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 The Society for Human Resource Management (SHRM) defines an HR audit as “an intensely objective look at the company’s HR policies, practices, procedures and strategies in order to protect the company, establish best practices and identify opportunities for improvement.
Conducting a thorough review of the “current state” of HR practices and results will help the HR consultant assess the effectiveness of the operations as well as the alignment of specific practices with strategic organizational goals, and legal compliance.
Usually an HR compliance audit will consist of two key elements:
- Evaluation of the organization’s operational HR policies, practices and processes and their effectiveness in achieving strategic organizational goals related to activities such as: employee relations, retention, performance management, hiring, training, etc.
- Assessment of current HR metrics for reasonableness and results. These metrics might include indicators such as time to fill a new position, turnover, employee satisfaction, etc.
The Process As the audit process has grown in complexity, more HR organizations have moved to enlist assistance from an external HR consultant to lead their audit process. Engaging with the consultant, the organization will first clarify the scope and the purpose of the audit.
There are several types of audits that can be structured to occur on a rotational basis, or in one big project. Naturally the constraints of time, budget and staff will help to dictate what is right for your organization. Examples of the types of audits to consider might include: Compliance – As expected, this audit focuses on how well the company is complying with current federal, state and local laws and regulations. This audit may also anticipate and make recommendations for processes that will be impacted by pending legislation; and may include a review of compliance with the company’s Code of Ethics. Best Practices – This audit compares the current practices of the organization with those of companies identified as having exceptional HR practices. Strategic – Takes an overall view of HR functions and the strengths and weaknesses of each. This audit aligns with the organization’s strategic goals. Function-Specific – Targets a specific function of HR, i.e., Job Classification and Descriptions, Personnel Records, I-9 Documentation, etc.
After the scope is confirmed, the consultant will begin to work with the HR Director or Manager to gain access to all documentation related to the scope. For example, the consultant will most likely review current copies of the:
- Employee Handbook
- HR Operations Manual
- HR Policies and Procedures Manual
- Personnel Files
- I-9 Files
- Affirmative Action Plan
- Orientation materials
- HR forms, such as employment application, disciplinary notice, time reporting documents, requests for training, etc.
- EEOC claims
The review of the related documentation will aid the consultant in targeting specific files and practices the consultant will audit through personal interviews and/or observations of actual employer/employee interactions. In addition, the review of these documents will assist the consultant in completing the questionnaire to be used in one-on-one interviews to gather manager and employee understandings of policies and practices. Depending on specific needs of the organization, the consultant may decide to do an on-line survey to gather specific information relative to the audit, or may find it appropriate to conduct focus groups to gather data.
Once the data is collected, the consultant will analyze the various elements in evaluating the HR organization and its practices against the audit objectives. In addition, the consultant will note any gaps between the current state and benchmarked practices and recommend steps the organization should consider for making improvements.
Taking Action Once the consultant has presented the audit findings to the HR professionals and senior management, the next step is to aid the team in developing a roadmap of actions to be taken to close the identified gaps. Audit results should also be shared with the members of the HR team, and employees in general, so they are aware of what came out of the audit – what’s working, and areas identified for improvement.
As with any organizational change, the process lays the ground to complete the audit emphasizing the importance of continuous improvement. The audit process is a great way for the consultant to transfer knowledge and skills to the HR team and for them to use that knowledge to improve processes and procedures going forward. Depending on the organization’s relationship with an employment attorney or inside counsel, it may be helpful to designate someone on staff to monitor legal developments to ensure future compliance. Being a member of SHRM is an excellent way to accomplish this.
Moving forward with the audit findings and recommendations, the senior management team will want to ensure that the HR metrics continue to be relevant to organizational strategies and goals. Collecting data on Health Care Cost per Employee is a meaningless activity unless someone is using that information for analyzing employee benefit costs. Be careful that your organization doesn’t fall into the trap of continuing to measure a factor that is no longer considered relevant by the management team. Be strategic with the metrics and align them with the key objectives they relate to.
The time and cost of the audit will depend on the scope and size of the organization. However, you can be assured that the audit will cost less than defending the organization in court with a team of attorneys. |
