Introduction to Risk Management

Human Resources Issues

Human resources are both a source of risk and an important part of the strategy for dealing with risk. At the core of dealing with that risk--and that potential--is your approach to managing people.

Most families that successfully work together have evolved a good management system, although they usually don"t think about it as a management system. Their system flows from the inter-dynamics of lifetimes spent together, of giving and taking, of listening to and respecting one another. But, even small family farms can benefit as much as large operations from clearly defining how plans and decisions are to be made for the business.

Involving everyone, family and outside employees, in the planning process can create a sense of group ownership of the goals of the organization. Workers who understand why and how decisions are made, and exactly what their responsibilities are, will see opportunities for the organization and for themselves inside the organization. Formalizing planning and management can improve safety performance and reduce legal risks arising from employee relationships.

Human resource management is best viewed as a process. Seven functions describe that process:

1. Job analysis and job descriptions,
2. Hiring,
3. Orientation and training,
4. Employer/employee interaction,
5. Performance appraisal,
6. Compensation, and
7. Discipline.

You can learn more about these functions--what is expected from you and what you should expect from employees--from your local library and from your State cooperative extension service.

Remember, hired labor is not the only component of your human resource team. Family, managers from outside the business, consultants, and external advisory committees can also be a part of your team. It is important that everyone on your management team understands your risk management tools.

Human resource calamities can hamper even the most carefully made and appropriate risk management decisions. Those calamities include divorce, chronic illness, and accidental death. Your risk management plans should anticipate the likelihood of human resource calamities.

Remember, risk management strategies are implemented through people. Every manager's job description should have explicit risk management duties and delegations of power and authority to manage risk.

Identifying risks and strategies for managing those risks is an important part of business planning and can give employees confidence in their own long-term future with the organization. That is especially true of family members. For family members, business planning should inevitably lead to estate planning.

• Helps everyone focus on the right priorities.
• Allows the business to function during the illness or absence of a key person.
• Gives employees a better opportunity to plan their own lives.

Estate planning is the process of planning for the final disposition of your life's work. Will the distribution be fair and according to your desires? Life will be tough enough for your family and business partners after your death without leaving tough decisions for them to make. Estate planning is as much for them as it is for your peace of mind. Who should have an estate plan? Anyone with business or personal assets and with responsibility for children or parents should have an estate plan.

• A reduction in estate tax liability, where there is sufficient wealth to exceed the legal life-time limit, thereby preserving more assets for your family.
• Peace of mind for you and your family.
• A distribution of assets which is according to your wishes.
• An assurance that your business will continue with the least amount of disruption.

It's a Whole New Ball Game
Understanding Goals and Risk Tolerance
Understanding Production Risks
Understanding Marketing Risks
Understanding Financial Risks
Legal Issues Associated With Agriculture
Human Resources Issues