Learn why HR governance is important for any organization
A governance framework helps establish a positive workplace culture and ensure fair treatment for employees. Learn more about why HR governance is important.
HR governance is a framework that guides how organizations manage their workforce by providing a structure that informs decision-making, standardizes policies and procedures and ensures adherence to regulatory compliance. Organizations that fail to implement a governance framework will be less prepared for problems, which can put them at legal and reputational risk.
A governance framework helps leaders make decisions and ensures consistency across the company. Start-ups are particularly vulnerable to the risk brought by a lack of a governance framework because a start-up’s focus is usually ramping up operations instead of building an HR infrastructure. Establishing governance over HR can help start-ups and more established companies scale better as they grow.
Here’s more about why any organization – large or small – must create an HR governance framework.
1. Reduces the risk of compliance problems
A governance framework lowers the probability of risk from litigation, regulatory fines and failure to adhere to compliance rules because a framework documents the company’s processes and stipulates how the company will ensure that employment laws as well as federal, state, and local labor standards will be met. For companies in certain industries, such as financial services, a thorough HR governance framework is a regulatory and legal requirement for doing business.
A governance framework also helps establish a positive workplace culture, and a positive or negative culture affects an organization's reputation. Having a framework in place helps ensure fair treatment for employees as well as appropriate handling of harassment claims, negative performance evaluations and worker misconduct.
2. Helps HR be consistent
An HR governance framework helps establish consistency and reduces bias in decision-making by creating pre-defined criteria that everyone must follow.
The framework helps ensure fairness in recruitment and hiring practices, performance assessment criteria and qualifications for promotions or raises. It also establishes guidelines for policies regarding new technologies, such as the use of AI for employees' work. In addition, a governance framework defines who is responsible for making decisions that affect the workforce, making it clear which business unit or specific individual is responsible for certain outcomes.
3. Improves data security
Establishing a framework also helps improve an organization's data security. CHROs must create governance for HR’s handling of sensitive employee information. A breach of sensitive employee data such as Social Security numbers, health information or salary numbers can result in regulatory penalties.
Organizations with entities in Europe are subject to GDPR regulations, while companies that operate in California are subject to the California Consumer Privacy Act. Both are aimed at protecting consumers but affect employers as well. HR governance establishes strict protocols for access to employees’ personal data and the maintenance of that information, which protects companies from penalties or litigation and helps reassure employees about the protection of their private information.
4. Enables planning for the future
CHROs should not view HR governance solely as a hedge against risk but should see it as a roadmap for future growth as well.
Governance standardizes an organization’s processes so that infrastructure is already in place when a company expands to new locations, which enables the organization to scale efficiently without defaulting to ad hoc responses.
HR governance is essential for organizational success. A well-designed governance framework protects companies from potential regulatory breaches and legal liability, and it helps create employee trust through its transparency. CHROs should recognize that HR governance is a strategic tool that will empower their organization to thrive.
Lynda Spiegel is a freelance writer and former global HR executive for financial services, telecommunications and SaaS companies.
