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Compliance is an HR Concern too!

What a few weeks it has been for Yahoo! As the company was settling into its fifth CEO in five years, activist investor Daniel Loeb uncovered the fact that Scott Thompson had, let’s call it “misinformation,” on his resume.

By now this topic has been covered by the media around the globe, has trended on Twitter and been blogged about relentlessly.  Board member Patti Hart stepped down as a result of her lead role in the recruiting of Thompson and more recently Loeb’s hedge fund Third Point received three seats in the Yahoo board room.

But in all of the mudslinging it seems that there has not been much discussion about the underlying processes (or lack thereof) that allowed Thompson’s error to exist for so long. What I refer to here is a topic that has also been extremely newsworthy of late and that is compliance.

Compliance can mean a number of things and is usually discussed in relation to financial issues and internal audits within a company. However compliance is of great significance to the HR function as well.

In 2006 The Bureau of National Affairs published a paper, “Sarbanes-Oxley Act: HR’s Role in Ensuring Compliance and Driving Cultural Change. It contained an extensive discussion of HR’s important compliance role in a post Sarbanes-Oxley business environment.  The paper states: “HR processes can tighten the bottom line, mitigate risks of legal exposure, reduce costly turnover, and improve corporate morale—or expose the business to financial and reputation losses if proper controls are not in place.” So where was all of this in the hiring of Scott Thompson at Yahoo or even at his former employer, EBay?

Many companies have a hiring process compliance checklist that enumerates all of the checks and balances that must be completed when making a new hire. This checklist can include specific interviews that should have taken place, a methodology for reference checking and hopefully a mechanism for degree verification. While some aspects of the hiring process can be laborious, degree verification is a simple and typically streamlined activity. A quick look at several college and university web sites reveals explicit instructions about degree verification and the common promise that it can be completed in 1 business day.

Systematic compliance practices for HR functions creates a structured and organized hiring process in which errors have a way of being recognized before the investment in a new hire is made. Hopefully, this will be amongst the lessons learned from the Thompson debacle!