Family friendly policies create new risk issues. You should consider strategic HR and people risk management, says Mark Edelsten.
In May last year, the UK government started to look at the work-life balance, and announced a review of maternity pay, parental leave and flexible ways of working. Although initial press reports suggested that any new measures would be limited, latest developments indicate that an autumn Green Paper will be much wider in scope, possibly opening the way to offering rights to part time work, paid parental leave and considerably improved statutory maternity pay and leave.
Recent surveys show that the "family friendly" approach does not necessarily attract wholehearted support. Both employees' and employers' views vary greatly. In particular, introducing family friendly policies can easily generate resentment and added pressure for those without children, who have to fill in for their colleagues while they're away. This will cause problems for employers operating in tight labour markets, where attraction and retention is already difficult. Ironically, the government itself may be the main victim, given its heavy reliance on flexible working in the health and education sectors.
Above all, the push for family policies will generate change in employee-employer relationships. This change will create risks which employers need to manage. What strategies can you adopt to deal with this area of human resources (HR) and people risk, and how will this fit in with developing an overall strategic approach to HR and people risk management?
Generally, the scope of HR and people risks is not well articulated or understood. For example, high levels of labour turnover are an issue because of the significant costs typically associated with them. But what is the correct level of labour turnover for a company? Too little turnover can be just as much a risk as too much turnover. It can indicate that a company is not changing fast enough to bring in the new skills and thinking it needs to move it forward quickly enough to compete in a rapidly changing economy.
The answer is that levels of labour turnover are company specific. You need to understand at what level your company's labour turnover will balance costs and benefits. Inevitably, this means approaching the issue fairly scientifically. Access to HR data is the key. Once HR and people risks such as labour turnover are analysed and defined, you can evaluate them, in terms of impact and frequency, and prioritise and manage them, much in the same way as any other area of risk.
Understand the scope
Developing a strategy for dealing with the impact of employment regulation change, such as family-friendly policies, need not be difficult or confusing. Introducing family friendly policies can create the following risk issues.
Measure impact and frequency
This gives a flavour of the scope of an HR risk identification process. The next step is to measure the impact and frequency of these HR risk areas. While people often baulk at taking this step, it is not as difficult as it appears. It involves working out how often, in practice, each individual risk issue arises or will arise, and then estimating how much - in actual and opportunity cost terms - this issue will cost your business. This process creates a risk map, and provides the platform for developing an action list for dealing with the problem.
The next stage is to look at how you should manage the HR risk highlighted by this process. At this point, you should consider a range of approaches, ranging from doing nothing, to short term and more lasting solutions. You will need to consider the investment needed to manage HR risks effectively. In turn, this provides the overall cost/benefit framework to link HR risk management to overall company shareholder value and cash flows, which is, the object of strategic HR risk management.
Why don't more companies adopt this approach? Often, the basic information is available, the HR interventions and measurement criteria are in place, and the HR risk issues are well understood and prioritised. However, companies frequently do not see HR and people management as a risk management activity. It is not clear why this is the case. In many, particularly in areas of financial services, the HR function and activity are often absorbed by asset (ie people) acquisition and protection.
The need for strategic HR risk management varies, however, from one sector to another, and from one company to another. Demand for a strategic approach to HR and people risk management generally reflects the size of the business, the element of overall value comprised by intangible assets, and the scale of change within the organisation. Using these parameters, it is possible to judge the need for developing a strategic approach to HR risk issues and to prepare for change.
Mark Edelsten is a consultant, reward and HR risk consulting, William M Mercer, Tel: 020 7423 5420, e-mail: Mark.Eddsten@wmmercer.com .
The 1999 UK Employment Relations Act implemented the European Union parental leave directive, introducing new rights of parental leave from 15 December 1999. Key points are:
A copy of the Maternity and Parental Leave Regulations can be found on the DTI website at www.dti.gov.uk/er/erbill.htm