNING ACTIVITY 16 • Group Discussion: • Review the degree of compliance of your current HR Auditing practices measured against: • X8 Critical success factors • X10 Key Principles – refer to link https://www.surveymonkey.com/r/B 3PYYCT • Identify gaps and recommend improvement strategies.
  184. 184. 0 5 10 15 20 25 30 35 40 HRM AUDITING - FREQUENCY DISTRIBUTION 21-30 31-40 41-50 51-60 61-70 71-80 81-90 90-100
  185. 185. HRM AUDITING – WIDEST COMPLIANCE GAPS BEST PRACTICE CRITERIA RELATIVE DIFFICULTY RANKING MEAN SCORE Q3: The scope of and the HRM Audit measures are adequate and comprehensive i.e. the 70-20-10 principle is consistently applied. 1 55% Q8: All stakeholders have agreed on the HRM Audit reporting template and there is general buy-in and support from the key stakeholders, especially senior management and the labour unions. 2 59% Q6: All HRM Auditors are properly trained and competent in performing their auditing role and the appropriate and relevant use of HRM Auditing tools. 3 59%
  186. 186. HRM AUDITING – MOST COMPLIANT CRITERIA Range Median Mean Standard Deviation 22-100% 60% 62% 17% BEST PRACTICE CRITERIA DIFFICULTY RANKING MEAN SCORE Q1: The HRM Audit is objective and independent from other HRM governance processes. 10 67%
  187. 187. SABPP HR AUDITED RATINGS (X39 COMPANIES)
  188. 188. TYPES OF HR AUDITS • Skills audits; • Effectiveness audits; • Performance audits; • Value-add audit; • Cultural audits; • HR systems audit; • Compliance; • Best Practices; • Strategic; • Function-Specific
  189. 189. HR AUDIT MEASURES • Planning and staffing • Recruitment efficiency • Recruitment effectiveness • Compensation measures • Benefits • Orientation cost per employee
  190. 190. HR AUDIT MEASURES • Counseling/disciplinary costs • Lost time costs • Turnover rates • Training and development costs/measures • Organization development measures
  191. 191. HRM AUDITING PROCESS
  192. 192. HRM AUDITING PROCESS • Design and develop HR policies, procedures and practices for your organization; • Assess current HR policies, procedures and practices against set criteria; • Analyse the results from evidence; and • Take action: to close gaps, make recommendations/set improvement goals.
  193. 193. HRM AUDIT ACTION PLAN • Phase 1: Foundational/Initiation • Phase 2: Assessment • Phase 3: Concluding and Reporting
  194. 194. PHASE 1: FOUNDATIONAL/INITIATION • Audit set-up actions • Audit planning actions ❑ Determine the purpose and objectives of the audit ❑ Determine the scope of the audit ❑ Determine the organizational components to be audited ❑ Determine the auditing tool to be used ❑ Determine costs and resources needed to perform the audit ❑ Determine audit team governance
  195. 195. THE SCOPE OF HRM AUDITING
  196. 196. THE SCOPE OF HRM AUDITING • Evaluation of the organization’s operational HR policies, practices and processes and their effectiveness in achieving strategic organizational goals. • Assessment of current HR metrics for reasonableness and results. ❑Efficient ❑Effective ❑Ethical ❑Economic use of talent to achieve organizational goals.
  197. 197. PHASE 2: ASSESSMENT • General comments • Identify key organizational metrics - determine employment issues accountability • Formulating auditing methodology and tools • Developing a checklist (Refer to Annexure D)
  198. 198. PHASE 3: CONCLUDING AND REPORTING • Report preparation • Report presentation ❑ Quantify your results - start with outcomes ❑ Include an executive summary ❑ Identify risks ❑ Identify and prioritize solutions to problems identify. Where possible, frame your solutions from a bottom line perspective, i.e., Calculate the benefits and costs of proposed solutions ❑ Evaluate and discuss the organizational, financial and employee relations impact of action or inaction • Develop a HR improvement plan
  199. 199. LEARNING ACTIVITY 17 • Group Discussion: • Describe how you will audit the strategic HRM function. • Apply the 3-step HRM Auditing process.
  200. 200. DIAGNOSTIC TOOLKIT • Strategic Performance Advisor https://www.surveymonkey.com/r/BXRKRXG • Strategic HR Planning https://www.surveymonkey.com/r/5SNGNTW • HRM Metrics and Analytics https://www.surveymonkey.com/r/XBSFY53 • Strategic Total Rewards Management (STORM) https://www.surveymonkey.com/r/PQWGNJJ and https://www.surveymonkey.com/r/PHKFGQL
  201. 201. DIAGNOSTIC TOOLKIT • HRM Auditing https://www.surveymonkey.com/r/B3PYYCT • Future Fit HRM/L&D Consultant https://www.surveymonkey.com/r/8HVNTW3 • Succession Planning https://www.surveymonkey.com/r/J7S6VSH • Job Analysis and -Profiling https://www.surveymonkey.com/r/732GHMP • Performance Management https://www.surveymonkey.com/r/3GXW72Z
  202. 202. SELECTED LIST OF SOURCES • Grobler, A, Hydra, A & Bezuidenhout, M.L. (2014). Governance and HR: the development of a framework for South African organisations. Journal of Contemporary Management 11:164-184 • Institute of Directors S.A. (2016). The King IV Report on Corporate Governance for South Africa 2016. IoD S.A NPC. • KPMG. (2016). King IV Summary Guide. KPMG: Sweden. • Mercer Human Resource Consulting. Why HR Governance Matters Managing the HR Function for Superior Performance. www.mercer.com • SABPP. (2017). HR Governance Fact Sheet. April 2017 – Number 2017/04. SABPP. • https://www.linkedin.com/pulse/reality-check-chief-human-resources- officers-africa-hrm-cotter-phd/
  203. 203. SELECTED LIST OF SOURCES • http://www.sabpp.co.za/siteitems/uploads/2014/SABPP-Fact-Sheet-July-2014-HR- Risk-Management.pdf • https://www.slideshare.net/CharlesCotter/balanced-business-scorecared- performance-management-best-practice-process-and-principles • https://www.slideshare.net/CharlesCotter/hr-risk-managementhrm-auditingskills- auditing • https://www.slideshare.net/CharlesCotter/measurement-and-diagnosis-of-the- strategic-impact-and-value-of-selected-african-hrmld-practices-a-surveybased- studyresearch-findings • https://www.slideshare.net/CharlesCotter/strategic-human-resources- management-and-hr-business-partnering • https://www.slideshare.net/CharlesCotter/strategic-human-resources- management-metrics-and-analytics
  204. 204. CONCLUSION • Key points • Summary • Questions • Training administration • Certification
  205. 205. CONTACT DETAILS

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