What is risk management in HR?

The only sure way to avoid risk in nonprofits would be to lock the doors and put up a closed sign in the window.

Risks are inevitable and organisations have a moral and legal obligation to attend to the safety and well-being of those they serve, those who work for them and others who come into contact with their operations. This is known as “Duty of Care.”

Organisations need to look at all the risks throughout their entire operation and incorporate risk management into all planning and decision-making. However, the specific focus of this section is risk management as it applies to HR activities.

Applying risk management to HR

HR Activity Potential Risk Potential considerations
Compensation and benefits Financial Abuse Who has signing authority?
How many signatures are required?
Are there checks and balances?
Hiring Discriminatory practices Was a complete screening completed on potential applicants?
Hiring unsuitable or unsafe candidates Were provincial human rights laws observed?
“Wrongful” hiring Is there a set probationary period?
Were promises made to the candidate that cannot be honored?
Did the employee sign off on the policies and contract of employment before being hired?
Occupational Health and Safety Environmental Do we provide safe working conditions and do we conduct safety checks regularly?
Personal injury or death Do we provide adequate training for staff?
Do we ensure the use of appropriate clothing and safety equipment?
Do we have adequate policies, procedures, and committee in place?
Employee supervision Abuse Do we provide sufficient orientation and training?
Reputation in the community Do we provide adequate supervision (especially for activities that occur off-site or after hours)?
Release of personal information Do we have a performance management system in place?
Are personal information protection guidelines followed?
Employee conduct Abuse Do we have clearly written position descriptions for all positions?
Reputation in the community Do we follow up when the parameters of the job description are not respected?
Do we provide thorough orientation and training?
Do we provide an employee handbook?
Do we have comprehensive policies and procedures?
Do we provide ongoing training about our policies and procedures?
Do we retain written records of performance issues?
Do we ensure that organisational valuables are secure?
Do we have cash management procedures?
Do we have adequate harassment policies and procedures?
Exiting employee Property Do we retrieve organisational information and equipment that a dismissed employee used (especially from home)?
Reputation in the community Do we ensure that all access codes, passwords, etc are de-activated?
Compensation Do we conduct an exit interview?
Do we record lieu time and vacation balances?

When developing a risk management plan for your HR activities, there are a number of areas to focus on. This general list will get you started but it is very important that all organisations identify and evaluate the risks unique to their own organisation.

The risk management process

Risk management is a cycle. That means that it is not something that gets checked off a “to do” list but it is a continuous activity. Having a risk management process means that your organisation knows and understands the risks to which you are exposed. It also means that your organisation has deliberately evaluated the risks and has strategies in place to remove the risk altogether, reduce the likelihood of the risk happening or minimize harm in the event that something happens.

At a very basic level, risk management focuses you on two fundamental questions:

What can go wrong?

What will we do to prevent the harm from occurring in the first place and in response to the harm or loss if it actually happens?

Identify the risks

The very first step is to identify the risks. Ask yourself what can go wrong. Every activity of an organisation poses a risk so brainstorm and document the risks.

Consider both the general risks (that could happen to any organisation) and the risks specific to your organisation.

Risks can be:
– Abuse that is either one-time or ongoing (physical, emotional, psychosocial, sexual, financial)
– Personal injury
– Medical
– Environmental
– Property
– Financial
– Reputation/goodwill
– Other

Assess the risks

If you have done a thorough job of identifying risks, you may end up with a long (and overwhelming) list.

The next step is to assess each of the risks based on the (1) likelihood or frequency of the risk occurring and (2) the severity of the consequences.
Using a risk map to plot the likelihood of occurrence and the severity of the consequences will help you prioritize your next steps.

Develop strategies for managing risks

Consider the most appropriate risk management strategies for each identified risk:

Avoidance – Stop providing the service or doing the activity because it is too risky.

Acceptance – Some risky activities are central to the mission of an organisation and an organisation will choose to accept the risks.

Modification – Change the activity to reduce the likelihood of the risk occurring or reduce the severity of the consequences. Policies and procedures are an important part of this risk management strategy because they communicate expectations and define boundaries. Learn more about writing policies and procedures.

Transfer or sharing – Purchase insurance or transfer the risk to another organisation through signing a contractual agreement with other organisations to share the risk (for example, having a contractual agreement with a bus company to transport clients rather than staff driving clients).


When you have decided which risk management strategies will be the most effective and affordable for your organisation, practically outline the steps and who is responsible for each step in the risk management plan.

Communicate the plan and ensure that there is buy-in from all who are involved in the organisation (staff, volunteers, clients, other relevant stakeholders).

Provide training for all organisational staff and volunteers so they understand the rationale of the risk management plan as well as the expectations, procedures, forms, etc.


Consider the following questions and document any changes to the plan:

Is your plan working?
Have your risks changed?
Have you expanded or reduced your programs and services?
Are changes or updates required?
Are staff and volunteers following the risk management plan?
Do they need re-training on the details?
Do we need to better communicate the plan?

Who is involved in the risk management process?

Risk management is a large and important undertaking. There must be commitment from the board to commit the financial and human resources. In larger organisations, a risk management committee, team or department may be formed to handle the risk management process. In smaller and medium sized organisation, the responsibility for developing and implementing a risk management process will likely fall on the executive director. However, paid staff, volunteers – and potentially clients and other stakeholders – will be very helpful partners in identifying risks and developing effective strategies to deal with the risks. Once the risk management process is in place, everyone in the organisation has a role to play from identifying risks to following policies and procedures to completing forms and reports.

This article appeared on hrcouncil.ca.

How digital makes our tomorrow relevant today

‘What will I look like when I’m old?’ is a question many people seem to want answered – that is why ‘face-aging’ apps have become so popular. But with 95% of people employed in South Africa retiring on less than 40% of their final salary, a more pressing question is ‘What will my life look like when I’m old?’

The fact that saving for retirement is perceived as ‘unsexy’ is standing in the way of people engaging with it and making it a priority. In a fast-paced age in which people’s most valuable asset is time, digital solutions are irrefutably the future. So in our view, technology will be the most important key to unlocking a change in attitude when it comes to retirement.

With 69% of South Africa’s adult population on smart phones, according to the South Africa Online 2017 report, no industry is exempt from people’s expectation for simple mobile-responsive solutions that make everyday life easier. Our rationale in developing new platforms, products and value-adding services for Sanlam Employee Benefits – such as the app, member and broker portals – is based on our determination to give people the tools to support their financial freedom through the creation of wealth in both the short and long term.

How digital can make financial planning for the future easier than ever before:

1. Give people greater access to knowledge: The Sanlam Benchmark Annual Surveys have consistently uncovered the fact that many retirement fund members are not aware of their retirement savings position until it is too late. This research prompted Sanlam to develop the Retire-mate, an integrated digital solution that provides members with a return on investment calculator, regular reports on the status of their savings in relation to their retirement goals, and soft ‘robo advice’ backed by telephonic support from a retirement benefit counsellor. Additionally, there’s a wealth of educational articles for members to upskill themselves.

2. Make goals realistic and attainable: With wearable tech increasingly linked to rewards, millennials in particular are becoming accustomed to actions being driven by goals. The fewer barriers there are to an incentivised action, the more likely people are to perform it. Digital platforms can remove obstacles like admin, facilitate online transactions, and gamify and reward ‘positive’ behaviours through attainable goal setting and linked lifestyle benefits – both for short and long-term goals.

3. Keep it personal: With the digital age comes a general call for customisation tailored specifically to a user’s needs. Machine learning algorithms, Big Data and regression models make it possible to track a user’s behavioural data in order to make accurate predictions regarding their financial future and current best-outcome decisions. Additionally, Sanlam’s portals make it possible to pull a holistic report on every aspect of a member’s financial wellbeing – from their unit trusts and individual policies regardless of whether they are with Sanlam, to their retirement savings with our fund and their current outstanding credit – providing all the knowledge needed at the push of a button. This can be forwarded straight to an individual’s financial planner.

4. Enable employers to empower employees: In order to attract top talent, employers are feeling the pressure to provide additional benefits to staff, such as access to the company retirement fund, budgeting tools and loan facilities. The contribution level an employee chooses on the first day of work has been shown to potentially have a material impact on their standard of living in retirement. Sanlam’s digital platforms provide an on-boarding ‘Day One’ strategy to alleviate an HR team’s burden of inducting new staff to the company retirement fund. This includes access to a retirement savings calculator and educational videos.

5. Be transparent: People want to know what they’re paying and what value they’re getting in return. Automation means less time needs to be spent on mundane tasks and this allows more value to be directed to members at reduced expense.

6. Partner with every link in the value chain: This includes financial intermediaries. Digital platforms also provide an easy way for brokers to communicate directly with members – communication that members often cite as missing.

7. Make the future of tomorrow relevant today: Ultimately, like an app that provides a glimpse of what it’ll be like to look in the mirror after one turns 65, it’s vital to provide a realistic glimpse into what life at retirement age will look like, in a way that makes the future relevant now. This means upskilling people to know what they need to retire comfortably and to set attainable short- and long-term goals to achieve this.

Tanya Teare is the Head: Product at Sanlam Umbrella Solutions.

Creating an HR dream team

The need for Human Resources Management to play an increasingly meaningful and transformational role in the boardrooms of organisations has been a source of considerable discussion since Dave Ulrich published his notion of the HR Business Partner ​and subsequent papers on various iterations of HR competencies.​

The webinar 2016 Predictions for HR: A Bold New World of Talent, Learning, Leadership, and HR Technology Ahead, recently published on the Bersin by Deloitte website, is in many ways a game changer for a profession that has been trying to define itself for a number of years.

Looking at the HR function through a variety of functional lenses rather than the traditional HR lens, I believe there is a need, in a fast changing, disruptive and connected world, to radically relook at the skills and perspectives required by an HR team. The need to break down silo thinking is emphasised in Gillian Tett’s recently released book The Silo Effect and this applies to HR as much as any other discipline.

The skills and disciplines that I believe should be represented in a future HR dream team are described below.

Several of the skills that are core to HR effectiveness are not even related to traditional HR:

An anthropologist or social psychologist: In the final analysis the role of HR is to assist organisations to be more effective and adapt very quickly to disruption and transformation. For this change to be effective, a deep understanding of social and organisational dynamics is required at a level far greater than the average HR or OD practitioner brings to the process. In her book referred to earlier, Gillian Tett, a financial journalist who ran the New York office of the Financial Times and who also has a PhD in Anthropology, points out the relevance of the discipline to business and organisational effectiveness in facilitating deep organisational change.

A marketing expert: One of the key roles of HR in the modern organisation is to assist in facilitating organisational culture that is relevant to the strategy. In fact, organisational culture should be the internal representation of the organisation’s external brand or reputational aspiration. The two should be inseparable and, just as an organisation needs visibly to represent its brand values externally, it needs to represent these same values internally with the same rigour. This internal ‘marketing’ is not usually a strength of HR practitioners. A further marketing expertise need is to develop an organisation’s employee value proposition (EVP) and to market this in the competitive talent market, thus building an employer brand.

A customer-centric HR operations manager: The Bersin predictions show how critical HR technology will be in the future and how, for the most part, it will be a game changer. The person who runs the HR customer services operations should have a background in running externally focused customer services operations such as those in organisations like Discovery and Multi-Choice.

Social media expert: The need for understanding social media and social technology in its widest sense will be a key skill required for communicating with staff and other stakeholders in the future. This is an indispensable new addition to the core skills set.

A business analyst: Big data and data analytics will be as relevant to HR as to any other organisational discipline. This analysis will form the basis for strategic workforce decisions that are based on accurate, real-time data. Again, this is not currently a core HR skill.

Business leaders: The greatest, and generally justified, criticism of HR practitioners has always been that they do not understand the business of the organisation for which they work. Many organisations place high-potential line managers in HR to provide them with a learning experience about the people side of the business. This is an excellent grounding for future leaders; it is also an excellent opportunity for business leaders to shape HR practices to ensure that they are relevant to the business. In my view, this exposure to HR would be suitable for operational managers and strategists as both are relevant to aligning HR strategy and practice to the needs of the business. It can be anticipated that they would bring experience in leadership which goes beyond the traditional HR approach that is often driven by processes and compliance rather than by good leadership.

HR leaders: Although all the aforementioned disciplines and skills will become increasingly essential to the effectiveness of HR, clearly there is a need for HR professionals. They should be in roles that are specialist to the profession, such as IR and remuneration, but also in roles that integrate all the skills mentioned above, experience and expertise into a coherent team that designs and facilitates the execution of the organisation’s people or HR strategy.

How such a dream team is constituted depends on the organisation. It may be that certain expertise such as marketing is sourced from the marketing function. Or, the HR operations and customer service operation falls within a larger central services division.

However the team ends up being configured, one thing is certain: in a world characterised by disruptive innovation and a whole new generation of HR technology, a radical rethinking of HR is required. Because our professions are largely responsible for how our brains are wired, it will be almost impossible for HR to reinvent itself in the way that will be required in the future. The silo approach to organisational design, in this case HR, will not be sufficient to provide the level of innovation necessary to compete in the future. Multidisciplinary and diverse teams, which include some thinkers from ‘the fringe’, will be required to generate the levels of innovation required for an effective future HR team.

Terry Meyer is a strategy and leadership consultant and author. He is also a part-time faculty member of USB-ED where he is responsible for the HR Executive Programme. Further areas of expertise include organisational design, and talent and human capital strategy.

This article appeared on USB-ED.com.

What is organisational design?

With ever-changing expectations of consumers across a global market, private and public agencies, businesses, and groups are finding more and more value in strategically approaching organisational design.

The careful evaluation of how an organisation operates in order to best align with an overall mission and goals results in more positive outcomes for people, systems, and the incorporation of technology.

People and roles

Most business experts agree that the way to be able to predict success in an organisation is to have the right people in the right positions. The development and re-evaluation of existing organisational charts is a key part of the initial designing or re-structuring of a company, business, or other group. Processes from what interview questions to ask new candidates to evaluation of existing employees are carefully examined when looking at the people of an organisation. This leads directly into what roles each person should play in operations based on expertise and ability.

Every employee has strengths that can be useful for leading a company or organisation to a level of success. Most often, those strengths should be recognized, in some cases shifting roles and re-formatting the reporting structure of an organisation. From the president’s office to the first level manager to a shift supervisor, each person who holds authority within a company is evaluated for strengths and weaknesses to determine if each person’s position is ideal for maximizing positive overall results, including the location of an employee in the global workplace.

Systems and processes

An organisation designer will also carefully consider the ways in which workflow is implemented. Consideration is given not only to the processes that are completed during a work day, but evaluation of the ways in which those processes are completed is also a top priority when an organisation is looking at the design of the firm overall. Understanding the efficiency of all programs, automated and manual, is often the start of analyzing how to better improve outcomes through the re-development of systems.

Accountability is an additional factor often included when systems and processes are examined in the design of an organisation and its structure. In order for processes to run smoothly, some level of autonomy and clear standards, expectations, and flow of information must be identified in the design process.

Technology and equipment

As technology continues to become essential in all areas, the ability to incorporate and integrate the right technology into organisational structure is also a top priority. In the design of an organisation, which software, hardware, and other equipment are being used are a central focus. More on the connection between organisational design and technology can be reviewed here

Putting it all together

Ultimately, a successful structuring of a company or other organisation increases profits, employee and consumer satisfaction, and workflow optimisation. After each area of an organisation has been evaluated, analyzed, and developed, completion of organisation design requires for implementation of any of the new policies identified in the process.

Starting from the top or working through an organisation’s structure from the bottom up can help for analysts, project managers, and executives to identify a number of areas of improvement. After evaluating and considering options, stakeholders are able to make recommendations and create implementation plans through organisational design.

This article appeared on humanresourcesmba.net.

What does organisational design have to do with HR?

A motorbike and a bicycle have a lot in common but they both function in very different ways. So why is that? The simple answer is design.

Just as design dictates whether your two-wheeler is pedal-powered or requires fuel, the design of your company dictates how it operates on a daily basis. Organisational design is the way your organisation’s structure aligns with its objectives.

Digital disruption, employee expectations and an evolving workforce are all challenging companies to rethink their organisational design. Change is needed if they want to engage and retain talent, empower their employees, tackle leadership issues, and develop company culture.

Deloitte’s Global Human Capital 2016 report found that 92% of companies believe that organisational design is either very important or important. Almost half of the respondents told the survey that they have already restructured their organisation or are planning to do so.

So where does HR fit in? HR is well placed to offer organisational analysis and advice but perhaps its biggest role is in helping to implement any design changes.

Trends in organisational design

Companies are moving away from a traditional hierarchical structure in favour of a network of smaller teams that tackle particular missions or objectives. Employees are seen as a resource of the company rather than the resource of any one manager.

Teams are formed on the basis of expertise or skills for a specific project, customer or market. It’s a fluid, team-centric approach that harnesses an organisation’s talent in the most effective way. Smaller, more responsive teams can communicate better and decentralising authority helps to speed up decision-making.

Only 38% of companies are still functionally organised, the report from Deloitte found. Letting people move from team to team to handle different projects is an obvious way to get the most out of your pool of talent.

More than half the workforce are now Millennials. They want rewarding work, flexibility, development opportunities and to be engaged. So companies are being challenged to change. Leadership roles are evolving to accommodate Millennials but just 7% of companies believe they are “excellent” at developing Millennial leaders.

Established companies only need to look at the exponential growth of disruptive organisations to see the benefits of new design models. These “exponential companies” aren’t hampered by the legacy structures, culture or technology that hinder their old-school rivals. Instead, they’re rapidly evolving organisations that constantly adapt and develop as they grow.

How to avoid organisational design mistakes

“A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools,” said Douglas Adams. Sure, designing a foolproof redesign is difficult, but knowing the potential pitfalls can stack the odds in your favour.

One common problem is adopting a new design without the structures to support it. Imagine a shiny new surface design with the old engine underneath. Your organisation could tear itself apart from the inside. Employees can get confused about their roles or end up trying to satisfy two bosses, which leads to frustration on all sides.

Don’t underestimate company culture. Over half of the companies in the Deloitte survey are currently trying to change their culture, which shows how tricky it is to get right. If a redesign is resisted by traditionalists, it can cause a cultural divide.

There’s no point putting a new engine on your bike if the person riding it insists on using the pedals. Taking the time to convert doubters and clarify new expectations is one way to improve a redesign’s chances of success. Part of this process is explaining how the new structure will work and how they fit into it.

Don’t just change your design for the sake of change either. Think about what you want to achieve, plan accordingly and form a strategy based on your resources. Transforming your organisational design on a whim will rarely end well.

How can HR steer organisational redesign?

Design thinking transforms HR from a “process developer” to an “experience architect” and this makes it an important stakeholder in the process. HR professionals should work closely with management to identify an organisation’s problems and come up with design solutions. HR can also put the employee experience front and centre in any organisational transition.

Job titles and descriptions can become blurred in project-based organisations so employees require support and performance management from HR. Hiring policies and succession planning also need to be carried out with the new structures in mind, making HR vital to the success of any organisational design.

Think of a redesign as upgrading from a bicycle to a motorbike. HR’s role is to explain the operator manual, walk the employee through the mechanics, ensure everything’s working, and to teach them to ride it before they hit the road.

Smart HR technology helps you manage the entire employee journey, from hiring to retiring. It takes all the admin out of the transactional stuff which means you can focus on the design thinking that will help transform your organisation.

By Mark Sexton.

This article fist appeared on CoreHR.com.

How to put a high-impact operating model design in action

Reducing the risk of a failed transformation.

Influential and instrumental, operating models are a vital link connecting business vision to an organisation’s design and ultimately to a company’s success or failure. In a truly remarkable way, operating model design acts as connective tissue between theory and reality. Yet effective operating model design tends to remain one of the least understood organisational topics and continues to evade armies of sophisticated professionals. In the first of our three-part series on high-impact operating model design, we look at the (often overlooked) role of operating models in achieving business transformation, particularly their role in enabling and supporting desired behaviors.

What drives business transformation?

Often it’s the need to compete, to grow, to adapt to changes in markets, technology, customers, the workforce, and society in general. Like many of these forces, today’s business transformations should be revolutionary, rather than evolutionary (it’s not easy building the organisation of the future), compelling operating model design to become more holistic, nuanced, and sophisticated. The customer-centric organisation demands a structure that secures internal behaviors that drive customer value. Yet, the continued existence of failed business transformations has prompted us to consider a key question:

Why do employees fail to make the necessary behavior changes, rendering transformation efforts useless?

Stepping back to move forward

What if first, before designing an operating model, before implementing a technology, changing metrics and rewards, restructuring roles, or spending money on flashy campaigns, leaders reflected on how each individual or group should behave in order to make the target state operating model a success? Companies across industries are realizing and adopting this new way of designing operating models. This new way focuses on end behaviors that not only activate an operating model but also organically drive the desired value case, as opposed to the old way in which operating models were designed to support an established value case without consideration of the end behaviors. This design approach often left a void because the operating model did not consider behaviours, leaving nothing in place to drive the value case. A behaviour-driven operating model establishes a customer-centric organisation that organises around behaviours to drive profits.

old way new way

Source: Deloitte Consulting LLP

We’ve just looked at the “what” of high-impact operating model design. In part two of this series, High-impact operating model design in action: Realising the ultimate influencer, we’ll take a closer look at “how” operating models influence behaviors.

Tiffany McDowell is an Organisation Transformation & Talent principal in Deloitte Consulting LLP’s Human Capital Practice, where she focuses on helping companies improve performance by building organisation structures to execute new capabilities through their workforce.

Uzair Qadeer is an Organisation Transformation & Talent manager in Deloitte Consulting LLP’s Human Capital Practice, where he specializes in organizational development with deep focus on supporting culture, change management, and talent strategies. Uzair has delivered transformative organisational strategies work both in the United States as well as internationally.

Julia Rudansky is an Organisation Transformation & Talent consultant in Deloitte Consulting LLP’s Human Capital Practice and focuses on organisational strategies, talent, change management, and strategic communications.

This article appeared first here.

5 legal and HR issues to consider in a small business

If you run a small business, you probably spend most of your time doing client work, finding new business and managing your team. With all these responsibilities, it’s common for small business owners to overlook legal and HR issues – besides a lack of time, they also may not understand where and how to be compliant in their operations. But doing this is extremely important: if you find yourself in legal hot water over an HR or client issue for example, the resulting expense and reputation damage could be significant. Here are five issues you should look into:

1. Issue client contracts

Whenever you take on a new client, whether on a retainer or project basis, you should have a solid contract in place that details the exact scope of work to be done and provision for if that scope changes. It should also contain details such as timings and remuneration structure, how work will be delivered, and applicable jurisdictions for where the contract applies. Having a solid client contract in place helps manage expectations on both sides, and provides a course of action if something goes wrong.

2. Issue employment contracts

No matter how small your business is or whether you have full time, temporary or contract employees, South African labour law states that you need to give all employees a written document that outlines the terms and conditions of work. An employment contract as with a client contract is also vitally important to outline what’s expected from both parties. Employment contracts should include details such as duties required to be performed, working hours, payment details, benefits, leave allowances and notice periods. You should also update this contract if the law changes, if you and your employee agree to different employment conditions, or if their pay or benefits increase.

3. Decide on a maternity leave policy  

As a South African employer, you’re legally required to provide four months of maternity leave to all pregnant employees, during which time their job is reserved for them. You’re not required to pay them during that time, but many employers make separate arrangements to pay at least part of their salary while they’re on leave. As a small business, you’ll need to look at your projected cash flow to see how much you could contribute to maternity leave pay for part or all of the time. You could also look at other arrangements for when they return to work, such as job sharing, flexi-time or reduced hours. While these arrangements aren’t a legal requirement, being a flexible employer can improve your employees’ job satisfaction, loyalty and productivity.

4. Have a proper HR policy in place

When it comes to things like employee grievances, misconduct or breaches of employment contracts, it’s crucial that you’re following the correct legal procedures. If what you’re doing doesn’t fit within current labour law, you could face complications such as your employee taking you to the CCMA. A comprehensive HR policy also looks at things like disciplinary processes and procedures, and performance reviews. You should also make other managers and employees aware of these processes so that they can implement them correctly across the board.

5. Make sure you’re tax compliant

If you’re a South African company, you need to make sure you’re operating within tax laws governed by SARS. For example, you’ll need to pay provisional tax twice a year based on projected profits. You’ll also need to withhold income tax on behalf of your employees and then pay that over to SARS as PAYE, which you’ll declare in a monthly EMP201 form submission for each employee. If your business earns over a certain amount per year you’ll also need to register for VAT, which is paid bi-monthly. For these and other tax issues, it’s highly recommended that you use the services of an accountant or financial advisor who understands tax law in the context of your particular business.

For all legal issues relating to your business, it’s important that you stay legally compliant, which typically means getting advice from an HR, legal or tax professional. Although this will involve additional costs that could put pressure on your small business’s cash flow, the long term benefits are huge in terms of avoiding fines, penalties, or legal issues if things go wrong.

Provided by Fedhealth.


What are the immediate benefits of outsourcing?

Labour outsourcing has become a necessity in South Africa as many industries are held to ransom by organised labour. The mining, transport and agriculture sectors are generally hit hardest by industrial action. According to the Industrial Action Report, South Africa experiences an average of 85 strikes per annum. Their research shows that ±335,000 workers are responsible for 5,2 million working days lost per year.

While it makes sense for companies to focus on their core business and outsource their staffing requirements, many remain cynical. As outsourcing is still a new concept in SA, labour broking and its ills are legendary.

Outsourcing is a vastly different business model to labour broking. One of the key differences between the two is the type of employment contract workers must sign. Employees appointed by labour brokers are temporary workers assigned to a client for a limited time frame. The employee enjoys no benefits and when the contract expires, so does his employment.

Outsourced employees remain on their company’s staff roll, and enjoy permanent employee benefits. Irrespective of the duration of the outsourced client’s contract, employees keep their jobs. If the contract expires, the outsource company will redeploy the employee to a new client.

Many companies outsource certain non-core services such as truck drivers, hospitality staff, cleaners, farm workers, etc.

By outsourcing their staff to an organisation that understands human resources and its related legalities, the client can focus on growing their core business. We provide a skilled and competent labour force to provide our clients with a specialised service.

Yet, some might argue that outsourcing results in the loss of control over certain business processes but the converse is true.  

Back office operations do not generate money for the business but take up an inordinate amount of time. It therefore makes sense to outsource non-essential functions such as driving, cleaning, administration and accounting. This allows clients to play a more strategic role in their business by concentrating on operations. It is impossible for a business owner to work in the business and on the business. Outsourcing allows them to focus on growth, rather than staffing issues and activities.

One of the unpleasant realities of business is having to let go of employees who are under-performing or do not fit the corporate culture.

Outsourcing takes care of this. If staff don’t fit in for some reason, we will replace them and move them onto another contract, with a better fit. The client is thus free of guilt and does need to deal with the associated human resource issues. Or, we will follow our own disciplinary code and resolve the matter internally. This eliminates all risk involved for the client such as CCMA hearings or potential labour unrest.

To ensure optimal client satisfaction, good outsourcing companies recruit the best talent in their respective fields, which results in repeat or increased business.

We have stringent processes to check the credentials of all our staff. They are further provided with ongoing mentorship and training programmes to ensure they are business-ready. By developing and upskilling staff, we provide clients with the best possible service and operational solution for their specific business.

Considering these arguments, it is easy to see how outsourcing remains a win-win situation all round.

Arnoux Maré is the MD at Innovative Staffing Solutions.

What is the new organisation?

We just launched one of the world’s largest studies of people challenges in business, Deloitte Human Capital Trends 2016, and the results were striking. Among the 7,000+ companies who responded (in over 130 countries), the #1 issue on leaders minds is “how to redesign our organisational structure” to meet the demands of the workforce and business climate today.

Our conclusion, after almost a year of study, is that today’s digital world of work has shaken the foundation of organisational structure, shifting from the traditional functional hierarchy to one we call a “network of teams.” This new model of work is forcing us to change job roles and job descriptions; rethink careers and internal mobility; emphasize skills and learning as keys to performance; redesign how we set goals and reward people; and change the role of leaders.

The new organisation Different by Design a network of teams

Fig 1: The New Organisation: A Network of Teams

Our research, which identifies the top ten human capital trends for 2016, shows that most of the issues facing companies today (employee engagement, culture, time to market, innovation) are tied inextricably to this new way of working. And 92% of the companies we surveyed cited “redesigning the way we work” as one of their key challenges, making this the #1 trend of the year.

Figure 2 Importance of trends to business

Fig 2: Relative Importance of the Ten Global Human Capital Trends

What is a “Network of Teams” and Why Now?

If you look at the research, you find that companies already operate this way. Only 24% of large companies (>5,000 employees) claim to be functionally organised and only 38% overall. We naturally run our businesses in sales teams, manufacturing plants, retail stores, product groups, service teams, and geographically independent operations.

Uber, who is well known as one of the most disruptive and innovative companies in transportation, sets up city managers who run their local operation with local marketing, government relations, staffing, and operations leaders.

The problem we face, however, is how we coordinate and align these teams, how we get them to share information and work together, and how we move people and reward people in a company that no longer promotes “upward mobility” and “power by position” in leadership.

As the trends above show, the new organisation of today requires us to rethink the leadership strategy, focus on culture and engagement, deliver on-demand organisational learning, and provide information centers, analytics, and digital HR tools to help people operate, share information, and work together well.

I have had the opportunity to talk with dozens of companies about this over the last year, and I believe this is a profound new way of thinking about business. We have to think of companies like “Hollywood Movies” – people come together and bring their skills and abilities to projects and programs, they build and deliver the solution, and then many of them move on to the next “movie” later.

Our research identified four keys to success in this new organisational model:

1. Shared values and culture.

As people operate in geographically dispersed teams which are closer to customers, they need guidelines and value systems to help them decide what to do, how to make decisions, and what is acceptable behavior. This is driven by mission, culture, and values – hence the tremendous interest in understanding, measuring, and aligning culture (86% of companies rate this as important). Our trend entitled “Shape Culture, Drive Strategy” and the article “Why Culture is the Hottest Trend in Business Today” describe this topic in detail.

2. Transparent goals and projects.

People operating in teams and small groups have to work with other teams, and they can’t do this unless goals are clear, overall financial objectives are well communicated, and people know what other people are working on. Our research on next generation performance management and “The End of the Bell Curve” describe this in detail.

3. Feedback and a free flow of information.

As teams operate and customers interact with the company, we must share information about what’s working, what isn’t working, what’s selling, and what problems we have to address. While local management and team leadership (i.e. a plant manager or sales leader) should take immediate responsibility for errors, others need to know what problems are taking place, so they can respond to support the team. This takes place today in digital information centers, analytics dashboards, and free flowing feedback systems that have replaced annual engagement surveys and performance reviews.

Solutions require a focus on open and transparent feedback, digital information centers, and building an open and inclusive culture. Our research on “Feedback is the Killer App” and the article “Why Inclusion is A Critical Business Strategy in 2016” describe this in more detail.

I recently talked with the head of diversity for Atlassian, a fast-growing software company. Their entire talent strategy is now focused on building diversity and inclusion at the team level. It isn’t enough to have some teams which are all women, some all young, some all old – we have to build inclusion, diversity, and open feedback within each team and across teams.

4. People are rewarded for skills and contribution, not position.

Finally, the network of teams rewards people for their contribution, not their “position.”The days of “positional leadership” are going away (i.e. “I’m the boss so you do what I say.”) to be replaced by growth and career progression based on your skills, alignment with values, followership, and contribution to the company as a whole. Our chapter “Leadership Awakened: Generations, Teams, Science” describes our findings here.

These HR and organisational changes have been taking place for years, but are now accelerating because of the widespread use of digital technology, a demanding younger workforce, and the need for more rapid business innovation. Artifacts like organisation charts, job descriptions, performance appraisals, and career paths are being reinvented, redesigned, or even thrown away before our eyes.

The Research: Top 10 Trends We Discovered

The title of our report, “The New Organisation: Different by Design” (which is also the theme of our 2016 IMPACT Conference on April 25, 2016) came from our detailed study of global trends.

This is our fourth year conducting this research, and this year we had more than 7,000 respondents in more than 130 countries. We analyzed and sorted the data by industry, company size, and geography and found that the trends we highlight are both global and important to companies of all sizes.

Here are the ten trends.

Figure 3 global captial trends 2016

Fig 3: The Ten Deloitte Global Human Capital Trends for 2016

On the topic of structure, the research found that only 26% of large companies (> 5,000 employees) are functionally organised today (ie. sales, marketing, finance, engineering, service, etc.) and 82% are either currently reorganising, plan to reorganise or have recently reorganised to be more responsive to customer needs. The issue of structure is quite dynamic as we all know: among these companies only 8% believe their structure is optimized and only 4% have no plans to change.

As we talked with companies and explored this issue, we realized that the drivers of this trend are digital technology, information transparency, demographics, and business disruption. Cisco, GE, Cleveland Clinic, and most of the other companies we interviewed told us stories about how their functional structures were obsolete, and that this new “team-based” structure was one that appealed to Millennials, drove innovation and customer service, and was now possible to manage well because of the widespread use of digital technology to share information.

Many of us remember the old fashioned “matrix organisations” which were popular in the 1980s. Well today the “matrix” makes a company look more like a series of Hollywood movies, where people take their skills and functional expertise, they work on a “project” or “team” or “program” to get work done, and as they learn and the company adapts, they move into another team over time.

While there are still senior executives in the company, leadership now becomes a “team sport,” where leaders must inspire and align the team, but also be good at connecting teams together and sharing information.

General Stanley McChrystal, in the book Team of Teams, describes how this structure helped the US Army during in the war in Iraq. He had to dismantle the functional structure in place, build these teams, empower team leaders to take charge, and build a digital information center to help these teams coordinate. This story of “coordinated but distributed operations” is what’s happening in almost every company we talked with, but the talent and HR practices are still behind.

Leadership: More Important than Ever

As the data in the trends chart shows, the second issue companies now face is leadership – an even bigger problem than in our 2015 study. 90% of companies cite leadership a major problem and the percent that rate the problem “urgent” went up to almost 2/3 of all respondents.

figure 4 generations teams science

Fig 4: Leadership: generations, teams, science

Why is leadership such an issue? Quite simply because the leaders we need today must be agile, they must learn fast, and they must be connected throughout the organisation. The customer service team, sales teams, or marketing teams in your company are often led by mid-level leaders, many of which have grown up in the function. They must have hands-on leadership skills and they must both lead the team and interoperate across teams, a set of skills not always present in the old fashioned hierarchical organisation.

I had a meeting with the CEO of one of the fastest growing companies in India last Fall and he put it clearly:

“We have no room for ‘general managers’ any more. If our leaders aren’t functional, hands-on leaders, I don’t need them around. Information flows easily from team to team and city to city, I don’t need managers in the middle to generate reports and tell me when one team is behind or problems are taking place.”

In his case, the company is designing its business around digital information centers, shared goals, and mobile platforms that help employees communicate and share information instantaneously. In most companies that kind of infrastructure is just being built, so the shift from “the hierarchy” to “the network” is very much a work in process.

The Importance of Culture and Engagement

One of the biggest drivers and facilitators of the “new organisation” is the need to drive culture, employee engagement, learning, and feedback throughout the company. The third and fourth most important trends were culture (86% rated important) and engagement (85% rated important).

This makes perfect sense. Millennials, which now make up more than 50% of the workforce (more in many countries), are looking for mission and values at work, and when they work in small teams they need a shared culture to ensure that strategies, programs, and compliance takes place in a consistent way. We’ve done many studies of compliance programs, for example, which always show that building a “culture of compliance” is far more effective than giving people tools or processes to make sure they do as they are told.

figure 5 shape culture drive strategy

Fig 5: Culture: key to strategy, execution, and alignment

What is culture and how do you measure and manage it? This topic is on the minds of CEOs, investors, and business leaders around the world. Our research tries to unlock the secret of building a high performing culture, and I would encourage you to read the section “Shape Culture, Drive Strategy,” or the article “Why Culture is the Hottest Topic in Business” to understand ways to help you define, monitor, and better align your culture.

Coupled with culture, the topic of employee engagement continues to be urgent as well.

As we wrote about last year and I describe in the Simply Irresistible Organisation research, we also know that employees today operate more like “volunteers” than like indentured servants or “employees.” They are busy and often “overwhelmed” with work (read our article on The Overwhelmed Employee for more), they are active on social networks (where they can browse for new jobs or receive job offers), and they openly share information about your company and their boss. If they are not inspired and engaged at their work, they drift away and you may find yourself with a large organisation operating with low performance or inconsistent customer service.

figure 6 always on

Fig 6: Engagement: Always On

The issue with employee engagement today is that we have to build an “always on” listening process, one the opens up streams of feedback and concerns in a way that helps leaders immediately spot problems and design solutions that make employees more productive, aligned, and engaged at work.

This is a major thrend sweeping through HR departments around the world, bringing the world of I/O psychology, survey and feedback technology and People Analytics together. I recently talked with a large insurance company who is looking at employee engagement data, pulse survey data, exit surveys, performance ratings, and job mobility in an integrated new system. They expect this new platform to give them immediate insights into operational problems throughout the organisation, help them design better employee benefits and reward systems, and identify management problems quicker than ever before.

What is the relationship between Culture and Engagement? While many vendors are mixing the words somewhat randomly, our research shows that they are directly linked, but not the same thing:

figure 7 the relationship between culture and management

Fig 7: Culture vs. Engagement

If you take the time to define and align your culture, you now have a set of tools to help measure and manage engagement. Together these new practices in HR give you a dashboard and set of alignment tools to make sure your “network of teams” is operating well around the world.

Learning: The New Fuel of the Organisation

The topic of learning, which 84% of surveyed companies rated important, increased in urgency by 10% over last year.

Our research shows two important shifts here:

First, today learning is “owned by the employee,” so companies have to provide a rich set of learning experiences on the job, enabling employees to continuously train and educate themselves. The adoption of MOOCs and advanced video learning more than doubled from 2015, as the corporate training department shifts from one of “education” to one of “building a learning experience” at work.

Second, there is a major trend toward career development, professional development, and upskilling in the workforce. As I like to describe it, today “The Learning Curve is the Earning Curve,” and people now flock to companies that can give them the opportunity to grow and develop.

There is an urgent rush to skills around the world, forcing high performing companies to provide professional skills, technical education, and career development in order to attract great people. Most major retailers, for example, now offer tuition reimbursement for hourly workers and early career management programs are becoming popular again.

figure 8 employees take charge

Fig 8: Learning: Employees take Charge

In today’s “network of teams” organisation, skills and capabilities are the currency of success. The corporate learning industry is trying to adapt, as we provide an “always on,” high fidelity learning experience through all phases of an employee’s career.

Design Thinking Takes Center Stage

This new organisation, which empowers people through shared goals and a team-centric structure, has to be designed to help people get things done. This is why the next trend we identified is the huge interest and need for design thinking, in areas like HR, learning, performance management, and the entire work experience.

figure 9 crafting the employee experience

Fig 9: Design thinking in HR: Crafting the Employee Experience

As we wrote about recently in our article “HR for Humans,” people today don’t just “do what’s best for them” at work – they behave as humans, and we need to make work simpler, easier, and more developmental in every way. This leads to a whole new way of designing HR, learning, and talent programs – based on simplicity, a focus on only what’s important, the use of mobile apps, and a core of user-centric design. The old days of building an end-to-end process for recruiting, onboarding, performance management, or career development are going away. Now we look at each employee’s role in the company and we design “curated experiences” that help them learn and progress.

A New Model for Management

Coupled with the change in organisational structure and talent practices is major shift in management thinking. Every decade or so we rethink how management works, and right now we are entering a new era.

Today, as the chart below illustrates, we no longer think of executives as “kings,” but rather as facilitators, strategists, and team leaders who can inspire and empower teams to succeed. This new concept, which has become fundamental to management books and practices over the last few years, is coming from a realization that the old fashioned, hierarchical leadership models just don’t work today.

figure 10 the evolution of management thinking

Fig 10: The Evolution of Management Thinking

There are many implications of this shift: what high performing leaders do, who we promote to top leadership, and how we design reward and alignment systems to help leaders contribute. But the biggest symptom of this change is the enormous trend to reinvent performance management.

People keep asking me “how should we reinvent performance management?” and what I tell them is “think about how you want to reinvent management!”

The old fashioned once-per-year annual review is going away, to be replaced with a more open, transparent, “always-on” process. Our research shows that over 70% of companies are simplifying the process, and we see a dramatic shift away from “forced ranking” and “numeric ratings” toward programs to facilitate feedback, encourage coaching, and evaluate people on contributions broader than their individual numeric or project goals.

As leaders of teams and networks, we have to promote practices that bring people together, help people develop, and also focus on topics like onboarding (people change teams regularly), work-life balance, career transition management, and wellness. These practices of HR are hot growth areas today because companies are realizing that if we can’t help people operate in the team, transition from team to team, and stay healthy – we can’t perform as a business.

Do Away With the Organisation Chart: Help People Build Careers

One may ask, does this “New Organisation: Different by Design,” even need an org chart? Of course people need to know how the company is organised, who is in charge of what, and where to go for information and decisions.

But as our research shows more and more, the days of the “org chart” are starting to disappear, because the organisation itself operates more like a sports team or consulting firm, and less like a top-down bureaucracy than ever before. What we really need today is a “network analysis” of the company (the discipline is called ONA) that tells us who to call for what, regardless of where they work. (I believe Organisational Network Analysis is an important new trend and a valuable tool for HR and management as we learn to manage in the network model.)

Let me give you an example. A large, well-known technology company recently spent a day with us to help redesign their programs for career development, in their quest to change their culture toward that of innovation, creativity, and technical excellence. We found, after talking for several hours, that one of the biggest obstacles in the way was “job titles” and “job levels.” The company had developed such a culture of “up or out” that people were unable to move to important new roles (many of which were very strategic) because they felt they were not “promotions” and it would not “improve their level.”

This kind of thinking, which we have institutionalised around the world for decades, has to go away. In today’s digital workplace the value of an individual can be enormous, as long as they have the skills, passion, and network connections to do what is needed. Why would we penalize or hold back someone’s ability to grow by telling them that only by moving “up” can you progress in the company?

We decided after this workshop that the whole idea of a “HIPO (high potential)” is now obsolete, and we have to empower everyone to grow through lateral projects and roles, continuous development, and challenging assignments. Yes there will be levels, but maybe we only need 5 or 6 in the company, not the 30-40 detailed levels they have today.

Growth in People Analytics and Emergence of Digital HR

Which gets me to our final two trends: the emergence of People Analytics and what we call Digital HR. People Analytics, a discipline we labelled “stuck in neutral” last year, has started to take off. The maturity of this discipline doubled this year, and while there is still much work to do, this has become a major new discipline within HR and business.

figure 11 gaining speed

Fig 11: People Analytics: Gaining Speed

My experience with analytics, after many years in this market, is that we have hit the “knee in the curve” and growth will greatly accelerate this year. If you’re interested in this space, please read the chapter People Analytics: Gaining Speed or look through the article “Ten Things I’ve Learned in People Analytics.” 

We couldn’t write this report without taking a hard look at HR technology as a whole. Well as looked across all the management, structural, talent, and leadership issues companies face, we found that HR is going through a digital disruption of its own. While cloud computing has radically changed the way we buy HR software and develop HR platforms, an even bigger change is happening in the way we design and build HR solutions.

Digital HR, as we decided to call it, is a new focus on building HR solutions that are experiential, designed for mobile apps, and built through design thinking and behavioral economics to help people get work done. We are shifting HR’s focus away from “process and programs” toward “strategies and solutions” that help people get work done. This means HR departments have to understand and learn how to build feedback, coaching, goal setting, and development programs that look and feel like apps, are easy to use, and fit into the context of work.

figure 12 revolution not evolution

Fig 12: Digital HR: Revolution not Evolution

Digital HR is not only a way to leverage new technology, it is really the next wave in our efforts to facilitate the new world of work. It’s a new way of building HR solutions, driven by analytics and behavioral economics, reflecting the new model of work, new roles of leaders, and the way people now work together in a peer to peer basis. We developed a set of case studies in the research, and we will be talking much more about this new world in the coming months.

(One of the new challenges to HR software providers, by the way, is building systems that facilitate the dynamic development of teams. Ashley Goodall, the head of talent and development at Cisco, believes the company has more than 30,000 teams at any time, with people constantly changing teams and moving into new teams at any time. HR software vendors now have to build tools that facilitate the always-changing nature of teams, so we can align goals, measure feedback, and identify leaders on a dynamic basis.)

The New Organisation: Designed for Us as People

As I reflect on the hard work we did to complete this research and understand the findings, I’m left with one final thought. The new organisation we identify and describe in this research is not just an artifact of technology, disruptive change, or the demanding needs of Millennials.

It’s more than that – it’s a shift away from “corporations as institutions” to “businesses as collections of people:” designed to operate the way we as people like to work.

The new organisation and talent models we describe are not just trendy, they’re natural to us as people. As I studied for this research, I found many studies which show that we as humans like to communicate, collaborate, and operate in small groups. We are essentially tribal animals, and we like to be part of something bigger than ourselves, connected locally to people we like, respect, and can enjoy. (Google just published its research on teams and it shows that we operate best when the organisation builds trust, respect, and inclusion.)

The 1960’s organisation, which looked like a hierarchy or an industrial institution, with executives who have private parking spaces, executive washrooms, and thickly carpeted offices at the top of the building with expansive views, is becoming a dinosaur. Yes executives will always like power and luxury to compensate them for their hard work – but today if they want to succeed they must learn how to tap into the power of every individual, every team, and figure out how to bring the network of teams together, aligned to fulfill on the needs of customers and the organisation as a whole.

Think about who really “runs” your company: generally, retail companies are run by store managers; sales teams are run by sales leaders; consumer goods companies are led by product leaders; consulting teams are led by strong consultants; manufacturing companies are run by plant managers; and software and technology companies are led by engineers. If you come to grips with the potential to empower teams, make the teams work, and bring the teams together – you’ll find that your company, regardless of how large or small it may be, can flourish and grow like never before. It’s human nature for us to love our work if we “own it” – so part of this new organisation is to let every person “own their work” and contribute in their own special way.

This research identifies new models to drive performance, employee engagement, and business growth in every industry. The ten trends we identified: structure, leadership, culture, engagement, learning, design thinking, Digital HR, analytics, and workforce management – come together to serve as a roadmap for your organisation’s journey into the future.

I recommend you read this report in detail, give us your feedback, and let’s talk about these issues in the coming year. The digital world of work is here, and our ability to build this “new organisation, different by design” is more important than ever for all of us.

By Josh Bersin.

This article first appeared on Joshbersin.com.

7 employee concerns to look out for in African M&A deals

Across Africa, employee concerns are looming large as potential deal-breakers in mergers and acquisitions. Investors in Kenya, Nigeria and South Africa would do well to watch out for red flags that could scupper a transaction or leave them holding the bill for unforeseen employee costs.

Here are seven employee-related pointers for investors to look out for.

1. Different transactions, different impacts

There are three main transaction types that affect employees to varying degrees: a simple purchase of shares, the purchase of a company as a going concern and the purchase of the stripped-out assets of a company.

A purchase of shares usually (but not always) has the fewest employee-related implications. Asset sales can be problematic if there is nothing left behind for the running of the company, raising the likelihood of redundancies. The sale of a going concern raises many employment law issues, especially around employee transfers.

2. Transfers: automatic or by agreement

Of the three jurisdictions being considered, only in South Africa does the law make provision for employees to be transferred automatically. From the date of transfer, all employees move across to the new entity with their employment conditions and benefits unchanged. Any retrenchment or dismissal caused by the transfer is deemed an automatically unfair dismissal. Employers will then have to reinstate the employees or pay them up to 12 months’ remuneration.

The transfer of employees in Kenya will depend on what the parties agree. The critical point is that transfer agreements must be tripartite: the old employer, new employer and the employee must all sign a transfer agreement for it to be valid. When employees are unionised, the trade union will be engaged and consulted on their behalf.

Nigeria is similar to Kenya in that a tripartite transfer agreement must be signed. However, a fourth party comes into play when employees classified as “workers” under the Labour Act are to be transferred.  

Workers are clerical and administrative employees such as receptionists, office assistants and drivers. When this class of employee is affected by a change of business ownership, the consent of each employee must be obtained. In addition, a Labour Officer from Nigeria’s Ministry of Labour must endorse the transfer. The Labour Officer will confirm that each worker freely consented to the transfer, and that every worker’s old and new employment contracts are at the very least comparable.

3. Employees may choose not to be transferred

Investors should not assume every employee from the company they are buying will want to go over to the new entity.

In Kenya, there have been several transactions where some employees refused to sign the tripartite transfer agreement, even though the new employer was offering better employment conditions. They wanted their employment to come to an end, with redundancy benefits, even before the transaction was completed. The employers agreed because the situation threatened to become litigious.

Employees in Nigeria also have the right to decide whether they wish to be transferred to the new entity. Depending on the terms of their contracts, those who choose not to be transferred may be entitled to redundancy payments.

A factor to consider in South Africa is that although the transfer occurs by operation of law, if only part of a business is being sold, an employee may want to stay behind in another part of the remaining business. If so, or if the transferring business does not want the employee, the person can stay behind by agreement.

4. Addressing concerns through the courts

This is a trend that is gaining momentum in Kenya. Even in transactions where the legalities seemed straightforward, as in a transfer of shares, employees or their unions have lodged court challenges, either to obtain better conditions of employment or for fear of being worse off under the new arrangement.

The courts in Kenya have more often than not ruled in favour of the employees, even if there was no legal or contractual basis for their grievance. In some cases, an additional payment was made to employees. In others, the employees successfully prevented the deal from going through.

In Nigeria, while employees could potentially challenge a transaction in court, it is not likely that Nigerian courts will uphold such actions. However, the transaction could be potentially delayed.

5. Competition authority limits redundancies

In Kenya and South Africa, the competition authorities are taking an increasing interest in the employment implications of M&A transactions. Nigeria has not yet reached this point, although it has other mechanisms (the Labour Officer system) to safeguard jobs.

More and more often, the Competition Authority of Kenya is imposing redundancy-limiting requirements as a precondition for transactions. The trend is to require the parties to give an undertaking not to carry out redundancies affecting a certain percentage of the workforce (for example, not more than 5%) for a specified period.

In South Africa, too, the Competition Commission has invoked public interest considerations when approving transactions. Regularly, a prohibition is placed on retrenchments for a specified period after the transaction.

6. Employee costs and liabilities

Investors need to be aware of all employee costs and liabilities, and ensure the transaction agreements clearly state who will carry these.

A major potential cost to watch out for in Nigeria is unpaid statutory payments, such as compulsory pension contributions. Similarly, extreme care should be taken when dealing with employee share option, share trust and gratuity schemes. The new owner will have to decide whether to continue with a scheme or terminate it and pay out the benefits. Both options can be problematic, especially when benefits are part of employees’ contracts.

7. Compliance issues

A critical issue in South Africa is the seller’s compliance with the Employment Equity Act and the Compensation for Occupational Injuries and Diseases Act as the purchaser could be liable for any unpaid fines. Investors should also look out for liabilities such as accrued annual leave and any ongoing litigation. Appropriate warrantees or indemnities become important here.

Nigeria does not have legislation like South Africa’s Employment Equity Act but investors should be mindful of claims for occupational injuries made against employers that have not contributed to the Employees Compensation Fund.

Forewarned is forearmed

Despite the many potential pitfalls that investors can encounter before, during or even after a transaction, these can be dealt with effectively if picked up early. The more thoroughly due diligence is done, the less likely it is that investors will pay later for unforeseen liabilities or lose their appetite altogether.

Sean Omondi and Lusanda Raphulu, Bowmans and Mary Ekemezie, Udo Udoma & Belo-Osagie.

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