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Some HR tips for directors

Written by
Vinatea y Toyama are the largest boutique firm focusing on HR law in Peru
Boards often take an interest in the ‘soft’ parts of HR, things like culture, values and branding. But could an increased focus on the ‘hard’ parts of people management be another important way to help make a company a better place to work?

The board of directors plays an essential role in any organisation. Overall strategy, improving shareholder value, maintaining healthy finances, the appointment and oversight of senior management, regulatory compliance and efficient risk management are all responsibilities of the board. In addition, directors are often responsible for maintaining good relationships among shareholders and other stakeholders.

Increasingly, HR matters are also dealt with at board level. This can include people management but also strategy and innovation. Boards often approach people management only from the ‘soft’ side: from purpose and culture, climate and values, talent and succession planning, inclusion and diversity as well as employer branding. In addition, board members often participate in committees on talent, compensation and benefits, employee satisfaction and human resources management.

It is rare, however, for directors to actually take a detailed look at symptoms of a company’s problems when it comes to people management. And this is in spite of the fact that the identification of these problems provides key information for strategic talent management. Paying attention to the ‘hard’ parts of HR means thinking carefully about a company’s common internal grievances, most frequent anonymous complaints, typical lawsuits and regulatory action, the reasons key personnel leave the company, the reasons for a walkout or strike, and levels of (dis)satisfaction.

Staff issues affect all businesses, and therefore the value of any company. A sale, a loan, a takeover bid, and the transformation of operational processes are all affected by workforce contingencies. A long strike, a poorly structured outsourcing, a fatal accident, the dismissal of a pregnant woman, and problems with community workers, for example, can not only lead to fines and liability but also affect operations. The company’s reputation and financial results may be affected. In certain cases, even criminal sanctions may come into play.

The best strategic plans, high-impact measures and effective connections with employees are generated by identifying and paying attention to conflict and employee dissatisfaction. Understanding complaints and grievances can help devise flexible and individualised people management plans, develop leaders, and improve employee experience. This approach can lead to the implementation of successful inclusion and diversity measures, efficient compensation and personalised welfare policies that help workers and their families, to managing risks with tighter focus and, in general, to implementing successful and equitable people management processes through effective communication.

Directors, senior executives and managers cannot see labour risks as mere monetary costs (e.g. fines) or figures (e.g. a number of grievances). According to the World Economic Forum, Peru is one of the ten countries where hiring and firing workers is most difficult. This high labour market rigidity, combined with significant worker-friendly media and the generally poor reputation of employers, mean that the management of labour relations is of great strategic importance.

Taking the ‘hard’ part of people management seriously is another way of focusing companies’ strategies when it comes to being a good place to work. Managers need to have a risk map, be clear about the contingencies associated with more than 200 separate labour law obligations, plan for and act on the most frequent complaints and take steps to mitigate, suppress or manage these. They should be constantly seeking to increase the commitment of workers by contributing to their well-being and that of their families.

The management of third parties, such as contractors, can be a particular challenge. The responsibility to ensure compliance with payroll and insurance must be extended to the entire labor ecosystem, supervising services, intermediaries, contractors and outsourcing companies. This is not only because companies are responsible for the payment of social benefits and social security contributions, but also out of respect for the entire community that works daily with and alongside a company’s own employees. Often, these others share spaces with a company’s employees, but live in a very different reality. Companies should not look for third parties in order to pay lower salaries and avoid providing other employment benefits. Instead, why not consider those that have the best people, the best welfare management plans, or who are only rarely sued or penalised by the regulator?

The best places to work are those that bet on people. But this commitment to people must amount to more than mere words. The best way to show real interest in people is to remain in contact with them throughout the working relationship, listening to complaints and grievances and understanding employee dissatisfaction. Managers who understand this manage ‘from workers up’, and devise better people management plans as a result. These, in turn, can provide the basis for considerable improvements to a company’s bottom line.

For more information on employment law

Jorge Toyama
Partner - Peru
Vinatea y Toyama