Risk audit in HR helps focus attention

Many of the activities encompassed by HR can increasingly be classified as
"high risk". The whole employer/employee relationship treads a
knife-edge between satisfaction and disaffection. By undertaking a risk audit,
HR directors can clarify where they should focus their attention.

A good starting point is to study the number of grievances, disciplinaries
and dismissals – closely followed by employee turnover generally – to establish
"organisation health".

A definitive risk profile should then be developed for HR throughout the
organisation. Are all employment contracts in place (and up to date)? Do staff
have the required training and skills to carry out their duties (and to provide
the flexibility needed to cover colleagues)? What is the cost impact of any
shortfall in training and what are the associated risks from absenteeism or
sudden departures or increased employee turnover?

HR Benchmarking databases give "norms" for all these areas – but
such averages, while giving a base level to match, should not be enough for
those organisations that are striving to excel.

A drinks manufacturer recently discovered that labour turnover above the
industry norm of 10 to 12 per cent was costing the company £500,000 per annum.
Recruitment costs and oncosts of between £7,000 and £20,000 per employee had
(as they do in so many organisations) gone unchecked. An audit programme was
established to identify the causes of turnover. This covered a far broader
spectrum than at first might be expected, including for example, identification
of a need for more accurate and precise job and recruitment specifications at
the pre-recruitment stages.

There was also a need to monitor the quality of interviewing and selection
to achieve a better job/employee match. This resulted in intensive training for
all managers involved in the selection process.

Pay levels were also found to be 2 to 5 per cent behind comparable market
rates, and induction procedures – previously quite slack, have been tightened
so that everyone undergoes corporate familiarisation sessions in eight weeks of

Awareness of the shortcomings and the concerted effort to overcome them, has
reduced turnover from an unacceptably high 17 per cent, to within the lower end
of the industry benchmark.

In achieving this more acceptable level of employee turnover, the company
has found that absenteeism has reduced, and morale is higher.

It is becoming clear that – having identified risk areas – and breaking down
the component risk factors to quantifiable elements, has focused everyone’s
mind. The fact that there are benchmarked norms available to clarify whether
improvement is meeting a realistic "sector equivalent" target has
been an added bonus.

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