I recently had breakfast with an HR colleague who had started a new job at a small government contractor. This company had never employed an HR professional, so she had a lot of work to do.
As she described her new role, she talked about the extensive time, effort and investment it was going to take to bring her new company into compliance with all of the regulation that goes along with being a government contractor. And, she was starting to meet some resistance from the leadership because she had started telling them that they had to stop doing some things they had been doing for years.
I started asking her a few questions about the penalties for non-compliance and the likelihood of audit. She hadn’t even considered those things.
She had seen a regulation and she saw risk. This is where things went wrong.
Her goal was to eliminate any and all of that risk. That’s what she thinks her job is: to eliminate risk.
Somewhere along the way, human resources professionals became convinced that a big part of the job was to eliminate risk. Regardless of the cost. Regardless of the potential impact.
Zero risk. That became the goal.
So, HR started cranking out policy manuals and then cracked the whip anytime a leader or manager wanted to do anything the MIGHT have some risk involved with it.
And, the mantra of HR became “No, you can’t do that.”
The problem, of course, is that being in business is all about risk. Business leaders make decisions by weighing potential benefits against perceived risks. There is always risk. If leaders only made decisions when there was zero risk involved, they wouldn’t be in business.
Good leaders aren’t looking for HR to create zero risk environments. They want an HR team who understands risk and can advise leaders about risk to help them make solid business decisions. The goal should be to create workplace practices that are optimized for employee performance. This means considering and managing risk, not eliminating it.
It is impossible to maximize human performance without some risk. Humans are irrational, emotional and only somewhat predictable. We need to come to grips with this reality and embrace it.
Here are some things to consider when thinking about managing risk:
- What is the risk we are concerned about specifically? Too often when we talk about risk, we make vague statements like “they could sue us” or “someone could take advantage of this.” Name specifically what they could sue us for or how they could take advantage. This clarity is critical to understand the true risk involved.
- Why are we concerned about this risk? What is the true potential impact of this risk on the company? What is the worst case? What evidence do we have to support this?
- How likely is it that this risk will come to fruition? What is the probability that this would occur? Too often, we focus on an exception that could possibly occur, but is highly unlikely.
- What can we do to manage the risk without preventing progress or hindering our ability to do business? I think this is what is meant when leaders say they want HR to think more like business people. For example, when a manager wants to fire an employee without proper documentation, there are times to slow that process down. And, then there are times to help them make it happen quickly while trying to mitigate the most significant risks of doing so.
As HR professionals, if you want to be taken seriously by the leaders in your business, you must change your relationship and approach to risk. Instead of “no, you can’t do that,” your response becomes, “we could do that, but it would come with some risk.”
Want to really become a rock star? Follow that statement with “Why don’t you tell me what you are trying to accomplish and we’ll figure out a way to make it happen that minimizes the risk.”
This is how business decisions are made. And, as a result, this is how human resources should be practiced.
And the good news? There’s hardly any risk involved in trying this new approach.