Platt Perspective on Business and Technology

Human Resources audits 101 – 5: adding in outside regulatory and reporting requirement complexities 2

Posted in HR and personnel by Timothy Platt on November 24, 2013

This is my fifth posting to a series on performance reviewing and assessing Human Resources as a crucial area of ongoing business function, and how an HR department or service does or does not align with and support its business, and both operationally and strategically (see HR and Personnel, postings 183 and following for Parts 1-4.)

I offered a partial list of some of the areas of business operations that are commonly shaped by outside regulatory oversight in Part 4, and I focused my discussion on regulatory oversight there, on the specific due diligence issues of employee protection from harassment and workplace discrimination. I then stated at the end of that installment that I would continue its general discussion here, this time focusing on other areas of regulatory concern noted in that list. I am in fact going to focus primarily on one of those other regulatory arenas here and with a goal of more fully discussing how systematically addressing one area of regulatory concern can impact on wider areas of a business and its operations and strategy. And for that, I focus on the last entry in my Part 4 listing:

• Legally mandated rights to organize into and participate in trade unions, or labor unions as they are also called.

When a business unionizes, its workforce takes a direct role in operational decision making and certainly as that impacts on working conditions and worker compensation. And this of necessity impacts upon and serves to shape overall business strategy as a business’ senior executives negotiate mutually agreed to terms with union representatives. This, I have to add is not always viewed as a positive by senior management as it can be seen as a relinquishing of control without compensating benefit, and certainly from a due diligence and risk/benefits analysis perspective. But if unionization leads to a more stable and satisfied workforce with lower employee turnover with all of the costs that bringing in new hires entails and bringing them up to speed, that can offset increased salary and benefits expenses.

As a non-union example of how that works, when Henry Ford built his first assembly line automobile factory, he intentionally and systematically raided every business that held the types of employees he needed by offering higher pay and benefits than any of his competitors for skilled labor did or could, and by a significant margin. As he put it, he wanted all of his employees to be able to afford to buy one of the cars they were making. And his factory became a coveted place to work and he succeeded as much as he did and as quickly as he did because he was able to draw in the best employees. Unionization might be seen as forcing the issue, where Ford did this on the basis of his own foresight and strategy, but better compensation and creating a more positive place to work does draw in more skilled employees and particularly the ones with skills and experience that your competition would want too.

But my focus of attention here is not on how agreements with unions can create win/win situations, even if that is true and the detail I cite here as to how is only one of a range of potential reasons. My point is that when unionization is a worker right and as a part of enforced labor law, a business’ leadership has to relinquish a measure of their decision making authority as they enter into agreements that are designed, from the other side of the bargaining table’s perspective, to benefit employees rather than specifically and directly promote the execution of the basic business model.

• How do you track and measure and audit this from a Human Resources perspective, and why?

The Why is very simple:

• It is a fundamental responsibility of Human Resources to track and manage employee performance, and both at the individual level and through overall data analysis for its workforce as a whole. I have been discussing employment lifecycle processes and their performance evaluations (e.g. onboarding, annual performance reviews, etc.) throughout this blog (see my HR and Personnel directory.)
• When an agreement is made with a union as to hiring or employee dismissal for example, what is the actual impact realized from this as it is put into practice? At the very least, absent this analysis, the management of this business cannot know how to negotiate or what to bargain for the next time that their union contract has to come up for discussion. If they do not know how a current contract has worked or failed to work for them and with numerical data that they can share in pressing their side of these discussions, they enter these negotiations with a very weak hand.

When a business process or activity is regulated, the business needs to know the actual, realized impact of that on their competitive position and strength and on their finances.

• When employees at whatever level on the table of organization are involved in this,
• That of necessity means HR audit results as well as requiring other functional area-sources of data and insight.

I posed a set of basic, fundamental questions in Part 1 of this series and in the course of posting to it, have at least started to respond to all of them, but I have significantly left one of them out of this ongoing discussion, at least up to here: the last question on that list:

• How can overall business strategy and operational planning be connected back to HR through incorporation of actionable feedback into their practices and policies?

I am going to turn to more directly consider this in my next, and for now at least last installment to this series, and note in anticipation that Human Resources becomes significant to the overall strategic process not so much for what it does, as for the auditing and related data and insight that it can bring to the table as it tracks and monitors what it does. Meanwhile, you can find this and related postings at HR and Personnel.

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