No one is surprised when the financial function of an organization goes through an audit process. It’s standard practice. However, when it comes to the human resources function, not so much! As much as business intelligence and the perspective about the human resources function have changed over the years, the fact of the matter is, human resources departments are still significant cost centers. If there ever was a reason to audit a function or process, money or cost would certainly rank pretty high as a reason to proceed.
Beyond the cost factor and the importance of managing people, an HR audit helps your organization ensure that a strategy to increase investment in human resources and people is beneficial and aligns with the organization’s strategic goals and objectives. An HR audit ensures that your business is compliant with ever-changing rules and regulations related to human resources policies and is utilizing best practices to maintain or improve competitive advantage. An important component of the human resources function is risk management and conducting an HR audit ensures that human resources is compliant and managing risk effectively – in other words, doing its’ job and providing people risk management for the organization. An HR audit gives you a picture of the value of HR to the organization; where the function excels and where effectiveness can be improved.
So, how does one go about conducting an audit of the human resources function or department? First, talk to the staff in the human resources department to introduce the concept of an independent review and the benefit to them. No one enjoys being put under a microscope so be aware of how the staff might react and feel about the audit process. The goal is to have human resources staff on-side and not feel defensive and resistant. Sell the audit by focusing on the benefits to the human resources department, involving them in the identification and selection of an internal or independent auditor, and encouraging them to participate in the development of the audit plan.
The audit plan is a critical component of the audit process and serves as a communication tool and a road-map for the audit process. The audit plan typically clarifies the scope and type of audit, includes the development of an audit questionnaire to gather information from stakeholders, identifies the processes to collect data and conduct a review a sample HR related documentation and policies, outlines the approach to assess compliance requirements and a best practices, and identifies the various HR metrics that will be used to measure the effectiveness of HR. Following completion of the audit, feedback that identifies strengths and opportunities for improvement is provided to the HR department and senior management team. The final step is taking the recommendations for change and developing an action plan for moving forward.
Often, people in an organization view the auditing process with suspicion and even fear as to what will be found. However auditing the HR function provides confidence to senior management and HR that the human resources function is managing risk and doing its’ job effectively.