The HR expertise domain of Workplace Knowledge counts toward 16 percent for both exams. This domain covers the essential HR knowledge needed for relating to the workplace. The following are the functional areas that fall within the Workplace Knowledge domain:

•   Functional Area 11—HR in the Global Context

•   Functional Area 12—Diversity and Inclusion

•   Functional Area 13—Risk Management

•   Functional Area 14—Corporate Social Responsibility

•   Functional Area 15—U.S. Employment Law and Regulations

HR professionals are expected to know how to perform the following Body of Competency and Knowledge (BoCK) statements for the Workplace Knowledge domain:

•   01 Fostering a diverse and inclusive workforce

•   02 Managing organizational risks and threats to the safety and security of employees

•   03 Contributing to the well-being and betterment of the community

•   04 Complying with applicable laws and regulations

Functional Area 11—HR in the Global Context

Here is SHRM’s BoCK definition: “HR direction required to achieve organizational success and to create value for stakeholders.”¹

Globalization is here. It has been coming for more than half a century. Now, technology has altered our lives and the way we interact so that world markets, world politics, and world education have all come to our personal cell phones. Employers, too, are now tapped into world suppliers, world customers, and world recruiting like never before in history. It is going to be increasingly difficult to locate an employer that doesn’t tap into the Internet resources available from these world sources.

Key Concepts

•   Best practices for international assignments (e.g., approaches and trends, effective performance, health and safety, compensation adjustments, employee repatriation, socialization)

•   Requirements for moving work (e.g., co-sourcing, near-shoring, off-shoring, on-shoring)

The following are the proficiency indicators that SHRM has identified as key concepts:

The Global Context

No longer are we just Americans, Mexicans, Canadians, or Swiss. Global interactions mean we must find ways to place our employer issues in a global context while still abiding by the cultural and legal requirements of each country in which we operate. Globalization is a larger version of the U.S. state differences and how they contribute to the American context.

Defining Globalization

Globalization is the trend of increasing interaction between people on a worldwide scale because of advances in transportation and communication technology.² Business and governmental requirements are also contributing factors in the new definition of globalization. Overall, it represents a compression of the world and intensification of the consciousness of the world as a whole.

Forces Shaping Globalization

International economic influences (finance and development), environmental forces, political forces, global insecurity, and a refugee crisis, along with insecure investment trading markets (Dow Jones, Nasdaq, commodities markets), all contribute to shaping the thing we call globalization. Ultimately, these forces boil down to the shift from developed to emerging economies, a global recession and global warming, and hyper-connectivity.

Three Precepts of Global Force Interconnectedness   Taking all of the forces into consideration, there are three precepts of global force interconnectedness that become apparent.

•   PEST factors can be fully understood only as global impacts.

•   Forces may be global, but impacts can be uniquely felt locally.

•   We need to distinguish between large-scale forces and trends and more immediate events and “trendy” phenomena.

Globalization in the Twenty-First Century   Thomas L. Friedman reminds us, we used to build our towns and factories along rivers because they provided access to neighbors and their ideas, power, mobility, and nourishment. “But the rivers you want to build on now are Amazon Web Services or Microsoft’s Azure—giant connectors that enable you, your business, or your nation to get access to all the computing power applications in the [worldwide Internet of Things], where you can tie into every flow in the world in which you want to participate.”³

HR professionals no longer have the luxury of thinking only about their own local, state, or federal interactive requirements. International requirements are always nearby in terms of off-shore manufacturing, importing rules and procedures, and exporting rules and procedures. Monetary impact comes from all parts of the earth. Workforce recruiting, talent management, and policy influences come from more countries as time goes by.

Some experts have pointed out that the workforce in emerging world economies is primarily young, while the workforce in developed countries is aging. The problems presented by each of those populations are quite different. HR professionals must be able to address both.

Shift from Developed to Emerging Economies

The long-term global economic power shift away from the established advanced economies is set to continue to 2050, as emerging market countries continue to boost their share of world GDP in the long run despite recent mixed performance in some of these economies.⁴

The Diaspora   The World Encyclopedia suggests diaspora refers to any people or ethnic population forced or induced to leave its traditional homeland, as well as the dispersal of such people and the ensuing developments in their culture. It is especially used with reference to the Jewish population, who have lived most of their historical existence as a diasporan people.⁵

Demographic Dichotomy   The workforce in emerging economies is becoming disproportionately young, while the workforce in developed economies is rapidly aging (parallel demographic shift).⁶

Reverse Innovation   Innovations created for or by emerging-economy markets and then imported by developed-economy markets suggests that the “new” economies will have a greater influence over world economic events because they are selling their innovations to markets in developed countries.

Global Recession and Global Warming

Episodes of severe weather in the United States, such as the abundance of rainfall and then drought in California, are brandished as tangible evidence of the future costs of current climate trends. A study by Hsiang et al. (published in the journal Science)⁷ collected national data documenting the responses in six economic sectors to short-term weather fluctuations. This data was integrated with probabilistic distributions from a set of global climate models and used to estimate future costs during the remainder of this century across a range of scenarios. In terms of overall effects on the gross domestic product, the authors predict negative impacts in the southern United States and positive impacts in some parts of the Pacific Northwest and New England.

Hyper-connectivity

Hyper-connectivity is a state of unified communications (UC) in which the traffic-handling capacity and bandwidth of a network always exceed the demand. The number of communication pathways and nodes is much greater than the number of subscribers.⁸ This is evidenced by the increasing digital interconnection of people and things around the clock from anywhere.

Achieving a Public-Private Balance   The government fiscal balance is one of three major financial sectorial balances in the national economy, the others being the foreign financial sector and the private financial sector. The sum of the surpluses or deficits across these three sectors must be zero by definition. Hence, a foreign financial surplus (or capital surplus) exists because capital is imported (net) to fund the trade deficit. Further, there is a private sector financial surplus due to household savings exceeding business investment. By definition, there must therefore exist a government budget deficit so all three net to zero. The government sector includes federal, state, and local.⁹

Measurability   If you can’t measure it, why spend time working on it? Each of the issues we are discussing in this functional area can be measured if you take the time to think about them.

Moving Work

Globalization more than anything has resulted in employers finding ways to do their work better, cheaper, and faster by looking outside traditional local recruiting sources. Here are some of the influences we see today:

•   Outsourcing The transfer of some work to organizations outside the employer’s payroll. The vendor may be across the street or across the country.

•   Off-shoring The transfer of some work to sources outside the United States.

•   On-shoring (home-shoring) The relocation of business processes or production to a lower-cost location inside the same country as the business.

•   Near-shoring Contracting part of the business processes or production to an external company located in a country that is relatively close. For the United States, that could mean Mexico or Canada.

HR professionals play a critical role in supporting the decision-making effort involved in moving work from one location to another. In performing due diligence, HR professionals should perform research on each of the following:

•   Talent pool Languages spoken, cultural differences.

•   Sociopolitical environment Governmental regulations, the expense involved in meeting them. Quality of life and ethical environment can create certain expenses.

•   Risk levels IT security, political and labor conflicts, natural disasters, and security for individuals and property.

•   Cost and quality Wage structure, tax structure, communication facilities, Internet access.

Defining the Global Organization

A global corporation is a business that operates in two or more countries. It also goes by the name multinational company.

Defining the Role of Global HR

Global businesses should have a global HR function. At the same time, to compete successfully in diverse markets, companies should recruit, train, and manage people locally—reflecting local culture, local labor markets, and the needs of diverse local business units.¹⁰

•   Business and talent strategies should be global in scale and local in implementation. Effective programs recruit, train, and develop people locally.

•   Global HR and talent management is the second most urgent and important trend for large companies around the world (those with 10,000 or more employees), according to Deloitte Insights’ global survey.¹⁰

•   Companies face the challenge of developing an integrated global HR and talent operating model that allows for customizable local implementation, enabling them to capitalize on rapid business growth in emerging economies, tap into local skills, and optimize local talent strategies.

Creating a Global Strategy

As firms expand into countries around the world, more and more are deciding that they need to create an overarching, global human resources strategy. This is because HR leaders must adhere to local laws but still meet the needs of regional staff all while maintaining an across-the-board strategy.¹¹

The Strategic Attraction of Globalization

Current attitudes toward globalization have resulted in new thinking called guarded globalization. Governments of developing nations have become wary of opening more industries to multinational companies and are zealously protecting local interests. They choose the countries or regions with which they want to do business, pick the sectors in which they will allow capital investment, and select the local, often state-owned, companies they want to promote. That’s a different flavor of globalization: slow-moving, selective, and with a heavy dash of nationalism and regionalism.¹²

“Push” Factors   These are examples of “push” factors influencing global organizations:¹³

•   Saturation of domestic demand and need for new markets The market for a number of products tends to saturate or decline in advanced countries. This often happens when the market potential has been almost fully tapped. For example, the fall in the birth rate implies contraction of a market for several baby products. Businesses undertake international operations to expand sales, acquire resources from foreign countries, or diversify their activities to discover the lucrative opportunities in other countries.

•   Shortfalls in natural resources and talent supply When natural resources begin dwindling in developed countries, it seems reasonable for organizations to look to other countries for their raw materials. Creating a physical presence where the resources are located can help reduce the costs of acquisition. Moving to locations where talent can be found is a common solution for dwindling talent supplies in the home country.

•   Trade agreements Global expansion is driven by domestic competition from foreign competitors.

•   Technological revolution Revolution is a right word that can best describe the pace at which technology has changed in the recent past and is continuing to change. Significant developments are being witnessed in communication, transportation, and information processing, including the emergence of the Internet and the World Wide Web.

•   Globalized supply chain Moving production facilities closer to supplier locations can help reduce costs involved in moving raw materials before processing.

•   Domestic recession Domestic recession often provokes companies to explore foreign markets. One of the factors that prompted Hindustan Machine Ltd. (HMT) to take up exports seriously was the recession in the home market in the late 1960s.

•   Increased cost pressures and competition as driving force Competition may become a driving force behind internationalization. There might be intense competition in the home market but little in certain foreign countries. A protected market does not normally motivate companies to seek business outside the home market.

•   Government policies and regulations Government policies and regulations may also motivate internationalization. There are both positive and negative factors that could cause internationalization. Many governments offer a number of incentives and other positive support to domestic companies to export and to invest in foreign locations. Tax subsidies or even tax forgiveness can be a strong magnet for international business moves.

•   Improving the image of companies International business has certain spin-offs too. It may help the company improve its domestic business; international business helps to improve the image of the company. There may be the “white skin” advantage associated with exporting: when domestic consumers get to know that the company is selling a significant portion of the production abroad, they will be more inclined to buy from such a company.

•   Strategic vision The systematic and growing internationalization of many companies is essentially part of their business policy or strategic management. The stimulus for internationalization comes from the urge to grow, the need to become more competitive, the need to diversify, and the need to gain strategic advantages of internationalization.

“Pull” Factors   Here are some factors that make “foreign” markets attractive:¹⁴

•   Government policies When policies encourage foreign investment, domestic organizations may find it financially beneficial to locate in foreign markets. There may be tax advantages gained by expanding into foreign locations.

•   Strategic control Many multinational companies (MNCs) are locating their subsidiaries in low-wage and low-cost countries to take advantage of low-cost production. When it becomes easier to control things such as brand image by having a subsidiary in a foreign country, organizations can be seen taking that leap.

•   Taking advantage of growth opportunities MNCs are getting increasingly interested in several developing countries as the income and population are rapidly rising in these countries. Foreign markets can flourish in both developed and developing countries.

•   Declining trade and investment barriers Declining trade and investment barriers have vastly contributed to globalization. Business across the globe has grown considerably in a free trade regime. Goods, services, capital, and technology all benefit significantly moving across nations.

Regional trading blocs are adding to the pace of globalization. WTO, EU, NAFTA, MERCOSUR, and FTAA are major alliances among countries. Trading blocs seek to promote international business by removing trade and investment barriers. Integration among countries results in efficient allocation of resources throughout the trading area, promoting growth of some business and decline of others, development of new technologies and products, and elimination of old technologies.

Strategic Approaches to Globalization

A firm using a global strategy sacrifices responsiveness to local requirements within each of its markets in favor of emphasizing efficiency. This strategy is a complete opposite of a multidomestic strategy. Some minor modifications to products and services may be made in various markets, but a global strategy stresses the need to gain economies of scale by offering essentially the same products or services in each market.¹⁵

These are some approaches to strategic globalization:

•   Creating a new organization in the foreign country

•   Acquiring a subsidiary in the foreign country perhaps through merger or acquisition

•   Creating a new partnership

•   Outsourcing all or at least some of the production tasks to a supplier in a new work location

•   Adding capacity to existing domestic locations by offshoring

Global Integration (GI) vs. Local Responsiveness (LR)   Adjustments for consumer preference is one strategy for the globalization of product marketing. H. J. Heinz adapts its products to match local preferences. Because some Indians will not eat garlic and onion, for example, Heinz offers them a version of its signature ketchup that does not include these two ingredients. On the other hand, such alterations are not needed in products hidden from consumer view. Intel’s processing chips are an example. There is no need to modify the chips for various international cultures. The chips will work the same across all cultures. Such is a benefit of global integration.

Achieving Global Integration   Global integration means the decisions are made from a global perspective, and in some cases the meganational firm operates as if the world were one market.

Achieving Local Responsiveness   Local responsiveness is achieved by delegating most of the decision-making responsibility to local units and by appointing a local manager to the top management teams of subsidiaries.

Global integration vs. Local Responsiveness Examples   BASF is a German-based corporation that is one of the largest chemical production companies in the world. It has more than 330 plants producing a host of chemicals for nearly all industries in the world that use chemicals. Its chemicals are standard, regardless of the country where they will be used. That is global integration.

Beverage companies produce various brands and flavors in local markets worldwide. Coca-Cola offers Georgia Coffee in Japan, Café Zu in Thailand, Inca Cola in Peru, and the Burn energy drink in France. Adjustments for local taste are examples of local responsiveness.

Global-Local Models   There is a range of strategic choices available within the global-local concept.

Upstream and Downstream Strategies   A simple metaphor like “upstream and downstream” can help you identify the strategies that you can apply.

•   Upstream Decisions are made at headquarters and apply to strategies for focusing on the standardization of processes and integration of resources. That can be a strategy for workforce alignment, organizational development, and sharing knowledge and experience across internal organization boundaries.

•   Downstream Decisions are made at the local level and target adapting strategic goals to local realities. That can be a strategy for agreements with local work groups, adjustments to standard policies related to working conditions that reflect local requirements, and adjustments to operations based on local requirements.

Identity Alignment and Process Alignment   As strategies, identify alignment and process alignment offer some possible benefits to multinational organizations.

•   Identify alignment This is based on the diversity of people, products/services, and branding; differences among locations; and adjustment of brand identity and products/services based on local culture. Some downside risks are that localized offerings can dilute the brand or product/service image unless the corporate brand is well established, and local approaches can diffuse the core organizational identity. Think of McDonald’s hamburgers. In most markets around the world, beef burgers are acceptable. In India, however, religion prevents a large portion of the population from eating beef. In that local market, products with chicken and fish are much more widely accepted.

•   Process alignment This is how well common internal functions can work across all locations. Are the same technologies used in all locations for accounting, HR, finance, legal? Are the same performance measurements used in all locations? Is a unified HR system used in all locations? This can be a problem when one organization acquires another. There is great inertia within each organization for continuing to use their own systems. Blending them or replacing them can be and is often problematic.

The FI-LR Matrix: Strategic Options   For many years scholars have been studying the relationships between global integration and local responsiveness.¹⁶ The following table illustrates what they developed.

•   International strategy All products/services, processes, and strategy at all levels are developed in the home country even though the organization may export products or services to other countries.

•   Multidomestic strategy Headquarters has little influence over remote subsidiary units. They develop their own strategies and goals.

•   Global strategy Headquarters develops and disseminates strategies, products, and services. All offerings are the same worldwide. Local entities can influence global image or products very little. Customizable elements are kept to a minimum.

•   Transnational strategy Remote locations are chosen for their access to supplies, vendors, and local markets. Subsidiaries are permitted to make adaptations to global products for appeal to local markets. Knowledge and practices are shared among all units in the organization. HQ assumes responsibility for certain factors such as advertising and strategies.

Perimutter’s Headquarters Orientations   Howard Perlmutter identified a way of classifying alternative management orientations, which is commonly referred as Perlmutter’s EPRG model. He states that businesses and their staff tend to operate in one of four ways.¹⁷

•   Ethnocentric These people or companies believe that their home country is superior. When they look to new markets, they rely on what they know and seek similarities with their own country. Overseas subsidiaries or offices in international markets are seen as less able and less important than the head office. Typically, these companies make few adaptations to their products and undertake little research in the international markets.

•   Polycentric Polycentric organizations or managers see each country as unique and consider that businesses are best run locally. Polycentric management means that the head office places little control on the activities in each market, and there is little attempt to make use of any good ideas or best practices from other markets.

•   Regiocentric Regiocentric sees similarities and differences in a world region and designs strategies around this. Often there are major differences between countries in a region. For example, Norway and Spain are both in Europe but are very different in climate, culture, transport, retail distribution, and so on. Another example of a regiocentric management orientation occurs when a U.S. company focuses on countries included in the North American Free Trade Agreement (NAFTA), the United States, Canada, and Mexico.

•   Geocentric Geocentric companies, as truly global players, view the world as a potential market and seek to serve this effectively. Geocentric management recognizes the similarities and differences between the home country and the international markets. It combines ethnocentric and polycentric views; in other words, it displays the “think global, act local” ideology.

Sourcing and Shoring

As a product of globalization, work is moved to the most advantageous location. That can bring off-shoring and outsourcing into play.

Off-shoring   This is the practice of placing production or other elements of the organization in another country. Off-shoring is sometimes chosen because it offers lower costs, it offers production a closer location for raw materials, it offers better tax impact or other financial impact, or there are direct financial incentives, such as government-sponsored loans or cash payments. It can also take advantage of time zone differences, and work can be done on a project without interruption should the appropriate workforce be scattered around the globe.

Disadvantages of off-shoring can include a strong resistance from customers, whom even call the practice “unpatriotic.” Other problems that sometimes arise are language difficulties, cultural differences, high turnover rates, quality control issues, and educational degrees that do not offer reliable skills or talents.

On-shoring   When business processes, product manufacturing, or other functions are contracted out to another organization within the home country, it is called on-shoring. Having home-country employees can often avoid the problems associated with off-shoring.

Near-Shoring   The practice of contracting part of the organization’s business processes to a country that is close to the home country is known as near-shoring. A company in the United States selecting manufacturing subcontractors in Mexico for making its automobiles or washing machines is a good example. These arrangements are influenced to a great degree by trade agreements and social or economic stability.

Outsourcing   Almost always outsourcing is evidenced by contracts with vendors in the home country other countries that can provide products or services more cheaply than can be offered at headquarters. A prime example is the use of call centers to support customer service and order processing.

HR’s Role in Globalization

Anytime a strategic decision is contemplated that involves placing a workforce in a distant location, HR has some responsibility for contributing portions of due diligence in that process. What is the workforce talent pool? What are the local laws and customs that will influence operations? What will be the approach to product quality in the new location?

HR Global Abilities   Experts say that some of the core competencies international HR careers demand are the same as those for domestic HR professionals—the skills are just on a heightened scale. For example, global HR managers need effective communication skills, including the ability to listen well.¹⁸ It is common for international HR professionals to be multilingual. It is often a job requirement. Here are some questions you should include in performing due diligence for HR management in a new distant work location:

•   What is the wage structure?

•   What is the tax structure for payroll in addition to operational taxes?

•   What is the real estate situation?

•   How will telecommunications, Internet, and transportation be provided?

•   How much government regulation will be involved in managing a workforce?

•   How ethical are the government, political influences, or business environments?

•   What is the quality of life in the new location?

•   Is there a history of labor unrest or political upset?

•   Have there been any natural disasters? What is that likelihood?

•   How can IT security be addressed?

•   What are the possibilities for intellectual property rights and personal and property security?

•   Is the economy stable? How widely does the currency exchange value fluctuate?

•   What cultural differences are there?

•   Is there a qualified labor force available?

HR Global Tasks   On a global level, HR professionals must work toward helping the organization achieve its maximum value. Strategically, HR must help balance the priorities of headquarters and subsidiaries. How can human resources be distributed and balanced within budget restrictions and still maximize goal achievement? On a tactical level, HR professionals must facilitate management groups so that different disciplines and professions can achieve joint goals within differing cultural and sociopolitical environments.

HR Global Skills   HR professionals must be capable of doing a lot of things that require professional HR skills. Here are some of the skills HR professionals must possess in the global workplace:

•   Develop a strategic view of the organization How does value get created? What can HR contribute to the strategic plan development of the organization?

•   Develop a global organizational culture Training plays a key role, and HR needs to be the training provider. How can communication issues be overcome?

•   Secure and grow a safe and robust talent supply chain Work for a ready supply of leaders at each global location. Monitor the availability of qualified workforce candidates at all levels. Support efforts to develop a strong employer brand.

•   Use and adapt HR technology Assure HR technology can be applied at all locations globally. Work with IT professionals to assure technology supports both domestic and global operations.

•   Develop meaningful metrics Develop and implement consistent measurement devices and their application at all global locations. Be sure it is obvious that employee investment supports strategic goals.

•   Develop policies and practices to manage risks Assure health, safety, and security of employees. Protect physical assets and intellectual property of the organization. Assure all legal requirements are being met at all global locations, including safety requirements, nondiscrimination requirements, payroll requirements, benefit requirements, and ethical requirements.

Auditing Global HR Practices   It is important to know how your global HR practices are actually serving your organization and its people. To determine that, you will need to assemble a global compliance audit project team. Consider these types of representatives in your team selection process:

•   Headquarters HR representative

•   Foreign location HR representative

•   In-house legal counsel

•   Compliance officer

•   Outside legal counsel

•   Outside international HR expert

•   Corporate audit department representative

An audit of global HR practices would be advisable if you have received a lawsuit challenging your HR practices, you are going through a merger or acquisition, you are undergoing corporate restructuring, you want to be sure you are complying with antibribery and insider trading laws, or you simply want to be sure your practices are being followed.

An audit should begin by identifying the countries that are involved. Next, define what focus you want the audit to have. Will it look at legal compliance, union contracts, corporate policies, or simply best practices? It is possible to take in all of these focal areas, but that becomes more complex.

Will your audit look only at local host country employees, or will you include expatriates, consultants, independent contractors, international transfers, temporary workers, or some other group? Will the audit engage in examining international payroll tax laws or data security issues?

Build a master checklist of areas to be examined. Then, expand that into a matrix that includes individual team member assignments, expected completion date for each component, and the ultimate audit report completion. Be sure you include time for a review process by identifying who will be involved in the review and approval sequence and how long each contributor will have to submit approval or additional report requirements. Finally, determine who will receive the final report when it is issued. What role will the report have in legal filings with organizations such as the Securities and Exchange Commission (SEC) or other similar oversight group?

Becoming a Multicultural Organization

Organizations cannot become multicultural by proclamation. It takes concerted effort.

Developing a Global Mind-Set

Personal development precedes organizational development. First leaders must develop their own global mind-set. Then they will be able to help guide their organization into the same way of thinking. Here are five steps toward that goal:¹⁹

•   Recognize your own cultural values and biases Developing a strong self-awareness has shown to foster a nonjudgmental perspective on differences, which is critical to developing a global mind-set.

•   Get to know your personality traits, especially curiosity There are five specific traits that affect your ability to interact effectively with different cultures, listed here:

•   Openness

•   Flexibility

•   Social dexterity

•   Emotional awareness

•   Curiosity

Ask yourself how open you are to different ways of managing a team. Are you flexible enough to attempt a different feedback style? How easy is it for you to strike up a conversation with people from foreign countries?

•   Learn about the workplace and business expectations of relevant countries and markets Learn about the typical workplace habits, expectations, and best practices in other countries and cultures.

•   Build strong intercultural relationships Just like when learning to speak a second language, it’s helpful to immerse yourself with people from other parts of the world to develop a global mind-set. These relationships facilitate valuable learning about what works and what doesn’t. The ability to form relationships across cultures is not a given, but the more positive intercultural relationships you develop, the more comfort you’ll have with diverse work styles and the less you’ll resort to stereotyping.

•   Develop strategies to adjust and flex your style What has made you successful in a domestic or local context likely won’t help you reach the same level of success on a global scale, which is why learning to adapt your style is often the hardest part of mastering a global mind-set. This step involves expanding your repertoire of business behaviors by learning to behave in ways that may be unusual to you but highly effective when interacting with others.

Defining a Global Mind-Set   We would define global mind-set as one that combines an openness to and awareness of diversity across cultures and markets with a propensity and ability to see common patterns across countries and markets.

Benefits of a Global Mind-Set   The main benefit of a global mind-set is the organization’s ability to combine speed with accurate response. The organizational global mind-set can bring about benefits that can manifest themselves in one or more competitive advantages.

Acquiring a Global Mind-Set   Acquiring a global mind-set requires you to recognize situations in which demands from both global and local elements are compelling; you need to be open and aware of diversity across cultures and markets with a willingness and ability to synthesize across this diversity.

Types of Cultures

Some people consider there are seven major cultures in the world today.

•   Western culture This includes Anglo America, Latin American culture, and the English-speaking world.

•   African American culture Also known as Black-American culture, this refers to the cultural contributions of African Americans to the culture of the United States, either as part of or as distinct from mainstream American culture.

•   Indosphere This is a term coined by the linguist James Matisoff for areas of Indian linguistic and cultural influence in Southeast Asia.

•   Sinosphere The Sinosphere, or East Asian cultural sphere, refers to a grouping of countries and regions in East Asia that were historically influenced by the Chinese culture.

•   Islamic culture This is a term primarily used in secular academia to describe the cultural practices common to historically Islamic people.

•   Arab culture The Arab world stretches across 22 countries and consists of more than 200 million people. Arab is a term used to describe the people whose native tongue is Arabic. Arab is a cultural term, not a racial term, and Arabic people come from various ethnic and religious backgrounds.

•   Tibetan culture Buddhism has exerted a particularly strong influence on Tibetan culture since its introduction in the seventh century. Buddhist missionaries who came mainly from India, Nepal, and China introduced arts and customs from India and China.

Definition of Culture   Culture is the beliefs, customs, arts, etc., of a particular society, group, place, or time. It’s a particular society that has its own beliefs, ways of life, art, and so on, and it’s a way of thinking, behaving, or working that exists in a place or organization (such as a business).

How Types of Culture Affect an Organization   Here are five types of corporate culture.²⁰ Can you find one that describes your organization?

•   Team-first corporate culture Team-oriented companies hire for culture fit first, skills and experience second. A company with a team-first corporate culture makes employee happiness its top priority. Frequent team outings, opportunities to provide meaningful feedback, and flexibility to accommodate employee family lives are common markers of a team-first culture. Netflix is a great example; its recent decision to offer unlimited family leave gives employees the autonomy to decide what’s right for them.

•   Elite corporate culture Companies with elite cultures are often out to change the world by untested means. An elite corporate culture hires only the best because it’s always pushing the envelope and needs employees to not merely keep up but lead the way (think Google). Innovative and sometimes daring, companies with an elite culture hire confident, capable, competitive candidates. The result? Fast growth and making big splashes in the market.

•   Horizontal corporate culture Titles don’t mean much in horizontal cultures. Horizontal corporate culture is common among startups because it makes for a collaborative, everyone-pitch-in mind-set. These typically younger companies have a product or service they’re striving to provide yet are more flexible and able to change based on market research or customer feedback. Though a smaller team size might limit their customer service capabilities, they do whatever they can to keep the customer happy—their success depends on it.

•   Conventional corporate culture Traditional companies have clearly defined hierarchies and are still grappling with the learning curve for communicating through new mediums. Companies where a tie and/or slacks are expected are, most likely, of the conventional sort. In fact, any dress code at all is indicative of a more traditional culture, as are a numbers-focused approach and risk-averse decision-making. Your local bank or car dealership likely embodies these traits. The customer, while crucial, is not necessarily always right—the bottom line takes precedence.

•   Progressive corporate culture Uncertainty is the definitive trait of a transitional culture because employees often don’t know what to expect next. Mergers, acquisitions, or sudden changes in the market can all contribute to a progressive culture. Uncertainty is the definitive trait of a progressive culture because employees often don’t know what to expect next (see almost every newspaper or magazine). “Customers” are often separate from the company’s audience because these companies usually have investors or advertisers to answer to.

Cultural Layers²¹

There are differing interpretations of culture. A metaphor describes it well: culture looks at it like an onion, consisting of layers that can be peeled off.

Schein’s Model²²   In 1980 the American management professor Edgar Schein developed an organizational culture model to make culture more visible within an organization.

•   Artefacts and symbols Artefacts mark the surface of the organization. They are the visible elements in the organization such as logos, architecture, structure, processes, and corporate clothing. These are not only visible to employees but also visible and recognizable for external parties.

•   Espoused values This concerns standards, values, and rules of conduct. How does the organization express strategies, objectives, and philosophies, and how are these made public? Problems could arise when the ideas of managers are not in line with the basic assumptions of the organization.

•   Basic underlying assumptions The basic underlying assumptions are deeply embedded in the organizational culture and are experienced as self-evident and unconscious behavior. Assumptions are hard to recognize from within.

Cultural Dimensions

Social scientist Geert Hoftstede suggests that there are six unique cultural dimensions that can be seen anywhere. These dimensions rank cultures on a scale of 1 to 100 for each dimension.²³

•   Power distance This dimension displays how a culture handles inequality, particularly in relation to money and power. In some cultures, inequality and hierarchal statuses are a way of life.

•   Individualism versus collectivism This dimension focuses on the unification of culture. In individualistic cultures, the population is less tightly knit, and there is an “every man for himself” mentality.

•   Masculinity versus femininity In this dimension, a culture is measured on a scale of masculinity versus femininity, which represents a culture’s preferences for achievement, competition, and materialism versus preferences for teamwork, harmony, and empathy.

•   Uncertainty avoidance Have you ever been in a situation where a new idea or element is introduced? How did you react to that? For this dimension, cultures are gauged on their response to ambiguity and new ideas and situations. Change in the future can be a terrifying notion for some, while others will see it as an exciting possibility.

•   Long-term orientation versus short-term orientation When dealing with the present and future, a culture either will look to innovate when facing new challenges or will look to the past for answers.

•   Indulgence versus restraint In the final dimension, all cultures acknowledge that the natural human response in life is the urgent need to gratify desires. However, each culture will answer this need by either enjoying (indulgence) or controlling (restraint) those impulses.

Hall’s Theory of High- and Low-Context Cultures   Hall defines intercultural communication as a form of communication that shares information across different cultures and social groups. One framework for approaching intercultural communication is with high-context and low-context cultures, which refer to the value cultures place on indirect and direct communication.²⁴

Hofstedes’s Dimensions of Culture²⁵   Hofstede’s cultural dimensions theory is a framework for cross-cultural communication, developed by Geert Hofstede. It describes the effects of a society’s culture on the values of its members and how these values relate to behavior, using a structure derived from factor analysis.

Hofstede developed his original model as a result of using factor analysis to examine the results of a worldwide survey of employee values by IBM between 1967 and 1973.

Trompenaars’s and Hampde-Turner’s Dilemmas   Anglo-Dutch gurus Fons Trompenaars and Charles Hampden-Turner have become the go-to guys on multinational mergers. Their recipe: making opposites attract.²⁶

If you followed dilemma theory to its logical conclusion, you would attribute every pernicious culture clash, and most other management problems, to the human habit (especially common in Western cultures) of casting life in terms of all-or-nothing choices: winning versus losing strategies, right versus wrong answers, good versus bad values, and so on. As a manager, when you unconsciously approach a business issue (or any issue) as a contest between good and evil, you lose sight of the potential benefits the “evil” side has to offer. It’s far better to interpret, say, the battle between English and French management styles or American dominance and European resistance as a dilemma that can be reconciled when both sides see they have something to learn from the other.

Cross-Cultural Challenges for HR²⁷

With the rapid increase in the globalization of business, workforces are becoming increasingly diverse and multicultural. Managing global workforces has increased pressure on human resource managers to recognize and adapt to cultural differences, which when ignored can result in cross-cultural misunderstandings. With the growing significance of developing economies in the global business environment, human resource management is facing increased difficulty in managing cross-border cultural relationships.

Challenges of Culture   As workplaces become more complex and the mingling of cultures becomes more challenging, HR professionals must keep an eye open for these specific challenges:²⁸

•   Colleagues from some cultures may be less likely to let their voices be heard.

•   Integration across multicultural teams can be difficult in the face of prejudice or negative cultural stereotypes.

•   Professional communication can be misinterpreted or difficult to understand across languages and cultures.

•   Navigating visa requirements, employment laws, and the cost of accommodating workplace requirements can be difficult.

•   There may be different understandings of professional etiquette.

•   There may be conflicting working styles across teams.

Dilemma Reconciliation   The essence of the reconciliation of a dilemma lies in the recognition that a dilemma is a nonlinear problem and therefore needs a nonlinear problem-solving approach. It replaces “either-or” thinking with “and-and and through-and-through” thinking.²⁹

Creating Cultural Synergy   Cultural synergy is a term coined from work by Nancy Adler³⁰ of McGill University that describes an attempt to bring two or more cultures together to form an organization or environment that is based on combined strengths, concepts, and skills. High-synergy organizations have employees who cooperate for mutual advantage and usually tackle their problems by following a simple structure that focuses on identifying the problem, culturally interpreting it, and, finally, increasing the cultural activity. Contrary to this, there are low-synergy organizations that work with employees who are ruggedly individualistic and insist on solving any problem alone.

Managing Global Assignments

Only 51 percent of companies track the actual total cost of international assignments, yet 69 percent say there is pressure to reduce mobility program costs, according to a recent survey report on global mobility trends and practices. In addition, 76 percent of companies do not compare the actual versus estimated cost at the end of an assignment, and a whopping 94 percent do not measure the program’s return on investment.³¹

Strategic Role of Global Assignments

Global assignments can contribute to the organization’s strategic plan. They offer cross-training for senior managers and executives. This can enhance cultural exposure and even cultural emersion. Global assignments also provide an opportunity to assess global presence and expansion plans.

Types of Assignments

Specialists in international human resource management identify different types of global assignment. Technical assignments occur when employees with technical skills are sent from one country to another to fill a particular skill shortage. Developmental assignments, in contrast, are typically used within a management development program and are used to equip managers with new skills and competencies. Strategic assignments arise when key executives are sent from one country to another to launch a product, develop a market, or initiate another key change in business strategy. Finally, functional assignments resemble technical assignments but differ in one important respect.³²

Managing Allegiances

Sometimes people are torn between their parent company and their local company. According to Kate Hutchins and Helen De Cieri, those allegiances can be understood by using the following chart:³³

Global Assignment Guidelines

The companies that manage their expats effectively come in many sizes and from a wide range of industries. Yet they all follow three general practices.³⁴

•   When making international assignments, they focus on knowledge creation and global leadership development. Many companies send people abroad to reward them, to get them out of the way, or to fill an immediate business need. At companies that manage the international assignment process well, however, people are given foreign posts for two related reasons: to generate and transfer knowledge and to develop their global leadership skills (or to do both).

•   They assign overseas posts to people whose technical skills are matched or exceeded by their cross-cultural abilities. Companies that manage expats wisely do not assume that people who have succeeded at home will repeat that success abroad. They assign international posts to individuals who not only have the necessary technical skills but also have indicated that they would be likely to live comfortably in different cultures.

•   They end expatriate assignments with a deliberate repatriation process. Most executives who oversee expat employees view their return home as a nonissue. The truth is, repatriation is a time of major upheaval, professionally and personally, for two-thirds of expats. Companies that recognize this fact help their returning people by providing them with career guidance and enabling them to put their international experience to work.

What Managers Should Know   Global human resource managers can use the high failure rates of international job assignments to support investing in up-front and ongoing programs that will make international assignments successful. Selecting the right person, preparing the expat and the family, measuring the employee’s performance from afar, and repatriating the individual at the end of an assignment all require a well-planned, well-managed program. Knowing what to expect from start to finish as well as having some tools to work with can help minimize the risk.³⁵

The Global Assignment Process

There are five stages involved in the global assignment process.

•   Stage 1: Assessment and selection Determining who will be appointed to the international job opening depends on who meets the job requirements in the best way. There may be a formal assessment, or there may be only a single selecting manager who makes the decision.

•   Stage 2: Management and assignee decision The selecting manager determines how long the assignee will have to accept or reject the appointment.

•   Stage 3: Predeparture preparation Before anyone leaves the home country, there are important considerations to be processed and questions answered. What are the immigrant requirements in the destination country? What visa requirements must be processed? What provisions will be made for the employee’s family members (school or spouse work appointment)? What about selling a home before departure? Will a home be purchased in the destination country?

•   Stage 4: On assignment When the employee arrives at the new job location, there is a “settling in” process. Are the living arrangements going to be satisfactory? Where is the local grocery store? What about dentists, optometrists, and physicians? What about automobiles?

•   Stage 5: Completing the assignment When the expat comes home, there should be a debriefing process that could last several days. Inquiries should be made about the employee’s opinion of the job environment, the work itself, the support received from the employer, and what things could be done differently.

Navigating the Global Legal Environment

There are always labor-management laws to be considered regardless of where one works in the world. They vary greatly in their control over the workplace, but both employee and the employer should understand them for the destination country so no one violates one of them even by accident.

World Legal Systems

Around the globe there are several different types of legal systems, and they don’t always agree with one another.

Types of Legal Systems

Civil law, common law, and religious law are the three primary kinds of legal systems in the world today.

Civil Law   Civil law systems have drawn their inspiration largely from the Roman law heritage that, by giving precedence to written law, have resolutely opted for a systematic codification of their general law. It is the most widespread system of law in the world.

Common Law   Common law systems are legal systems founded not on laws made by legislatures but on judge-made laws, which in turn are based on custom, culture, habit, and previous judicial decisions throughout the world.

Religious Law   The Muslim law system is an autonomous legal system that is of a religious nature and predominantly based on the Koran.

Key Concepts of Law

While laws bring us some level of consistency in treatment for the same or similar events, there are some key elements that you should recognize in all of them.

Rule of Law   The rule of law is the principle that law should govern a nation, as opposed to being governed by decisions of individual government officials.

Due Process   Due process acts as a safeguard from arbitrary denial of life, liberty, or property by the government outside the sanction of law.

Jurisdiction   Legal jurisdiction applies to government agencies as well as courts. State courts have jurisdiction only in their state. Federal courts have jurisdiction over federal matters. Federal case law is determined by appellate courts, and those decisions apply only within the jurisdiction of the appellate court. The U.S. Supreme Court has jurisdiction over all matters of the U.S. Constitution.

Levels of Law

Each governmental strata can offer its own laws.

Within a Nation   At the national level, there can be laws created that apply to the entire country and others that apply only to a subset of the nation.

National Laws   Federal laws apply to all governmental subsets such as states in the United States. Nondiscrimination rules apply to all states equally. Of course, there are qualifying thresholds such as the number of employees that can cause certain employers to be exempt from the provisions of the law, but all those who qualify by employee head count will be expected to comply with the national law.

Subnational   Called a nation-state, canton, or province, each smaller entity within the federal umbrella can create its own laws. These laws apply only within its own jurisdiction.

Between and Among Nations   When nations agree that the same laws should apply to each of them, one of the following types of rule would come into existence.

Extraterritorial   Extraterritorial jurisdiction (ETJ) is the legal ability of a government to exercise authority beyond its normal boundaries. Any authority can claim ETJ over any external territory they want. This is the stuff that wars are fought over. The European Union and the World Trade Organization are examples.³⁶

Regional/Supranational   A supranational organization is an international group or union in which the power and influence of member states transcend national boundaries or interests to share in decision-making and vote on issues concerning the collective body.

International   This is a body of rules established by custom or treaty and recognized by nations as binding in their relations with one another.

For example, EU law is divided into primary and secondary legislation. The treaties (primary legislation) are the basis or ground rules for all EU action. Secondary legislation—which includes regulations, directives, and decisions—is derived from the principles and objectives set out in the treaties.

Background   The European Union was set up with the aim of ending the frequent and bloody wars between neighbors, which culminated in World War II. As of 1950, the European coal and steel community began to unite European countries economically and politically to secure lasting peace. The six founding countries are Belgium, France, Germany, Italy, Luxembourg, and the Netherlands. The 1950s were dominated by a Cold War between East and West. Protests in Hungary against the Communist regime were put down by Soviet tanks in 1956. In 1957, the Treaty of Rome created the European Economic Community (EEC), or Common Market.³⁷

With the collapse of communism across Central and Eastern Europe, Europeans become closer neighbors. In 1993, the single market was completed with the “four freedoms” of movement of goods, services, people, and money. The 1990s was also the decade of two treaties: the Maastricht Treaty on European Union in 1993 and the Treaty of Amsterdam in 1999. People were concerned about how to protect the environment and also how Europeans could act together in security and defense matters. In 1995 the EU gained three more new members: Austria, Finland, and Sweden. A small village in Luxembourg gives its name to the Schengen agreements that gradually allowed people to travel without having their passports checked at the borders. Millions of young people study in other countries with EU support. Communication was made easier as more and more people started using mobile phones and the Internet.

Legal Institutions   Here are the current institutions serving the European Union:

•   The European Parliament (EP) and its 751 members represent the citizens of the member states and are directly elected every five years. The Parliament makes decisions on most EU laws, together with the Council of the EU, via the ordinary legislative procedure. Parliamentary positions are prepared by 22 committees, which work on different policies, and adopted during plenary sessions held in Strasbourg or Brussels. Seven political groups have been established at the European Parliament for the current term of office.³⁸

•   The European Council comprises the 28 heads of state or government of the member states and sets the EU’s overall political agenda. The president of the European Council, whose primary role is to coordinate and drive forward the work of the European Council, is elected by the members of the European Council and can serve for a maximum of 5 years.

•   The European Commission is the executive branch of the union. It represents the interests of the European Union and is composed of 28 commissioners (one from each member state) and chaired by a president. The latter is nominated by the European Council and appointed by the European Parliament for a term of five years. The commission has 35,000 staff members working in 33 different departments known as directorate-generals (which represent specific policies) and 11 other services. The commission is the only EU institution with the right to propose legislation as part of the ordinary legislative procedure. It also ensures that EU legislation and the EU budget are properly implemented, and it represents the European Commission in international negotiations.

•   The Court of Justice of the European Union reviews the legality of the acts of the institutions of the European Union, ensures that the member states comply with obligations under the treaties, and interprets EU law at the request of the national courts and tribunals.

•   European Central Bank is the central bank of the 19 European Union countries that have adopted the euro. Its main task is to maintain price stability in the euro area and so preserve the purchasing power of the single currency.

•   The European Court of Auditors (ECA) mission is to contribute to improving EU financial management, promote accountability and transparency, and act as the independent guardian of the financial interests of the citizens of the union. The ECA’s role as the EU’s independent external auditor is to check that EU funds are correctly accounted for, are raised and spent in accordance with the relevant rules and regulations, and have achieved value for money.

Legal Instruments   All of those institutions of the European Union rely on various legal instruments as the foundation of their work.

Treaties   The European Union is based on the rule of law. This means every action taken by the European Commission is founded on treaties that have been approved voluntarily and democratically by all EU member countries. For example, if a policy area is not cited in a treaty, the commission cannot propose a law in that area. A treaty is a binding agreement between EU member countries. It sets out EU objectives, rules for EU institutions, how decisions are made, and the relationship between the EU and its member countries. Treaties are amended to make the European Union more efficient and transparent, to prepare for new member countries, and to introduce new areas of cooperation such as the single currency.

Regulations   A regulation is a legal act of the European Union that becomes immediately enforceable as law in all member states simultaneously. Regulations can be distinguished from directives that, at least in principle, need to be transposed into national law.

Directives   A directive is a legal act of the European Union, which requires member states to achieve a particular result without dictating the means of achieving that result. It can be distinguished from regulations that are self-executing and do not require any implementing measures.

Judicial Decisions   EU case law is made up of judgments from the European Union’s Court of Justice, which interpret EU legislation.

Recommendations and Opinions   Recommendations are without legal force but are negotiated and voted on according to the appropriate procedure. Recommendations differ from regulations, directives, and decisions, in that they are not binding for member states. Though without legal force, they do have a political weight. An opinion is an instrument that allows the institutions to make a statement in a nonbinding fashion, in other words, without imposing any legal obligation on those to whom it is addressed. An opinion is not binding.

Functional Area 12—Diversity and Inclusion

Here is SHRM’s BoCK definition: “Diversity and Inclusion encompasses activities that create opportunities for the organization to leverage the unique backgrounds and characteristics of all employees to contribute to its success.”³⁹

Diversity and inclusion are linked together both by definition and by practice. Having a diverse workforce will not persist if that diverse group doesn’t feel included as individuals.

Key Concepts

•   Approaches to developing an inclusive workplace (e.g., best practices for diversity training)

•   Approaches to managing a multigenerational/aging workforce

•   Demographic barriers to success (e.g., glass ceiling)

•   Issues related to acceptance of diversity, including international differences (i.e., its acceptance in foreign nations or by employees from foreign nations)

•   Workplace accommodations (e.g., disability, religious, transgender, veteran, active-duty military)

The following are proficiency indicators that SHRM has identified as key concepts:

Overview: Key Terms

The two key terms are diversity and inclusion. It is helpful to define them to understand how to incorporate them into an organizational culture and management.

Diversity

Diversity is a workforce characteristic. It indicates a mixture of social, cultural, and personal attributes that affect individual attitudes and behaviors. Diversity characteristics impact how others react to individuals “because they are different.”

Diversity of Thought   Experiences are tightly linked to cultural background. Food, housing, recreation, and life activities are tied to the culture in which one grows up and matures. Thought processes and references are determined by the experiences people have had and the interactions with others that were part of those experiences. If we were rewarded early on for our “fresh ideas,” it is easier for us to generate ideas later in life. If we were encouraged to contain our behavior within strict boundaries of social decorum and not deviate much from those expectations, then it will be more difficult for us to be inventive or creative later in life.

Organizational leaders need to understand each individual’s background to understand how to encourage them to fully participate in the organizational workings.

Inclusion

Inclusion is the characteristic of a workplace referring to behaviors within the organization that determine how individuals are valued, engaged, and respected. Inclusion is also linked to “fairness” and equal access to resources and opportunities. You can see the link between inclusion and equal employment opportunity (EEO). While EEO is a legal obligation, inclusion goes further by valuing the importance of being part of the group in every way.

Diversity Without Inclusion   Through a strong outreach program, it is possible that an organization can recruit a diverse group of employees. And it is possible that some of those employees may not be made to feel like a part of the company because they are not invited to contribute their ideas or suggestions. They may not be invited to participate in out-of-hours activities or assigned the really good jobs. Some folks may not be comfortable with co-workers because they look different or come from different cultures.

Any exclusion, whether subtle or overt, can lead to a feeling of being an outsider. So, diversity does not innately result in inclusion. Inclusion comes from conscious efforts. Inclusion depends on more than a lack of bias. It depends on commitment to assuring each person is welcomed as a participant in every facet of work life.

Diversity and Globalization

Not every culture in the world has the same view of diversity and inclusion as found in the United States. Some are theocracies, monocracies, or other monogenic countries. Whatever the circumstance, lack of variety in cultural experience makes it more difficult to accept, let alone encourage, recruiting a diverse group of job candidates. When it comes to selecting new hires, this cultural bias often plays a part in the hiring decision. That bias usually isn’t intentional. Yet it exists, and its results are seen in a high percentage of people in the organization that look alike. It may be based on religion or race or even gender. The differences in cultural experience are measured along a broad spectrum. From one country to another, the pointer along that spectrum line can shift dramatically.

Global Legal Distinctions   Legal requirements for equal employment opportunity and diversity vary widely from one country to another. In some cases, imposition of quotas for some groups exists. Here are a few random examples. Equal employment opportunity requires some serious study of local and federal requirements in each political jurisdiction where you will have employees located.

•   Australia Australia requires employers with 100 or more workers to report their gender equity plans and submit reports on the participation of women in their workforce and their board of directors.

•   Canada Seven provinces and the federal government have pay equity legislation that requires employers to provide equal pay for work of equal or comparable value.

•   Germany There are absolute quotas for the employment of severely disabled people based on the size of the employer workforce. Employers with 60 or more employees must have 5 percent of their workforce composed of severely disabled employees. Smaller quotas apply to smaller organizations.

•   Great Britain The practice of a fixed retirement requirement at age 65 has been rescinded by law.

•   South Africa There is a legal prescription for annual turnover thresholds. Exceed those limits, and affirmative action requirements will apply for recruiting and hiring. Protected groups include black people, women, and people with disabilities.

The Benefits and Costs of Diversity

A few years ago, the European Commission, Directorate-General for Employment, Industrial Relations, and Social Affairs conducted a study using input from 200 companies in four European countries.⁴⁰ It identified some specific benefits and costs associated with employment diversity policies and programs.

The benefits of active diversity policies were determined to include the following:

•   Strengthened cultural values within the organization

•   Enhanced corporate reputation

•   Helped attract and retain highly talented people

•   Improved motivation and efficiency of existing staff

•   Improved innovation and creativity among employees

•   Enhanced service levels and customer satisfaction

•   Helped overcome labor shortages

•   Reduced labor turnover

•   Resulted in lower absenteeism rates

The costs of diversity programs were determined to include the following:

•   Costs of legal compliance Recordkeeping systems, staff training, policy communication.

•   Cash costs of diversity Staff education and training, facilities and diversity support staff, monitoring and reporting processes.

•   Opportunity costs of diversity Loss of benefits because a scarce resource cannot be used in other productive activities (diversion of top management time, productivity shortfalls).

•   Business risks of diversity Plans taking longer than planned to implement or fail completely. This is known as the execution risk. Sustainable diversity policies are an outcome of a successful change in corporate culture.

The Four Layers of Diversity

According to Color Magazine,⁴¹ the four layers of diversity can be compiled into the four layers model, which has radiating rings from a center where personality constitutes the core.

•   Personality This includes an individual’s likes and dislikes, values, and beliefs. Personality is shaped early in life and is both influenced by, and influences, the other three layers throughout one’s lifetime and career choices.

•   Internal dimensions These include aspects of diversity over which we have no control (though “physical ability” can change over time because of choices we make to be active or in cases of illness or accidents). This dimension is the layer in which many divisions between and among people exist and which forms the core of many diversity efforts. These dimensions include the first things we see in other people, such as race or gender, and on which we make many assumptions and base judgments.

•   External dimensions These include aspects of our lives that we have some control over, which might change over time, and which usually form the basis for decisions on careers and work styles. This layer often determines, in part, with whom we develop friendships and what we do for work. This layer also tells us much about whom we like to be with and decisions we make in hiring, promotions, and so on, at work.

•   Organizational dimensions This layer concerns the aspects of culture found in a work setting. While much attention of diversity efforts is focused on the internal dimensions, issues of preferential treatment and opportunities for development or promotion are impacted by the aspects of this layer.

The Color Magazine article tells us, “The usefulness of this model is that it includes the dimensions that shape and impact both the individual and the organization itself. While the ‘Internal Dimensions’ receive primary attention in successful diversity initiatives, the elements of the ‘External’ and ‘Organizational’ dimensions often determine the way people are treated, who ‘fits’ or not in a department, who gets the opportunity for development or promotions, and who gets recognized.”

Implications of an Inclusive Definition   In its simplest terms, a narrow definition will narrow impact to the organization. A broad definition will increase that organizational impact. There are many things that can be measured to determine whether the definition being used is broad enough for the organization. Some of them are job satisfaction, relations with supervisors and group members, intention to stay with the organization, commitment to the organization, job performance, organizational citizenship behaviors, well-being, creativity, and career opportunities for diverse individuals. For many of these metrics, benchmarks will need to be established so direct application to any given organization can be accurately developed.

Visible and Invisible Diversity Traits

SHRM breaks down diversity into two categories, namely, visible diversity traits and invisible diversity traits. Basically, everyone matters.

Visible diversity traits are the more typical and visible areas associated with diversity such as race, gender, physical abilities, age, body size/type, skin color, behaviors, and physical abilities.

Invisible diversity traits include areas less visible such as sexual orientation, religion, socioeconomic status, education, sexual orientation, military experience, culture, habits, education, native born/non-native, values/believes, and parental status, among other things.

Developing a Diversity and Inclusion Strategy

There is a key question to be answered at the beginning of any organizational policy discussion: What do you want to accomplish and how will you measure it? Strategy involves the plan for implementation. You must look at problems to be anticipated and identify alternatives for dealing with them. You must identify the value to be received from creating an executive steering committee that will monitor the program implementation. Once the alternatives have been assessed, strategy can be cited from the remaining options.

Why a Diversity and Inclusion Strategy?

Three reasons mark the need for a strategy to be used in creating and implementing a diversity and inclusion (D&I) program for any organization.

•   Reason 1: Priority Without a strategy, the D&I efforts will always take a backseat to other more immediately urgent matters.

•   Reason 2: Complexity D&I programs are not simple. The complexity requires organization-wide strategies if successful implementation is to be achieved.

•   Reason 3: Resistance D&I programs require organizational change, regardless of the organization. There will be more change in some organizations than in others. Change is hard. Therefore, making the changes needed for successful D&I programs will take some significant effort.

The D&I Strategic Process

Once the decision has been made to develop and implement a diversity and inclusion program in your organization, you will need to identify the strategic steps you must take to achieve success.

Executive Commitment   Changing organizational behaviors and individual attitudes are results that don’t come easily. If they are to be achieved at all, the highest level of executive will be needed to lay out the program, its reasons, and its objectives. Without the constant challenge and reinforcement from the senior leader, there can be no hope for reaching the established goals. “What the boss says is what gets done.” If the boss isn’t fully behind the program, it will just waste organizational resources and not accomplish what is hoped.

Making the Business Case for D&I   The Conference Board published some thoughts in 2008 that still hold true today.⁴²

•   Business acumen and external market knowledge This becomes the foundation of understanding how a D&I program can support business needs. It includes the following characteristics:

•   Executives understand and are current on global and local trends/changes and how they inform and influence D&I.

•   Executives gather and use competitive intelligence.

•   Executives understand diverse customer/client needs.

•   Executives understand and are current with global sociopolitical environments.

•   Executives understand context and lessons learned.

•   Holistic business knowledge This requires understanding of the impact of the financial, economic, and market drivers on the bottom-line results. Additional requirements include the following:

•   Executives understand core business strategies.

•   Executives possess solid financial acumen.

•   Executives use information from multiple disciplines and sources to offer integrated ideas and solutions on issues important to the organization.

•   Diversity and Inclusion return on investment (ROI) This is where the financial impact of the D&I program becomes evident. Requirements include the following:

•   Determine and communicate how D&I contributes to core business strategy and results.

•   Create insights on how D&I contributes both to people and HR strategies as well as business results.

•   Design and develop D&I metrics that exhibit the ROI impact.

Preliminary Assessment   A quick way to determine how you are doing with your D&I program is to conduct an employee survey. It may take some professional help to identify the specific information you want to gather and the form of the inquiries you craft for each. But, surveying the workforce will help you understand the “state of the enterprise” about diversity and inclusion.

Infrastructure Creation   If you are just beginning to address the issues of diversity and inclusion, it is important to recognize that there is going to be a need for some changes in the way you do things within the organization. Sometimes those changes can be uncomfortable for people, and that demands you be ready to give them the support they need to get past their discomfort to participate in the successful implementation of your program.

Diversity Councils   Diversity councils are groups of employees who discuss issues of diversity and inclusion. The duties of these councils can vary widely from being an advisory group to having some responsibility for implementing or overseeing program elements such as complaint handling or community involvement.

Employee Resource Groups   Employee resource groups can be called many things. Early on in diversity program efforts, they were called employee affinity groups. Whatever the name, these are groups of similar employees who can express opinions and requests for consideration that apply to their group. These are some examples: Black Employees Group, Hispanic Employees, Asian Employees, Women Engineers, Employees Using English as a Second Language. There are countless possibilities.

Strategic Alliances   D&I programs can make use of linkages to community groups that support efforts to expand or reinforce outreach efforts for particular groups of people. It may be that you need more women in professional jobs. Identifying and then building relationships with these community groups can take some time but will contribute authenticity to your D&I program. They can also be sources for your open job placement opportunities when those occur. Community organizations range from disabled groups to veteran groups and various racial and gender support groups. Some are social, but many are also focused on increasing employment opportunities for their qualified membership.

System Changes   D&I programs by their very nature require changes to the way employers operate. Systemic changes will there be needed by definition. That is why there is often discomfort associated with D&I programs. They take us out of our usual and customary routines and demand that we expand our experiences and embrace things that are different.

Recruitment, Sourcing, and Hiring   Identifying new sources for qualified job candidates can take some time. There are groups supporting every type of job candidate you can imagine. They are race-based, gender-based, veteran, and disability-support groups. Larger organizations can usually afford to have people on staff who are dedicated to identifying and developing relationship opportunities within the employer’s recruiting geography. Smaller organizations can outsource some of this effort to organizations like Local Job Network.com (www.localjobnetwork.com). For an annual fee, the vendor will find and provide the employer with access to D&I community groups that are relevant to the employer. They will also provide reporting on hiring from each of those sources, so through monitoring, the employer can identify the best sources of diverse candidates for its jobs.

Onboarding and Retention   Most would argue that hiring a diverse group of employees won’t do much good if they can’t be made to feel welcome in the organization. So, how they are treated when they first come to work (onboarding) and what is done to make sure they can be retained for longer periods of time will contribute to a larger financial payback and lower turnover rates for the employer. It will also contribute the benefits associated with a vibrant D&I program.

Promotion and Career Development   For those who are interested in and qualified for promotion, nothing will break their spirit faster than seeing others promoted while they “wait in the wings.” This used to be blatant discrimination based on religion, race, sex, or other category that is protected under today’s laws. On the other hand, using promotion for those who are qualified and interested in advancement can be a solid motivational tool and morale builder when employees see “nontraditional” advancement. It sends the message that “even I have a chance to advance in this company.”

Compensation and Benefits   There is a bigger downside to mismanaged compensation and benefits than there is an upside through increased morale. As a function of D&I programs, it is essential that compensation and benefit programs act to constructively balance both the appearance and reality of fairness in employee treatment. These programs can act as a lure in recruiting and an anchor for retention. Their development and ongoing management should embrace participation from all groups within the employee body. It is important that each segment of the workforce feels like part of the process of development for benefits and compensation. To the extent that any employee group is asked to participate, all employee groups should be represented in the participation.

Supply Chain Management and Relations   Vendor and supplier relations are important to D&I programs because spending dollars is an activity that raises sensitivity and a desire to be on the receiving end of the transaction. Outreach programs to encourage participation of minority- and female-owned businesses are part of the D&I process. It should also be possible for businesses owned by veteran or people with disabilities to participate in the contracting or bidding process. There are some governmental jurisdictions that require contractors to meet participation goals for vendors and suppliers to be sure that these various groups have a “piece of the pie.” Employers who demonstrate active solicitation from all portions of the vendor community will also have successful relationships with the vendors, assuring that they will be able to meet future requirements as well as current demands for contract participation.

“Beyond that, nurturing a diverse supplier base—including coaching minority-, veteran-, and women-led enterprises on ways to improve their offers—enhances the buying company’s image. It can also foster economic strength, as many of these companies tend to hire from within their communities.”⁴³

Marketing, Branding, and Customer Relations   Broad appeal is the goal of most marketing programs. Establishing a brand that is recognized and valued by multiple cultures is also desirable. Doing that with an eye on healthy customer relations may require addressing each group in special ways. If a portion of the customer base is Hispanic, having customer service representatives who are able to work on the customer hot line while speaking Spanish can help reinforce those customer relationships. The same is true of any other ethnic or cultural group. In some portions of the country, there are fairly large populations of Vietnamese, Chinese, and Korean people. Serving these groups in their own language can build positive relations and increase brand loyalty. Providing literature in languages that are native to customers is another way to address their needs and increase diversity and inclusion of the various nationality groups.

Providing employment posters in languages that are native to employees is a requirement in many instances. That’s why in some places such as San Francisco, employment posters can be found in English, Spanish, Chinese, and Tagalog (Philippines).

Training   Training programs for both managers and nonmanagement employees can be a key component of the D&I program. It is more than sensitivity training. It involves the communication of key organizational values. Also, training can help raise the skill levels of supervisor and manager groups so they are able to more effectively deal with issues of D&I.

Initial employee training during the onboarding process can help new workers understand “how we do things around here.” Communicating and instilling values of diversity and inclusion early on can help those lessons last for the duration of the employee’s tenure.

Measurement and Evaluation   Diversity programs can be measured by looking at demographics of employee composition. How diverse is the incumbent group? How diverse is the recruiting effort? Count the number of recruiting resources that represent various racial or ethnic groups. Are there groups representing women, veterans, and people with disabilities? Recruiting and hiring are just exercises unless they result in employee retention. So, another measurement is turnover rate. What percentage of new hires are still on the payroll after a year?

Inclusion is a bit more difficult. It can be effectively measured, however, through the use of employee surveys. To what extent do employees feel their boss (supervisor) includes them in decisions about their job activities? Do employees feel they are part of the decision-making process when policy changes are being considered?

Why Diversity Initiatives Falter   Most people don’t have a clear understanding of diversity. When you ask people what diversity means, you will get as many definitions as the number of people you poll. People plainly don’t have a common understanding of it.

If you are going to emphasize diversity and inclusion in your organization, it is not enough to develop a statement to post on the wall next to your company values. How you define diversity and inclusion needs to be in clear enough terms that your workforce can both understand and reiterate the definition and “walk the talk” in all functions of work, demonstrated leadership, policies, systems, and programs.

The intent of annual diversity and inclusion training is helpful, but it isn’t enough. Too often, these initiatives fail because they are delivered as a strong-arm tactic. About three-quarters of firms with training still follow the dated advice of the late diversity guru R. Roosevelt Thomas Jr. He said, “If diversity management is strategic to the organization, diversity training must be mandatory, and management has to make it clear that ‘if you can’t deal with that, then we have to ask you to leave.’” Many firms even see adverse effects because of the use of negative messages in their training, like headlining a legal case for diversity and highlighting stories of huge settlements, which gives an implied threat: “Discriminate, and the company will pay the price.” Threats, or “negative incentives,” don’t win converts. Organizational Development (OD) specialists have told us for years that people often respond to compulsory training with anger and resistance. Do people who undergo training usually shed their biases? Researchers have been examining that question since before World War II. While people are easily taught to respond correctly to a questionnaire about bias, they soon forget the right answers. The positive effects of diversity training rarely last beyond a day or two, and a number of studies suggest that it can activate bias or spark a backlash. Frank Dobbin and Alexandrea Kalev studied 829 midsize and large U.S. firms, and their findings concluded in their report “Why Diversity Programs Fail”⁴⁴ that “companies do a better job of increasing diversity when they forgo the control tactics and frame their efforts more Zpositively.” In their statistical research, Figure 6-1 highlights three examples of the percent of change over 5 years in representation among managers from their findings.

Figure 6-1     Diversity programs that get results: percent change over 5 years

Evolution and Integration   Deloitte University Press says, “Organizations can start by broadening their understanding of diversity to focus not only on the visible aspects of diversity, such as race, gender, age, and physical ability, but also diversity of thinking. This means deriving value from people’s different perspectives on problems and different ways to address solutions. It’s a complex world, it’s a global world, and maximal participation is required from every workplace participant from the bottom to the top. Thinking of diversity in this way helps organizations to see value and to be conscious of the risk associated with homogeneity, especially in senior decision makers. And this means that diversity is no longer a ‘program’ to be managed—it is a business imperative.”⁴⁵

Unless organizations consciously focus on evolution of their inclusion programs, there won’t be any integration. After all, integration means that diversity and inclusion become the way things are done. It’s no big deal. It’s rather the expectation for behavior.

HR’s Role in the D&I Process

It was in 2011 that SHRM defined the role of human resources in the diversity and inclusion process. At its annual diversity conference, Doug Harris, CEO of the Kaleidoscope Group, offered these thoughts: “The expectations of human resources in diversity and inclusion is higher than other organization stakeholders. Leaders, managers, and employees often seek out HR for support, coaching, and guidance on how to address challenges and ensure that differences are maximized in the organization. In addition, human resource professionals are often asked to play a key role in the design and implementation of impactful D&I solutions but are rarely given the opportunity to enhance their existing capability and build the D&I expertise necessary to support the overall effort.”⁴⁶

Aspects of Organizational Change

Any organizational change effort is dependent upon having clear objectives and implementation assignments. Human resources is often a key player in the change program. There is usually an educational component that HR can take on. And there is the cheerleading role that reinforces over and over the benefits to be achieved by employee support of the change implementation.

Individual Attitudes and Behaviors

There are three major components of personal attitudes and behaviors required of human resource management groups trying to implement a successful D&I program.

Global Mind-Set   The Conference Board is an organization known around the world as a source of insights on the issues facing employer organizations. It publishes Council Perspectives to share its research and opinions with its members and the public. In that publication, the Conference Board has concluded the following: “There is no single globally accepted definition of ‘diversity.’ … For a diversity and inclusion strategy to be truly global, D&I professionals need to understand the culture, politics, economics, and relevant legislation within the regions in which their businesses operate, all of which underscores the critical importance of being culturally competent.”⁴⁷

Emotional Intelligence   Emotional intelligence is the ability to monitor people’s emotions, to find distinctions between them, and to use that information to guide behavior. Organizations that have high emotional intelligence are able to achieve greater effectiveness in their work.⁴⁸

Intercultural Wisdom   This is the absence of knowledge. Intercultural wisdom is knowing what we do not know about the values, behavior, and communication styles of people from other cultures.⁴⁹ The only way to gain wisdom of this nature is to get input from others.

Managerial Skills and Practices

Management skills are still important in today’s workplace. Individual competence in areas of decision-making, leadership, communication (both oral and written), inner work standards, personal ethics, behavior flexibility, creativity, self-objectivity, tolerance for uncertainty, and resistance to stress are some of the key skills still required of today’s managers.

The 4 Ts: Travel, Teams, Training, Transfers   In the late 1990s, a team of people studied leadership and concluded that it can be said to consist of the four Ts. Gregson, Morrison, and Black identified each of the categories as critical for international management success today.⁵⁰ These four leadership components were elaborated on by Gamaliel Perruci in a paper presented to the International Leadership Association conference held in Atlanta, Georgia, in 1999.⁵¹

•   Travel Travel allows future leaders to see where their followers come from culturally, economically, and politically.

•   Teams Teams reflect the need to allow inclusive participation and consensus building.

•   Training Training involves four things: language, development, internships, and development of facilitation skills.

•   Transfers Transfers provide the opportunity to spend a significant amount of time overseas to immerse oneself in a foreign culture.

Organizational Values and Policies   Organizational values are those things that are important to the organization at its core. They represent the “why we do what we do.” Policies should be designed to support the things the organization values. Policies are the guidance for handling issues that arise on a regular or routine basis. For example, most organizations have a policy on safety that includes a statement about why safety is important and also addresses how employees should handle the reporting of safety hazards when they are recognized in the workplace.

Critical Policy Challenge   It is not uncommon to make policy changes. In fact, it is a best practice to review all organizational policies at least once per year. When a policy needs to be changed, it should be rewritten and then distributed to all employees with enough advance notice that the effective date will be far enough in the future to allow proper employee preparation if necessary. An example is changing the policy on expense reimbursement. Employees need enough advance notice so they are able to adapt to the new policy and not be caught off guard with a sudden change of expectations.

Challenge of Details   Details matter, perhaps more in the realm of values and policies than in other aspects of organizational management. The way we do things is important. People have a right to expect that the way we do things will continue from today into the future. When those policies must change or we have a central shift in values, employees need to be given enough detail about the changes so they can adapt and implement the changes appropriately. Details matter, too, in the explanation we offer to workers about the rationale for making the changes they are facing.

Challenge of Dimension-Specific Issues   One way to deal with an issue is to break it into individual components. Diversity can be thought of in terms of individual dimensions or components as well as any other workplace issue. SHRM has created a single list of dimensions it offers as components of diversity. We suggest that you might be better off considering two categories of dimensions: primary and secondary.

Primary diversity dimensions are those we commonly think of when the term diversity comes up. They are characteristics found in legal protections at federal, state, and local levels. They include sex/gender (including sexual orientation, sexual preference, LGBT issues), race/ethnicity, culture/nationality, religion, age, disability status, and veteran status.

Secondary diversity dimensions are those that have impact in workplace interactions and achievements but are not as predominant as the primary dimensions. They include marital status, socioeconomic status, personality, educational achievements, and work experience.

These categories are not an exhaustive list. You can add others as you want or find a need in your workplace.

The next question you must ask is, “How can I effectively deal with each of these dimensions?” There are really two avenues of approach to diversity in the workplace. One is the individual approach including personal learning and empathy for others. The second is the organizational approach, which includes assessing the diversity status, training to fill gaps in knowledge and skill discovered in the assessment, and providing mentoring/coaching for individuals and teams that will encourage the necessary changes.

Functional Area 13—Risk Management

This is SHRM’s BoCK definition: “Risk Management is the identification, assessment and prioritization of risks, and the application of resources to minimize, monitor and control the probability and impact of those risks accordingly.”⁵²

Risk management is a broad functional category. There are so many types of risk management that it is hard to list all of them. Some areas of risk management are liquidity, banking, crisis, supply chain, insurance, software, and strategic reputation risk management. In human resource terms, risk management involves health insurance, discrimination and employee behavior, workplace safety, asset security, and more.

Key Concepts

•   Approaches to a drug-free workplace (e.g., testing, treatment of substance abuse)

•   Approaches to qualitative and quantitative risk assessment (e.g., single loss expectancy, annualized loss expectancy)

•   Business recovery and continuity-of-operations planning

•   Emergency and disaster (e.g., communicable disease, natural disaster, severe weather, terrorism) preparation and response planning

•   Enterprise risk management processes and best practices (e.g., understand context, identify risks, analyze risks, prioritize risks) and risk treatments (e.g., avoidance, reduction, sharing, retention)

•   Legal and regulatory compliance auditing and investigation techniques

•   Legal and regulatory compliance auditing and investigation techniques

•   Quality assurance techniques and methods

•   Risk sources (e.g., project failures) and types (e.g., hazard, financial, operational, strategic)

•   Security concerns (e.g., workplace violence, theft, fraud, corporate espionage, sabotage, kidnapping and ransom) and prevention

•   Workplace/occupational injury and illness prevention (e.g., identification of hazards), investigation, and accommodations

The following are the proficiency indicators that SHRM has identified as key concepts:

Establishing the Context of Risk

Nearly every aspect of HR management impacts the function of risk management in one way or another. Employee satisfaction can be captured through monitoring of complaints. Safety can be expressed in terms of workers’ compensation experience. The cost of employee health benefits is impacted by employer programs that support smoking cessation, exercise, and good diet. Computer security programs can block unauthorized access to confidential employee and business records. Privacy of records can be expressed in financial terms. All of these issues are potential impacts on the profit or loss of an employer’s organization. Even nonprofits and governmental agencies have budgets they are expected to live within. Huge, unexpected expenses related to risks can cause instant budget failure. HR professionals can have a great impact on the organizational finances by preventing large losses through proper risk management programs.

Focusing Risk Management

Risk management covers many functional areas in the employment world. Some of them are as follows: complying with federal employment laws, identifying workplace hazards, developing safety plans to protect employees and the public, and preparing job descriptions to be used both as a communication tool and as a means to address the physical and mental requirements of each job. Risk management explores how technology can help manage the liability that comes with operating an employment organization. Finally, risk management addresses the rapidly evolving field of social media, Internet, technology, and e-mail use.

There are business risks, and there are employment risks. Risk management addresses issues related to employees, customers, clients, the public, and vendors/suppliers. Risk management is the process of managing liabilities related to these populations in ways that will protect the employer organization and not be so heavy-handed that the organization can’t function well in performing its mission. HR professionals are the key to striking a balance in that delicate effort—developing, implementing/administering, and evaluating programs, procedures, and policies to provide a safe, secure working environment and to protect the organization from potential liability. There are lots of exciting things to think about.

Defining Risk

Risk is the potential for losing something of value. As individuals we value our health, our financial well-being, the people we care for, and our happiness. As organizations, we value investment in our workers’ training, worker skills, physical plant, assets such as supplies and product material inventories, customer/employee data, financial records, and community goodwill.

Categories of Risk   Risk comes in many forms and can be related to many different issues. There are risks of decision-making, but there are also risks of standing outside as a target for lightning strikes.

What Is Unknown and What Is Not Known About the Unknowns   Planning for risk management is based on the ability to identify anticipated risks. If you are unable to identify the risks in the future, you are not reasonably able to determine how to mitigate them. Consider these examples:

Kaplan and Mike’s Categories   Robert S. Kaplan and Annette Mikes are two Harvard Business School professors who wrote an article for the Harvard Business Review⁵³ in June 2012. In it they suggest that risks can be managed using a model containing three categories of risks.

•   Preventable risks Internal risks that are controllable and should be eliminated or avoided. They include illegal, unethical, or inappropriate actions and breakdowns in operational processes. These are manageable through rule-based compliance approaches. The best controls involve active prevention such as monitoring operational processes and guiding people’s behaviors and decisions toward desirable norms.

•   Strategic risks Such risks are identified and accepted in the process of strategic planning. These cannot be managed through a rule-based control model. Instead, it is necessary to reduce the probability that the assumed risks actually materialize and to improve the employer’s ability to manage or contain the risk events should they occur.

•   External risks These risks generally cannot be prevented from happening. So organizations should forecast what those risks might be and develop ways in which their impact can be minimized. Using key-player discussions to identify how best to handle such risks will take the form of war gaming (simulations) for the near-term issues or scenario analyses for long-term issues. Both offer value from stepping out of individual and group comfort zones, looking around at the bigger picture, and taking the time to plan for the unexpected.

Enterprise Perspective   Risk management can best be performed with an enterprise perspective. Looking at risks solely within a department or division won’t reveal the importance of those risks to the entire organization without taking the wider view. When risks are identified, the potential impact on each department can be assessed as well as the impact on the enterprise as a whole. If the risk involves illegal activity, even though only one department is involved, the entire enterprise will be tainted by the bad publicity generated by the bad behavior.

HR and Risk   Human resource management (the HR department) plays a key role in risk management and mitigation. From benefit program management to employee complaint investigations, HR professionals help protect the employer from serious harm and the employees from abuse.

ISO Principles, Framework, and Process

The International Organization for Standardization (ISO) is based in Geneva, Switzerland, and is the world’s largest developer and publisher of international standards. In the United States, the oversight organization is called the American National Standards Institute. It publishes standards applying to everything from the size of nuts and bolts (ISO 225:2010) to how to measure the cost per hire (ANSI/SHRM 06001.2012).

Establishing the Context of Risk Management

In 2011, the U.S. Department of Homeland Security (DHS) published a paper on its risk management process.⁵⁴ It says, “It is critical to define the context for the decision that the risk management effort will support. When establishing the context, analysts must understand and document the associated requirements and constraints that will influence the decision making process, as well as key assumptions.” Here are the key variables DHS says should be considered:

•   Goals and objectives Clearly defined goals and objectives are essential to identifying, assessing, and managing those areas that may threaten success.

•   Policies and standards Ensure that risk management efforts complement and take into account any risk management policies, standards, or requirements the organization has in place.

•   Scope and criticality of the decision The risk analysis and management effort should be commensurate with the criticality of the decision.

•   Decision-makers and stakeholders Stakeholders should be engaged and represented throughout the risk management process.

•   Decision time frame The time frame in which a decision must be made and executed will dictate a number of the attributes of the risk management effort, including how much time is available for conducting formal analysis and decision review.

•   Risk management capabilities and resources At the beginning of the process it is useful to identify the staff, money, skill sets, knowledge levels, and other resources available for risk analysis and management efforts.

•   Risk tolerance Risk management efforts often involve trade-offs between positive and negative outcomes.

•   Availability and quality of information Consider the anticipated data limitations, including expected levels of uncertainty, so decision-makers can adjust their expectations accordingly.

Risk Criteria   According to ISO 31000, risk criteria are terms of reference and are used to evaluate the significance or importance of an organization’s risks. They are used to determine whether a specified level of risk is acceptable or tolerable. Risk criteria should reflect your organization’s values, policies, and objectives; should be based on its external and internal context; should consider the views of stakeholders; and should be derived from standards, laws, policies, and other requirements.

Moral Hazard   Moral hazard is a situation in which one party gets involved in a risky event knowing that it is protected against the risk and the other party will incur the cost. For example, shareholders may want to have managers distribute all profits to them. Managers may be more interested in using profits to increase manager compensation.

Principal-Agent Problem   The problem of motivating one party (the agent) to act on behalf of another (the principal) is known as the principal-agent problem. For example, shareholders expect managers to oversee profit generation so distributions can be made to the shareholders. Managers may want to hold back some profits to hedge against future problems involving dropping revenues.

Conflict of Interest   A conflict of interest is a conflict between the private interests and the official responsibilities of a person in a position of trust. For example, a manager is responsible for the impartial selection of vendors to maximize value to the employer but has a close relative bidding on the contract. Selecting the relative may represent a conflict of interest for the manager.

Identifying and Analyzing Risk

Risk identification is the process of recognizing and defining risks. Risk analysis is the systematic process to comprehend the nature of the risk and to determine the level of risk.

Risk Assessment Phase

Risk assessment involves evaluating and comparing the level of risk against predetermined standards, target risk levels, or other criteria. For example, the risk identified is associated with managers and supervisors sexually harassing someone in the workforce. Compared to a standard of zero tolerance for such behavior, the risk may be deemed to be strong if there is only one occurrence.

Identifying Risks

Risk identification is the process of determining risks that could potentially prevent the program, enterprise, or investment from achieving its objectives. For example, an employee complains of sexual harassment coming from one manager. The risk has been identified.

Risk Identification Approaches   There are many tools and techniques for risk identification. Here are some of them:

•   Brainstorming This is a freewheeling generation of ideas without criticism of any one until later.

•   Delphi technique Here a facilitator distributes a questionnaire to experts, and responses are summarized (anonymously) and circulated among the experts for comments. This technique is used to achieve a consensus of experts and helps to receive unbiased data, ensuring that no one person will have undue influence on the outcome.

•   Interviewing This is a discussion with individuals using questions to stimulate responses.

•   Root-cause analysis This is for identifying a problem, discovering the causes that led to it, and developing preventive action.

•   Checklist analysis This involves comparing each item on the checklist with a set of pre-established criteria.

•   Assumption analysis This technique may reveal an inconsistency of assumptions or may uncover problematic assumptions.

•   Diagramming techniques This includes cause-and-effect diagrams, system or process flow charts, or influence diagrams (graphical representations of situations, showing the casual influences or relationships among variables and outcomes).

•   SWOT analysis This is a structured planning method used to evaluate the strengths, weaknesses, opportunities, and threats (SWOT) involved in a project or in a business venture.

•   Expert judgment Individuals who have experience with similar projects may use their judgment through interviews or risk facilitation workshops.

Analyzing Risks

Risk analysis involves evaluating vulnerable assets, describing potential impacts, and estimating losses for each hazard. When you buy common stocks, the potential exists for them to lose some or all of their value.

Risk Analysis Tools   It is helpful to have some tools with which to assess risks to your organization. The following are some of the more popular tools available.

Risk Scorecard   The U.S. Army Materiel Systems Analysis Activity developed a “reliability scorecard” that uses eight critical areas to evaluate a given program’s reliability progress. Each element within a category can be given a risk rating of high, medium, or low (red, yellow, or green) or not evaluated (gray). The scorecard weights the elements, normalizes the scores to a 100-point scale, and calculates an overall program risk score and eight category risk scores.

•   Risk assessment

•   Reliability requirements and planning

•   Training and development

•   Reliability analysis

•   Reliability testing

•   Supply chain management

•   Failure tracking and reporting

•   Verification and validation

•   Reliability improvements

Risk Matrix   A simplified example, using a single element from the previous list, is shown here:

In general terms, risks can be classified as low, moderate, high, or extreme, as shown here:

Evaluating Risks

A risk evaluation system is a combination of practices, tools, and methodologies within a risk management system used to measure the potential impacts of risk events on the performance metrics of an organization. So, evaluating risks is the act of measuring potential impacts that various risks will have on the organization’s ability to accomplish its objectives. For example, you can identify a risk as the possibility of a work stoppage when the union contract expires. Evaluation of that risk can tell you how well you may expect to keep your business operating using only management personnel during the strike.

Key Risk Indicators

A key risk indicator (KRI) is a measure that indicates how risky an activity is. It is different from a key performance indicator (KPI). The KRI indicates the possibility of a future adverse impact. A KPI measures how well something is being done. Indicators are metrics used to monitor identified risk exposures over time. Therefore, any piece of data that can perform this function may be considered a risk indicator. The indicator becomes “key” when it tracks an especially important risk exposure (a key risk) or it does so especially well (a key indicator), or ideally both. An example is the forecasting of the financial impact of expanding the workforce into international offices in multiple countries. Will that be repaid with profits over time, or will it interfere with profitability? Then, how can HR management impact those potential results?

Risk Register

A risk register acts as a central repository for all risks identified by the organization and, for each risk, includes information such as source, nature, treatment option, existing countermeasures, recommended countermeasures, and so on. ISO 73:2009, “Risk management – Vocabulary,” defines a risk register to be “a record of information about identified risks. It can sometimes be referred to as a risk log.”

Managing Risks

Once risks have been identified and logged, the next logical step is planning for handling those risks believed to bring negative impacts on the enterprise that cannot be accepted.

Responses to Upside and Downside Risks

Upside and downside risks are two sides of the same coin. Possible adverse outcomes represent downside risk. When there is uncertainty about a desirable outcome, there is upside risk.

Eliminate Uncertainty   Risk can be managed if the uncertainty is eliminated. If you know for certain that there will be an undesirable outcome, there is no risk. You simply avoid entering into the activity that will produce that outcome because you know for certain that it will take place. If someone sets fire to a building, that person knows for certain that the fire will happen. There is no risk, simply a certain undesirable outcome. If you can eliminate the uncertainty of an event, you can control the risk.

Redefine Ownership   Only the person or organization that owns the circumstances will own the risk. If you can redefine ownership of the problem, you can reduce your risk exposure.

•   Share Sharing the risk of being an employer can be done, for example, by entering into a joint-employer relationship with an employment leasing agency, sometimes called professional employer organizations (PEOs). That won’t eliminate risk for either party, but it will double the resources available to combat whatever risk may exist because of having an employee workforce.

•   Transfer Transferring risk is done by purchasing insurance policies. Employers are able to reduce their exposure to employee liability through the purchase of employment liability insurance. It can lower the potential for financial loss when employees are found to have engaged in harassment, for example. It is much the same as purchasing fire insurance to protect against financial loss if there is a fire in the workplace.

Increase or Decrease Effect   A way to decrease the effect of fire in the workplace is to install a water sprinkler system. So, if a fire does happen, the sprinkler system can limit the damage or effect of the fire. Employee training programs can act in the same way. Teaching employees about the dangers of harassing behavior can help them reduce their personal exposure to liability while at the same time lowering the employer’s liability exposure.

Take No Action   In most circumstances, when faced with various possible courses of action, one of those options is to take no action. When a risk is identified and defined, it may be judged to be in the best interest of the organization to do nothing. Usually this is considered if the impact expected would be minimal or the level of certainty for the outcome is low.

•   Accept “We will take the risk” is sometimes heard, meaning the decision is to take no action to eliminate the hazard and just wait to see how things develop. If a safety hazard is identified that would not cause serious harm and can be repaired within the near future, it may be best to simply identify the risk by putting out orange cones, for example, than prohibiting all access to the area. Remediation of the hazard will take place in due time. The risk of injury is minimal, and the level of certainty can be lowered by putting out the cones.

•   Ignore When a safety hazard is identified, considered, and ignored, there is no credence given to the level of risk or the certainty of loss. Think about the air bag failures that Takata Industries ignored for several years. That was a decision that didn’t work out so well for the company.

Implementing the Risk Management Plan

A risk management plan results from analysis of the circumstances that foresees risks, estimates impacts, and defines responses to issues.

Defining Risk Management Performance Objectives   All business enterprise exists in the world of balancing risks and rewards to produce value. Risk management performance objectives should be part of the overall list of performance objectives generated at each level of the organization. Just like EEO compliance or time reporting, risk management for each component of the organization should be identified by those responsible for the component/department/division.

Integration   Is our risk management process aligned with our strategic decision-making process and existing performance measures? Is our risk management process coordinated and consistent across the entire enterprise?

Communication   Does everyone use the same definition of risk? Are all employees involved in some way with the risk management process, sensing a degree of ownership that will result in organizational success? Proper risk management plans will involve employees in training programs and daily discussions, if only brief, about the “risks facing us today.” These are sometimes called tailgate meetings where safety topics are common. And, they last only five or ten minutes, and then everyone is off to do their work for the day. At higher levels of the enterprise, the topic of risk management should be present on each staff meeting agenda. That way, it becomes a common topic of conversation, and everyone begins to take some level of ownership in the results.

Emergency Preparedness and Business Continuity

A primary safety axiom is that proper planning can save lives and property. It is a good idea to have a written plan specifying what actions will be taken in any of many various scenarios. There are some basic alternatives for dealing with a disaster, large or small.

We are talking about the entire universe of emergency planning.

Crisis Management Planning and Readiness Process   The first step toward having an emergency response plan is to conduct a risk assessment for your work location. Look at the physical facilities, emergency exits, fire suppression systems, electrical and gas shut-off access, hazardous materials used in the workplace, protective equipment needed for operations, employee training for special equipment, use of proper lock-out/tag-out procedures when working on electrical equipment, and proper handling of carcinogenic substances such as copy machine toner. Answer hypothetical questions such as, “What would we do if someone with a gun walked through our front door?”

Engage key personnel in the development process. Ask people on the production line and in the office what they would do in some circumstances. Get input from experts and nonexperts alike. Then list the responses that should happen for each emergency you listed.

Finally, once the plan is developed, be sure everyone in the workplace knows about it and what to do if an emergency happens.

Manage Risk   Initially, it is important to identify the risks. Then you can move on to identifying how to deal with them effectively. So, what types of risks are we concerned with in the world of human resource management? And, what type of involvement does HR have with those risks?

Develop Contingency Plans   If there is a flood or fire and your workplace is destroyed, the computers, hard drives, on-site backup systems, and filing cabinets may no longer be available. How will you open your business tomorrow morning?

Employers must have a plan for how they will continue operating their organization. What about customer records, accounting records, client data, and payroll information?

This is an area of responsibility where HR professionals should work with others in the organization such as professionals in information technology (IT) and accounting. It should be common practice for backups to be made of all technology systems, especially a human resource information system (HRIS). And, those backups, or at least duplicates of them, should be stored off-site at some secure location. It is necessary for the survival of your organization that it be able to continue operations as quickly as possible with all the records it requires for that to happen.

How will you communicate to employees where they should report to work after such a disaster? Do you plan to use e-mail, text messages, or a telephone tree to contact everyone and pass along instructions? How will you keep supervisors and managers informed? Who will handle media inquiries about the disaster and your plans for the future?

Test and Implement Plans   A key element of disaster recovery is practicing the contingent plan to see whether it will actually work. That’s what fire drills are all about. People in the military constantly gripe about having to drill all the time. Those drills are nothing more than rehearsals for the time that the actual event will come to pass and the practiced behavior responses will become essential. The same holds true for civilian organizations. Employees need to practice evacuating their work location so they know for sure which exit they should use and what their assigned rallying point is once outside the building. If there is a disaster involving the loss of key personnel, an emergency response plan should be activated. Ideally, it will have been rehearsed so everyone involved understands their roles and how to play them. Who will be the spokesperson for the company when media representatives come asking for answers to their questions? Who will be responsible for interacting with government officials if that becomes necessary? Who will be guiding the instruction of managers and distributing information to the general employee group?

Debrief and Learn   Make plans and then test them by rehearsing. Evaluate the results of the rehearsal and adjust the plans based on those experiences. Identify where improvements can be made and then make them. Debriefing is the process of meeting to discuss what happened during the practice exercise. Debriefing should gather input from individuals as well as the collective input of managers and employees.

Debriefing is the opportunity to be sure all of the communication channels are open and working accurately. Are all telephone number lists up-to-date? Are other contact points noted and verified? What are the emergency contact points for government resources (fire/ambulance/police/sheriff)? If the plan involves coordination with other organizations, they should be represented in the debriefing session so their input can be gathered and evaluated.

Evaluating Risk Management

At least once per year, all formal risk management plans should be reviewed and adjusted if it is thought necessary. Those reviews are usually chaired by either the chief HR officer or the chief legal officer in the organization.

Providing Oversight

The role of risk management oversight is commonly assumed by the board of directors. It applies to all forms of risk for the entire enterprise. Since the board is the organizational element responsible for the overall success of the company, identifying how risk management is being handled becomes a key element of the board’s responsibilities.

Evaluating Effectiveness of Risk Management Policies and Processes

Obviously, the most effective feedback or evaluation comes from having actually experienced the danger (risk) that plans had been developed to address. When disaster strikes, debriefing sessions or critique meetings should be held to establish what worked well and what needs improvement.

Healthy organizations will conduct periodic tests of their risk management plans through exercises designed to probe every element of reaction to the problem anticipated. There should be critique sessions held following each test to determine what updates should be made to the plans. Then, after a reasonable interval, the plans should be tested again. Some plans (evacuation/earthquake/shelter-in-place) should be tested quarterly. Other plans can be tested once a year, or even less frequently. Some tests can be as simple as the CEO walking into an executive staff meeting and announcing that a test scenario will be run in which the top five executives of the enterprise have all been killed in a plane crash. What will the remaining employees do as a result of hearing “The exercise begins now”? Tests of risk management plans must be customized to the plan.

After-Action Debriefs and Incidents Investigations   How to determine the effectiveness of risk management plan test exercises depends on what the plan involves. Fire reactions and building evacuation can be evaluated by using a stop watch and exercise referees who keep track of when each group of employees has assembled at their emergency contact point outside the building. When testing plans for handling embezzlement or product failure/recalls, the exercise will not be as dramatic. But, it should be evaluated after it has completed to determine whether people followed the plan and what issues they discovered need improvement.

If an employee comes to work one morning to find an alligator sitting on the building’s front porch blocking the normal route employees use to enter the building, there needs to be a risk management plan/safety plan implementation that can address that issue. The reaction may be as simple as directing workers to a different entrance. But the incident demands there be a reaction to prevent serious harm to humans. After-incident investigations can shed light on how well the plan worked and people reacted. If the plan was good but people didn’t implement it properly, there may be a training need. More frequent practice could be called for. The investigation should provide direction for resolving any remaining issues.

Whistle-Blowing   When an employee (or outside person) blows the whistle on bad behavior going on within the organization, it can result in a public relations nightmare. One of the conditions for which emergency plans are prepared should be disclosure of bad behavior such as a cover-up of illegal activity or simply behavior that is ethically wrong and embarrassing to the employer. What can be made of the story by media representatives will be potentially damaging to the company. Someone will need to be positioned to speak for the company on such issues. There needs to be a predesignated group of key employees who will decide quickly how to address the problem and explain the company’s reaction to it when addressing the media.

Evaluating Compliance

Compliance with government regulatory requirements is a complex realm. There are compliance requirements for many different topics.

Promoting Continuous Improvement

In 1985, Tom Peters wrote a book entitled Thriving on Chaos.⁵⁵ In it, he highlighted the Japanese management concept of Kaizen, the never-ending quest for perfection. American managers have retitled the concept to continuous improvement. Whatever it is called, the idea is to strive each day for a little better quality, quantity, and effort. Peters became famous for, among other things, his suggestion that management by walking around (MBWA) was the most effective approach and produced the greatest positive organizational results. Searching for continuous improvements means employees must be involved by very definition. Managers can’t be expected to think of everything, and those who work directly with the process are best able to identify how improvements can be made. Employees are truly the best resource for identifying better ways of doing things.

Functional Area 14—Corporate Social Responsibility

Here is SHRM’s BoCK definition: “Corporate Social Responsibility (CSR) represents the organization’s commitment to operate in an ethical and sustainable manner by engaging in activities that promote and support philanthropy, transparency, sustainability and ethically sound governance practices.”⁵⁶

As an HR professional, your role is to help the organization and its employees to integrate corporate social responsibility (CSR) into the everyday business activities of the organization. CSR reflects how the organization integrates and aligns with its communities as a helping hand for sustaining economic prosperity, social equity, and environmental protection.

Key Concepts

•   Approaches to community inclusion and engagement (e.g., representation on community boards, joint community projects, employee volunteerism)

•   Creating shared value (e.g., definition, best practices)

•   Developing CSR-related volunteer programs (e.g., recruiting and organizing participants)

•   Organizational philosophies and policies (e.g., development, integration into the organization)

•   Principles of corporate citizenship and governance

•   Steps for corporate philanthropy and charitable giving (e.g., selecting recipients, types, donation amounts)

The following are the proficiency indicators that SHRM has identified as key concepts:

The Ever-Changing and Growing CSR

HR can no longer see CSR as an isolated defensive or tactical action. CSR is now seen as a comprehensive strategic initiative for the organization, aligned with business strategy. CSR now has a global reach and impact, enriching and broadening its communities and beyond. As cultural and political landscapes and opinion shift, so does the need for CSR in an organization.

Is Sustainability the New CSR?

Sustainability practice is in every aspect of doing business today and needs to be ingrained in an organization’s culture, becoming an ongoing process and way of doing business. Sustainability is a key focus for many organizations as government and regulatory pressures, societal demands, and even climate change have increased its demands on companies. For organizations, this means a conscious way of doing business and how it impacts their communities, employees, and environments. In addition, businesses must assess social and environmental risks and opportunities with their business decisions. This approach is referred to as the triple bottom line, which is the simultaneous delivery of positive results for people, the planet, and profit. Sustainability, such as environmental stewardship, workplace responsibility, human rights protection, and good corporate citizenship, are increasingly part of an organization’s social legitimacy. The HR function is critical to achieving success in a sustainability-driven organization.

Redefining Sustainability

Sustainability and the associated accountability efforts within sustainability (behavior that is cognizant of depleting resources that the organization is intertwined with) have also become front and center for CSR. Time, labor, and finances are where HR is involved with the design or implementation of programs. An example of a program would be re-entry into the workforce by former stay-at-home parents. “Green initiatives” along with “environmental footprints” are now prime attention grabbers within CSR. HR departments reducing their paper printing needs by converting to online paperless activities such as employment and benefit forms, employee handbooks, and newsletters are green initiatives. Creation of a paid-time-off volunteerism policy for employees is another popular initiative in CSR.

Today’s CSR

Corporate social responsibility involves keeping a watchful eye within the organization’s communities, including local, national, and even international. CSR strives to enhance the organization’s reputation. Strategic relationship and behaviors are elements involved in CSR activities such as being a member of the Chamber of Commerce or sponsoring a local nonprofit fundraiser creating a corporate citizenship. Multiple departments may have responsibility, yet HR is typically the department primarily at the core, absent an organization’s official CSR or public relations department.

Forces Shaping Today’s CSR

The external forces that typically drive goals and objectives in CSR can be better understood by looking at Figure 6-2.

Figure 6-2     Corporate responsibility

According to McKinsey & Company, when identifying the goals and objectives for CSR, it is ideal to use the same analysis tools as used with strategic planning to identify the long-term investment and involvement for the organization.

Creating a CSR Strategy

As mentioned, the CSR of an organization needs to be carefully aligned with the organization’s business goals and strategies. As with all strategy initiatives, careful planning must be undertaken. Research into frameworks and existing benchmarks should be involved, and so should the reports of CSR initiatives.

Frameworks, Guidelines, and Examples

Gaining a clear perspective of the work is the best starting point for developing a CSR strategy. There are several international organizations that have provided frameworks and templates, along with guidance for organizations.

•   Global Reporting Initiatives’ G4 guidelines

•   The United Nations Global Compact that developed a broad statement of principles on which a CSR strategy can be based

•   The International Organization for Standardization and the Social Accountability International (SA) that created standards addressing specific sustainability issues and social responsibilities

The most widely accepted frameworks and guidelines are briefly described next. Although this are a good starting point to develop your organization’s CSR strategy, be sure to tailor them to your organization’s industry and unique environments. Review your CSR annually and benchmark against other like organizations.

OECD Guidelines for Multinational Enterprises   The Guidelines for Multinational Enterprises established in 1976 by the Organisation for Economic Co-operation and Development (OECD) is one of the first to address corporate governance. Since 1976 the guidelines have had many revisions; 2008 saw the most recent version, which covered the following:

•   Transparency governance and disclosure

•   Environment

•   Consumer interests

•   Workforce relations

•   Bribery

•   Science and technology application and access

United Nations Global Compact   Introduced in 2000, the United Nations Global Compact has ten principles addressing human rights, labor, environmental, and anticorruption issues. When an organization commits to uphold these principles, it also agrees to annually report on the progress, including specific actions taken.⁵⁷

The UN Global Compact’s Ten Principles

Human Rights

Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights.

Principle 2: Make sure they are not complicit in human rights abuses.

Labor

Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining.

Principle 4: Eliminate all forms of forced and compulsory labor.

Principle 5: Abolish child labor.

Principle 6: Eliminate discrimination in respect to employment and occupation.

Environment

Principle 7: Businesses are asked to support a precautionary approach to environmental challenges.

Principle 8: Undertake initiatives to promote greater environmental responsibility.

Principle 9: Encourage the development and diffusion of environmentally friendly technologies.

Anti-Corruption

Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery.

Caux Principles   The Caux Round Table (CRT) principles believe that the world business community should play an important role in improving economic and social conditions. In 1986, a network of business leaders from Japan, Europe, and the United States (aka the Caux Round Table) began meeting because of mounting trade tensions. In 1994 they developed and formalized a set of international business standards based on the values of human dignity and working together for the common good. These became known as the Caux principles, which was one of the earliest employer-led efforts for an international code of ethics. The key Caux principles⁵⁸ are as follows:

•   Principle 1: Respect stakeholders beyond shareholders. Contribute value to society and act with honesty and fairness toward customers, suppliers, competitors, employees, and the community.

•   Principle 2: Contribute to economic, social, and environmental development. Maintain investments in the community and its economy that support the environment and social well-being as well as organizational income.

•   Principle 3: Build trust by going beyond the letter of the law. Know the spirit and intent of the law and abide by them rather than just the letter of the law.

•   Principle 4: Respect rules and conventions. Respect local cultures and traditions everywhere the organization operates.

•   Principle 5: Support responsible globalization. Perhaps the most controversial of the Caux principles, this calls for reforming domestic rules and regulations where they impinge global commerce. It supports open and fair multilateral trade.

•   Principle 6: Respect the environment. Protect environmental needs while conducting business so the next generations will have the advantage of a secure planet.

•   Principle 7: Avoid illicit activities. Corruption of all kinds, bribery, money laundering, drug trafficking, human trafficking, and other illegal and illicit activities are not condoned.

ISO 26000   The ISO is the world’s largest developer of voluntary international standards. ISO 26000 is the international standard developed to help organizations effectively assess and address those social responsibilities that are relevant and significant to their mission and vision; operations and processes; customers, employees, communities, and other stakeholders; and the environment. ISO 26000 provides guidance on key themes of social responsibility across a wide spectrum of topics; it’s a quality standard, though not a certification. The principles have social and environmental responsibility and guidance for action/implementation. ISO 26000 addresses seven core subjects of social responsibility as shown in Figure 6-3.⁵⁹

Figure 6-3     The seven core subjects of ISO 26000, “Social Responsibility”

SA8000   Social Accountability International (SAI) is the international nongovernmental organization that created SA8000. SA8000 is an auditable certification standard that encourages organizations to develop, maintain, and apply socially acceptable practices in the workplace. It is one of the first certification standards (1997), focusing on human rights and labor relationship, that provides process and performance criteria. It is based on both United Nations and International Labor Organization (ILO) standards.

Close to 2,500 facilities with approximately 1.5 million employees around the globe have adopted SA8000. It is frequently used as a tool for ensuring human rights in extended supply chains (aka slave labor). It not only focuses on standards of performance but also on systems that need to be in place for management. In the latest version as of June 2014, nine key areas are the focus of SA8000.

•   Human rights and labor relations

•   Child labor

•   Forced or compulsory labor

•   Health and safety

•   Freedom of association and right to collective bargaining

•   Discrimination

•   Disciplinary practices

•   Working hours

•   Remuneration

•   Management systems

GRI G4 Sustainability Reporting Guidelines   The Global Reporting Initiative (GRI) G4 Sustainability Guidelines are the universally accepted standard for global reporting or a company’s sustainability effort and progress. The main goal is for organizations to identify and report on what GRI terms mertial aspects that are significant to a business’s economic, environmental, and social impacts that influence the decisions of its stakeholders. The guidelines are divided into two parts.

•   Reporting Principles and Standard Disclosures (criteria for preparing the sustainability reporting)

•   Implementation Manual (explanations for applying the principles for the reporting)

GRI has other supplementary guidelines, listed here:

•   Assistance with G4 efforts

•   Guidelines for specific business sectors such as oil and gas, financial services, food processing, media, and so on

•   Interactive guides that are online for assisting with specific concerns and issues such as risk management and supply chain

•   A sustainability disclosure database providing URL links to corporate CSR reports and scorecards

The G4 list is organized into categories,⁶⁰ as shown here:

KPMG Survey of Corporate Responsibility Reporting   KPMG has been tracking the trends in corporate responsibility reporting since 1993. KPMG provides a detailed examination of what is being reported and the quality of the reporting. KPMG reporting is helpful with the following:

•   Identifying areas that organizations need to address and how to report and measure on the results and outcomes.

•   Providing support in making the business case for a sustainability strategy for an organization. This section of the reporting has interviews with industry leaders who discuss how to best maximize the value of sustainability.

You can find more information on KPMG reporting surveys at www.kpmg.com.

Philanthropy and Volunteerism

Corporate philanthropy has been around for decades and was typically the influence of senior management within a corporation. Although corporate philanthropic activities such as monetary donations, percentage of sale, and cooperative programs are still widely in existence, the tide has shifted to a more strategic focus on donations, one that affiliates with the organization’s relevant business or branding. A good example of this is the cosmetic company Avon, which is widely known as a corporate sponsor for breast cancer research. The company’s customer base is relevant to the majority of affected individuals with breast cancer, women.

Employee Volunteerism

An aspect of CSR is employee volunteerism. It has been growing in popularity in organizations and for good reason. Volunteerism can positively impact employee engagement. Surveys have indicated that when employees frequently participate in company-sponsored volunteer programs, then they are more likely to feel a strong connection and sense of belong at work, which is good for retention. While volunteering sounds like a win-win for everyone, in practice there can be some pitfalls that HR professionals need to be aware of. Chief among them is ensuring that the activities are truly voluntary, especially if the employer is not paying employees to participate.

A great risk for employers centers around the Fair Labor Standards Act (FLSA). An employer can’t require an employee to “volunteer.” As an example, let’s say a company organizes a disaster relief effort for a community recently hit by a hurricane and asks for employees to volunteer to help hand out water and blankets or provide meals. If getting involved is truly voluntary, then that is perfectly fine. But once it’s required of any employee, the employee is no longer a volunteer, and it’s considered time on the payroll clock. Companies sometimes get so caught up in pushing employees to get involved that they cross this line even though their intentions were for the good of all.

Another related risk for for-profit companies is that there is no such thing as “volunteering” for a for-profit company. If the company “suffers or permits” an employee to work, the employee has to be paid at least minimum wage under FLSA. This issue has shown up recently related to the use of unpaid interns.

Organizations need a program and policy around volunteerism so employees and management completely tow the FLSA line and understand what can and should not be expected of the workforce. Without a policy, there can be misunderstandings and ill-will on the part of employees. Having a policy or process helps to clarify expectations.

Functional Area 15—U.S. Employment Law and Regulations

Here is SHRM’s BoCK definition: “U.S. Employment Law and Regulations refers to the knowledge and application of all relevant laws and regulations in the United States related to employment—provisions that set the parameters and limitations for each JR functional area and for organizations overall.”⁶¹

As an HR professional, you are responsible for the compliance of HR programs and policies to be in alignment with employment laws and regulations. You may be educating the workforce and leadership, coaching executives on various matters and options, and tracking compliance with required reporting. It’s one of the most important focuses of the HR professional in an organization.

Key Concepts

The key concepts within this functional area are in six broad categories of U.S. laws, regulations, and Supreme Court cases relating to employment. The examples listed here from the SHRM BoCK⁶² are not an exhaustive list, nor are the categories. Please refer to Appendix B in this book. Also know that state, municipal, and other local-level laws, regulations, and cases are not included.

•   Compensation

•   Employee Retirement Income Security Act of 1974 (ERISA)

•   Fair Labor Standards Act of 1938 (FLSA; Wage-Hour bill; Wagner-Connery Wages and Hours Act) and amendments

•   Equal Pay Act of 1963 (amending FLSA)

•   Lilly Ledbetter Fair Pay Act of 2009

•   Employee relations

•   Labor Management Relations Act of 1947 (LMRA; Taft-Hartley Act)

•   National Labor Relations Act of 1935 (NLRA; Wagner Act; Wagner-Connery Labor Relations Act)

•   NLRB vs. Weingarten (1974)

•   Lechmere, Inc. vs. NLRB (1992)

•   Job safety and health

•   Drug-Free Workplace Act of 1988

•   Guidelines on Sexual Harassment

•   Occupational Safety and Health Act of 1970

•   Equal employment opportunity

•   Age Discrimination in Employment Act of 1967 (ADEA) and amendments

•   Americans with Disability Act of 1990 (ADA) and amendments

•   Civil Rights Acts

•   Equal Employment Opportunity Act of 1972

•   Uniform Guidelines on Employee Selection Procedures (1978)

•   Griggs vs. Duke Power Co. (1971)

•   Phillips vs. Martin Marietta Corp. (1971)

•   Leave and benefits

•   Family and Medical Leave Act of 1993 (FMLA; expanded 2008, 2010)

•   Patient Protection and Affordable Care Act (ACA “Obamacare”)

•   National Federation of Independent Business vs. Sebelius (2012)

•   Miscellaneous protection laws

•   Employee Polygraph Protection Act of 1988

•   Genetic Information Nondiscrimination Act of 2008 (GINA)

The following are the proficiency indicators that SHRM has identified as key concepts:

HR and the Legislative and Regulatory Environment

Legislatures in state houses around the country, and in Congress at the nation’s capital, have been busy in recent years placing more worker protections into law. Where the legislatures would not act, President Obama took the reins and placed requirements on employers through the federal contracting regulations. With approximately 60,000 federal contractors, from small companies with only 50 employees to mega-corporations like Boeing and General Motors, a great many changes can be accomplished through the federal contracting employer community.

Organizational Compliance

Compliance has become expensive for employers, in and out of the federal contracting world. In the first few years of this century, the federal government has enacted the following rules regarding employee management. You will find all of these explained in Chapter 3.

•   2000: The Needlestick Safety and Prevention Act

•   2001: The Economic Growth and Tax Relief Reconciliation Act

•   2001: The USA Patriot Act

•   2002: The IRS Intermediate Sanctions

•   2002: The Sarbanes-Oxley Act

•   2002: The Homeland Security Act

•   2003: The Fair and Accurate Credit Transactions Act

•   2006: The Pension Protection Act

•   2008: Jobs for Veterans Act

•   2008: Americans with Disabilities Act Amendments Act

•   2008: The Genetic Information Nondiscrimination Act

•   2008: The Mental Health Parity and Addiction Equity Act

•   2008: The National Defense Authorization Act

•   2009: The Lilly Ledbetter Fair Pay Act

•   2009: The American Recovery and Reinvestment Act

•   2009: The Health Information Technology for Economic and Clinical Health Act

•   2010: The Dodd-Frank Wall Street Reform and Consumer Protection Act

•   2010: The Patient Protection and Affordable Care Act

•   2012: The FAA Modernization and Reform Act

In addition to these federal laws, states have been busy working on their own versions of employee protections. Those protections vary widely, and HR professionals find themselves faced with having to track and adapt to changing requirements from one state to another. International enterprises have even more challenges with compliance requirements. Other countries have quite different views of employee management requirements. HR professionals must constantly be monitoring the legal updates to be sure they are allocating proper budget amounts for compliance work and covering all of the requirements placed on them by these different jurisdictions.

U.S. Laws and Regulations

Chapter 3 details the federal laws most commonly impacting HR professionals who are responsible for compliance in interstate commerce organizations. You should be familiar with all of these requirements, regardless of your specific corporate obligations.

Employee Records Management

There are increasing obligations for records management in today’s climate. It used to be that “good management practices” were the guiding element in determining how an employer established records creation and retention. That’s not so any longer.

There are three reasons why proper recordkeeping is a requirement for employers. First, it simply makes good business sense to have accurate information handy and organized when you want to use it. Second, most business owners and managers will eventually encounter the need to produce documentation about employee performance and work history. Having the proper records to retrieve is vital when the need presents itself. Third, some employee records are required by federal or state governments and must be kept somewhere. Organizing them by employee name makes access easy.

There are some important cautions to be given about the subject of identifiable employee information. Generally, state laws permit employees the right to examine their personal employment records. This simply allows individuals the opportunity to confirm information in the file and identify any specific information that is believed to be incorrect. Employees are not universally guaranteed the right to copies of all file contents, however. As the employer, you usually have the right to control the time and location of these examinations as long as you are reasonable in doing so. The objective, of course, is to ensure accuracy of information about each person. In most states, ownership of the personnel file and its contents rests with the employer who maintains it.

Access to information about employees should be strictly limited to those people in your business with a need to use the information in their jobs. Many states are aggressive protectors of employee privacy, and random or unauthorized access to personnel files can bring on severe penalties. Make sure that you store personnel files in a secure location and that they are not left unattended even during the business day. When asked by people outside the company to provide “verification” of certain employment information about your employees, make it a practice to confirm only the information your employees have authorized you to release. Employment verifications are usually required to support such things as mortgage applications, credit applications, and the like. Employee authorization should be in writing and specify the information they want you to reveal. Tell your employee the policy is designed for their protection.

Job applicants may not have decisions about their applications made based on protected categories such as race, color, sex, religion, national origin, and so on. Therefore, having any information on the application that identifies these categories is inappropriate and may be considered illegal. It is permissible, and for some employers required, to request demographic data from job applicants. This information is directed to a location separate from the hiring manager, however, to avoid even the suspicion of discrimination.

For employees (someone you have put on your payroll), it is necessary to have information in the personnel file that would be considered illegal to gather prior to the job offer being made. For example, you need a birth date to enroll your employee in health insurance and life insurance programs. As long as such information is used for legitimate purposes, employers will have no problem (see Chapter 3).

Personnel File

A personnel file is often a collection of record files maintained by various people in various locations. The central file is usually maintained by the HR department. However, additional employee records could be located in the training department, in the labor relations department, and in the desk of the immediate supervisor. Each of these files contains different information, yet they all comprise personnel records. Taken together, they represent the personnel file.

The following should be in a personnel file when circumstances require them:

Employment Request for Application

•   Employee’s original employment application

•   Prescreening application notes

•   College recruiting interview report form

•   Employment interview report form

•   Education verification

•   Employment verification

•   Other background verification

•   Rejection letter

•   Employment offer letter

•   Employment agency agreement if hired through an agency

•   Employee handbook acknowledgment form showing receipt of handbook

•   Checklist from new employee orientation showing subjects covered

•   Veterans/disabled self-identification form

•   Transfer requests

•   Relocation offer records

•   Relocation report

•   Security clearance status

•   Payroll

•   W-4 form

•   Weekly time sheets

•   Individual attendance record

•   Pay advance request record

•   Garnishment orders and records

•   Authorization for release of private information

•   Authorization for all other payroll actions

Performance Appraisals

•   New employee progress reports

•   Performance appraisal forms

•   Performance improvement program records

Training and Development

•   Training history records

•   Training program applications/requests

•   Skills inventory questionnaire

•   Training evaluation forms

•   In-house training notification letters

•   Training expense reimbursement records

Employee Separations

•   Exit interview form

•   Final employee performance appraisal

•   Exit interviewer’s comment form

•   Record of documents given with final paycheck

Benefits

•   Emergency contact form

•   Medical/dental/vision coverage waiver/drop form

•   Vacation accrual/taken form

•   Request for nonmedical leave of absence

•   Retirement application

•   Payroll deduction authorizations

•   COBRA notification/election

•   Hazardous substance notification and or reports

•   Tuition reimbursement application and or payment records

•   Employer concession and or discount authorization

•   Annual benefits statement acknowledgment

•   Safety training/meeting attendance/summary forms

Wage/Salary Administration

•   Job description form

•   Job analysis questionnaire

•   Payroll authorization form

•   Fair Labor Standards Act exemption test

•   Compensation history record

•   Compensation recommendations

•   Notification of wage and or salary increase/decrease

Employee Relations

•   Report of coaching/counseling session

•   Employee Assistance Program consent form

•   Commendations

•   Employee written warning notice

•   Completed employee suggestion forms

•   Suggestion status reports

The following should not be in a personnel file:

Medical Records

•   Physician records of examination

•   Diagnostic records

•   Laboratory test records

•   Drug screening records

•   Any of the records listed previously in the discussion on HIPAA

•   Any other medical records with personally identifiable information about individual employees

Investigation Records

•   Discrimination complaint investigation information

•   Legal case data

•   Accusations of policy/legal violations

Security Clearance Investigation Records

•   Background investigation information

•   Personal credit history

•   Personal criminal conviction history

•   Arrest record

Insupportable Opinions

•   Marginal notes on any document indicating management bias or discrimination (for example, comments about an applicant’s race, sex, age, disability, national origin, or other protected class membership)

Medical File

The federal Health Insurance Portability and Accountability Act of 1996 (HIPAA) requires employers and health care providers to protect medical records as confidential, separate, and apart from other business records. That means you may no longer retain medical information in a personnel file. Here are some examples of information you should extract from your personnel files and place in separately protected files as medical information:

•   Health insurance application form

•   Life insurance application form

•   Request for medical leave of absence, regardless of reason

•   Personal accident reports

•   Workers’ compensation report of injury or illness

•   OSHA injury and illness reports

•   Any other form or document that contains private medical information for a specific employee

Questions about employee access to review their personnel file come up frequently. Each employer should have a policy addressing such questions that complies with state requirements. Federal law does not address the question. Government employees and private sector employers are usually controlled by state laws. So, multistate employers must comply with requirements in all of the states in which they operate.

Investigation File

Any time a complaint is lodged or law enforcement agencies get involved with individual employees, it may be necessary to conduct an investigation of facts. Each time that happens, a written record should be created that documents what investigative steps were taken and what actions resulted from them. Complaints of illegal employment discrimination are a good example.

These files will have specific employee-identifiable information that may be of a sensitive personal nature. Facts may involve criminal activity or behavior that could result in civil action. For the sake of privacy, each investigation file should be held under the same security provisions as medical records. Only those people having a need to access the content of the files should be allowed access. Records should be secured at all times so passersby cannot pull open a file drawer and remove documents.

Recordkeeping Legal Compliance

As with many HR issues, retention requirements do change from time to time. Be sure you confirm the requirements for your situation before destroying any records. Because these requirements are fluid in nature, we suggest you confirm your specific needs through discussion with your management attorney or by checking the Internet for guidance. Be careful about relying on the Internet without knowing your source, however. You still have the responsibility and the liability for proper records retention even if you get bad advice from an Internet source.

Some possible sources include the following:

•   www.management-advantage.com/products/retainrecords.htm

•   http://nctc.fws.gov/courses/references/job-aids/supervisors/suprefdocs/documents/FederalRecordRetentionGuidelines.pdf

•   www.nationalscanning.com/document-retention-guidelines.html

The following table lists some of the most common federal requirements for record retention:

Records Destruction   Once a record has reached its expiration date (been retained for the period required by law), it should be destroyed. Destruction is something that should be done by shredding so that records cannot be reconstructed by someone rifling through the trash bin.

There are commercial records storage and destruction companies almost everywhere in the United States. For a fee, they will come to your work site, collect the records you want to have destroyed, and either shred them in their truck while at your location or take them back to a central location where the documents will be shredded. Some specialize in certain industries such as medical records.

SHRM-SCP

As with other subject areas, the difference between SHRM-CP and SHRM-SCP requirements lies with the level of policy involvement. Strategic policy development is in the realm of the senior HR responsibilities.

For example, developing a records retention policy requires involvement of all operations, departments, and support organizations such as accounting and payroll, benefits administration, legal, and safety administration. Coordinating input from all of those sources requires a level of skill defined as “senior” for the human resource professional.

Senior Certified Professionals (SCPs) must be masters of all the knowledge required of federal laws and regulations. They must also be capable of understanding how those compliance requirements impact their daily interactions with employees and managers. The formulation of strategic policies is the result of a process built on knowledge, skill, and experience.

Chapter Review

In this chapter, you studied workplace issues such as the global context, diversity and inclusion, risk management, and corporate social responsibility. All of these are based on the foundation of employment law and regulations that are thoroughly reviewed in Chapter 3. You saw how contemporary HR organizations are influenced by global issues even if they are not themselves multinational. HR professionals will be expected to increasingly know and manage according to these influences as years pass and societies change.

Questions

1.   What is diaspora?

A.   Any medical condition that presents as an upset stomach

B.   Any people or ethnic population forced or induced to leave the traditional homeland

C.   Any common grouping of workers who commute across international borders

D.   Any group of people who are collectively working to upgrade their personal skills

2.   What does guarded globalization mean?

A.   Developing nations are wary of opening more industries to multinational companies and are zealously protecting local interests.

B.   Countries are slow to invest in globalization.

C.   Developing nations believe it is unwise to export too much of their national resources.

D.   Developed countries choose not to participate with certain developing countries in trade exchanges.

3.   What did Perimutter identify?

A.   Certain countries don’t behave fairly in international trade agreements.

B.   Developing countries are the best type of trade partners.

C.   Unknowns must be revealed before international trade can begin.

D.   Classifying alternative management orientations can be classified into four categories.

4.   HR’s role in setting up global business presence involves which of the following?

A.   Updating the employee handbook for the new location languages

B.   Providing accounting with the payroll tax withholding rates for the new location(s)

C.   Providing due diligence in issues related to the workforce

D.   Issuing newsletter updates about the progress being made in opening distant locations.

5.   When placing an employee on an international assignment, it is important to do what?

A.   Provide ongoing support for the individual and their family in the new location

B.   Provide anything needed before the family lands in the new location

C.   Provide assistance with language issues before the move takes place

D.   Provide publicity in the corporate newsletter showcasing the newly appointed employee and the assignment.

6.   Diversity and Inclusion touch:

A.   All organizations in the modern workplace

B.   Only employers with 50 or more workers on the payroll

C.   Only people of color

D.   Only employers settling government complaints

7.   Diversity and Inclusion programs:

A.   Explain that minorities and women must be hired at a certain rate

B.   Provide managers with mandates for recruiting only minorities

C.   Make it possible for all employees to contribute to the workforce

D.   Supersede EEO and affirmative action programs

8.   Diversity and Inclusion programs should reach out to:

A.   Employees of competitor organizations

B.   Veterans and disabled people for their viewpoints and experiences

C.   Government auditors for validation of the employer’s program

D.   News organizations that can provide justification for a diversity program

9.   Employee affinity groups can provide:

A.   Mandates for hiring more people like those in the affinity group

B.   Enticement for other employees to form their own groups as a defense

C.   Input on diversity programs and suggestions for changes

D.   Secrets to why language options should be permitted

10.   Diversity and Inclusion programs can include:

A.   Special benefits based on cultural background

B.   Special hiring bonus based on minority or female status

C.   Executive endorsement of hiring preferences

D.   Celebrations based on specific cultural groupings

11.   Employment risks are the potential for losing things of value. They can include which of the following?

A.   Confidential employee data and complaint investigation records

B.   Job requisition information and published news articles on the organization

C.   Executive biographical summaries and SEC required reports

D.   Visitor comment cards and building maintenance records

12.   What are key risk indicators (KRIs)?

A.   Indicators of how well something is being done

B.   Indicators of how much insurance covers the employer

C.   Indicators of future adverse impact

D.   Indicators of company risks compared to competitor risks

13.   What is a risk register?

A.   A financial account of insurance costs

B.   A record of information about identified risks

C.   A computer device to monitor IT performance

D.   A record of automotive repairs due to accidents

14.   The first step toward having an emergency response plan is to:

A.   Be sure all emergency exits are properly marked

B.   Write a policy for evacuation in an emergency

C.   Conduct a risk assessment for your work location

D.   Assign development for the emergency plan to an HR person

15.   Contingency plans explain:

A.   How to handle whistle-blower exposure

B.   How to bring the organization into governmental compliance

C.   How to respond to discrimination complaints

D.   How the organization will continue running in the event of a catastrophe

16.   Which CSR guideline framework was one of the first initiatives relating to corporate governance?

A.   United Nations Global Compact

B.   OECD

C.   The Caux principles

D.   SIO 26000

17.   Which social responsibility subject does not belong to the ISO 26000?

A.   Animal rights

B.   Labor practices

C.   Consumer issues

D.   The environment

18.   What set of sustainability guidelines was created by a network of business leaders from Japan, Europe, and the United States?

A.   ISO 26000

B.   OECD Guidelines for Multinational Enterprises

C.   SA8000

D.   Caux principles

19.   Elsie is the plant HR specialist for the Natural Springs Water bottling plant, which is the closest plant to Naples, Florida. Naples just experienced a direct hit from Hurricane Albert. The plant manager has instructed Elsie to round up employees to go with the truck drivers to deliver water to the people of Naples. What should Elsie do in seeking volunteers?

A.   She should ask only management employees to go with the drivers so that there is no overtime pay involved.

B.   She should ask employee volunteers to sign a document stating they are volunteering for this relief work knowingly, without pay, and representing the company.

C.   She should pay only the truck drivers and not the employees helping them.

D.   She should ask the plant manager for budget allocation for overtime pay for the volunteers.

20.   What should not be in an employee’s personnel file?

A.   Job description

B.   EAP consent form

C.   Performance improvement program records

D.   Insupportable opinions

Answers

1.   B. Relocating any specific population by inducement or force is diaspora.

2.   A. Protecting local interests is part of guarded globalization.

3.   D. Perimutter classified management orientations into four categories.

4.   C. Global business expansion involves more than translating the employee handbook. Due diligence embraces everything from legal requirements to policy differences.

5.   A. Expatriate employees need support as do their family members.

6.   A. All units in an employer entity are involved in diversity and inclusion these days.

7.   C. Diversity and inclusion programs attempt to gain value from the contributions of all employees.

8.   B. Veterans and disabled workers have been overlooked populations for many years. Including them in recruiting and employment programs is a way to strengthen diversity and inclusion programs.

9.   C. Employee affinity groups can contribute to diversity with suggestions for program content.

10.   D. Cultural celebrations are helpful in understanding how others live and celebrate their heritage.

11.   A. Confidential employee data and complaint investigation records are both considered confidential and private. Losing them would be losing something of value.

12.   C. KRIs are forecasts of future bad things happening.

13.   B. A risk register is like a log of identified risks.

14.   C. Emergency response plans depend on a risk assessment that the response plan is built on.

15.   D. Contingency plans outline how the organization will continue operating in the event of a catastrophe.

16.   B. Corporate social responsibility (CSR) was an overall umbrella guideline. The Guidelines for Multinational Enterprises established in 1976 by the Organisation for Economic Co-operation and Development (OECD) is one of the first to address corporate governance.

17.   A. Animal rights are not part of the ISO 26000 standard on corporate social responsibility.

18.   D. The Caux principles were created by a joint effort of several countries.

19.   B. Getting signed documents from employee volunteers in the relief effort is important because the work will be unpaid.

20.   D. Insupportable opinions, regardless of the source, should never be part of an employee’s personnel file.

References

1.   The SHRM Body of Competency and Knowledge, page 52.

2.   https://en.wikipedia.org/wiki/Globalization, retrieved on March 10, 2018.

3.   Friedman, Thomas L. Thank You for Being Late: An Optimist’s Guide to Thriving in the Age of Accelerations, pp 120–121. New York: Farrar, Straus and Giroux, 2016.

4.   https://www.pwc.com/jp/en/press-room/world-in-2050-170213.html, retrieved on March 10, 2018.

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13.   Push and pull factors in business, www.ukessays.com/essays/business-strategy/push-and-pull-factors-in-business.php, retrieved on March 12, 2018.

14.   Ibid.

15.   Mastering Strategic Management, https://opentextbc.ca/strategicmanagement/chapter/types-of-international-strategies/, retrieved on March 12, 2018.

16.   Bartlett, C. A., and S. Ghoshal. Managing Across Borders: The Transnational Solution. Harvard Business School Press, 1989.

17.   https://www.managementstudyhq.com/eprg-framework.html, retrieved on March 13, 2018.

18.   Koch, Jennifer. Must-have Global HR Competencies, Workforce, 10/1/1996, retrieved on March 13, 2018.

19.   https://trainingindustry.com/articles/strategy-alignment-and-planning/5-ways-to-develop-a-global-mindset/, retrieved on March 13, 2018.

20.   https://blog.enplug.com/corporate-culture, retrieved on March 14, 2018.

21.   Lee, Kiefer, and Steve Carter. Global Marketing Management, 3rd Edition. OUP Oxford, 2012.

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26.   https://www.strategy-business.com/article/17251?gko=444c1, retrieved on March 14, 2018.

27.   http://summit.sfu.ca/item/774, retrieved on March 14, 2018.

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30.   https://www.mcgill.ca/desautels/category/tags/nancy-adler

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32.   http://www.oxfordreference.com/view/10.1093/oi/authority.20110803095855152, retrieved on March 14, 2018.

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38.   http://cor.europa.eu/en/welcome/Pages/module-1-part-1.aspx, retrieved on March 15, 2018.

39.   The SHRM Body of Competency and Knowledge, page 53.

40.   The Costs and Benefits of Diversity: Fundamental Rights and Anti-Discrimination, A Study on Methods and Indicators to Measure the Cost-Effectiveness of Diversity Policies in Enterprises; European Commission Directorate-General for Employment, Industrial Relations and Social Affairs Unit D/3 Manuscript completed in October 2003.

41.   www.colormagazineusa.com

42.   https://www.conference-board.org/pdf_free/councils/TCBCP005.pdf

43.   “Global Diversity and Inclusion: Perceptions, Practices and Attitudes,” Society for Human Resource Management, 2009, http://graphics.eiu.com/upload/eb/DiversityandInclusion.pdf

44.   Dobbin, Frank, and Alexandrea Kalev. “Why Diversity Programs Fail,” HRBO.org July/August 2016.

45.   www.dupress.com/articles/hc-trends-2014-diversity-to-inclusion

46.   http://www.shrm.org/Conferences/Diversity/Documents/11Confsessions/11Div_Harris.pdf

47.   Council Perspectives CP-014, The Conference Board, Inc., 2009.

48.   “Emotional Intelligence and Organizational Effectiveness,” Industrial Psychiatry Journal, Jul–Dec 2013.

49.   Fleming, Sherwood. “Exercise Intercultural Wisdom,” www.sherwoodfleming.com.

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52.   The SHRM Body of Competency and Knowledge, page 54–55.

53.   Kaplan, Robert S., and Anette Mikes. “Managing Risks: A New Framework,” Harvard Business Review 90, No. 6, June 2012.

54.   Risk Management Fundamentals, Homeland Security Risk Management Doctrine, U.S. Department of Homeland Security, April 2011. https://www.dhs.gov/xlibrary/assets/rma-risk-management-fundamentals.pdf.

55.   Peters, Thomas J. Thriving on Chaos, New York: Harper & Row Publishers, 1987.

56.   The SHRM Body of Competency and Knowledge, page 56.

57.   Ten Principles of UN Global Compact, www.unglobalcompact.bg.

58.   CRT Principles for Responsible Business, www.cauxroundtable.org.

59.   ISO 26000 Social Responsibility: 7 Core Subjects, https://www.iso.org/iso-26000-social-responsibility.html.

60.   Global Reporting Initiative, G4. Categories and Aspects in the Guidelines https://www.globalreporting.org.

61.   The SHRM Body of Competency and Knowledge, page 57.

62.   The SHRM Body of Competency and Knowledge, page 57.