TEM Journal. Volume 8, Issue 4, Pages 1185-1190, ISSN
2217-8309, DOI: 10.18421/TEM84-11, November 2019.
Risk Management in
Human Resource Management
Vyacheslav
M. Kraev, Alexey I. Tikhonov
Moscow
Aviation Institute (National Research University), 4, Volokolamskoe shosse,
A-80, Postal service-3, 125993, Moscow, Russia
Abstract – Human
resource risk is the probability of unfavorable
events’ and threats’ realization occurrences coming from people as a result of
decision making. It plays an increasing role in the companies’ activities.
Threats of this type are of complex nature and are also called anthropogenic.
Risk realization leads to the loss of important confidential information,
commercial losses, profits’ losses, and a decline in the company's goodwill.
Adequate reduction of personnel risks will improve the personnel quality and,
consequently, reduce the damage from the risk threats’ realization.
Keywords –
Human resource risk, personnel security, personnel risk management.
1. Introduction
Personnel
security and personnel risk management play an increasing role in the business
process of enterprises [1].
There is no doubt that we are going to face rapid
increase in threats and dangers. The topic of risk management has become
relevant around the last 40-50 years in developed countries.
According to the author [7], personnel risk
management is a process that begins at the stage of developing a human
resources management strategy,
DOI: 10.18421/TEM84-11
Corresponding author: Vyacheslav M.
Kraev, Moscow Aviation Institute, Moscow, Russia Email: kraev_vm@mail.ru
Received: 09 July 2019.
Revised: 26
October 2019.
Accepted: 31 October 2019.
Published: 30 November 2019.
© 2019 Vyacheslav M. Kraev, Alexey I.
Tikhonov; published by UIKTEN. This work is licensed
under the
Creative Commons Attribution-NonCommercial-NoDerivs 3.0 License.
The article is
published with Open Access at www.temjournal.com
encompassing
the entire human resources management system of an organization, and includes
defining, assessing and controlling all internal and external personnel risk
factors, the change of which can negatively influence on the organization’s
activities and its employees.
Other modern types of
personnel-related risks are the probability of a company's material assets
stealing and the risk of losing company funds as a result of unjustified
investment in staff training, which has left the company afterwards. Stealing
the company’s property arises quite often in the modern Russian business
environment and has the following sources of origin:
§ deformed
social attitudes of employees;
§ low level
of organization control and accounting in the enterprise;
§ double standards of tax and legal business model that management has to
implement in order to keep business in crisis [13].
2. Methodology
According to the basics of risk
management, risk management in HR management and security ought to ensure:
§ compliance with the concept of acceptable risk, which assumes not only
the absolute elimination of risks, but the minimization of threats to values
below the critical ones;
§ a
purposeful sequence for realization through actions’ is: identification,
assessment, development and implementation of a risk minimization program,
application of compensatory measures for leveling the damage caused by embodied
threats;
§ regulatory interaction of risk management’s subjects and objects. The
state’s legislative and executive powers, the company’s general management and
HR service are the subjects. Management is aimed at a specific object: factors
and sources of the company’s personnel risks;
§ implementation of special principles, functions, assessment and
management methods, that allows to achieve the best effect in conditions of
uncertainty and unpredictability of human behavior [13].
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The recruitment process is a separate process, which has specific risks
accordingly:
§
wrong candidates source selection (from which
field, positions);
§
incorrect job description;
§
inadequate to the application form searching for
candidates’ channels;
§
inaccurate assessment of the
candidate (professional competence, incompatibility with the already
established team, candidate’s low motivation for a job in this company and in
general, discrepancy between the company's goals and the personal goals of the
candidate, whether the candidate has mental disabilities, alcohol, drug or
gaming addiction, incorrect assessment the candidate’s ability to harm the
company, etc.);
§
the risk of forming a negative
employer branding image due to incorrect announcement about open job
opportunities, long time “hanging” open vacancies, posts of former employees on
sites of “black lists of employers”, illiteracy, incompetence and rudeness of
recruiters, lack of feedback or a formal response to candidates from HR
specialists).
The most frequent risks in the company’s HR management system are:
1. Risks at
the employee’s beginning working stage in the company. This type of risk arises
when hiring employees. In many companies during the screening procedure there
is no stage of checking a candidate for compliance along with social norms,
corporate standards and psychological stability, which means that there is a
risk of negative, often unintentional, employee’s actions in relation to the
company.
2.
Risks when working with
employees. A special case is when an organization becomes a “talent foundry”
and trains skilled specialists for their own competitors. The reason for this
may be not enough well-developed systems of adaptation and motivation of staff
in current activities, training and career planning of employees.
3.
Risks while working with staff at
the stage of employee’s dismissal. The dismissal procedure of employees is
prescribed in the Labor Code of the Russian Federation, however, incompliance
with formal requirements may lead to employee’s claims and, as a result, to
reputational and financial losses. According to legal practice, it is better
not to bring labor disputes to court, because the financial costs will have to
be covered by the employer [1].
The author [15] among the factors of personnel
risks attributes to the “diffuse values of particular workers” in a separate
category.
Risks in
the stuff screening, as personnel risks are becoming increasingly important. At
the screening stage, it is necessary to identify at least the level of
education, work experience, etc. The task is difficult due to the limited
information at this stage. In the context of the information theory, addressed
to human communications, the uncertainty in the estimates of any objects is a
consequence of the information’s incompleteness about these people, the poor
quality of the estimated information and subjective preferences in the
estimates, leading to distortion of information. Therefore, to reduce risk in
personnel decisions, it is necessary to obtain complete information about
applicants, improve the quality of evaluation information by eliminating the
imperfections of the assessment mechanism and limiting the subjectivity in
applicants’ evaluations [15].
From the above suggested approach, logically
follows the need to determine whether the applicant is honest and decent. It is
impossible to give an answer at the stage of the applicant's documents review,
and even at the interview stage, using the traditional approach. Namely, these
qualities are welcomed by the employer and make it possible to significantly
reduce personnel risks [14], [15].
According
to the information in the social networks, it can be determined which candidate’s
resume is in front of us, and also check some of the CV’s information for
accuracy. For example, how much an active and law-abiding life does the
candidate lead, what he is keen on, and whether he can combine his hobbies with
the position (for example, the correspondence of personal qualities) [9], [10].
There are a lot of problems while working with
employees that cannot always be solved.
But
problems are not all the troubles of the HR department. There are other risks
connected with a large number of factors. For example, hiring of certain
workers who may not correspond to a particular position.
Risk management is a system of managing risks and
financial or economic relations that arise in the process of management itself,
and also includes the strategy and tactics of management actions and
consequences that affect the enterprise. Thus, when implementing unfavorable
events, the company receives a specialist, who does not fit the requirements
while recruiting. Moreover, the risk can be associated not only with the
non-performance of the functional, but also with the actual damage.
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At the moment, there are three key areas of risk management development:
1. Risk and
risk occurrence prevention and their impact on the structure of the
organization.
2.
Minimization of negative
consequences for the company, which may be caused by different types of risks.
3.
Study of the risk’s positive
aspects, such as additional income, bonuses for risk identifying and those that
an organization can receive in a risk situation.
The risk management system
created in the enterprise is capable of managing risks in order to achieve the
goals and objectives. In such cases, the concept of a risk-based approach can
be applied, which focuses on the need to identify risks when planning certain
activities. This system is displayed in the probability of a negative event
(risk) occurrence in the analysis and research, as well as its minimization or
complete elimination [12]. The choice of specific methods by which the
evaluation takes place from the analyzed information is determined by such main
factors as:
§ type of a
business risk;
§ availability of a complete research information base, specially formed
to assess the level of probability of certain business risks;
§ the level
of specialists’ qualification according to risk management; the degree of their
awareness for the use of modern mathematical and statistical devices for such
an assessment;
§ technical and software equipment of financial managers (risk managers);
§ the possibility of using modern information technologies for carrying
out such a complete elimination assessment.
The main task and peculiarity in risk assessment is
their grouping and the development of an integrated approach to determine the
risk level that may affect the financial and economic activities of
enterprises.
When forming a risk management
system, it is necessary to ensure that there is no conflict of interest, i.e.
so that the same employees do not determine the risk management strategy and
monitor the extent to which the company’s activities correspond to, and at the
same time initiate the decision to take risks and manage them. In other words,
it is necessary to divide duties between employees and clearly define the
duties of a risk manager in order to avoid conflicts in the organization at the
subordination level and in the process of risk control over the activities of
certain departments. Also, the presence of a risk manager should not relieve
responsibility for risk from employees of other departments, especially since
they
understand the nature of these risks better than others and provide the first
level of protection for the company against unreasonable actions leading to
risk [1].
The
algorithm for risks determining:
I.
Receiving and information processing.
Information may be one of the key parties in
identifying and analyzing risk. For any risk research, it is necessary to spend
a lot of time for collecting and analyzing the information received, but,
unfortunately, not everyone pays due attention to this aspect.
Identifying the main requirements
that apply to the quality of the received information:
§ exhaustiveness
of the received information;
§ correctness
or accuracy of the information received;
§ degree of
objectivity of information obtained during the study;
§ number of links from the source to the end user information;
§ degree of
information proximity to the essence;
§ the information’s relevance;
§ the
information’s obtaining costs.
The probability of taking an
undue risk depends on the quality and completeness and information security. If
there are several options according to which the decision is being made or with
equal profitability the minimum risk probability decision is taken [10]. It can
be also drawn to a conclusion that with several identical options
(approximately the same profit) it is needed to choose a solution that, based
on the checks’ results, corresponds with more reliable information.
II. Risks
fixation.
To assess the company’s financial
and business operations, it is necessary to perform risk fixation, that will
help to narrow the circle of existing risks. This principle is based on
considering the most significant and most common risks. There are types of
risks that are worth using in this method: property, production, financial,
natural, personal, legislative, organizational, transport, marketing, regional,
calculated, investment, currency, credit, political.
III. Developing
the decision algorithm.
This stage exists in order to
divide the decisions that are planned into more detailed and simple solutions.
In another way, it may be called the composition of the solution algorithm.
IV.
Qualitative risk assessment.
Identification of risks related
to the proposed solution implementation; quantitative risk structure
determination; the most dangerous risk areas
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identification
in the decision developed plan – all these risks imply a qualitative
assessment.
The main purpose of this assessment stage is to
identify the main types of risks that affect the enterprise’s financial and
economic activity. The advantage of this approach is the fact that at the
initial stage of the analysis, the manager can independently, based on the
data, estimate the risk degree and also refuse to implement a certain solution.
V. Quantitative risk assessment.
For the
successful enterprise organization, the risks should be managed but not fight
against. Risk managing these is one of the main tools that are aimed at
increasing the company's management efficiency, which ought to be use to
minimize the product life cycle price and avoid or, in extreme cases, mitigate
potential problems that will become the key factors of the company’s success.
Risk prevention situations and losses reduction
contribute to the enterprise’s positive development. Thus, risk management is a
process as a result of which organization management is aimed at risk
management. Risk management is the process when losses that a company faces
during the main product manufacture and the exposure degree are identified, and
the selection of the most appropriate way to manage each of the certain type of
risks.
In order
to minimize the risks mentioned above, innovative solutions are required to be
implemented. An indicator in evaluating an applicant by HR manager is the
innovations economics. So, it can be concluded that the achievement of the
specified values of the personnel efficiency indicators system have to meet the
target indicator of increasing the project’s profitability by reducing losses
caused by inefficient production behavior of staff.
Currently, the problem of employees’ selection in
organizations and enterprises is one of the most currently central. Therefore,
this topic is increasingly considered in modern literature [2]. Recruitment is
the first task of any organization, which gives the first step to the creation
of an enterprise. Recruitment of new staff is a recurring action and of a very
significant consequence. It is important to note that the recruitment should be
made as qualitatively as possible and at minimal cost.
It is very important to determine the set: search
within the organization or from external sources. The main advantages of
attracting labor from outside are primarily related to the possibility of
covering the additional need for labor resources, broader choices and the
possibility of using another firms’ experience. The disadvantages of this type
are connected with higher costs (material and time) for attracting labor, a
negative impact on the
psychological microclimate in the organization and staff turnover, lack
of knowledge about the features of production and its organization, etc.
The
recruitment criteria allow selecting objectively, since all applicants are
evaluated according to the same criteria. Though the recruitment criteria, it
is possible to identify both the strengths and weaknesses of applicants for the
vacant position. Requirements description for a particular job opportunity is
prepared by the head of the structural unit, which includes the vacant
position.
The CV provides some useful information for
evaluating an employee. For example, information about how often the applicant
changes companies, the duration of work in each department, the nature of his
career transfers, get an insight into his professional experience, level of business
skills, communication skills; education data may serve as evidence of its
intellectual potential. On the basis of the data collected from the CV, it is
possible to formulate hypotheses about certain candidate’s characteristics,
assume about his professional qualities, but these assumptions should be
supported by interviews and other methods.
The
interview, in most cases, is the only source that presents a trustful picture
of the motivational and emotional characteristics, as well as the specifics of
his social behavior (tact, manners, benevolence, etc.).
Sometimes, managers, as well as heads of HR
services, while seeking to make a fairly reasonable decision to hire a new
employee, rely primarily on these characteristics (recommendations) from their previous
job. For example, from a copy of a diploma, it can be gathered some information
about what subjects candidate handed over and with what marks, but it is
impossible to judge about the creative potential of the diploma holder, his
value orientations, motivational orientation, etc. However, it is difficult to
assess the personal qualities of a candidate only on the basis of the
information contained in them, since they cannot always be objective.
Depending on the composed personnel management
structure, how the goals function which are assigned to the managers,
subdivisions and employees are distributed, as well as if the authorities’
delegation is carried out correctly, staff and managers are aware of the trust
degree to employees in corporate governance.
The quality of HR management system functioning
depends, first of all, not only on the employees’ qualification level, but also
on the particular specialist’s load. It is the performance level. According to
the specialists’ recommendations, such load should not exceed 100–120
applicants per month per HR employee.
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Effective
screening leads to the creation of a positive HR brand image and further
attraction of experienced and skilled candidates for the vacant position [4].
For some job opportunities, the screening process
is much more complicated than for others, and preparation must be done very carefully.
The more responsible the work is, the greater the value of the task for the
enterprise, and the more difficult and costlier is the recruitment process for
this position. The screening procedure usually consists of several stages, each
subsequent cost more than the previous one. At each stage, part of the
applicants for the vacancy should [14].
The approach to the personnel screening assessment
stages is compared with the set of business objectives. The information
obtained during the steps should help minimize risks when making decisions.
Thus, it is necessary to find the optimal balance
between the cost of risk assessment and income after completing the task [6].
The HR
procedures of many enterprises include testing and questioning. The final results
of testing and questioning are considered when making a final decision on
whether or not an employee will be admitted, but at the same time, these
procedures are not key when planning.
Testing while the personnel screening is now
becoming increasingly popular in the organization. These tests used in
recruitment are aimed at obtaining a psychological portrait of the applicant,
assessing his professional knowledge and skills, as well as decision-making
abilities in stressful situations. They allow making candidates’ comparing
table among all applicants, as well as with the preferred candidate. There are
two reasons for tests usage. First of all, when the applicants’s number for a
vacant position in an enterprise increases, HR specialists seek to use every
opportunity to determine and identify the worthiest candidate of all [7]. The
more applicants responded to the vacant position, the more difficult it is to
decide on the choice of a candidate.
It is not
possible to form the right portrait about the applicant according to education
only, and professional experience as well. Other advantages of the candidate
are also considered, among which are personal qualities, intelligence,
decision-making flexibility and ability to adapt in the workplace can be distinguished
as well. Testing is considered as a method that is able to provide the employer
all the above positive applicant’s qualities.
Another stage in checking the applicant is an
interview. The main goal for the employer during the interview is to get acquainted
with a potential employee of the company as deep as possible,
thereby minimizing the risks from hiring low-skilled staff that may be
related to hiring mistakes [3]. The quality of the interview gives the maximum
possible information about the real possibilities of the candidate, but also
increases the motivation of the candidate to accept the offer from this
particular company.
When selecting personnel, it is necessary to
consider, as the main factor, the overall strategy for the effective development
of the enterprise, as well as the information based on the objectives of the
enterprise for the near future.
As we
mentioned above, each subsequent stage in the personnel screening is more
expensive. On this basis, it is necessary to develop a set of automatic or
semi-automatic, i.e. non-costly, filters that allow to “screen out”
unacceptable applicants at the early stages of the screening process [5]. When
talking about unacceptable applicants, it means referring to a greater extent –
not professional level of training, but rather the potential risk of adverse
events that may occur in the future. It is about the so-called
"toxic" employees.
Let us consider in more detail what “toxic”
employees are in a few examples. In 2018, a 31-year-old employee from one of
the educational institutions in Moscow [1], driving a BMW car, knocked down
several people at a pedestrian crossing. As a result of an accident 2 people
died. The university’s PR department claimed that the accident’s author was an
employee from the university’s regional development department and the person
behaved adequately at work. 49 traffic citations in the six months that he
drives a car show of the level of his law-abiding. Later in the blood of the
accident’s author cannabinoids were detected, which means, that before he got
behind the wheel, he used marijuana or hashish. Based on this, the investigator
re-qualified the crime as “Traffic violation and vehicle operation, committed
by a person in a state of intoxication, resulting negligent homicide” [13].
There is a realization of personnel risk, which cost the well-known university’s
trust and reputation level reduction, accordingly, financial losses as well.
How to
recognize at the stage of personnel screening in the average young man or woman
potentially dangerous one for the company employee? Moreover, according to
their personal data, such a person is no different from his colleagues.
To make such decisions, it is necessary to analyze
the applicant, not only by personal data. Much more information can be obtained
from social networks, because most young people actively use them. According to
this information, it is possible to plan the possibility or impossibility to
considering the applicant at the next stages of screening. Social
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networks now represent a large data base. The number of accounts in
VKontakte is about 26 million, of which 58% are women, and 42% are men. Main
users – 37% – under the age of 18 years. The second group is 18 – 24 years old –
25%. Among more than 7 million Instagram users, 77% are women. Facebook has
about 2 million users. FB users are older than VK users. In the age group of 25
– 34 about 37% of users. Over 45 years old – 24% of users [11]. The
authors [13] believe that according to outward appearances, behavior, processes
and products of another person’s activities, one can make a conclusion about his
personal qualities, intentions, abilities, emotional state, social status,
cultural level, etc. In this respect, an accessible list of the “friends” of a
particular applicant has a certain advantage: the presence of a common
acquaintance among them is desirable, the reputation of this acquaintance
serves as a kind of confirmation of the correctness of the interpersonal
perception actions performed. However, there is never any certainty that a
person who is not familiar (in direct communication) is someone who claims to
be: a presentation may be deliberately erroneous or provocative, photographic
materials may not belong to the author of the presentation, biographical data
with the user's real biography or only partially coincide [8]. Each social
network member may have many accounts registered for different purposes, or
differing chronologically (for example, an abandoned and not closed account if
there is a new and actively used one) or meaningfully, that is, in essence,
assigning different identities to the presenting participant. According to the
All-Russian Public Opinion Research Center, at least half of Russian
respondents distort information about themselves in social networks: from age,
family status, appearance and income or gender, political and religious views,
musical preferences, etc.
Thus, on the one hand social
networks, although represent a large amount of information, should be carefully
considered, taking into account the above mentioned content.
3. Conclusion
Personnel screening is an important stage of HR
processes. A significant disadvantage is the limited information on the
applicant, on the basis of which the recruitment decision is made. To improve
the screening stage, it is proposed to use information from social networks in
which the applicant is a member. Adequate approach in the methodology formation
and information analysis will significantly increase the decision-making
objectivity at the screening stage and reduce costs when considering the
applicant at subsequent stages.
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