Introduction
Effective management of the HR risks is one of the most important roles that HR officers play in ensuring that there is increased productivity and performance in any given company. The essay focuses on the HR risk issues that are common in some of the large companies like Toyota and the corrective measures that can be taken to diffuse such risks. The HR risks that are discussed in the paper include compliance with regulations, carrying out operations, human capital risks, ethics and behaviors, and succession planning risks.
Compliance with Legislation Risk
There is much legislation that a business is required to strictly adhere to register or operate in a given country. Some of the common legislations that affect HR departments include employment equity, health and safety of employees, and many other labor acts practiced by different countries (Meyer, Roodt & Robbins, 2011). The typical HR risk of this type of risks is noncompliance. There are huge fines and penalties that are associated with the noncompliance of the regulations, which are likely to land the business at risk and may jeopardize its success and reputation.
Noncompliance with the legislation is a medium risk because it can easily be avoided if HR officers are aware of the legislations and strictly follow them. However, the high number of legislations that the business must adhere to puts it at a risk because it is easy to avoid or assume some of the employment legislations that are silent. In the case where large companies like Toyota complies with employment regulations like Equity Act, but fails to employ skilled and competent employees, then it can easily be in trouble, which can lead to a significant risk.
The most important corrective measures of the noncompliance with the legislations risk is for HR managers to have a clear understanding and awareness of what every legislation entails after which the HR personnel should strictly follow the legislations to avoid fines and penalties (Carnovali, & Davis, 2010). Secondly, the training programs undertaken by a business should include enough information about compliance issues, which will ensure that all departments in the company comply with employment legislations.
Carrying Out Operations
Carry out operations simply means the transforming into an executable task in order to achieve goals and objectives of an organization. However, the big question is whether an organization has qualified staff to implement the tasks. It is the responsibility of the HR personnel to come up with qualified staff and performance management systems that can facilitate the execution of tasks. The specific risks that are associated with carrying out operations include lack of right expertise, implement tasks, lack of well-defined performance standards, and lack of clearly designed operations and roles of employees (Meyer, Roodt & Robbins, 2011).
The risk factor is low because it is linked to recruitment and selection process of the company, which is always thoroughly done by Toyota to come up with qualified staff who can execute assigned tasks. However, careless selection of staff can increase the likelihood of the risk to occur. Companies with reactive approach when carrying out recruitment are likely to experience the risk than the companies that are proactive and have well-designed recruitment and selection process. Therefore, the likelihood of the risk to occur depends on how a company recruits and selects its new staff.
One of the most effective, socially responsible corrective measures that can be used to mitigate the risks is to establish a proper recruitment process and adhere to the recruitment and selection practices of the company to come up with qualified staff who can effectively execute the assigned tasks (Meyer, Roodt & Robbins, 2011). Secondly, HR departments should come up with an effective performance management system should be properly implemented to enhance the performance and productivity of employees.
Human Capital Risk
Lack of critical skills is one of the key risks that can hamper the success of an organization because of lack of innovation and creativity that can give it a competitive advantage in the market (Atkinson, 2015). The risk of not getting the critical skills required in a company is some of the greatest concerns that human resource personnel are struggling to cope with. Finding the right employees for the capital-intensive companies like Toyota is the main work of HR departments, but sometimes finding the critical expertise that a company wants may pose some challenges due to high competition for the critical expertise in the automobile industry (Atkinson, 2015).
The human capital risk is high in the organization because of the competition of acquiring the best experts, especially in the industry that requires special skills that may not be common in the market. Therefore, retaining critical personnel who are in demand can be challenging because they are in high demand, which can make such experts to easily leave the organization in the search of greener pastures or move to the companies that offer better terms of employment. The risk, therefore, is most likely to occur in the organization.
The first corrective measure that can be used to mitigate the risk is to come up with the effective measures of retaining critical expertise in the organization (Atkinson, 2015). It is important to offer attractive value propositions for employees. In addition, the company should have a better reward system to motivate critical experts to remain in the company or attract potential qualified staff. Secondly, the risk can be defused by internally developing critical skills that the company needs through training and development.
Succession Planning Risk
Large companies like Toyota are likely to face a succession risk if they do not plan well for the replacement of key leaders like the CEOs and CFOs. The inability of the organization to have future leaders is likely to suffer the risk of a hostile takeover in the case that key leaders retire or leave the organization unexpectedly (Meyer, Roodt & Robbins, 2011). In addition, reactive succession can also make the companies to recruit new leaders who are incapable of leading the company. It is the responsibility of HR personnel in the organization to develop a leadership pipeline to make succession easier and less risky.
Succession planning as a risk factor is low due to the fact that the organization is always aware of the time when key leaders are supposed to retire, which makes the HR to plan in advance for their succession. However, in case that key leaders leave office unexpectedly, there are always personnel who deputize them who equally have the ability to run the affected docket. Succession risk, therefore, is less likely to occur.
The most effective way of defusing succession risk is to start planning early for succession to allow more time for better planning and the development of internal talents, who are familiar with the organizational cultures and values (Meyer, Roodt & Robbins, 2011). Therefore, the second corrective measure is an internal development of talents to ensure that the organization has sufficient leaders help in managing the organization in all positions.
Ethics and Behavior Risk
Unethical behavior is HR risk that is likely to occur in the organization because some employees can engage in unethical behaviors that can affect the financial status or the reputation of the company. Unethical behavior is one of the risks that the organization may find hard to cover from because it affects its reputation and brand image. The HR department in the organization is regarded as the guardian of values and morals because it should cultivate ethical behaviors among employees.
The likelihood of unethical behavior to take place is relatively high because companies like Toyota employs a large number of employees, which makes it difficult to control their practices and behaviors. A company may have a comprehensive code of conduct, but it cannot directly control the behaviors of employees because they are inborn. Therefore, the chances of the risk occurring is high despite the regulation and policies put in place to control the behaviors and actions of employees.
The risk can first be corrected by formulating an effective code of conduct that is implemented by the ethics committee. The company should ensure that all employees are aware of the code of conduct and the consequences of breaching ethical standards set by the company. Secondly, the company should not just pay attention to the consequences of violating the code of conduct, but should also put in place a system that rewards employees who comply with the required ethical behaviors within the company.
References
Atkinson, W. (2015). Confronting the Skilled-Worker Shortage. Retrieved from http://www.hreonline.com/HRE/view/story.jhtml?id=534359115
Carnovali, M. & Davis R. (2010). The HR Function’s Compliance Role. Retrieved from http://corporatecomplianceinsights.com/hr-function-compliance-role/
Meyer, M., Roodt, G., & Robbins, M. (2011). Human resources risk management: Governing people risks for improved performance. SA Journal of Human Resource Management, 9(1), 12-pages.
