PHR and SPHR Professional in Human Resources Certification: Business Management (PHR Only)

THE PHR® EXAM CONTENT FROM THE BUSINESS MANAGEMENT FUNCTIONAL AREA COVERED HERE CONSISTS OF THE FOLLOWING RESPONSIBILITIES AND KNOWLEDGE AREAS. RESPONSIBILITIES:
 

01 Interpret and apply information related to general business environment and industry best practices
02 Reinforce the organization’s core values, ethical and behavioral expectations through modeling, communication, and coaching
03 Understand the role of cross-functional stakeholders in the organization and establish relationships to influence decision making
04 Recommend and implement best practices to mitigate risk (for example: lawsuits, internal/external threats)
05 Determine the significance of data for recommending organizational strategies (for example: attrition rates, diversity in hiring, time to hire, time to fill, ROI, success of training)
 

IN ADDITION TO THE PRECEDING RESPONSIBILITIES, AN INDIVIDUAL TAKING THE PHR® EXAM SHOULD HAVE WORKING KNOWLEDGE OF THE FOLLOWING AREAS, USUALLY DERIVED THROUGH PRACTICAL EXPERIENCE:
01 Vision, mission, values, and structure of the organization
02 Legislative and regulatory knowledge and procedures
03 Corporate governance procedures and compliance
04 Employee communications
05 Ethical and professional standards
06 Business elements of an organization (for example: other functions and departments, products, competition, customers, technology, demographics, culture, processes, safety and security)
07 Existing HRIS, reporting tools, and other systems for effective data reporting and analysis
08 Change management theory, methods, and application
09 Risk management
10 Qualitative and quantitative methods and tools for analytics
11 Dealing with situations that are uncertain, unclear, or chaotic

This guide looks at the important functions and roles that human resources (HR) professionals play in an organization with respect to the overall business environment. As a general rule, the HR team uses information about the organization and the business environment to reinforce expectations of stakeholders, influence decision makers, and avoid risk.

This function is tremendously important for HR professionals to master and understand. This portion is weighted as 20 percent of the PHR® exam. Often many HR professionals operate in smaller organizations as the sole subject-matter expert of the company and have a great deal of responsibility to support the key executives who rely on their experience and qualifications. HR professionals who understand and execute these responsibilities well will set themselves apart from their peers.

Required Knowledge

Smart people learn from their mistakes. Wise people learn from other people’s mistakes. Knowledge comes from either personal experience or the study of the experiences and lessons taught to us by others. HR professionals preparing for this exam must possess certain knowledge acquired from experience or study. In this guide, the knowledge portion reviews business management practiced at the operational level of the organization, which includes topics such as corporate governance and procedures, employee communications, business elements, and the underlying mission, vision, and values of the company.

Mission, Vision, and Values

HR professionals must know the mission, vision, and values of the company. In many of their tasks discussed here, they function as the champions, interpreters, or arbitrators of these concepts to the employees. The mission of the company is usually expressed as a short statement sentence describing the purpose of the company’s existence. It should be overarching and usually is an infinitive statement to do something. It answers the question, “Why?”
The vision of a company looks at the future and paints a vivid picture of what the organization will look like as it grows, develops, or changes over time. The vision considers where the organization is at present and describes where it wants to go. A vision must be able to be consistently repeated by employees to be effective. In other words, they are all able to describe the same picture. Vision statements should be simple to be effective and, in some instances, consist of only a phrase or a couple of words.

The table below shows some mission and vision statements from familiar organizations.

Values are the foundation of how a company is going to perform its mission and achieve its vision. From the HR perspective, a goal is to ensure that employee behaviors are aligned with the values of the organization. When behaviors are not aligned, the resulting issues and negative outcomes can impact performance management, employee relations, and HR development. Values must be communicated and modeled consistently throughout the organization to be effective. It is always the values that are practiced, not the ones that are written, that define how the organization conducts itself.

Types of Organizational Structures

Structure is essential for a company, and the HR professional must understand how a company is organized to perform critical tasks essential to operations. Often the HR professional must know the various departments or teams and how they are interconnected to establish policies over personnel transfers, evaluations, promotions, and other routine HR actions. Each organization is different, so there may be slight variations in how the organizational structure develops as a company expands. Knowing the choices that a company has about how to lead and control operations enables the HR professional to advise the corporate executives who are making structural decisions.

Two common approaches to organizational structure are the matrix and hierarchy methods.

In a hierarchy, the structure resembles a pyramid. The chief decision-maker, such as a chief executive officer, president, or chairperson, is the ultimate head of the organization responsible for all actions and the accomplishment of the mission, vision, and values of the company. Below the organizational head might be division heads and then lower management and finally the teams of employees.

In this kind of structure, there is a general stovepipe of information, and the flow tends to go up and down with little contact across.

The figure below shows an example of an organizational hierarchy.

FIGURE: A hierarchical organizational structure


The other common structure is a matrix. This example is often shown as a series of groups or equal parts all sharing responsibilities for the execution of the company mission. In these environments, information can flow across as well as up and down. While it may seem that this would be a preferred method given the more open communication, it has its own unique challenges; there can be too much information sharing, as well as conflicting guidance based on different priorities or interpretations of the needs.

Employees who work in a matrix environment must be more disciplined when resolving problems because their access means they can impact a far greater portion of the company with each decision.

Below, you can see the differences in structure compared to the hierarchical organization shown above.


FIGURE : A matrix organizational structure

 

Legislative and Regulatory Processes

HR professionals must know how laws and regulations are created to prepare an organization effectively for their implementation. Some laws or regulations can have wide impact on the operations of a company. For example, in 2016, the Department of Labor announced a major rule change to the administrative exemption to the overtime provision of the Fair Labor Standards Act (FLSA). This proposed rule change would have raised the minimum salary for exempted professionals significantly, thereby dramatically increasing the number of nonexempt workers in the United States. However, almost immediately several groups filed lawsuits in federal court, and an injunction was placed on the rule’s implementation. In that same year, the elections in November saw a change in political parties in the executive branch and a change in governing priorities, further delaying any changes to the rule. Without the knowledge of how and when an organization must follow rule changes and the legal and regulatory processes that accompany them, companies could go back and forth changing their employees’ status with respect to the exemption standard, creating confusion and costing money in added payroll costs.

The figure below highlights the regulatory process.

It starts with a proposed rule or rule change by the executive agency tasked by law with establishing those rules. For example, the Department of Labor establishes rules related to the Fair Labor Standards Act. Next, the proposed rule will have a public comment period. This period is the time during which groups and individuals impacted by the rule can submit concerns or recommend changes to the rule and offer insight as to how the new standard would impact them. Finally, all the submissions are reviewed, and, if necessary, changes are made before the final rule is published. The final rule will have an effective date when all organizations subject to the rule must be in compliance. Knowing how the Department of Labor issues a rule change, and the period of time that is allowed to adopt the changes into practice within your organization, will allow you to prepare key leaders, change policies and procedures, and inform employees to facilitate the changes to the organization effectively.

HR functions within the realm of regulations. Since the late 1800s our modern HR practices can be tied to laws in the United States and globally that protect workers, establish working conditions, create rules for corporate governance, and perform other such functions. It is imperative that as an HR professional you understand not just that rules change but how and when.
It is also important to know that from state to state and locally there may be differences in rules and laws that impact a company, especially one that operates in multiple locations. Laws in states that mandate minimum wages to be higher than the federal minimum are just one of a myriad of examples that affect HR operations. 

Ethical and Professional Standards

HR professionals have access to a wide variety of sensitive and personal information in the conduct of their jobs. An HR professional must maintain the highest ethical and professional standards. The HR Certification Institute certification process requires all applicants to adhere to a code of ethics to maintain their credential. In general, HR professionals must not use their position and privilege for their own personal benefit. They must strive to protect sensitive HR-related information about others in the organization and avoid conflicts of interest.

Those holding the PHR® must acknowledge the ethical and professional responsibilities in these six areas:
- Professional responsibility
- Professional development
- Ethical leadership
- Fairness and justice
- Conflicts of interest
- Use of information

Any applicant preparing for the certification exam review the code of ethics and professional responsibility at https://www.hrci.org/docs/default-source/web-files/code-of-ethical-and-professional-responsibility(1)-pdf.pdf.

Corporate Governance and Compliance

The knowledge of rules and regulations an HR professional needs also includes corporate governance procedures and compliance. HR professionals are responsible for knowing current reporting requirements with respect to laws such as the Sarbanes-Oxley Act.

The Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002, or SOX, was enacted following several public corporate and accounting scandals that occurred in the early 2000s. It set standards of corporate governance, oversight, auditing independence, and enhanced financial disclosure. To review the law, you can visit www.sec.gov/about/laws/soa2002.pdf.

Corporate governance procedures vary based on the type of company (private, public, not-for-profit) and the number of employees. In addition to federal statutes, the organization may be subject to state provisions depending on which states the company does business in. Also, international corporations have added compliance requirements throughout the globe, especially throughout Europe and Asia.
These are elements of corporate governance to review:
- Board composition and election of officers
- Corporate responsibility statements and ethics
- Conflict-of-interest policies and procedures
- Internal and external auditing practices
- Financial disclosure statements
- Whistleblower protection
An organization’s HR department should have working knowledge of the activities surrounding these elements and the input that is required. For example, it is not necessary to know how to do a full audit of the organization. However, HR professionals will provide documents such as payroll records and personnel files to verify or validate parts of the audited reports. HR professionals must know how their functional activities are tied to others within the organization.

Business Elements

The functional areas that form the core of a company are called business elements. Operations, sales, marketing, finance, information technology, and procurement all work together, along with human resources, to drive business processes and achieve the company’s goals. While it is not a requirement to perform their functions, HR professionals who understand how the other elements operate will have a decided advantage over their peers. A 2016 survey conducted by the HR Certification Institute, available at https://www.hrci.org/about-hrci/why-choose-hrci, shows why corporate executives value HR professionals who possess this knowledge and how it impacts a company.

Operations

Operations is the part of the organization that delivers the product or services to the consumer. It is the profit center of the company and is the purpose of the organization’s existence. All other elements of the company support the operations and daily activities of this division. The chief operating officer (COO) is the C-suite executive tasked with overseeing this element that ensures the day-to-day execution of the plans and vision of the company’s leadership team.
Operations will track production, quality, conversion rates, materials, and other resources used in producing a good or service. Managers will be the most technically knowledgeable in the company and along with the workers are the largest division.

Sales

The sales team is responsible for identifying, attracting, and retaining customers that demand the goods or services the company produces. They coordinate heavily with operations so that the total production meets the demands to ensure a steady flow. They forecast demand and study trends to determine which product or service will be needed and when. The sales team is usually the external face of the company and is sometimes also referred to as business development, especially when the role of sales is to find new customers. This division is also responsible for handling any concerns or complaints by these external business partners that are buying the goods.

Marketing

Marketing determines what the consumers need and then works with the capabilities of the company to create the good or service that meets that need. The marketing team evaluates public demand but also looks across other businesses to determine the competition that may already be meeting a specific need. It compares the costs of entering this demand space against the potential revenue that can be generated by delivering a new business line.
Marketing uses analytics to help determine a price point, develops promotional material or a campaign to draw consumers or alert them to something the company creates, and explains the details or features about a good or service the company provides that differentiates them from competitors offering similar items.

Finance

Finance is the division that plans and controls the execution of budgets, accounting, and auditing all financial resources and activities for an organization. They prepare the financial statements using generally accepted accounting principles (GAAP). GAAP accounting practices are rules or guidelines companies follow when preparing statements.

Different organizations may follow different practices in accounting based on the type of organization they are. For example, in the United States, governmental accounting practices are different from corporate accounting practices. It is not important for an HR professional to know the details of the accounting rules, but awareness of the type of accounting will assist in knowing the information that is generally provided for audits and record keeping.

Information Technology

With the ever-growing dependence on technology in companies, the information technology (IT) division has become increasingly critical to the success of an organization. IT is responsible for the infrastructure of the technology to include hardware, software, development, and maintenance. Data storage, security, and classification are also areas where the IT team plays a key role. IT may have application development, web design, or other subfunctions that tie directly to the flow of electronic information throughout the company. The team ensures availability and accessibility to data for internal and external consumers with an authorized need for it.

Procurement

Even for small companies, there is a need to buy supplies, establish contracts and vendors, and conduct supply chain management. Therefore, the procurement team has buyers who solicit vendors and prepare invitations for bid, also referred to as requests for proposals. Procurement also maintains inventory controls, develops specifications for purchases, and negotiates the prices for those purchases. Procurement is closely connected to operations, as business lines may not be able to function properly without certain supplies, putting the organization at risk of failing to deliver its intended good or service.

Products, Competition, and Culture

HR professionals must also have situational awareness of the product lines of a company and the competitive environment. Competitors will also compete for human capital as well as market share. HR professionals should understand how having a competitive advantage helps the business achieve its goals. The operating environment will have impact on wages and the availability of skilled labor especially. How the company establishes its corporate culture will address many operational issues, including processes, safety, and security, and the use of technology throughout the organization. Another key business element is the overall demographics of the stakeholders. Diversity improves an organization. The demographics of a company will have some bearing on how training and development, planning, and acquisition are done within the company and how employees are able to meet the goals and objectives of the company.

Technology to Support HR Activities

A variety of technology tools can support HR professionals in accomplishing the tasks to be performed. In general, a human resources information system (HRIS) is the electronic hub to store, access, and analyze HR data about employees in the organization and effectively provide accurate reports to decision-makers. There are many vendors and programs that can be used to accomplish this, and the choice largely depends on the size and type of organization. These systems range from storing basic personal data all the way to massive databases with thousands of fields. Obviously, the more complex a system, the more training involved for the system users, and the greater need to ensure data accuracy. Many systems have a self-service function that allows the individual employee to update certain elements to increase the timeliness and accuracy of the data being stored. It presumes that an employee entering information such as home address is more likely to be accurate with their own information than someone performing data entry from written information on a paper form that must be transposed and uploaded to a digital record.
The data that is stored is used to provide reports and analysis on the current status of the human capital and to make projections about needs in the future. HR professionals must know how to use these systems to compile data and prepare the information for executives and managers to use effectively in making decisions. Routine reports are created that can show trends and forecast demands. Effective data reporting and analysis is a key skill to possess.

Qualitative and Quantitative Methods and Tools

Qualitative and quantitative methods and tools are needed for analysis, interpretation, and decision-making purposes. A simplified way of understanding these concepts is that qualitative information answers the question “How well?” and quantitative answers “How much or how many?” Two important questions for HR to understand are the following:
- Are we doing the right (proper) things?
- Are we doing things right (correctly)?

To answer these questions, HR professionals have a variety of tools and measures they can use. They establish metrics with benchmarks to measure performance and effectiveness in core competencies throughout the organization. They use methods such as cost-benefit analysis, discussed later in this guide, to determine whether a course of action will provide sufficient return on investment (ROI) to overcome any possible negative consequences to that same decision. Finally, HR professionals can examine and understand financial statements to measure recruiting costs, payroll expenses, benefits, and other costs that impact the profitability of the company and make recommendations or adjustments to improve the financial position of the organization.
Quantitative methods include mathematical sets such as statistical averages, regression analysis, or standard deviations. These formulas are tools for HR professionals to determine average salaries in a pay group, the relationship of variables such as education level to starting salary in statistical modeling, and the range and distribution of salaries in a pay group.

Communication Skills and Strategies

Communication is a critical skill in HR. HR professionals must be well versed in the variety of strategies available to send and receive information and provide feedback. Communications consist of verbal and nonverbal cues that individuals interpret through the filter of their experience and can sometimes distort through prejudices or biases that may exist in the receiver. How the communicator presents the information can also have a profound impact on the reception. For example, a message sent by email is received differently than one communicated by telephone or in person because of a lack of nonverbal and visual cues that are not conveyed in text. There is often no emotion or timbre in a written communication that is more apparent in direct visual or auditory communication. The following are some other considerations for communication:
- Collaboration (communicating with a group and sharing complex ideas across a multitude of media)
- Presentation styles (how mannerisms, voice inflection, tonality, and wit or humor can affect the message being delivered)
- Sensitivity (delicate topics require a different approach and understanding of how the audience will be impacted by the subject matter)
- Language barriers (especially in multinational or multilingual environments)
- Speaking style (being clear and concise)

Employee Communications

Getting information to the employee is a continual challenge for HR professionals. HRISs often have a communication feature such as email notification, but that is not a complete solution. A company must make a deliberate effort to reach their employees and provide current information on the current state of the business. One effective method is the use of employee newsletters. A newsletter can be digital or hard copy, but the important factor is that relevant information is presented in a timely manner to the employees. These are some topics that may be of interest:
- Upcoming events
- Welcoming new employees
- Announcing rewards and recognitions such as promotions or awards for performance or contributions
- Changes or clarification to policies or procedures
- Information on benefits programs such as open enrollment
- Employee assistance program information to help improve the resiliency of employees

Change Management Theory, Methods, and Application

Organizations must adapt to grow and therefore must change. Consider the last company to make horse-drawn carriages; they might very well have been the best maker of such transportation. However, with the creation of the automobile, their function became obsolete. Technology changed the needs and demands of the market, and any company that failed to change lost its business. It is easy to accept that things change; however, the reality is that managing change effectively is difficult. HR professionals must understand how to manage change as a process and function of the company.
There are numerous change management theories. Among them are Kotter’s theory, Lewin’s change management model, and nudge theory, to name a few. For some examples and explanations, refer to https://www.process.st/change-management-models/. It is not important or required to know the intricate details of all change management theories, but there are similarities among them that should be reviewed. In general, the organization recognizes a need for change and a desired end state once the change is implemented. Next the organization must prepare for the change and communicate the significance and importance of the change to the employees to gain support and momentum to adopt the change. Then the company implements the change and must include a process to evaluate how the change is being received and integrated into current operations. Finally, the company reaches a new stasis having fully accepted and assimilating the change. This process continues as the needs for change keep presenting themselves.

Uncertainty and Unclear Situations

You often may be in a volatile, uncertain, complex, or ambiguous (VUCA) environment. This VUCA world we live in requires flexibility and the ability to adapt to changing surroundings. Effective HR professionals will anticipate needs of the company, as they are able to sense environmental changes that will have strategic impact. One of the most significant skills required of HR professionals is to see gray areas and not so much black and white. Every decision about human capital will have lasting effects and potentially unintended consequences. As these will develop rapidly, HR professionals must be timely and responsive in even the most unclear situations to act decisively.

Risk Management Techniques

A core knowledge point is to understand the choices an organization has about risk in general. These risk management techniques define how an organization will proceed to address the risk once identified. The general choices are avoidance, mitigation, transference, and acceptance. Each of these choices seeks to address the risk in a manner that is acceptable by the company and is consistent with the organizational values.
In avoiding risk, the company elects not to pursue a goal or perform a task because the risk is too great and cannot otherwise be resolved. While this is an option, it comes with the loss of an opportunity to benefit from a positive outcome. Generally, however, the choice to avoid a risk may come after a risk-reward or cost-benefit analysis and a determination is made that the risks far outweigh the potential positive outcome, which is not assured. Mitigation is most often the choice agreed upon by an organization. The company seeks ways to reduce the identified risks through the implementation of controls and measures, while leaving a residual risk. It is impossible to remove all risk in this case, but with mitigation, the risk is now below the value of the positive result expected and can be supported in a business decision.
Transferring risk is not mitigation because the total risk is still present. However, the area exposed might be different and therefore have less impact to the overall organization. Insurance is an example of risk transference, in which a company hedges against loss by providing a premium to a provider that calculates the likelihood of loss. Workers’ compensation insurance and employer group health coverage are examples of transferring risk to employees and the organization.
The final option is acceptance, which means that the executives responsible for decisions in the organization have underwritten the risk as a function of the work to be performed and are fully aware of the consequences of a negative outcome. Ultimately, any residual risk falls in this category regardless of the other three choices. It is imperative that HR professionals understand that they must identify risks to the organization related to HR actions, but that it is a function of the executive to choose to accept that risk. The largest danger is that they are often underwriting risk that they do not fully understand or are not aware of.

Exam Tips:

Know how the mission, vision, and values of a company interrelate. Companies exist for a purpose, usually to deliver a product or service to a consumer. When the company is organized, the executive team charts the course of the company defining these three elements. Often, they come in the form of a statement or summary, but what is essential to understand is that the actions of the company are what define these concepts, not what it says on paper. You should review your company’s mission, vision, and values as well as other organizations’ and look at how each organization defines its own purpose.
Review core business concepts and functions. One of the greatest criticisms of HR professionals is that they lack common business competencies and view HR in isolated terms. It is important to review each of the functions of business and how they impact HR and, more importantly, how HR impacts them. Pay particular attention to those functions in business such as accounting that have mirror processes or are closely related to HR functions. The more general business knowledge you possess, the more fluent you will be in terminology and concepts.

Responsibilities

The PHR® exam asks questions related to the responsibilities of an HR professional. These are the tasks that someone in human resources does each and every day. In Functional Area 01: Business Management, these tasks relate to the business environment and how to interpret and apply information related to industry best practices. HR professionals are expected to reinforce the core values of an organization and understand the needs of stakeholders. They implement best practices to reduce the risk profile of the company and help measure the success of the company by determining the significance of data related to organizational strategy.

Assess the General Business Environment

HR professionals have the responsibility to gather information about the general business environment and examine industry best practices and use that information to improve conditions within the organization through establishment of policies and procedures that effectively manage the human capital. They must use their knowledge to interpret the significance of available data and use critical thinking to apply the information to organizational practices.

Gathering Information from Internal Sources

As an HR professional, you are part of a network within the organization that optimally should be working to achieve the same goals at the strategic level. Each department within the organization should be integrated and collaborate to ensure that tasks performed by the individual support the team, department, division, and organizational goals. When the executive or C-suite is developing these goals, it is important to get input from all elements of the company.

The following departments and functions are potential sources of internal information:
- Information technology
- Marketing
- Finance and accounting
- Operations
- Business development
- Sales

The departments provide quarterly reports and forecasts, business projections, budgets, new product information or programs, and other internally generated data and metrics that are indicators that drive human resources decisions. Each division has different functions and will bring different viewpoints to the meeting, which can help the organization grow.

Real World Situation: Technology Improvements

A company has as one of its strategic goals to use modern technology to improve its operations. The executive director wants the company to offer telecommuting as a way to hire and retain top talent but is concerned about how the practice will work and the overall impact to operations. The organizational leadership works together to facilitate this change across the agency.
The information technology department must look at the security implications of remote users using a virtual private network (VPN) to access the network and the increased demand for laptops and other equipment the organization must provide to users who will be doing telework. This may require the procurement department to acquire new equipment that meets certain specifications. Finance will be involved as the change will have repercussions on the budget, and HR will develop policies for the agency to follow and training for managers on how to lead teams remotely to adapt to this new way of doing business.
Each area contributes and brings key pieces of the puzzle without which there could be unforeseen risks or gaps that could negatively affect the overall business. The outcome of an orchestrated plan supports the vision of the CEO or director and can be directly tied to a specific strategic objective or goal.
The information that a human resources professional has access to within an organization can be used to interpret data and make recommendations and decisions that affect the company. HR uses information gathered from reports produced by the finance department, marketing, sales, operations, information technology, legal, and others. HR experts must know how the different business units fit into the overall organization. By understanding these internal customers’ needs and objectives, HR can provide timely and relevant support that enables the company to achieve its mission.

Gathering Information from External Sources

While an HR professional can use information gathered from internal sources, many factors are beyond the control of an organization and will over time greatly impact its success. These external factors come from a variety of sources, and as an HR professional, you are expected to know how to interpolate the data and make inferences about how it will inform practices and policies within the company.
A great example is to look at regulatory changes from the government. In 2016 the U.S. Department of Labor announced a final rule change to the administrative test for exemption to the overtime rule of the Fair Labor Standards Act. The previous rule had a salary threshold of $23,660, regardless of the type of work or position that would otherwise qualify an individual for exempt status under the rule. This regulatory change proposed to move the threshold to more than $47,000 and further benchmark the amount to 40 percent of the median wage of the United States, which would automatically place thousands of workers in a nonexempt status, thus making them eligible for overtime pay. This one regulatory change could have affected hundreds of companies across the country and would have ramifications on workforce planning, compensation and benefits, and policies and procedures, and it could alter strategic plans. If a company wanted to hire or expand operations as part of its strategic goals and objectives, this cost of labor change as a result of the regulation could impact that goal. While HR professionals do not have a crystal ball and cannot always know what external factors will change, they must be aware of and responsive to the potential for change. Staying informed and current on HR regulations, networking with other HR professionals, and following changes in industry practices will help ensure that such environmental changes don’t disrupt the organization.
 

Here are environmental scan areas to consider:
- General business environment
- Industry practices (sometimes referred to as best practices)
- Technology changes
- Economic outlook
- Labor market
- Legal and regulatory environment

Communicate Values

Communication is a big responsibility and obligation of HR professionals. At the strategic level, this means communicating values. HR professionals through word and action will communicate with employees and managers about the values espoused by the company. They must faithfully adhere to these values they present so as to provide a clear and consistent message to the intended recipient.

Communicating Core Values

A key responsibility of HR professionals is to facilitate the development and the communication of the organization’s mission, vision, core values, and ethical behaviors. The modeling of these behaviors and the representation to the employees are critical requirements. Values and ethical behaviors must be consistently conveyed across the organization. The company values must be reflected in performance management systems, policies, and practices so that employees that exhibit desired behaviors are recognized and rewarded.
Values can be communicated through company internal communications such as employee newsletters. They are embedded in company training and onboarding practices. As part of the formalized decision-making process of the company, the company values should be considered to ensure that choices reflect the ethos of the organization.

Coaching and Modeling Core Values

Once the values of an organization have been communicated across all levels consistently, the HR team plays a key role in helping managers coach their employees and model the values of the company. Coaching is a different strategic capability and is defined by how effective a leader is at motivating, encouraging, and disciplining their followers to strive toward a common goal.

The table below shows a variety of methods of influencing individuals and groups to act or demonstrate behaviors. The proper choice is dependent on the situation, the leader, and the followers. Leaders must conduct themselves in a manner that properly reflects the behaviors they want their followers to exhibit.

TABLE: Motivational techniques
 

Establishing Key Business Relationships

Human resources is concerned with maintaining positive, productive relationships throughout a company’s life cycle. From the employee to employer, or stakeholder to executive, or customer to company, the HR functions help build and maintain these relationships. Among the more critical relationships are those that are forged at the strategic level. These relationships serve a high-level purpose to provide insight, access, and ability for the HR professional to influence and shape the company’s direction and maximize the human capital potential of the organization.

Influence Organizational Decision-Making

HR professionals must build and maintain strong relationships within the organization. Decision-makers rely on you to have discretion and maintain confidentiality with sensitive information. Access to key leaders is essential for exerting direct influence over the organizational decision-making process. Senior executives are more likely to share their thoughts with someone observed to be technically competent, honest, and trustworthy.

Integrity is essential for any HR professional.
- Be approachable and open
- Maintain confidentiality
- Actively listen to concerns and issues
- Offer technically sound analysis
- Stay within your scope of responsibility and expertise
- Be professional

Successful HR professionals have a high degree of skill with interpersonal communications. They understand organizational behavior and can evaluate personal motivations and emotions of others. They have strong emotional intelligence. This is not to say that all HR professionals are “nice” or “people friendly.” In fact, there are several parts of HR that are certainly not “nice” (like having to terminate an employee). What they are is empathetic to the situation.
HR professionals use referent or expert power to influence others. Managers and executives see them as subject-matter experts and rely on their judgment in situations involving the human capital of the organization.

Review the following observations to determine the strength of the relationship:
Access Do you have access to the key individual(s) making decisions? If your information and analysis are going through a filter process and there are layers of bureaucracy or intermediaries between you and the key decision-maker, it is unlikely you exert a great deal of influence over their decisions.
Support Do key leaders support your initiatives and decisions? Are recommendations made by you implemented? Or even better, are you given autonomy to implement certain decisions that have been delegated to you by executives? Good HR professionals will have great support from those making decisions. They will acknowledge your expertise and advise others to bring concerns and issues to you for advice and counsel. Your sphere of influence grows with more support by decision-makers.
Candor Do you filter comments and advice to shape what you need to say because “the boss” isn’t receptive to hearing it? HR professionals must speak their minds but tactfully. Dissent, in most cases, does not equate to disrespect. Sometimes HR must tell decision-makers the hard truth about the situation from the human capital perspective. If you feel you cannot be candid for fear of the reaction or response, your ability to influence the situation will be diminished. Otherwise, you will second-guess what information to provide and when; over time this will erode confidence in what you are saying.
Communication Closely related to candor, communication refers to the means of and frequency of the flow of information. Are items expressed in formal communications with memorandums and carefully worded emails? Is there informal, more frequent dialog with influencers throughout the organization? What process is established to ensure feedback and accountability when information is transmitted?

Building Alliances and Networks

A key responsibility for an HR professional is to establish relationships with individuals and groups external to the organization. The field of human resources is complex and constantly changing. While certified professionals are expected to know much, they are not expected to know everything. Only through building relationships and alliances with others can you help the organization achieve its strategic goals.
Community Partnerships Community partnerships are important for corporations, especially those that have a large impact to the economy, labor force, or environment. Even small companies can belong to a business coalition that seeks to improve a local community or neighborhood that supports and hosts those businesses.

These are types of community partnerships:
- Civic: Government leaders, law enforcement, civic groups, community organizations, local community colleges
- Business: Chamber of Commerce, business coalitions, job training centers, benefit providers (healthcare, retirement)
- Nonprofit: Charity organizations, religious centers of influence
 

Corporate Responsibility Corporate responsibility is the self-control regulating mechanism by which modern businesses operate. There are many instances where although a corporation is permitted to (may) do something, its corporate responsibility dictates otherwise (should). There are several factors to consider including the spirit of a law or regulation, the ethics of a situation, or the impact to a social compact or the environment. A company with a strong sense of corporate responsibility views itself as part of the community and understands that business decisions do not occur in a vacuum. It serves as an internal control that allows a business to function within acceptable social norms.

Best Practices to Mitigate Risk

As a key advisor to the organization, HR professionals must identify and manage risks associated with human resources. It is helpful to understand enterprise risk management (ERM) and the process to identify risks, reduce hazards when possible, implement control measures, and evaluate the entire process.

The table for risk (see below) shows criticality versus likelihood of occurrence. To show where risks are low, moderate, high, or very high, the risk is measured by how likely or often it may occur in a given situation and then if it occurs, how significant the loss to the organization would be. This is important because sometimes implementing a control might be more expensive than the cost of the loss if it happens.



FIGURE: The risk table


Human resources will develop policies that contribute to protecting the organization from potential risks. While some policies, like safety protocols, are more obvious when thinking about hazards and danger, ERM is not confined to physical hazards or Occupational Safety and Health Administration (OSHA) regulations. Any internal control might be protecting the company from loss or damage. Today, information and specifically personally identifiable information (PII) is valuable and highly susceptible to loss or theft from a company. Privacy policies that control access, storage, and transmission of data are forms of internal controls that mitigate risk.
As part of risk management, HR must establish practices and follow policies that are consistent and compliant with laws and regulations. This is to avoid possible litigation or at a minimum make such lawsuits unsuccessful. Lawsuits from former or current employees because of inadequate practices or flawed policies can pose a threat to the company’s financial stability.
Note: Risk can be internal to the company, such as insider action by employees or unwittingly facilitating access to sensitive information through negligent practices. Risk is also external through outside actors that intend to harm the company such as thieves, hackers, or corporate espionage for trade secrets. HR must have internal safeguards and measures to secure the company from both types of threats to the organization.

Data Analysis and Organizational Strategy

One responsibility of the HR professional is to determine the significance of data for recommending organizational strategies. The collection and analysis of the data was discussed previously, but once the data is collected, the HR professional will determine how this information is relevant and present the information in a concise manner so that executives can make decisions. Many metrics show an overall view of how effectively the company is maximizing its human capital potential.
For example, the attrition rate of the company, or how often employees separate and leave the organization, is useful to determine if the right individuals are being hired or if there is a training gap that causes managers to prematurely terminate an employee. Other metrics, such as diversity in hiring practices, are required by law but also provide insight into how the company selects its employees.
Time to hire and time to fill will allow the company to evaluate the timeliness of the recruiting process, which may be internal or external or a combination of both. Of course, once onboarded, employees will require training and the success of such can be evaluated as well.

Exam Tips

Know how to gather information about the general business environment from internal and external sources. Be familiar with the variety of sources of information and how to extract data and conduct analysis to provide a common business operating picture to executives. Be able to identify best practices in an industry and determine how those practices can be applied to your organization.
Know the importance of key business relationships. Understand the significance of building and maintaining strong relationships both internally and externally to the company. Be able to influence decision-makers and assess the strength of business relationships. Also, know the importance of corporate responsibility and community involvement.
Know practices and methods to mitigate risk. HR professionals should know sources of potential internal and external risk to a company and how to mitigate them. Be familiar with proper procedures to reduce a company’s exposure to litigation related to HR practices. Protect personally identifiable information of employees from unauthorized disclosure.

Summary

Embrace the business; then embrace the job. Being an effective HR professional requires an understanding of basic concepts related to business and management. The PHR® exam will test your knowledge and experience in business matters. Mission, vision, and values are translated into strategic goals and objectives. These goals are the foundation for policy, programs, and processes throughout an organization, many directly tied to various HR practices. As one of the organizational leaders, an HR professional must know and demonstrate the desired behaviors of the company reflective of the values it shares with employees. Finally, an HR professional constantly evaluates the effectiveness of the organization through metrics.

Tip:

Review your company’s mission or vision statement and any related information on company values. Look for links to HR policies and practices that are directly attributed to these statements or values and the overall impact to business management they have. However, when looking at questions during the exam, read the questions carefully. Many times, answers to a generic question may not be exactly how your company chooses to operate, so be careful of the variations.