Does HR Work? Pt Two 'The Negative Influence of Employment Law on HR'

First of all, apologies for not producing an article in August! I’m going to blame some holiday time and the Edinburgh festival (which was exceedingly good this year).  So here I am in an increasingly dark September and ready to continue with my series of blogs entitled ‘what’s wrong with HR’. In this article I’m going to talk about employment law and the negative effect, I believe, legislation has had on the role of HR departments.

Ask people about HR and the chances are that they will talk about a function that is there to hire and fire. I often found myself resisting this charge because to me HR was always about enabling people to work effectively, to boost performance and reduce cost. It was heavily based on psychology and evidence gathered over the course of a century. Indeed this was why I got it into it in the first place. But it has become clear this was my perception rather than the one held by people at large and indeed it wasn’t one which stood up next to my own experiences as an HR employee. In my defence a cursory glance at the Human Resource Management books in the library of Edinburgh Napier University is far more likely to support my original view of things. So why the disconnect between the boffins in the library and the public and practices of many HR departments who have adopted the role of hirer and firer?

Some of this has been undoubtedly brought about by various Westminster governments, particularly the Labour one. I recently chatted with a colleague from the CIPD, a person who is a little longer in the tooth than myself (but with age comes lots of experience)! He told me that when he started his career in the late 70s, employment law was pretty much “on one pamphlet of paper”. Oh how things have changed! We now live in an age where employment law is on many, many pamphlets of paper!

The ogre of employment law has grown and this hasn’t been helped by a growing blame/get rich quick litigation culture and the growing cottage industry around it which includes law firms through to HR/Employment law companies who promise to ‘keep your business safe’.

To be fair I understand within this climate why a company must address and comply with employment law and it is natural this should fall under the remit of HR. Unfortunately and with a few exceptions, HR at large has become concerned with what I will unapologetically call “ar8e covering”...I know you wouldn’t encounter such a term in the Harvard Business Review but this is my blog and I’m only bit part academic.

What is the result of this ar8e covering? Many HR departments have become convinced that their very purpose in life is to prevent litigation. The trouble is I’d argue that this has had damaging consequences for their businesses. Unless you’re a law firm your company doesn’t exist to prevent litigation - it surely exists to supply a product or service? Unfortunately the need to prevent litigation doesn’t sit well with enterprise. In practice this mind set of ar8se covering manifests itself in anti innovation tools such as draconian staff handbooks aka patronising rule books. Then there is my most hated bogey man of all, the appraisal system.

 It seems many HR departments do employment appraisals, not just because they mistakenly think it will improve performance, but because they think it important to have a paper trail “in case something goes wrong”. Indeed if you go along to any performance management presentation from a lawyer this is what you will be told to do – make sure you have a paper trail and an appraisal system. This is regardless of the fact that most appraisals are completely useless at fulfilling the paper trail role, a point a good employment lawyer recently made to me in private.

“Ahh but litigation damages company reputation and costs money” I hear many HR people and lawyers say. True it undoubtedly can but this doesn’t let HR off the hook. Rather I think it’s about keeping it in perspective. I’ll bet you the cost of defending and losing an unfair dismissal is far less damaging than nurturing an a8se covering culture. True the former will cost you some money but the second will eventually put you out of business.  Ask any entrepreneur if innovation and bureaucracy go hand in hand and listen to what they say. In fact if the best thing your HR department does is to keep the company compliant, I’d suggest you outsource this responsibility to one of the employment law companies because I’d wager you’ll find it cheaper than the cost of employing a HR manager.

Furthermore if we look at the employment law burden it’s not actually as onerous as many believe. The media like to report the horror stories such as the discrimination claims against city banks where huge pay outs are awarded. These are proportional to the company wealth, particularly ugly cases and are the exception to what really goes on. In fact the median pay award in 2012 according to law firm Morton Fraser for unfair dismissal was £4,560. The reality is tribunals don’t want to put companies out of business. Changes to employment law in July of this year should further reduce the risk to businesses.

So what should a company do? By all means have some sensible measures in place to prevent litigation; have good employment contracts and yes, have a sensible handbook with corresponding policies and procedures (but please, please resist the temptation to have a handbook written in patronising legal language). You might even want to have a good relationship with a reputable employment lawyer as a prudent measure. However don’t let them rule the roost and above all else, try to accept that you can’t mitigate against every eventuality and accept that to attempt to do so is damaging.

In fact the best way to protect your business is to adopt an altogether different mind set – that people are Innocent until proven guilty and that most people are trustworthy who want to do well. Build your company and HR practices on this basis. Be very questioning of your existing employment policies in terms of what they really do for your business and why they are in place. Treat people like adults, support them and engender a culture of responsibility and true empowerment as your principles. Can your HR department support with this? If not, question why they are there.

Am I an idealist? Unashamedly so. But I recently read that the famous proponents of the sort of trusting culture I mentioned, WL Gore & Associates, have never made a loss in their 50 year plus history. So there must be something in it.

In the meantime, I’m going to be happy to continue to tell people why my version of HR is much more than hiring and firing.

As ever happy to hear your thoughts!