What is HR governance?

We’ve been hearing quite a bit about “HR governance” over the last few years. While I don’t think there is a universal definition of what the term actually means, it appears HR governance encompasses many different types of issues — several of which are outlined below.

HR governance is important because senior business leaders are finally beginning to realize people truly are an organization’s most important asset. And in many industries, personnel costs represent the single largest expense for an employer. Therefore, organizations cannot afford to manage such a prized resource (and a major expense) in a haphazard manner.

Having some kind of governance structure in place, both for the HR function itself and for all types of people management issues, helps treat employees fairly, consistently and in compliance with the law and recognized best practices, control costs and align people management practices with an organization’s overall strategy and its vision, mission and values.

It also helps provide a framework to ensure an organization doesn’t descend into “anarchy” in the absence of rules, regulations, norms and standard operating procedures relating to people management.

With all the concern today around corporate governance, effective HR governance also facilitates compliance with legal and ethical obligations relating to people management practices. Having a proper HR governance structure in place can even impact the way an organization does business and makes decisions at the highest levels — right up to and including its board of directors.

Management of the HR function itself

The whole issue of how the HR function is to be structured, organized and managed is an important HR governance issue. This includes not only who does what within the HR department, but also who has the authority to approve certain transactions and make decisions relating to various policies, procedures, practices and programs.

While the most senior HR executive at an organization typically has ultimate responsibility for HR governance, most large organizations have one or more committees that deal with HR governance issues. For example, an organization may have an HR governance committee with membership comprised of senior leaders from all functional areas of HR (and possibly a few line executives) along with several sub-committees for issues such as employment policies, compensation and learning and development.

Employment value propositions

An HR governance committee is useful when it comes to developing and documenting the basic value proposition relating to employment at the organization. This examines what it’s really like to work for the company and how that vision is translated into reality.

This includes issues such as employer branding and considerations relating to an organization’s vision, mission and values, as well as its overall perspectives on employment at the organization, including strategies and philosophies around compensation, talent management and employee relations.

Authority for people management decisions

It’s important to realize the authority for most people management decisions at organizations rests with line managers as opposed to HR. Therefore, HR governance is very important in ensuring people managers make decisions in line with organizational policies, guidelines, philosophies and cultural norms.

For example, some organizations develop decision matrices outlining who has the authority to approve people management transactions (such as promotions, terminations or transfers) for employees at certain levels. Such matrices may also include approval limits with respect to transactions of a certain dollar value.

Similarly, some companies develop escalation protocols outlining the processes for resolving or adjudicating interpersonal or even interdepartmental disputes.

Employment policies and procedures

An employee handbook may be the most basic document outlining an organization’s HR governance structure. Policies included within such documents need to ensure the organization remains legally compliant. Handbooks also provide important organizational information to managers and employees and help set expectations around performance, behaviour and organizational culture.

Risk management and audits

Organizations differ in their degree of risk tolerance and aversion. And people management issues are part of any organization’s effective risk-management strategy, particularly with respect to risks relating to employment litigation, the potential impact of disgruntled employees or high employee turnover.

Because of these risks, it’s particularly important to periodically audit an organization’s HR policies, practices, tools and programs to ensure they are in compliance with the organization’s own basic values and beliefs, as well as legislation and case law and recognized HR best practices.

Brian Kreissl is the managing editor of Consult Carswell. He can be reached at [email protected]. For more information, visit www.consultcarswell.com.