Conducting HR Audits: Beyond The Concerns of Only HR Compliance

Every business needs to complete periodic HR audits, regardless of the size of their organization. You may need to do so as part of your due diligence for potential investors or perhaps because you have experienced adverse action against your organization for non-compliance with federal and state laws. An audit is a great opportunity for an organization to measure where it currently stands and determine what it has to accomplish to improve its human resource functions. A HR audit ideally is done by an outside authority who does not have a personal stake in the outcomes of the audit; by someone who can be unbiased and objective. It involves reviewing all aspects of human resources; ensuring employees are all adhering to all government regulations and company policies and procedures. Many organizations view completing any sort of audit as a headache and distraction from their day-to-day business. But, in fact, audits, and HR audits in particular, can mean the difference between profit and loss. Think of them as an opportunity to find out what is in perfect working order and what needs fine tuning or completely revamping. If done systematically, audits are not too time-consuming or arduous.

You can approach an audit from several different evaluation perspectives or a combination therefore: comparative, statistical, compliance and management by objectives. Your source of information for the comparative approach will require you to use another organization as a model. The results of your audit will be compared to that of the model company. To effectively use the outside authority approach, you will need to engage an experienced consultant to benchmark your results to the set standard/HR best practice. In using the statistical approach, statistical measures of performance are developed, e.g., absenteeism, employee turn-over rates, etc. based on your organization’s data. You will use this data to assess performance and make appropriate changes to policies, practices and procedures, etc. The compliance approach requires you to evaluate your organization’s policies and activities to ensure legal compliance. When using the management by objectives (MBO) approach, you will measure actual performance as it compares to your organization’s objectives. Let’s take a closer look at the MBO model for HR auditing.

You will want to evaluate your organization in the following areas:

1. Legal Compliance
2. Policies and Procedures
3. Workforce Review / Talent Management
4. Recruiting / Employment Practices
5. Compensation and Benefits
6. Communications
7. Employee Relations
8. Training and Development
9. Performance Management
10. Record Maintenance / Information Systems
11. Terminations

Managing by Objectives Approach Guidelines

Define the audit process by creating a definition of desired practices with your organization’s objectives.

Review the legal requirements and programs that must be evaluated and make a list of them. Determine in what ways the HR function can support your organization’s initiatives and goals. With your list, write a statement about each practice you want to define, better define, and/or possibly redefine. For example, your organization has an issue resolution process in place that is well understood and used by employees; new hires complete an orientation that includes company policies and procedures within their first week of employment.

With the list of statements for each area (1-11), assess current practices objectively. Look for evidence that supports or contradicts each statement. This evidence may come from your current policies and procedures, feedback from your employees, and/or reports made by regulatory agencies. Your assessment will make it clear if a definition must be modified.

Pay attention to the strengths and opportunities for improvement because patterns will appear in certain areas of your evaluation. Give yourself a pat on the back for areas that are stellar and create an action plan to deal with areas evidencing weaknesses. Prioritize your results. Obviously if your organization did not do well in areas concerning legal compliance, training and development will need to take its place on the back burner for now. Your organization’s priority may also be determined by the amount of time it can allocate to completing the action steps and by what items on the action plan will have an immediate and noticeable impact on your customers, employees, and your bottom line. While tackling those areas that you have assigned as priorities, do not neglect the areas that have been performing well. Remain consistent and your organization will be well on its way to creating and maintaining best practices for years to come.

To learn more about Hureco Maverick’s HR Auditing services or for help with HR Compliance topics, drop us a line or call today!

About the author

Tamsin is a senior manager at Hureco Maverick; she is also a coffee lover, cruciverbalist, altruist, and advocate for corporate social responsibility and volunteerism.

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