A Risky Tomorrow beyond

Traditional Human Resource

Risk Management

Contents

1 Introduction: ......................................................................................................... 2

1. . Defining the Context of the Study ...................................................................... 7

1.1. Scope of the Project ...................................................................................... 7

1.2. Objectives ..................................................................................................... 7

1.3. Organizational Impact ................................................................................... 8

2. What is Traditional Human Resource Risk Management? .................................. 8

3. Human Risk Management ................................................................................. 10

3.1. Employee Organisational Psychological Connections ................................ 10

3.2. Recruitment and Selection .......................................................................... 13

3.3. Operational Health and Safety .................................................................... 15

3.4. Change Management .................................................................................. 18

4. Risk Management Assessment and Mitigation .................................................. 20

5. Conclusion and Limitations ................................................................................ 21

1 Introduction:

Humans have altered environments and enhanced their well-being unlike any other

creature on the planet (Heilman & Donna, 2007); this is no different whether the

environment is ecological, social or organisational, each person is an individual who

will always control environmental factors in their own way (Bennett, Doshi, Do Vale

Junior, Kumar, Manikam, & Madavan, 2009). In recent times, risk management

theories and practices have become intricately entwined into human resource

management strategy (Baccarini, Salm, & Love, 2004). The importance of the risk

management and human resource management models are undeniable due to the

value these models bring to an organisation. The feedback received from real

business risk management and human resource management model users is that

the terminology is easy to learn; the model helps to identify undesirable risks; the

practice can help to improve and limit the internal and external losses to an

organisation; and the terminology, tools and models are expressive enough to

capture the essential information (Chen , Shaio , & Lin, 2007) assisting in the

analyse to support tactical and operational decision making processes

(Tannenbaum, 1990).

Various academics have documented the benefits of each model. Torrington (1993),

Widodo (2011), Welch (2003) and Tannenbaum (1990) conducted analysis of

organisations to obtain some benefits with regards to Human Resource Risk

Management (HRRM). Human Resource Risk Management (HRRM) was found to

bring benefits to the following areas:

1. Strategic: benefits from HRRM for strategic activities such as long-range

planning, mergers & acquisitions, internal process, competitive positioning and

employee retention.

2. Organizational: benefits from HRRM to the organization in terms of strategy

execution, learning, cohesion, and increased growth.

3. Managerial: benefits from HRRM provided to management in terms of

improved decision making, planning and employee empowerment.

4. Operational: benefits from HRRM related to the reduction of process costs,

increase of employee productivity, increase of task quality, improved customer

service and/or reduced task execution time.

5. IT Infrastructure: benefits from HRRM relating to the IT support of business

agility and reduction of IT costs through Human Resource Integrated Systems

(HRIS).

However, Risk Management is highly complex with ample theoretical practice due to

risk being highly uncertain, as organisations are not able to account for every risk

inclusive of those human based. Once a risk management strategy is put into

practice, internal and external factors affect it. A main component of both risk

management and human resource management models is the people involved.

Stress and anxiety can occur in many different circumstances, but is particularly

strong when a person’s ability to control the demands of work is threatened in such

instances as organisational change or employee position process and

communication channel changes. Insecurity about successful performance and fear

of negative consequences resulting from performance failure may evoke powerful

negative emotions of anxiety, anger and irritation (European Foundation for the

Improvement of Living and Working Conditions).The causes and consequences for

work related stresses are listed below in Figure 1.

Figure 1: Model of causes and consequences of work-related stress in Europe

These stresses can be attributed to a number of reasons. In the figure below, whilst

there has been a slight reduction in monotonous work, freedom to use one’s skills

and learning opportunities in the workplace has also been slightly curtailed. This can

be attributed to people being asked to adapt to a process.

Another key reason for work related stress could be attributed to learning new things

on a job. Morrison and Brantner (1992) stated “the impact of the context, or

organizational environment, on learning may be very strong, especially in

experiential learning, where the context cannot be controlled.” This means that one

may face strong psychological pressure from learning something new that is based

on experience Due to the different fields of experience of an individual strong

psychological pressure can arise when being faced with a new challenge in the

workplace.

Figure 2: Reasons for work related stress

This paper aims to provide an introductory ground of “Human Risk Management”

where links between an employee’s psychological state and the implementation of

non-traditional human resource risk management. The paper is structured in the

following manner:

1. Defining the Paper Context

1.1. Scope of Paper

1.2. Objectives

1.3. Organisational Impact

2. Framework

2.1. Introduction

2.2. What is Traditional Human Resource Risk Management?

2.3. Human Risk Management

2.3.1. Organisational Subconscious Connections

2.3.2. Recruitment and Selection

2.3.3. Occupational Health and Therapy

2.3.4. Change Management

2.4. Risk Management Assessment and Mitigation

2.5. Conclusions and Limitations

The first section will cover the context behind Human Risk Management. In this

section, traditional and non-traditional human resource risk management

backgrounds and frameworks are explored. This section is followed by subsection

exploring of human risk management in selected key aspects of human resource

management.

The next section, discussion around risk management assessment and potential

mitigation is explored. Finally this paper is concluded and the limitation presented ,

1. . Defining the Context of the Study

1.1. Scope of the Project

This paper will focus on the possibility on helping to better clarify the new

generational transition from traditional ‘human resource risk management’ to

‘human risk management’ within an organisation. For the purpose of this paper a

comprehensible exploration of how human risk management aligns to deliver a

more in depth understanding of risks within key traditional human resource

management capacities such as:

Recruitment and Selection

Operational Health and Safety; and

Change Management

Through the paper an introductory understanding of Human Risk Management

and Human Resource Management benefits will be established.

1.2. Objectives

The introductory examination of ‘Human Risk Management’ has been chose with

the main purpose of exploring its potential within the human resource. The

secondary applications for this are the uses within adapting psychology into risk

management and allowing for better employee safety management with additions

to evaluated areas.

1.3. Organizational Impact

The introduction of ‘Human Risk Management’ will allow for more assurance in

analysis of more unassessed areas such as human reaction to situations or risk

pre-emptive mitigation, or the human unpredictability. This analysis will

determine changes to training, people development, job integration, employee

transition, job evaluation, employee performance issues, management of

employee performance issues and above all operational capacity.

2. What is Traditional Human Resource Risk Management?

Traditional Human Resource management and Risk Management can be studied

and analysed differently. Traditional human resource management is based on

internal focused personnel functions such as recruitment, performance appraisals,

payroll administration, training and development and motivation initiative, as well as

legislative functionality compliance. According to Wagner (2010) and Dianhua

(2007) Human Management today focuses on the effective overall management of

an organisation’s workforce to facilitate the achievement of organisational goals and

objectives. The Human Resource Managerial process goals and objectives

according to Nankervis, Compton and Baird (2008) lie within recruitment and

selection, training and development, workplace planning, performance management,

remuneration, job analysis as well as other personnel functions, aiding the

organisation in customer service delivery in either service or product functionality.

However, with these functions comes risk. Hubbard (2005) defines risk management

as being a systematic process for considering threats inherent in a situation or

activity and taking steps to prevent or abate these from occurring.

The Traditional Human Resource Risk Management framework according to

O’Donnell (2005), deals with the controversial legislative issues, role of costs and

benefits and comparative risk, and physical risk in alignment with financial costing

and highest impact. However, traditional risk management does not specify the

psychological risks of an employee taking into consideration such areas as

psychological determinates such as personality, behaviour and employee needs

influences on risk areas either operational or administrative. According to O’Donnell

(2005) the standard risk management decision staged approach is:

1. Definition of the problem and placing that problem in context,

2. Analysis of the risk/s associated with the problem in context,

3. Examination of the options available for addressing the risk,

4. Option selection

5. Implementation

6. Evaluation of results.

However, even should this six stage approach be undertaken the definition of a

problem context this approach is still highly hypothetical. The introduction of a more

human risk management based approach should be implemented as it according to

Flouris and Yilmaz (2010) this would achieve managerial critical point objectives in

finance, strategic alignment, and operational context.

3. Human Risk Management

Human Risk Management according to Flouris and Yilmaz (2010) deals with

complexity of human factors and provides insights to managing human factor based

risks, offering a risk management framework to strategic human resource

management. This type of risk management takes a proactive approach for tackling

human factor risks and interconnecting the roles. To gain better understanding how

human factors influence this, we must first look at how the human factors of an

employee is subconsciously connected to an organisation.

3.1. Employee Organisational Psychological Connections

Sub-conscious breakdown effects on an employee can be seen in stress and

stress related disorders from anxiety to serve depression. The differing effects

which stress will have on an employee are not just physical but also

psychologically damaging,

as seen in Figure 3 the

stress reactions, can lead to

disastrous effects for an

employee, as well as

detrimental effects such as

increased costing, and impaired

employee performance and

absenteeism.

Figure 3: Model of causes and consequences of work-related stress in Europe

However, should an employee’s sub-conscious breakdown some effects are:

Work-Family Conflict

A form of inter-role conflict in which the role pressures from work and

family are mutually incompatible (Greenhaus & Beutell, 1985), thus

leading to an employee having to choose between either family or

work.

Depression

A psychiatric disorder characterized by an inability to concentrate,

insomnia, loss of appetite, anhedonia, feelings of extreme sadness,

guilt, helplessness and hopelessness, and thoughts of death

(Dictionary.com, 2010).

Burnout

A psychological linked factor attributed to work overload, role conflict,

role ambiguity, workplace environment and even supervisory support.

The workload required to be achieved is unhinged due to there being

not enough time or resources to meet the demands placed upon the

individual worker (Brewer & Shapard, 2004).

These are a few of the more serious outcomes should an employee

subconscious connection breakdown. The employee, in most cases will not

always know how to handle the feelings he or she is experiencing and is not

able to assess their own psychological state (Buggy, 2010).

For an organisation, stress of an employee can be a detrimental risk to the

overall bottom line of productivity and quality. In effect organisational

education about stress through the issuing of staff information packs

containing instructions on self-assessment, contact numbers, fact sheets and

also organisational process (Buggy, 2010).

The established link between work stressors and employee well-being places

a clear moral obligation on organisations to provide a healthy environment

(Patterson, West, Lawthom, & Nickell, 2003). In addition to this organisational

moral obligation, it is also argued that the financial impact can be reduced

when well-being and ill health are addressed (Donald, Taylor, Johson,

Cooper, Cartwright, & Robertson, 2005).

However, according to Kompier and Cooper (1999) such interventional

practices by organisations concentrate on the effects of stress on an

individual, however, actually fail to reduce actual stressor risks within the

workplace environment. The reasons for the individual-focused approach

according to Kompier and Cooper (1999) are a combination of:

Senior management failing to take responsibility, blaming employee-

personality and lifestyle rather than work environment factors.

The extreme difficulty adhering to systematic intervention and evaluation

strategies within an ever changing organisational structure

The lack of definite empirical evidence on the costs and benefits of stress

interventions

With this employee enhancement and understand the segregation between both

managerial and the rest of the organisation (operational, clerical, professional

etc.), due to the lack of trust between parties and their being a doubtable

relationship in which mistrust is a key player.

Research has shown that by encouraging open communication channels

between organisation levels, employees will feel more valued and trusted within

the organisation (Donald, Taylor, Johson, Cooper, Cartwright, & Robertson,

2005).

Once this understanding of employees is understood the establishment of a

successful implementation of a recruitment and selection program.

3.2. Recruitment and Selection

Recruitment and Selection is a critical human resource management function,

this is not simply hiring the best employees who can make the most significant

impact on bottom-line performance for the firm. Recruitment and Selection has

many differing impacts on an organisation, according to Janz and Etherington

(1985) an improved selection strategy assessment can deliver a cost-benefit

superiority of strategy patterning through behaviour based interviews and

employee testing to testing an employee based on unstructured interview.

The use of psychology within the recruitment and selection encompasses a wide

variety of types of tests, procedures and techniques which can be used to help an

organisational psychologist or manager to better understand a person. These

processes have been used to further enhance the recruitment, selection and

support within the human resources within an organisation (Framingham J. ,

2011) (Ryan, 2000) (Newton & Kleiner, 1999).

It is a necessity of today’s organisational environment that, to some extent

psychological testing/assessment are administered and relied upon, to help the

organisation’s humanistic administration role and responsibility in recruitment,

selection and support of employees (Newton & Kleiner, 1999).

The risks that are associated with recruitment and selection are as follows:

An employee, panel member and other players influence selection

procedures to ensure the appointment of a close friend or family

A selection panel member may fail to declare a conflict of interest and acting

in advance the interest of a candidate who is a close friend or a relative.

The power of a selection committee appointing members to the selection

panel whom they can influence in order to ensure their favoured candidate will

be selected.

An applicant may misrepresent qualifications or employment history to

enhance his or her prospects of securing a position.

Out-of –date job description with more than one page long, which does not

meet key requirements for job

Inappropriate person specification that does not meet all the essential and

desirable characteristics such as knowledge, skills and abilities of a potential

applicants , and being associated with discrimination on the grounds of age,

sex, religions and disability.

Another risk of recruitment and selection is associated with the inappropriate

use of assessment tools that are important in recruitment and selection

process. This risk may lead to misuse of information about applicants, waste

time and resources , and therefore it may impact on organisational

competitiveness, profitability and growth (Reynolds & Weiner, 2009)

These listed risks are just a few of the differing types of existing risks in the

workplace and which can expose a company to legislative claims in accordance

with the following:

Anti-Discrimination & Equal Opportunities Act

Fair Work Act

National Employment Standards (NES)

These standards are just some of the examples of legislation which an

organisation can become complacent about in which by allowing for the

recruitment and selection of the incorrect worker an organisation may jeopardise

the operational health and safety of other workers.

3.3. Operational Health and Safety

‘‘Health is a state of complete physical, mental and social well-being and not

merely the absence of disease and infirmity’’ (Erickson, 1996).

Occupational health & safety are efforts made to ensure the health of workers,

through:

– protection and promotion of health of workers by preventing and

controlling occupational diseases and injuries, & by eliminating factors

and conditions hazardous to health and safety at work

– development and promotion of healthy and safe work, work

environments and work organizations

Concepts and terms

Occupational injuries: occur when work processes were a significant contributing

factor, or existing injuries that are motivated by the work process.

Occupational illnesses: disease significantly related to work, workplace conditions,

or workplace activity or plant, or the recurrence, aggravation, acceleration,

exacerbation or deterioration of an existing illness to which work, or related

conditions, activities or plant were a significant contributing factor.

Accident: event that is without apparent cause or unexpected; unforeseen course of

events.

Incident: occurrence or sequence of events with results ranging from near miss to

injury, illness or death.

OHS & employment relationship

Both employees and employers have duties and obligations in respect occupational

health and safety.

• Queensland Workplace Health & Safety Act (1995)

• Workers’ Compensation Act 1990 (covers injuries suffered between 2/1/1991

and 1/2/1997)

• Workers’ Compensation Act 1996 (covers injuries suffered between 2/2/1997

and 1/1/2003)

• Workers’ Compensation and Rehabilitation Act 2003 (for injuries suffered after

1/7/2003)

• WorkCover Queensland Act 1996

Employees& OHS

Employees have the following duties and obligations

to obey lawful and reasonable orders , including workplace health and

safety rules)

not to harm others at workplace

According to Work Health and Safety Act 2011, employees or any person at

workplace have the following duties and obligations

– to comply with the instructions given for WH&S by the employer at the

workplace (or principal contractor if construction site)

– to use personal protective equipment(PPE) if provided by employer

and worker properly instructed in its use

– not to wilfully or recklessly interfere with or misuse anything provided

for WH&S

– not to place at risk the H&S of any other person

- not to wilfully injure themselves

3.4. Change Management

In the workplace today it is said that management is perspective when it comes

to people, organisations, problems and opportunities, but above all perspective

when it comes to change (Kipp, 2004). To such, management knows how much

the change is needed, how the change will occur, associated costs and also

whether the change can be led (Kipp, 2004). The impact of organisational

change on various facets of an individual’s behaviour are guided and poorly

supported when change is occurring as organisations tend to be very good at

planning and orchestrating the technical and structural aspects of change

(Bennett & Durkin, 2000). Fundamentally, the first steps an organisation should

take is to identify the specific behaviours they are trying to achieve (Biggs,

Dingsdag, & Sheahan, 2007) during the change implementation and the

behaviours they want to invoke thereafter. However, if the organisational clients

have become top priority, it is important not to forget your commitment to the

organisation employees, if this occurs employees may feel undervalued, and high

turnover and loss of expertise may ensure (Engaging the staff in a real

relationship, 2009).

Figure 3: The Theory of Planned Behaviour (based on Ajzen, 1991)

The direct determinants of intentions and behaviour, Figure 7 identify the beliefs

underpinning the constructs of attitude, subjective norms and perceived behavioural

control (Ajzen, 1991). According to Ajzen (1991) an individual’s attitude is the

function of salient behavioural beliefs, or the belief that outcomes associated with the

behaviour which will occur, these beliefs are weighted by evaluations of the

pleasantness of each of the outcomes. Ajzen (1991) go on further to say, subjective

norms are the function of the extent which other people want a person to behave,

this normative belief is weighted by the his or her motivation to comply. However, the

functional belief of perceived behavioural control concerns whether resources and

opportunities are available to perform the controlled beliefs, these are weighted upon

the expected impact that these factors would have if they were to have perceived

power. Furthermore, the identification of beliefs that underlie the attitudes of

employees toward a change initiative will help change managers to develop a

greater understanding of the psychological normative pressures and perceived

behavioural factors that distinguish between those employees that support the

change and those who don’t (Peach, Jimmieson, & White, 2005).

Once change has proceeded to the implementation stage in which either a full or

departmental organisational rollout occurs it is imperative that belief-based or indirect

measures of attitudes are obtained in the areas of Behavioural beliefs (benefits and

costs), outcome evaluations, employee normative beliefs, motivation to comply,

control benefits and perceived power (Jimmieson, White, & Zajdlewicz, 2009).

Through the collection of this data the ability for clear employee feelings will be

clarified and will allow for the organisation to respond correcting the fall areas to

ensure change success.

From this collection once all areas and employee perceptions are corrected the

development and/or amendments to business operational models can commence.

4. Risk Management Assessment and Mitigation

Risk management is a systematic process for considering threats inherent in a

situation or activity and taking steps to achieve the best results (Hubbard, 2009)

A risk Assessment is a systematic method of looking at work activities, considering

what could go wrong, and deciding on suitable control measures to prevent loss,

damage or injury in the workplace (Hubbard, 2009).

In terms of OHS, it is important to be aware of the difference between hazard and

risk.

Hazard: Anything with the potential to cause harm, electricity, hazardous substances

and noise are examples of typical hazards.

Risk: The likelihood that damage, loss or injury will be caused by a hazard and how

severe the outcome may be.

Methods of assessment for risks

To properly manage exposure to risks, we must

(a) Identify hazards

(b) Assess risks that may result because of the hazards; and

(c) Decide on appropriate control measures to prevent, or minimize the level of, the

risks

(d) Implement control measures; and

(e) Monitor and review the effectiveness of the measures.

Control Measure of Risk assessment

(a) Eliminating the hazard or preventing the risk;

(b) Eliminating the hazard or preventing the risk is not possible, minimizing the risk

by measures that must be considered in the following order

(i) Substituting the hazard giving rise to the risk with a Hazard giving rise to a lesser

risk;

(ii) Isolating the hazard giving rise to the risk from anyone who may be at risk;

(iii) Minimizing the risk by engineering means;

(iv) Applying administrative measures;

(v) Using personal protective equipment such as grove, mask, safety boot, life jacket

caps and others

5. Conclusion and Limitations

Concluding this paper, a number of findings can be derived from the knowledge

obtained from literature research. A human, whilst possessing unique individual

characteristics, is similar in many psychological characteristics. Acknowledging this

fact can enable an organization to better undertake their risk management

assessment and mitigation strategies as they are aware of how a person can react in

differing circumstances creating differing risks.

This paper is not without its limitations. Firstly, the idea is highly theoretical and was

approached with the idea of incorporating human behaviour as a straightforward

possibility in everyday risk assessment development. To further enhance this study,

actual implementation and a more comprehensive way of ensure all risk is identified

within a highly uncertain environment would also need to be developed. Thirdly,

Human Risk Management is a highly uncertain area as stated in the beginning each

person controller their environment around them in their own way.

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