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HR Governance
The Real
Gatekeeper
Charles Saliba
CEO, HR Works s.a.l.
Colloquium on
Corporate Governance across
Ethics, Culture & Citizenship
USEK, April 14 & 15, 2014
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Confidential
2008
Time of the UGLY Truth
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The Guilty
25 People to blame for the
Financial Crisis
The good intentions,
the meltdown
Richard Fuld
Bernard Madoff
Stockbroker, Investment Former Chairman &
Advisor, and Financier CEO of Lehman Brother
Kathleen Corbet
AAA Sealing
6.
7.
8.
9.
10.
11.
12.
Angelo Mozilo
Co-founder of
Country Wide
And many others...
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1.
2.
3.
4.
5.
13.
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bad managers and greed behind
Angelo Mozilo
Phil Gramm
Alan Greenspan
Chris Cox
American
Consumers
Hank Paulson
Job Cassano
Ian McCarthy
Frank Raines
Lathleen Corbet
Dick Fuld
Marion & Herb
Sandler
Bill Clinton
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
Georges W. Bush
Stan O’Neal
Wen Jiabao
David Lereah
John Devaney
Bernie MADOFF
Lew Ranieri
Burton Jablin
Fred Goodwin
Sandy Weill
David Oddosson
Jimmy Cayne
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The Guilt
greed
misjudgment
incompetence
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The Consequence
Financial
Economic
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Crisis
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What were the Repercussions of the Crisis?
Decrease in Trust Levels Financial Institutions
‘
,
The word CREDIT is derived from
the Latin word CREDERE, which
means to HAVE TRUST IN
Trust in the Top 50 Global Financials expressed through Media Sentiment
Source:
TRNA/Marke
tPsych/
Sentiment
Indicators –
Thomson
Reuters.
MarketPsych: “TRUST”/Top 50 Global Financials
Indicator drawn from news and social media sources to illustrate the level of trust in Global financial
institutions, which decreased considerably from 2008 until the first quarter of 2013
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What were the Repercussions of the Crisis?
Decrease in Trust Levels in Economic System
Anti Capitalist Tendencies among G8 Countries
30%
7%
11%
13%
15%
17%
Source: FT –
Harris Poll (2008)
USA
Italy
Great Britain
Spain
France
Germany
The graph shows the effect of the financial crisis on citizens’ confidence in the market economy.
Citizens from these countries were asked whether the current financial crisis had been caused more by
“abuses of capitalism” or by the “failure of capitalism itself”, an astonishing
30% of German respondents selected the latter explanation. This value is four times higher than
the 7% obtained in the US and nearly twice as high as that obtained in France, at 17%.
Results show that German economy has been hit the hardest among the world’s largest economies by the
financial crisis
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What were the Repercussions of the Crisis?
Increase in Regulatory Activity (documents changes, announcements, enforcements by regulators)
Proliferation of
regulatory activity
leading to increased
compliance burden for
the financial sector
Greatest volume of regulatory alerts
are tracked in North America, followed
by Asia, and UK/Europe.
Today, there are 85 regulatory alerts
per day
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Total Alerts Yearon-Year
Source:
Data drawn from
Governance, Risk
& Compliance
business and
Thomson Reuters
Accelus™.
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What were the Repercussions of the Crisis?
Great Financial Losses (especially in US Banks)
Average Quarterly Net Income per 100$ of Bank Assets (Pre-crisis, Last 5 years, Last 4 quarters)
Source: FDIC Bank Data &
Statistics Quanta Analytics
The graph shows the overall quarterly income to asset level as reported by each of the Big Four banks and
for the rest of the U.S. banking community for (1) the eleven-quarter pre-crisis period; (2) the five-year
crisis period; and (3) the last four quarters of the crisis.
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The Consequence
Financial
Social
Economic
Crisis
Existential
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Reading it Differently
25
Socio25
= Human = Existential
People
Resources
Crisis
(HR)
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Will it happen again?
Yes, it will
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Why?
Shy practice of
People Governance
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Examples
Key HR related
emphasis
 Organization Structure
 Roles of the BoD
 Succession Planning for
BoD Members
 Executive Remuneration
 BoD Members Induction
 Codes of Conduct & Ethics
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So, what is the Solution?
iNCLUSION of
HR Governance
in Corporate Governance practice
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Then again,
What’s the Big Idea?
The Governance Dilemma
It has been proven by undoubtful fact that the Global Economic & Financial Crisis of the
World was caused by people who lacked Competence and/or Morality.
1
Intentionally Wrong
Decisions
Moral Crisis
Economic &
Financial Crisis
Governance
Dilemma
2
Unintentionally
Wrong Decisions
Competence
Crisis
Integrity & professionalism of the
Human Resource in rganizations
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So What?
The Problem
The Challenge
Persistence
of the
Governance
Dilemma
(caused by
the Human
Element)
More Financial,
Social & Economic
Trouble will keep
coming because no
serious measure
are being adopted
to neutralize the
cause of the
problem
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The Answer
The need for an
HR Governance
As a tool to Mitigate
Human Resource
(HR) Risk
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But what is HR
Governance?
HR Governance is a management concept developed by HR Works’
Research Center in 2013. It stands for the process of ensuring that the
Human Element in any Organization is vigorously governed in terms of
Morality and Competence.
It aims at putting in place all required enablers to govern the Value Chain
of People Management inside an Organization.
Value Chain of People Management includes:
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Selection of Staff
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Remuneration
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Behavioral Compliance & Professionalism
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Employee Competence & Good Judgment
-
Career Development
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Succession Planning, and
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Performance Management
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How does HR Works apply it? (1/5)
HR Works’ ‘HR Governance Model’
HR Governance
II
Areas for
Governance
3. The Leadership Team
* This
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Pillar II
Pillar I
Legitimate
Governing
Bodies
Selected
Governing
Tools
1. The Board of Directors &
its Committees
1. The HR Department
2. The Human Capital
Structure & Composition
III
2. HR Committee
3. Internal Audit Department
4. Quality Assurance
Department
Model is developed by HR Works’ Research Center
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1. Due Diligence
Pillar III
Pillars
I
2. Audit Reports
3. Quality Assurance Reports
4. Progress Reports
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How does HR Works apply it? (2/5)
HR Governance
I
II
Areas for
Governance
III
Legitimate
Governing
Bodies
Selected
Governing
Tools
Three entry points through
which lack of compliance and
hence risk can penetrate any
Company
1
2
Governance Scope
The HR Department
Monitoring the Application & Compliance
of:
 HR Policies & Procedures
 HR Systems
 HR Team and,
 Practices that the HR Function is
utilizing for managing the Workforce
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The Human Capital
Structure & Composition
Ensuring Business protection in terms of:
 Workforce numbers
 Employees’ education & competencies
 Profiles & Social Background
 Gender & Nationalities
 Capacity & Ability to grow
 Level of Individual Dependencies
 Workforce Aging and,
 Performance
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3
The Leadership Team
Evaluating leaders’:
 Strength & Weaknesses
 Leadership styles
 Quality of decisions
 Extent of compliance vs. noncompliance to rules and regulations
 Projection of the Company professional
image
 Retention & Development potential and,
 Performance
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How does HR Works apply it? (3/5)
HR Governance
II
I
Areas for
Governance
III
Legitimate
Governing
Bodies
Selected
Governing
Tools
Entities in charge of
implementing the Company’s HR
Governance, by virtue of Law or
appointment by the Board
1
2
Board of Directors
& its Committees
3
Internal Audit
Department
Quality
Assurance
Department
4
HR Committee
Raise the flag whenever they notice a breach or a
deviation in the implementation of agreed upon
systems and policies
Monitor the appropriate execution of systems and
policies a priory, i.e. before a decision is made hence
mitigating any potential risks that might arise from
inappropriate actions
Reactive Governance
Proactive Governance
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How does HR Works apply it? (4/5)
HR Governance
I
III
II
Areas for
Governance
Legitimate
Governing
Bodies
Selected
Governing
Tools
Valid & reliable Tools that
sustain a concrete &
defendable outcome of HR
Governance Exercises
1
2
3 Quality Assurance
Due Diligence
Audit Reports
 Diagnostic Technical
exercises usually carried out
by Internal or External Human
Capital Auditors
 Assess the current status of
an Organization In terms of its
compliance with HR practice
(policies and regulations, key
financial, legal, &
organizational benchmarks)
 Review work previously
executed by the HR
Department or any other entity
involved in people
management inside the
Company
 Result in documented findings
and recommendations report
presented to the Board of
Directors for discussion and
appropriate Action
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Reports
 Give concerned entities, like
the HR Department and the
CEO, a comprehensively
detailed perspective on points
of improvement to sustain HR
Governance
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4
Progress Reports
 Emphasize the continuous
improvement dimension
brought about by HR
Governance
 Ensure that the Audit & Quality
Assurance Recommendations
are being acted upon, and that
the Organization is rectifying its
track to be or become
compliant again
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How does HR Works apply it? (5/5)
HR Governance
I
III
II
Areas for
Governance
Legitimate
Governing
Bodies
The Moral Dimension
of HR Governance
5
The Professionalism Code
 A Global formal Code that sets and defines the Pillars of
Professionalism for the modern World inclusive of Code of
Ethics, Collegial Relations, Good Judgment, Integrity of
Decisions, Collective Good, etc.
 This Code would be delivered to all Employees in companies
through Awareness & Training Sessions
 The Professionalism Code should also be a serious candidate
to become a Core University Course for all specializations,
specifically for Business related majors.
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Selected
Governing
Tools
The Competence Dimension
of HR Governance
6
Competencies of Governance
 This tool comprises of ensuring that all employees in a Business are
in their right place, i.e. in a position for which they have the required
competencies to work in.
 The tool is based on ensuring that every employee has a Job
Description based on a formally promulgated Organization
Structure; it also counts on having a clear Competency Assessment
tool that measure the gap between Employee’s current level of
competence versus the level of competence required by the Job he
is in
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How does the HR Governance Model Operate?
Board of
Directors & its
Committees
Progress Reports
Directives &
Recommendations
Input
Recommendations
& QA Reports
CEO
Internal
Audit
Department
Quality
Assurance
Department
Coordination
Feedback
HR Committee
Input &
Directives
Feedback
Request
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HR Audit & Review
Compliance
HR Department
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Monitoring of
Implementation
Confidential
Now let
The Guilty try again
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About HR Works s.a.l.
HRWorks
Your Human Capital Solution
Member of
HR Works is a Consulting Firm that specializes in Organizational Transformation and
Human Capital Strategies development and implementation. Through its extensive service
offering HR Works aims at providing high-end professional, comprehensive, and mostly
pan Arab expertise in the field of Human Capital & Organizational Consulting, Talent
Management, and Capacity Building.
Established in 2008, HR Works has offered its services to a mosaic of esteemed Regional
and International Clients in industries like Transport, Telecom, Banking, Architecture &
Engineering, Food & Beverage, Hospitalization, Investment, Manufacturing, Retail,
Shipping, Energy and others. The outreach of our Clients’ business activity is of global
presence including Asia, Africa, America, and Europe.
In addition, HR Works have a solid experience in the Public sectors of various Arab
Countries including Kuwait, KSA, UAE, and Lebanon. Its expertise in this regards include
Organizational Restructuring, Manpower Planning, HR Systems Development,
Compensation Strategies, and others.
HR Works is a company of The HR Group Holding s.a.l., based in Beirut and serving the
Middle East, GCC, and Levant Regions.
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HRWorks
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Our Service Offering
Member of
Services
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1.Organizational Re-engineering
13. HR Functions Set Up
2.Total Human Capital Strategies
14. Compensation Strategies
3.Talent Attraction Strategies
15. Manpower Planning
4.Talent Retention Strategies
16. Human Resources Bylaws
5.Performance Management Strategies
17. Employees Handbooks
6.Workforce Aging Strategies
18. Human Capital Due Diligence
7.Leadership Pipeline Strategies
19. HR Audit
8.Leadership Development Programs
20. Human Capital Dashboards
9.Talent DNA Assessments
21. Benchmark Studies
10.Succession Planning
22. Executive Human Capital Advisors
11. Change Management
23. HR Functions Advisory Support
12.Employer Branding
24. On-call HR advice
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