Impact of human capital risks on performance

Take a holistic approach to ensure ethical performance in the workplace.

An often-underestimated risk to an organisation is human capital risk. Most of the failures attributed to companies are in fact lapses by individuals, despite organisations having risk management processes and governing systems in place. These counterproductive actions have a huge impact on overall organisational performance. People are fascinating and unique. However, this individuality brings its own risks – and this is especially true when managing talent within an organisation, whether it is recruitment, succession planning or performance management. The risks include the possibility that a person might lack the skills, they could have a personality incompatible with the culture of the organisation or have priorities that are not in line with the organisation’s goals. Whatever the possible reasons might be, they pose a serious risk for optimal organisational performance. There is no point in simply shrugging and attributing such factors to ‘human error’.

Ethical performance

The management of ethical employee performance has a significant impact on overall organisational functioning. Many organisations have been questioned about their integrity and work ethic. As we have seen in recent cases in the political, public and corporate space, ethical wrongdoing can undo decades of brand goodwill, ruin an organisation’s standing in society, and cause huge financial losses. The impact of the speculation surrounding an organisation’s integrity may have damaging consequences as a result of even one employee not being a moral and ethical match to the organisation.

The risks of not assessing employees to determine their proneness to ethical lapses are too great to ignore. This is especially important in the recruiting stage. Fortunately, there are psychometric options available to anticipate the likelihood of such counter-productive actions that enable appropriate measures to be taken. Psychometric instruments are sophisticated tools that assess the psychological and skills makeup of existing and potential talent in numerous ways. Each of these criteria can be predicted by using the latest psychometric research and assessments for personality, behaviour, competencies, capability and integrity – with the latter issue a significant challenge to organisations.

During the talent acquisition process, it is common for some assessments to be done, but there is a plethora of accurate and relevant assessments with broader application than simple aptitude assessments. All of these can be employed to measure and evaluate the human capital risks an organisation faces, which contributes to eliminating bias in the recruitment process. Psychometric assessments in general should not be underestimated, but an integrity assessment is of special importance, given the damage we have witnessed in South Africa in recent years.

Having the right moral compass is positively linked to an individual’s performance. An organisation that functions ethically and morally builds not only the reputation of the organisation, but also supports and guides employees in their work ethic. An ethical organisation will steer the goals of the employee and organisation in placing value on people and creating a safe and trusting environment for itself and their clients. Assessing human capital is a continuing initiative which impacts not only the recruitment process but also an employee’s, as well as the organisation’s, overall performance. An organisation is likely to gain a competitive advantage when ensuring they have recruited the best suited candidate whose moral and ethical compass matches that of the organisation and its goals.

Besides highlighting potential risks, results can also assist individuals gain greater selfknowledge, to develop new skills or to revisit latent skills that may have been neglected. There are few things more empowering than learning more about oneself, and knowing your own strengths and weaknesses. This supports an individual to approach matters with a positive perspective.

Psychometric assessment tools are now effortlessly available to registered professionals to employ for various assessment purposes, especially for the use of integrity and risks assessment. It is critical that psychometric tools utilised in all processes must be relevant to the process, and be used in accordance with the country’s labour and employment laws. Psychometric assessments are only part of the process, and not the be-all and end-all of employee evaluations or risk determinations. They should be used along with qualification checks, personal interviews, regular communication and scenario projection. They are part of a holistic approach to understanding an organisation’s human capital risks and ethical status.

Psychometric assessments offer real benefits for organisations and it is imperative that these tools be employed to minimise operational risks. The outcome will be teams of people with the right moral compass and the ethical skills to benefit the company and its clients.

As Nelson Mandela once said, “Those who conduct themselves with morality, integrity and consistency, need not fear the forces of inhumanity and cruelty”. Let this quote be our guiding light in building an ethical and moral nation.

Aarti Natha is a Consulting Psychometrist at BDO People and Business Solutions,

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