APPLYING HR STANDARDS & METRICS

TO PROMOTE SOUND HR GOVERNANCE,

RISK, COMPLIANCE

12th Africa Corporate Governance Conference

Marius Meyer, CEO: SABPP

15 July 2014

@SABPP1

Agenda

• Clarifying the need for national and international

HR Standards

• Identify HR metrics to measure bottom-line impact

of HR

• Managing people risks in business

• Creating an ethical organisation culture

• Conclusion

Critical questions

1. How many of you would like to eat in a

restaurant without standards?

2. Or stay in a hotel without standards?

3. Or send your child to a school (or pre-

school) without standards?

4. Or get operated in a hospital without any

standards?

5. Or fly back home on an airline without

standards?

Then when it comes to HR …

Why do we continue to

manage people and govern

the most precious part of our

organisations (i.e. people)

without standards?

Top facts about HR

• Human Capital is the biggest concern for

CEOs (PwC).

• Only 18% of CEOs feel confident that they

have the right people in place to execute

strategy (CEB).

• Human Capital is the biggest risk in

business (HCI Africa).

• Skills crisis is the top obstacle to economic

growth.

• Strikes cost SA R197 million per day.

More facts about HR

• SA losing R12 billion a year due to absenteeism.

• Only 5% of employees understand business

strategy.

• World-wide only 13% of employees actively

engaged.

• Companied with engaged employees outperform

others by 202% (Dale Carnegie).

• Companies with good HR Practices outperform

others by treating HR as critical business function,

these companies are 105% more profitable.

• Average ROI on wellness programmes: 300%.

Operational Management Consistency in the

Management of People

One of the toughest things to be is consistent

Why standards ?

The chair that you're sitting on, or the desk your computer is perched on, are held together by bolts and screws.

Humble bolts and screws also hold together our children's bicycles - and also the aircraft we trust our lives to during business trips or holiday travel.

The diversity of screw threads used to represent big problems for industry, particularly in maintenance, as lost or damaged nuts and bolts could not easily be replaced. A global solution is supplied in the ISO standards for metric screw threads.

The credit card you may have used to buy your holiday can be used worldwide because all its basic features are based on ISO standards.

We are so familiar with many objects, like credit or telephone cards, that we tend to assume they just "fell out of the sky". In fact, the ease with which we can use them can be traced back to an ISO standard.

Today standard users account for 78% of the FTSE 100, 53% of the Nikkei, and 44% of both the Fortune 500 and Hang Seng listed companies.

Globally standards are a framework for consistency &

continuous improvement and managing risk through

controls

“Consistency is far better than rare moments of greatness “

Strengthening the human factor in management systems

Example of inconsistency –

paternity leave

• South Africa – 3 days

• Ghana – 5 days

• Cameroon – 10 days

• Kenya – 14 days

• Australia – 14 days

• Sweden – 60 days

• UK – 12 months (parents sharing)

Why a national HR Standard?

• We need to improve the quality of HR

practice.

• HR will not be seen as a true profession

without standards.

• Inconsistencies – practices, sites, business

units, companies, industries.

• Too many bad examples of things going

wrong – Marikana, Medupi.

• Raising the bar for the HR profession and

business impact.

468 HR Leaders developing

HR Standards for South Africa

HR Standards Facilitators

Kate Dikgale-Freeman Michael Robbins Linda Chipunza

BUSINESS STRATEGY – HR BUSINESS ALIGNMENT

❶ StrategicHRM

❷ TalentManagement

❸ HR RiskManagement

HR ARCHITECTURE

HR VALUE & DELIVERY PLATFORM

❹Work-force

planning

❺

Learning

❻Perfor-mance

❼

Reward

❽Well-ness

❾ERM

❿OD

⓫ HR Service Delivery

⓬HR Technology

(HRIS)

Prepare

Imple-ment

Review Improve⓭ HR MEASUREMENTHR Audit: Standards & Metrics

H R

C O

M P

E T E N C

I E S© SABPP HRM SYSTEM STANDARDS MODEL

Global approaches to standards

• Production and safety lead – ISO standards

• Professional standards – accounting

• Top global companies – their own standards

• Canada – HR Standards & Metrics

• USA – HR Metrics (SHRM)

• ISO HR project started

• South African National HR Standards

Market reaction to project• All over SA (all 9 provinces)

• USA (SHRM and ISO)

• UK (CIPD)

• Australia

• Netherlands

• Zimbabwe

• Zambia

• Botswana

• Namibia

• Lesotho

• Swaziland

• Kenya

• Ghana

• Malaysia

❶ STRATEGIC HR

MANAGEMENT STANDARDDEFINITION

Strategic HR Management is a systematic

approach to developing and implementing

long-term HRM strategies, policies and plans

that enable the organisation to achieve its

objectives.

SABPP (2013)

STRATEGIC HR

MANAGEMENT STANDARD

OBJECTIVES1.2.1 To ensure the HR strategy is derived from and aligned to the

organisation’s objectives in consultation with key organisational

stakeholders.

1.2.2 To analyse the internal and external socio-economic, political and

technological environment and provide proactive people-related business

solutions.

1.2.3 To provide strategic direction and measurements for strategic

innovation and sustainable people practices.

1.2.4 To provide a foundation for the employment value proposition of the

organisation.

1.2.5 To establish a framework for the HR element of the organisation’s

governance, risk and compliance policies, practices and procedures which

balance the needs of all stakeholders.

SABPP (2013)

STRATEGIC HR

MANAGEMENT STANDARDIMPLEMENTATION

1.3.1 Translate the overall strategic intent of the organisation into HR strategy.

1.3.2 Position the strategic HR agenda as an integral part of strategic decision making and

operational plans.

1.3.3 Allocate HR resources and build capability to implement the HR mandate.

1.3.4 Provide the contextual foundation for the development of the policies, plans, practices

and procedures.

1.3.5 Allocate accountability and responsibilities for the execution of HR strategy.

1.3.6 Ensure the execution of the HR strategy is measured and monitored within the

governance framework of the organisation.

1.3.7 Drive continuous improvement and sustainability of the HR strategy through planned

reviews and integrated reporting.

SABPP (2013)

HR RISK MANAGEMENT

DEFINITION

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 realisation of the objectives of an

organisation.

SABPP (2013)

❸

HR RISK MANAGEMENT

OBJECTIVES

3.2.1 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 organisational objectives.

3.2.2 To align HR and people management practices within the governance, risk

and compliance framework and integrated reporting model of the organisation.

3.2.3 To ensure appropriate risk assessment practices and procedures relating to

people factors are embedded within the organisation.

3.2.4 To ensure appropriate risk controls are designed and applied to HR

activities and interventions.

3.2.5 To contribute in creating and sustaining a risk culture in an organisation

which also encourages innovation and creativity.

SABPP (2013)

Risk / Readiness Profile

H R R I S K S – 8 African countries

• Safety - accidents

• Skills shortages/gaps

• Incompetence

• Employee disengagement

• Strikes & poor employment relationships

• Fraud/corruption

• Stress

• Staff turnover

• Low staff satisfaction –impact on customer satisfaction

• Cyber security

• Conflict/disputes

• Diversity problems

• Sexual harassment

• Expatriate issues

• Non-compliance

181 babies died in state hospitals last year.

Human errors, faulty equipment & cover-up by senior medical staff were key factors.

Infection-control nurse retired, and her post not filled.

Critical shortage of nurses & clinical engineers who are responsible for maintaining ventilators.

Senior doctors presented inaccurate stats to their bosses to cover up poor management practices.

Doctors failed to alert DoH to the crisis, even though a few nurses had raised the alarm to management.

Public sector case study

STAFF COMPLAINTS:

Shortage of nurses, leading to overworked staff being vulnerable to human error.

High baby-to-nurse ratio – babies not getting adequate care and attention.

Specialist doctors consult junior doctors on the phone without personally accessing high-risk cases.

Inadequate training for medical staff.

30 May 2010

If you don’t manage HR risks

HR RISK MANAGEMENT

IMPLEMENTATION

3.3.1 Position the role of HR in influencing and communicating the organisational risk

culture.

3.3.2 Assess potential positive and negative people factor risks to achieving organisational

objectives.

3.3.3 Identify and evaluate the potential risk impacts with regard to strategic and operational

HR activities.

3.3.4 Decide on appropriate risk tolerances for the different components of the HR function.

3.3.5 Design and implement appropriate people-based risk management systems, metrics,

risk controls, and HR practices which will contribute to mitigate the potential risks.

3.3.6 Ensure all HR risk practices conform to the organisational governance, risk and

compliance strategies and policies including integrated reporting.

SABPP (2013)

HR RISK ASSESSMENT

FRAMEWORK

HumanFactor

RiskLeader-

ship

HumanFactor

RiskManage-

mentProcesses

HumanFactor

RiskHandling

Outcomes

CAPABILITIES RESULTS

INNOVATION AND LEARNING

People

Human FactorRisk Policy &

Strategy

Partnerships

Adapted from EFQM & IMOR (Michael Robbins)

⓭ HR MEASUREMENT

DEFINITION

HR measurement is a continuous process of

gathering, analysing, interpreting and

presenting quantitative and qualitative data to

measure and align the impact of HR practices

on organisational objectives, including

facilitating internal and external auditing of HR

policies, processes, practices and outcomes.

SABPP (2013)

HR MEASUREMENT

OBJECTIVES

13.2.1 Determine measurement approaches, methodologies and metrics to

assess the effectiveness and efficiency of HR practices.

13.2.2 Identify relevant measurement areas for the purpose of integrated

reporting.

13.2.3 Implement appropriate tools and methods to measure timely the efficiency,

effectiveness and consistency of HR practices across the organisation.

13.2.4 Provide a clear framework for measuring HR impact on the bottom-line of

the organisation.

13.2.5 Develop performance indicators for HR service delivery and business

impact and present to the organisation in an appropriate HR Scorecard

SABPP (2013)

IMPLEMENTATION

13.3.1 Develop an integrated HR measurement and reporting

framework.

13.3.2 Set up management systems and resource the HR function to

collect and report on agreed people management metrics.

13.3.3 Develop and implement an HR scorecard.

SABPP (2013)

Towards National HR Metrics

• % of people meeting performance contracts

• % of outstanding performers

• Average time to resolve people issues

• % of payroll spent on training

• Training spent per employee (costs/FTE)

• Total amount spent on employees

• Number of training hours per employee (year)

• % of key positions with successors

• Vacancy rate (vacancies/headcount)

• Absenteeism rate (sick days/FTE)

• Labour turnover (people left/headcount)

• Diversity/employment equity profile (race, gender, disability)

Key Human Capital Metrics• Revenue per employee (Revenue/FTE)

• Profit per FTE (Revenue-Operating cost/FTE)

• Human Capital ROI (benefits-costs/costs)

• Leadership quality index

• Employee engagement score

• Employee satisfaction score

• Organisation climate score

• Employer of choice index

• Human capital risk index (less than 10% risk)

• HR customer satisfaction score

POSITIONING GRC IN

COMPANIES

GOVER-NANCE

RISKCOM-

PLIANCE

LEADERSHIP

MANAGEMENT

CU

LTUR

E

CO

NTR

OLS

Triple bottom-line: 3 P’s

PEOPLE(Social)

PLANET(Environment)

PROFITS(Financial

performance)

S U S T A I N A B I L I T Y

“Good human resource management is imperative for good governance”

Mervin King

HR governance defined:

is the act of leading, directing & controlling the HR function to promote sound corporate governance in pursuit of the overall business goal of economic, social & environmental sustainability

Workplace behaviour

OOPs !! What if ? the pilots had not read the Instruction book

What if ? The ground staff didn't think that

house keeping was an important issue

Who insured it and will they pay ??

HR role

HR’s role is to guide and develop policies and ensure that managers have a clear understanding of their responsibilities. This applies in respect of, for example, health and safety; fair employment practices; recruitment and terminations; diversity and the avoidance of discriminatory behaviour.

HR should participate at all levels in managing risks within the company and contribute to ensuring ‘joined-up thinking’ between different business functions.

HR should be represented at executive level and on specialist company-wide committees – for example, on the implementation of the Corporate Governance (King 3) requirements.

RISK Reporting

GUIDELINES FOR HR GRC

• Transform HR management to HR governance by taking

full responsibility for GRC in the HR space, but with a

clear link to overall GRC and business strategy

• Identify all stakeholders and engage with them

• Design and implement a robust HR risk management

plan

• Develop HR standards – good HR practices

• Infuse HR governance in your organisation

• Evaluate the impact of HR on the bottom-line

RATING SCALE TO ASSESS HR

PROBLEMATIC MEDIOCRE EXCELLENT

High Risk Medium Risk Low/no Risk

HR practice is non-existent, has a low uptake or is applied poorly. Little, no or poor results are evident. Requires urgent attention to move to medium risk over short or medium term.

Some pockets of excellence, but they are isolated, and applied inconsistently in certain parts of company. Some occasional positive results comparable to typical average HR standards. Should be addressed before it becomes problematic.

HR leading practice is well infused, aligned and integra-ted across the company and applied consistently with clear results. Comparable to world-class standards. Should be maintained, reinforced or used as a model for other companies.

SUSTAINABLE PERFORMANCE

“Whether a company sustains exceptional performance depends first and foremost on whether it continues to

have the right people in power.”

Ethics Management Process …

Develop or revise code of ethics & processes

Build an ethical culture

Integrate ethical

standards

Assess ethics risk and

opportunities

Report & Disclose

Reference: Ethics SA www.ethicssa.org

National HR Governance Strategy Alignment

HR Professional Standards:• HRMS (13)• HRMSAS (13)• HRPPS (30+)

HR Products/Services:• CPD• Mentoring• Professional registration• Research• HR Academy – QCTO• Curriculum standards

HR Metrics:• National HR Scorecard• HR Service Standards

HR Auditing:• Internal Audit• External Audit

King IV:HR Governance

ISO: HR

IntegratedReporting

HR Competencies

Conclusion

HR standards are needed to improve the

consistency and quality of HR management.

Consider the SABPP approach, process and

methodology, but develop your own HR

standards for your country.

Best wishes with your HR governance work.

For more information, contact us on executiveoffice@sabpp.co.za

Let us build well governed HR functions

professional@sabpp.co.za (Professional Registration)

xolani@sabpp.co.za (Professional Services)

kenneth@sabpp.co.za (Stakeholder Relations)

penny@sabpp.co.za (Research)

naren@sabpp.co.za (Learning & Quality)

marius@sabpp.co.za (Strategy inputs)

voice@sabpp.co.za (Social media)

Website : www.sabpp.co.za Blog: hrtoday.me

New office: 8 Sherborne Str, Parktown, South Africa

Tel: +27 11 482-8595 Fax: +27 11 482-4830

Cel: 082 859 3593 (Marius Meyer)

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