When Talent Management Meets Risk Management

Organizations have responded to risk management failures with audits, new risk and compliance policies and investments in a wealth of new processes. But, with all the recent procedures and processes that organizations have put in place, and the investment in communication and training in risk awareness and compliance, things still go wrong and create risk for organizations.

Talent measurement and management services firm SHL released its 2012 “Talent Report” in September, which included big data insight and a global workforce analysis. Included in the report is SHL’s International Behavioral Risk Study identifying the riskiest roles and sectors to work in worldwide. The behavioral risk analysis is based on 1.3 million respondents, from executives to front-line staff, across 79 countries.

The study found that ultimately, all that investment in processes, awareness, training and education comes down to one thing — what people do and how they behave. But, how can an HR leader describe risky behaviors so that people recognize and understand them?

When talent management meets risk management, it is up to leaders in recruitment, selection and succession to step up. Talent managers are employed to place the right person in the right role within an organization, which if done wrong, could be a critical organizational risk. As stated in SHL’s 2012 “Talent Report,” “Organizations must ask themselves whether they have the right talent in place at the middle management level to manage risk appropriately, and deliver the board’s vision to the front line.”

Create Healthy Risk
Today, there is more information regarding what types of behaviors position organizations to engage in risk more effectively and the qualities that underpin those behaviors. Many organizations already have or can easily acquire the data they need to understand the behavioral profile and risks of their people. The HR and talent management community are the keepers of that data.

The word “risk” naturally conjures up negative associations, yet risk is an inherent factor in the world. The upside is when a leader or employee realizes there is an opportunity within a risk to harvest innovation, or to promote change and adapt or to be better positioned in today’s increasingly turbulent business environment. To make this happen, individuals have to think of risk as a potential benefit.

There is an expectation for employees to engage in risk so the company as a whole may benefit. However, this does not account for both the downside and upside of risky behaviors. It’s important for organizations to have valid metrics to help them understand behavioral risk at all levels, whether they are positive or negative. Understanding the complexity in risk can help organizations distinguish between an appetite for risk and resistance to risk. It’s about striking the right balance between creating risk to take advantage of new markets and opportunities while simultaneously being resilient so organizations can achieve a competitive advantage and avert any crises.

Organizations have a healthy appetite for risk when their people are confident enough to take the initiative and engage, and are willing to make tough choices and accept challenging goals. Employees with these talents are more likely to discover opportunities, ideas and innovations, and they are more likely to show agility when responding to opportunities and threats. That’s the behavioral upside, and it needs to be balanced by skills that build caution.

What Are Your People Doing Wrong?
Two of the key skills that indicate someone will deal well with risk among managers and professional staffing organizations are decision quality and communication quality.

Making decisions is one thing, but those decisions need to be communicated effectively if they are to drive decision-making in an organization and, beyond that, mobilize people in the direction intended. Further, communication quality goes beyond clear and fluent communication style to projecting credibility and engaging others by targeting the needs of the various audiences who need to be communicated with and influenced.

The next level of behavioral risk sits with the operational levels of the organization, and here two behavior clusters are critical. The most obvious is compliance and quality. Organizations have greater resistance to risk where they have people who plan ahead, check the details and follow procedures and policies.

What is perhaps less obvious is another cluster of behaviors based on teamwork and commitment — employees proactively keeping each other informed, having a shared sense of responsibility and the capacity to take care of their responsibilities when they see something is wrong. Along with noticing risky behaviors in these situations, talent managers can take precautions and help organizations articulate the key risk driver — employees’ behaviors.

“There are two factors which senior managers could incorporate into their approach to reduce significant behavioral risks,” said Ronnie Kann, managing director at Corporate Executive Board, SHL’s parent company. “First, a commitment to appropriately enforcing ethical standards, and second, an effective channel by which employees feel comfortable communicating infractions.” Talent management can use these risk management strategies to help reduce risky behavior within an organization.

SHL’s analysis showed that 12 percent of people employed in managerial and professional roles are likely to create risk for their organizations. That is, they are significantly less likely to demonstrate the appropriate level of decision and communication quality. The same held true for operational roles.

When comparing the levels of behavioral risk across sectors by job level — manager and professional versus production line and front-line employees — the travel and leisure sector exemplified the highest risk at 18.2 percent. Banking ranks around the middle of the sectors with 13 percent risk across all job levels, and a similar profile emerged for technology. And while it ranked lower across the sectors, the highest levels of risk sit among the managerial and professional staffs in the public sector (Figure 1, page 42).

The data also showed a clear risk to all organizations called an execution gap. While there is behavioral risk — lower decision quality and communication quality — among the senior ranks of organizations — 1 in 15 executives — the levels of behavioral risk increase as one moves down the ranks of managers and professionals, and increases substantially at the middle manager and team leader levels (Figure 2, page 43). When looking at percentage of high-risk behavior, executives have the lowest likelihood with only 6.7 percent, and team leaders have the highest with 14.7 percent.

As organizations develop strategies to engage in today’s turbulent world, a significant impediment to those strategies being translated into effective operations is middle managers and team leaders’ failure to cascade that strategy effectively to the organization’s operational layers.

Talent managers have a critical role in supporting organizations in effectively engaging with risk. Several risks are present in both operational and managerial roles such as compliance, quality, commitment and teamwork (Figure 3, page 43).

It is a misconception to assume risk is balanced evenly across an organization or an entire industry. However, to effectively manage risk, organizations need to consider the risky behaviors their employees present. Doing so can allow talent managers to reduce risky behavior in the workplace.

Noticing these behaviors can help organizations achieve a balance between appetite for risk and caution. Understanding behavioral risk and evaluating risk management within an organization is important when establishing this
balance.

Eugene Burke is chief science and analytics officer for employment screening and assessment company SHL. He can be reached at editor@talentmgt.com.