Human Resources Risk Management

Robert A. Milligan

Cornell University

People Determine the Attitude of the Business Toward Risk

• Risk is bad and must be minimized

OR

• The business must be managed to thrive in a time of increasing change

• The decision to view risk as threat or opportunity is a choice the people in the business must make

Dimensions of Human Resources in the Farm Business

• Family and nonfamily

• Management and labor

• Full-time and part-time

• Seasonal and year around

The Human Dimension is Increasingly Crucial

• Increasingly technical production processes

• Increasing competitiveness

• Increasing role of interpersonal skills and employees

• Increasing importance of environmental responsibility and food safety

Dual role

• Source of risk

• Resource to mitigate, manage and prosper from risk.

Sources of Human Resource Risk

Human Resource Calamities

• Tragedies -- accidental death, illness, injury to owners

• Can undo even the most carefully planned risk management decisions

Management Succession

• Every business eventually has different managers

• A significant source of risk

• Family member career decisions have huge impacts

• Human resource considerations should drive succession

Owner/Managers Management Capability

• Increasingly broad job description of a manager

• Competitiveness makes each decision more crucial

Labor markets• Image of agricultural employment

• “Special” labor legislation

• Local labor markets conditions

Sources of Human Resource Risk

• Human Resource Calamities

• Management Succession

• Owner/Managers Management Capability

• Labor markets

Resource to Mitigate, Manage and Prosper

from Risk

View Risk as an Opportunity to be Managed

• Manage to thrive in a period of increasing change

• Look for opportunities presented by risk and change

• Involves seeking, analyzing and implementing risk-reducing strategies

• Crucial to have an attitude of optimism and hope

Managers Must Understand Risk

• Identify those risks that can severely damage or ruin the business

• Must insure against or have a plan for these risks

• Insure against or manage risk that put the business at risk -- Do not bet the farm

Decision Making and Decision Outcomes

ControllableFactors:

Implementation

Thinking/DecisionProcess

DecisionOutcome

UncontrollableFactors: Chance

Source: J. Edward Russon, Johnson Graduate School of Management, CornellUniversity.

Managers must Understand Decision-Making

• Not all good decisions result in the most favorable outcome

• A bad outcome does not does not mean the decision was wrong

• Must analyze and learn from ALL decisions

• Must learn from unfavorable outcomes rather than get discouraged

Everyone Is Committed to the Business

• Everyone is passionate about the business

• Great job satisfaction is integral to high productivity

• Structures and systems are in alignment with the business purpose

• Use modern management practices

• People are valued by the business leadership and the business culture.

Training

• Establish a continuous improvement culture

• Never allow an untrained person to do any task!!!!!!

• Major source of risk reduction

• Understanding of risk, risk management, change and change management is necessary

Recruit and Select the Best Qualified People

• A challenge because agriculture does not have a favorable image as an employer

• Must compensate highly skilled and motivated employees

• Takes time to recruit hire, train and develop excellent people.

Resource to Mitigate, Manage and Prosper from Risk

• View Risk as an Opportunity• Managers Must Understand Risk• Understand Decision-Making• Everyone Is Committed

to the Business• Training

• Recruit and Select the Best Qualified People

Conclusion

• People must be viewed as the resource to manage, mitigate and prosper form risk including human resource risk

• The decision to view risk as threat or opportunity is a choice the people in the business must make

• The business must be managed to thrive in a time of increasing risk and change