Effective human resource governance and decision-making establishes a framework for transformation and can improve the odds of solidifying change and realising the benefits of transformation.
Initiated by Dave Ulrich, the term HR governance is more popular as ‘human governance’, until experts clearly defined HR governance as a regulatory framework for personnel work. The term governance itself can be defined as a method of organising resources for the purpose of providing guidance. Governance is designed to lead to the desired set of behaviours for making decisions that have a positive impact on business performance.
For instance, the focus of HR is on the selection, development, remuneration, coordination and assessment of management boards and supervisory boards through the design of organisational structures such as decentralisation/centralisation and HR committees. Then, HR activities and instruments, such as remuneration or assessment systems, are only discussed in a rudimentary manner. As a result, human resource governance is only a subset of governance and consists of all external and internal standards for personnel management. Therefore, HR governance is defined separately from corporate governance.
Deloitte in their Governance and Decision Rights review mentioned that effective governance helps businesses manage their accountability for managing operational performance, communicating progress, resolving conflict, managing organisational change, and many more. Human resource governance also allows a company to be business and customer-focused, paving the way for seamless delivery of people service and business solutions. In addition, as next-generation HR organisations focus on customer service, market awareness, and operational efficiency, a board dynamic governance framework must be created.
Governance should be consistent and flexible enough to adjust to an organisation’s business, which can be begun by having a well-documented charter that outlines the purpose, accountabilities, timing of interaction, and participants. Once the core is strong enough, Deloitte found that governance can drive a consistent set of HR behaviours to:
There are six levels of human resource governance defined as follows:
1. Human governance
Human governance (known as self-governance) is cited to be the best form of governance. This is a system in which individuals or teams regulate their own affairs. To achieve this level of governance, an individual or team has to have the maturity embedded in the principles of responsibility and accountability. There are also a number of key prerequisites that need to be in place to make human governance work, including a high level of education and skills, employee empowerment, active citizenship, low levels of fraud, corruption and other types of unethical practices.
2. Organisational governance
Human resource governance deals with how a team governs organisations from a corporate governance perspective. All governance policies, processes, procedures, and controls form part of organisations human resource governance.
3. National governance
At a national level, there are several national organisations responsible for various aspects of human resource governance. For example, the Department of Labour provides oversight over labour laws, while the Department of Higher Education gives post-school skills development laws.
4. Economic governance
Economic means collaboration amongst countries’ human resource governance. Cross-border regional governance structures are in place to ensure each organisation in its own state follows the right regulations. And if there should be organisations operating in several countries, HR managers or committees responsible for HR can equip themselves faster to ensure their company follows rules in the targeted country properly.
5. Continental governance
Despite the existence of HR forums connecting different countries, it is evident that more work is needed in providing effective human resource governance through leadership across the globe. Different HR systems in these countries might exacerbate current inconsistencies in national human resource governance dispensations. Therefore, a collaboration between different national HR professionals is of utmost importance in improving human resource governance.
6. Global governance
At a global level, there are several organisations providing guidance and/or leadership on human capital issues from an international perspective. For example, Deloitte continuously raises questions on HR problems around the globe or McKinsey that often discusses employment issues globally. These efforts build on the human and labour rights work of the Global Reporting Initiative (GRI) and the International Labour Organisation (ILO). Most importantly, the international HR standards work of the International Standards Organisation (ISO) is expected to further elevate HR standards and human resource governance at a global level.
The above six levels are the beginning of a process to establish a human resource governance body of knowledge. It is important to have a clear understanding of unique issues in each level to decide on the best options of solutions to pursue across the levels where relevant.
Ultimately, an organisation must decide on the most appropriate human resource governance approach according to its needs. It is also essential to start developing a human resource governance framework in which a strong system is built in leveraging the human capital of an organisation.