How risky can HR be?

by Krishnan Rajendran
Certification Board, ERMA

Human resources are a source of risk. Organizations face this risk in various aspects of human resource management. We could go wrong in planning our manpower needs, leaving the organization with either a shortage of people or an excess. Faults in recruitment and selection could saddle the organization with misfits. Training systems could fail to develop the competencies needed by both the organization and the individual. Errors in goal setting and performance measures can result in sub-optimal performance. And, subjectives performance evaluations and unfair reward practices could lead to demotivation. The total effect of all this would be loss in productivity and failure in meeting organizational goals.

People are an integral part of risk management. Creative problem solving or organizational commitment that sees individuals doing the extra mile or teamwork that results in high performance or employee referrals that are able to source out good candidates to fill key positions is a major contribution that people make to mitigating organizational risks.

Human resourcement management is an integrated function that comprises a set of activities – planning for, acquiring, developing, and motivating people – towards achieving organizational objectives. Each of these activities has inherent risks contained within it, if executed improperly. To take a brief look at each one of the activities:

  • An ineffective human resource planning system could result in errors in forecasting demand and / or supplies. It is not uncommon to find divisions and departments in organizations complaining of human resource shortages, especially during periods of growth. It is also common to find excess manpower in some other organizations both in normal times or during a stagnant market situation. While the former situation could lead to failures in meeting strategic objectives and targets, the latter condition could add to operational costs.
  • Wrong acquisition (sourcing and selecting) of human resources could result in positions being filled by the wrong people. Both person-to-job fit and person-to-organization fit could suffer, leading to poor performance. It could also add to costs and managing-out the individuals could be a drain on valuable executive time and the organization’s exchequer.
  • Improving performance requires targeted training that addresses deficiencies in skills and abilities. Analysis of training needs based on consistent review and evaluation of performance helps in focusing capability building plans and programs. A wrong practice in this area could be risky as it would not produce the required training outcomes.
  • Motivating people to perform requires a mix of leadership qualities and carefully designed reward programs. Regular performance reviews and feedback together with coaching and performance- linked rewards are mechanisms a manager could use in motivating his people to perform and achieve targets. Lack of leadership qualities and sub-standard design of the performance management system could add to the risk of under-performance.


Aligning HR to business strategy, implementation of an integrated HR system, adoption of better practices, and building a competent HR organization to deliver strategically important outcomes could be the means to mitigating HR related risks. In the newsletters to come, we will take a deeper look at each HR sub-system and learn how the risks connected with each could be minimized.