HR Audit: An Essential Improvement Tool

The HR (human resources) function has evolved and broadened in scope and functionality and has assumed varied roles such as the “people’s people,” “change agent,” and “strategic business partner,” to name a few. These new approaches to HR have opened new horizons for the HR function and have given HR professionals the opportunity to establish better credibility both at the strategic and functional level.

The role of HR function has changed dynamically. However, there is always room for improvement which can’t be ignored. For HR, the diagnosis of improvement areas can be done through one essential tool: the HR Audit.

At times, HR and internal audit professionals miss opportunities to add value to their work because they don’t fully understand one another’s areas of responsibility. But when HR and internal audit find ways to work together more effectively, the gains for both are substantial.

 

It generally covers three important areas: HR policies and practices; HR professionals; and HR department. These three broad categories of the audit tend to find out the current state, the gaps between the current and desired states, their link with the overall strategy and the compliance level with the laws and regulations.

 

Auditing HR Policies & Practices
Audit of the HR policies and practices is the assessment and evaluation of the conventional HR practices being followed in an organization. These include:

  • Workforce planning:Assessment of existing resources; future personnel requests; analysis of succession plan; and staff turnover analysis.
  • Staffing: Assessment of methods and procedures used in recruitment; recruitment costs; recruitment efficiency in filling vacant positions; efficiency of selection procedures.
  • Performance management:Analysis of methods used in the personnel assessment; assessment of results and effects of the personnel evaluation process.
  • Training and development:Analysis of targets and forms of training; study of the training program; assessment of personnel after completing training; the efficiency and results of the training program; analysis of development system of personnel in the organization; job analysis; analysis of the plan for personnel development.
  • Compensation and benefits:Analysis of motivation forms; their relationship with personnel motivation; analysis of the level and structure of compensation.

Auditing HR Professionals: Developing an HR Competency Model
Audit of HR professionals in an important parameter of HR audit, as it assesses their competence. To carry out effective audit of HR professionals, a competency model must be developed, along with behavioral attributes that complement these competencies and indicate a successful HR professional. Different tools can be used in collecting data that identifies the extent to which the modeled competencies are exhibited by the HR professionals. The results obtained should be quantified in order to have a clear understanding of the strength areas and areas that need improvement, based on these figures further action plan can be devised on how to overcome areas for improvement.

Auditing the HR Department
The audit of the HR Department is an integration of both the HR function and HR competencies. It also involves a more numeric analysis of the HR department in terms of the ratio analysis, the cost and expenditures associated with HR. The audit process for HR audit is similar to that of any other audit. It includes; defining audit scope and objective, assessing current practice, analyzing results, action plan, reporting to the Management.

HR audit can be a powerful lever of change for the human resource department in any organization. It allows an organization to assess and evaluate any gaps or potential risks and increase the commitment. By making the HR audit a part of the audit cycle of the organization, the human resource department can transform itself from the organization’s “evil” to the “People’s Hero,” and from a “soft area” to a credible, strategic business partner.

-Dheeraj Swami, ShineWing India