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

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

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

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

• 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

OBJECTIVE #1:
THE FUNDAMENTALS OF CORPORATE AND
HRM GOVERNANCE AND STRATEGIC HRM

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).

KING IV (2016) REPORT ON CORPORATE
GOVERNANCE – 4 CORPORATE GOVERNANCE
OUTCOMES
• #1: Ethical Culture
• #2: Good performance
• #3: Effective Control
• #4: Legitimacy

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”

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”

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”

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.

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.

HRM
GOVERNANCE
– R-E-D-C-A-R
(Cotter, 2018)
• Risk management
• Ethics
• (Workplace) Democracy
• Compliance (legislation, policy and
procedure)
• Auditing
• Reporting

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

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

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.

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.

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.

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

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

BUSINESS INTELLIGENCE
(Level 3 of strategic HRM maturity –
transformational)
HRM STRATEGY
strategic)
HRM GOVERNANCE
traditional)
WORKPLACE ADVOCACY
transactional)
STRATEGIC
PERFORMANCE
ADVISOR
(Cotter, 2019)
STRATEGIC
TRANSACTIONAL
CURRENT FUTURE-FOCUSED

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.

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

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)

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
• 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

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%)

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)

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

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%

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%

OBJECTIVE #2:
DEVELOPING A HRM GOVERNANCE FRAMEWORK

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.

ELEMENTS OF HRM GOVERNANCE
• Structure and accountability
• Effective councils
• Philosophy and operating principles
• Core management activities
• Performance monitoring

HRM GOVERNANCE IMPLEMENTATION
(GROBLER, 2014)

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

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.

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)

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

ULRICH’S HR
COMPETENCIES
(2017)

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."

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.

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

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

• 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)

SUSTAINABILITY - 3 P’S OF THE TRIPLE
BOTTOM (KING)

• 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

LEARNING
ACTIVITY 3
• 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.

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.

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.

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.

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.

OBJECTIVE #3:
HR Risk Management

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

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)

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

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”

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)

BENEFITS OF
HR RISK
MANAGEMENT

BENEFITS OF HR
RISK
MANAGEMENT

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).

HUMAN CAPITAL INSTITUTE RESEARCH

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.

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.

LEARNING
ACTIVITY 4
• 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.

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)

A HR RISK MANAGEMENT CONCEPTUAL
FRAMEWORK

ISO 31 000:2009 RISK MANAGEMENT
FRAMEWORK

THE HR RISK MANAGEMENT PROCESS
(AON HEWITT)

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.

PROMINENT HR RISKS
• Compliance with legislation
• Understanding trends in the business environment
• People and corporate culture
• Implementing business strategy
• Carrying out operations

BUSINESS PROCESS MAPPING
(AON HEWITT)

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.

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.

STEP 4: RISK RESPONSE AND
IMPLEMENTATION

STEP 4: HR RISK MANAGEMENT ACTION PLAN
TEMPLATE

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

LEARNING
ACTIVITY 5
• Group
Discussion:
• Apply steps 1-
5 of the HR
Risk
Management
process to a
selected
organization.

CASE STUDY: HR RISK MANAGEMENT
NEDBANK

LEARNING
ACTIVITY 6
• 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?

(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

OBJECTIVE #4:
HRM Policies and Procedures

 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

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.

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.

ILLUSTRATION: CASCADING OF POLICY
AND PROCEDURAL LEVELS

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

ADVANTAGES OF FORMAL HUMAN
RESOURCE POLICIES
• Communication with employees.
• Communication with managers and supervisors.
• Time Savings.
• Curbing litigation.

 #1: Authoritative
 #2: Enforceable
 #3: Flexible and
adaptable
 #4: Feasible
 #5: Clear
 #6: Transparent
 #7: Consultative
7 DISTINCTIVE
CHARACTERISTICS
OF HRM POLICIES

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

LEARNING
ACTIVITY 7
• 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.

 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

LEARNING
ACTIVITY 8
• 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?

 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

• 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

 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

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)

ROLES OF THE HRM POLICY ANALYST

 #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

 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

LEARNING
ACTIVITY 9
• 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.

LEARNING
ACTIVITY 9
• 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.

 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

HRM POLICY FORMULATION – THE
POLICY TRIANGLE

5 FACTORS TO
CONSIDER PRIOR TO
FORMULATION OF
HRM POLICY
• Scope
• Principles
• Rights
• Content
• Process

HRM POLICY CONTENT/TEMPLATE
• A purpose statement
• An applicability & scope
statement
• Introduction & Background
• Definitions
• An effective date
• A responsibilities section

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

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

LEARNING
ACTIVITY 10
• 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.

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.

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.

LEARNING
ACTIVITY 11
• 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.

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.

CREATE A
CULTURE OF
E-T-H-I-C-A-L
HRM
PROFESSIONALS
• Exemplary
• Transparency
• Honesty
• Integrity
• Consistency
• Accountability
• Legitimacy

CREATE A CULTURE OF
M-V-P HRM PROFESSIONALS
• Morals
• Values
• Principles

ALL H-A-I-L THE HRM PROFESSIONAL

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.

DIVERSITY
MANAGEMENT
STRATEGIES
• Fully accept diversity
• Recruit broadly and select fairly
• Provide orientation and training programs
• Sensitize team members
• Strive to be flexible

DIVERSITY
MANAGEMENT
STRATEGIES
• Seek to motivate individually and support
valuable team membership
• Reinforce employee differences
• Encourage interaction and engagement
• Trouble-shoot diversity problems

LEARNING
ACTIVITY 12
• 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.

(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

OBJECTIVE #5:
Performance Reporting and HRM Metrics and
Analytics

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.

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.

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

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

PERFORMANCE MANAGEMENT SYSTEMS
– WIDEST COMPLIANCE GAPS
22-100% 61% 62% 14%
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%

PERFORMANCE MANAGEMENT SYSTEMS
– MOST COMPLIANT CRITERIA
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%

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.

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.

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."

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.

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)

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

10-POINT FOUNDATION AND “STARTER-PACK” FOR STRATEGIC HRM
METRICS
#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

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)
• Identify gaps and
recommend improvement
strategies.

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

HRM METRICS AND ANALYTICS – WIDEST
COMPLIANCE GAPS
22-100% 53% 52% 13%
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%

HRM METRICS AND ANALYTICS – MOST
COMPLIANT CRITERIA
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%

HRM ANALYTICS MATURITY MODEL
(BERSIN BY DELOITTE)

Source: The State of Workforce Analytics and
Planning 2014 Survey Report

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

THE 5 E’s OF HRM
ANALYTICS
• Exploration
• Examination
• Extraction
• Evaluation
• Extrapolation

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.

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)

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

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

STEP 2: EXAMINATION - HRM
MEASURES

BROAD CATEGORIES
OF HRM MEASURES
❑ Workforce Demographics
❑ HR Efficiency
❑ Remuneration
❑ Skills Development, Training &
Education
❑ Productivity
❑ Provisioning and Recruitment
❑ Risk Analysis
❑ Staff Retention

FREQUENTLY USED HRM METRICS
(PWC)

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

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

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.

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.

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

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

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.”

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.

HR METRICS REPORTING
– 4 C’S
• COSTS
• CAUSES
• CONSEQUENCES
• CURE

LEARNING
ACTIVITY 15
• Group
Discussion:
• Apply steps 1-5
of the HRM
metrics
process.

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

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.

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.

PURPOSE OF HRM
AUDIT – V-C-R
• Value
• Compliance
• Risk

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.

5 C’s – THE KEY BENEFITS
OF A HRM AUDIT
• Compliance
+
• Competitive
+
• Cash
+
• Credibility
+
• Competence
= Clean HRM Audit

V-I-P HRM
AUDITING
• Valid (accurate & correct
Measurement)
• Interrogative (3rd degree)
• Protective (against HR, people
& reputational risks)

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

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;

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.

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%)

LEARNING ACTIVITY
16
• 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

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

HRM AUDITING – WIDEST COMPLIANCE
GAPS
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%

HRM AUDITING – MOST COMPLIANT
CRITERIA
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%

SABPP HR AUDITED RATINGS
(X39 COMPANIES)

TYPES OF HR AUDITS
• Skills audits;
• Effectiveness audits;
• Performance audits;
• Value-add audit;
• Cultural audits;
• HR systems audit;
• Compliance;
• Best Practices;
• Strategic;
• Function-Specific

HR AUDIT
MEASURES
• Planning and staffing
• Recruitment efficiency
• Recruitment effectiveness
• Compensation measures
• Benefits
• Orientation cost per employee

HR AUDIT
MEASURES
• Counseling/disciplinary costs
• Lost time costs
• Turnover rates
• Training and development
costs/measures
• Organization development
measures

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.

HRM AUDIT ACTION
PLAN
• Phase 1:
Foundational/Initiation
• Phase 2: Assessment
• Phase 3: Concluding and
Reporting

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

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.

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)

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

LEARNING ACTIVITY
17
• Describe how you will
audit the strategic HRM
function.
• Apply the 3-step HRM
Auditing process.

DIAGNOSTIC TOOLKIT
• Strategic Performance Advisor
https://www.surveymonkey.com/r/BXRKRXG
• Strategic HR Planning
https://www.surveymonkey.com/r/5SNGNTW
• HRM Metrics and Analytics
• Strategic Total Rewards Management (STORM)
https://www.surveymonkey.com/r/PQWGNJJ and
https://www.surveymonkey.com/r/PHKFGQL

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

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/

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

CONCLUSION
• Key points
• Summary
• Questions
• Training administration
• Certification

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

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