Human Capital and Risk Management

Although Human Capital accounts for of operating costs at most companies and can have a significant impact on business results, the management of Human Capital Risk tends not to be a focus of Enterprise Risk Management Professionals.

The risks range from unionization/labor relations to offshoring and outsourcing to staffing in a pandemic to turnover/retention and the loss of intellectual capital and experienced workers.  Drilling down in Managing Human Capital Risk: A Call for a Partnership between Enterprise Risk Management and Human Resources, a Conference Board survey done earlier this year, a “shortage of critical skills within your company’s workforce” was the specific risk most on the minds of Senior Executives.

Out of eleven risk categories, the executives ranked Human Capital Risk as having the fourth highest impact on business results, ahead of financial, reputational, supply chain, and IT risks.  Still, it was interesting to note that less than one-third (31 percent) of companies believe they effectively assess human capital risk, and 24 percent believe they do an ineffective job.

Peter Cappelli, Director of the Center for Human Resources at The Wharton School, recently published an article Managing Human Capital Risk which discusses the potential for risk in human resources to negatively affect entire business organizations.

We would encourage all administrators of mentoring programs click through and read Professor Cappelli’s article and to adopt the language of risk management in talking to colleagues, both inside and outside the Human Resources Department.

Regarding these risks, Mentoring programs offer:

• A tool for Increasing Tacit Knowledge. Tacit Knowledge is skills that can only be gained through experience, which is the primary purpose of most mentoring programs. This is the intellectual capital which keeps the company running smoothly, but is difficult or impossible to capture in patents and formal processes.  Thus, Mentoring is the most effective way to transfer and increase Tacit Knowledge.
• A way to Reduce Costs for training by lowering turnover. Higher retention is a side effect of both higher job satisfaction and help with career advancement.
• Expanding the Critical Skills within the Workforce, the Talent Development part of the mentoring program.

Of course, at Mentor Resources, we believe the effectiveness of the mentor-mentee match is highly correlated with the measurable results from the mentoring program. If you would like to see a white paper on this topic, send me an email at KWise “at” MentorResources.com or call me at 415-380-0918.

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Peter Cappelli is the George W. Taylor Professor of Management and director of the Center for Human Resources at The Wharton School. His latest book, with Bill Novelli, is Managing the Older Worker: How to Prepare for the New Organizational Order

If the topic of demographics in your workforce is of interest, Mark your calendar now for November 3^rd at 11:00 AM  PST/2PM EST for “The Importance of Mentoring with Four Generations in the Workplace.”

Four generations, with different values and communication styles, have created interesting challenges in the workplace.  Don’t miss Mentor Resources’ informational webinar for managers on Thursday, November 3.  RSVP with Jennifer Aguilar  at jaguilar “at” MentorResources.com or 415-380-0918.