Thursday, October 19, 2017

Time for a Tune-Up: The Necessity of a HR Audit

Posted by OnCourse Staff January 14, 2011 1:36pm

Photo Credit: Sailor John

Every 30,000 miles you bring your car in for an oil change and regular maintenance.  Every year you get a physical examination.  Every month you balance your checkbook.  There are some things that we do on a regular basis to help ensure we are up to date (both financially and health-wise), everything is working the way it should, and to evaluate what, if any, changes and updates need to be made so we are prepared for the future.   This concept should be applied to the HR function.  Annual HR audits are like taking your car in for service; you get a chance to see what's under the hood.  Many readers might have asked the following question: So, what? My HR function is not broken and doing a satisfactory job, why should I bother with an HR audit. 

Here is why: The results from the HR audit will identify holes in your HR practices, which in turn will minimize your risk of an Employee Practices Liability (EPL) lawsuit and/or regulatory violations that WILL cost you time and money.   An HR Audit will provide clear guidance on the overall strategy you have undertaken and if your investments are yielding positive or negative results.   HR audits are often conducted on an annual basis or when the organization is in a period of transition.  Does your organization fit any of the following change criteria?

  • Have you grown from 10 employees to 40, where the primary emphasis was on recruiting? It might be time to grow your HR function to ensure compliance with federal, state & local regulations.
  • The organization has outgrown itself and needs to identify key resources to mature.
  • Do you have fragmented practices and want to put in place seamless processes?

If you have answered in the affirmative for the questions above, you should conduct an HR audit.  That was a mere sample of questions your organization can ask. Simply put, is your HR function performing the way you intended it to?  If no, then it is time to conduct an audit. 

The HR audit process consists mainly of two parts:

1.    Evaluation of operational HR policies (i.e., recruiting, employee retention, compensation, benefits, and etc.), and

2.    A review of HR indicators (i.e., turnover, employee satisfaction, absenteeism rates, and etc.).

The HR audit can be structured to focus on compliance, best practices, strategic objectives, or a specific HR functional area.  Deciding what to audit depends on your assessments of where you believe you have gaps, weakness, or an area your organization would like to improve upon. Your HR professional (if he/she is properly trained and can remain objective) or an external vendor can conduct the HR audit.  The model for conducting an HR Audit is much the same as financial audits:

1.    Determine the scope and type of audit.

2.    Develop the audit questionnaire.

3.    Collect the data (from policies, handbooks, hire statistics, employee files, and etc.).

4.    Benchmark the findings (both internally and/or externally).

5.    Provide feedback about the results.

6.    Create Action Plans.

7.    Foster a climate for continuous feedback and process improvement.

Once the audit is completed and reviewed it is important to take action based on the findings.  You will need to take steps to ensure the results remain confidential and that privacy laws are adhered to and followed (especially regulations concerning HIPAA and The Fair Credit Reporting Act).  Critical needs should receive the highest level of priority with the HR audit acting as a blueprint for further change.  Once a new course is set, your internal resources should be able to implement the change or, if it is not part of the core competencies of your organization, outsourcing the task might be an option.

Just like getting a physical or taking your car for regular oil changes, an HR audit will help keep your organization healthy and on the right course.

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