The role of human resource management in risk management

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Bernie Erven, an agricultural economist and expert in personnel management at The Ohio State University, offers these tips for managing people, and risk, in agricultural businesses.

Human resources, Erven says, have two roles in risk management. First, people are a source of risk. These risks include shortages of employees, people doing sloppy work, an employee refusing to take on additional responsibility, or a key employee leaving two months after completion of a one-year training program. Second, people are important in handling risk. Examples include people using their ingenuity to solve unexpected problems, employees going the extra mile for the good of the organization, a key employee redesigning her own job to avoid unnecessary delays in getting work done, or an employee persuading a talented friend to apply for a position in the business.

Human resources, he points out, include all management and labor personnel, family and non-family members, full-time and part-time people, and seasonal and year-round employees. These people play important roles in farm businesses of all sizes. Orientation and training matter as much for one employee as for 20 employees. A business with just two people can have serious conflicts that jeopardize the business’ continuity and success. No team of people is so small as to avoid the need for leadership or so large as to make leadership impossible.

Risk specialists have traditionally focused mostly on important causes of risk such as weather, disease and natural calamities, and ways to deal with the risk. Risk management has paid little attention to human resources and human resource calamities such as divorce, chronic illness, accidental death, or the impact of interpersonal relations on businesses and families. Including human resources in risk management reflects the fact that people are fundamental to accomplishing farm goals. Human resources affect most production, financial, and marketing decisions. People can help or get in the way of accomplishing what managers have planned.

Smaller family businesses do not escape the impact of people. In these businesses, as in larger businesses, people are a source of risk and are important to the business’ ultimate success or failure. Overdependence on family members for management and labor negatively affects family business effectiveness and efficiency. A family may have highly talented people in one management or labor area but fall short in another area. Confronting human resource risk may take the family business outside its usual boundaries to fill critical labor and management gaps.

Human resource management, Erven says, is a process that can be broken down into specific activities: job analysis, writing job descriptions, hiring, orientation, training, employer/employee interactions, performance appraisal, compensation, and discipline. Understanding these activities helps explain the relationship between human resources and risk. Failure to successfully carry out these activities increases risk and penalizes the business by not taking advantage of what its people could be contributing.

Erven stresses that effective integration of risk management and human resource management requires that managers have certain skills. Most important are: leadership, communication, training, motivation, conflict management, and evaluation.

In his full article, Erven outlines how to develop and apply these skills toward a more efficient and profitable agricultural business.


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