In this, our final blog on the topic, we discuss the Key People Indicators for risk management. Operational Risk Software can be key to supporting this discipline.
Taken from: Mastering Risk Management
If people are, as a category, a firm’s biggest potential risk, it’s fair to ask what indicators are available to monitor that risk, and in particular to monitor the constituent risks and their controls. When you look at the chain of cause and effect, many indicators relating to process and systems risks and controls in the end come back to some form of people risk. They tell you much about levels of competence in the firm, as well as vulnerabilities, which may point to the need to strengthen controls in the form of training or simply better people management.
In our previous blog, we showed a number of external indicators to assess behaviours and values. But they can also be used to indicate people risks.
But that isn’t the raw data and we need to dig further. The key is to analyse and understand what the numbers are telling you. Staff turnover is probably the most common people risk indicator to appear on risk dashboards and management reports. But staff turnover alone is a very blunt instrument. It is not the number of staff, but the quality of staff leaving and the knowledge and experience they take with them which is the issue, so does the turnover data indicate loss of staff by experience and by appraisal grading? Is there a target for turnover? In some areas, we might be only concerned with 50% annual turnover. In a new project area, we might be devastated by the loss of anybody in the team.
Another good indicator of stress – or unhappiness with the working environment – is sickness. The problem with sickness figures, as we saw with key staff turnover, is that the raw number is not a good indicator. One of the problems with sickness in the UK’s NHS (for example), is that much of it relates to experienced and dedicated staff whose conscientiousness means that they exhaust themselves, in the face of lack of adequate support. So, as with all operational risk data, it is essential to get beneath the headlines and discover the true cause. You can read more about Risk Management and Events in our previous blog.
People Indicators
Issues | Indicators |
Workforce stability/attrition | Turnover – regretted/experience/seniority Absence, sickness Appraisals, including 360 degrees feedback Overtime analysis Salary surveys |
Retirement | Scorecard metrics |
Hiring/selection | Behavioural competencies – values |
Diversity and inclusion | Gender, ethnicity, geographic analytics Pay equality |
Engaged workforce | Staff engagement and satisfaction surveys HR complaints and grievances, breaches Helpline, ‘speaking up’, whistle-blowing use Communication analysis e.g. thank you emails |
Safety | Incidents |
Skills | Training analytics |
Leadership | Board effectiveness survey |
A firm can gain important feedback from its employees by undertaking a workplace staff satisfaction survey. But for staff surveys to be effective, there must be a belief that if issues are raised, these will be considered and be acted upon and that the process will be transparent. Firms usually achieve this through making submissions anonymous while committing to sharing the results with all employees at the outset, whether good or bad.
We can have indicators concerning training and development, but how many staff have been identified with training or development needs? How many of those needs have actually been fulfilled? Have they actually taken the training? What’s the impact?
In Summary
Each employee is an individual and they are influenced by, for example, their families, how they were brought up, their workplace and their external environment. All of these influences are constantly changing. But the firm has a number of people risk management activities to use, from criminal charges to training, engagement and reward. Here is an example:
Champion Recognise and reward
Compliant Engage
Confused Enable
Careless Educate
Chancer Engage
Criminal Take action – criminal charges
In the end, if we choose the right people, make sure they are clear about their role and the importance of their job, give them opportunities to develop and learn, pay them according to clear and transparent performance criteria which reflect the behaviours of the organisation, give them regular feedback and dialogue with their superiors and make sure there is effective internal employee communications, we shall have a successful business in which our people risks are being successfully managed and mitigated.
In short, good people management is good management is good risk management.
That’s it for now on the topic of People Risk. Our next series of blogs takes a deep dive into Reputation Risk.
Mastering Risk Management by Tony Blunden and John Thirlwell is published by FT International. Order your copy here: https://www.pearson.com/en-gb/subject-catalog/p/mastering-risk-management/P200000003761/9781292331317
For more information about how Operational Risk software can help your organisation, contact us today on sales@risklogix-solutions.com
