The HR audit: an essential improvement tool

Drake Editorial Team

The human resources department is often tagged as an "evil" in the organization by the employees and a "soft area" by the management. Despite these tags, the HR function has evolved and broadened in scope and functionality and has assumed such varied roles as the "people’s people", "change agent", and "strategic business partner". These new approaches to HR have opened new horizons for the function and have given HR professionals the opportunity to establish better credibility, at both strategic and functional levels.

The paradigm of the HR function has shifted from qualitative to quantitative. Today's HR speaks the language of numbers — the same language management speaks, understands, and expects from its HR department, thus giving HR a more strategic outlook. The role of the HR function has changed dynamically. However, there is always room for improvement, which the HR audit can promote.

Auditing is a diagnostic tool to gauge the current status of operations and identify the gaps between what is intended and what is delivered. The HR audit is a systematic process to examine HR strategies, policies, and procedures practised in an organization. Although the HR audit is not a new concept, it is rarely used in an organization’s audit cycle.

The foundation of an HR audit is understanding that the business environment is ever-changing. Human resource processes and practices need to adapt and respond to change as they have an impact on employee morale, performance, and ultimately, organizational competitiveness. The scope of an HR audit is comprehensive, requiring a thorough assessment and evaluation of the HR function, and is not a mere personnel activity.

It generally covers three important areas: HR policies and practices; HR professionals; and the HR department. These three broad categories of the audit can 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.

1. Auditing HR policies and practices

This audit assesses and evaluates HR practices in an organization:

• 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 of 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 the 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

2. Auditing HR professionals and developing an HR competency model

Auditing HR professionals assesses their competence. To carry out an effective audit of HR professionals, a competency model must be developed along with behavioural attributes that complement these competencies to indicate a successful HR professional. Different tools can be used to collect data that identifies the extent of the HR professional's competencies. The results should be quantified to give a clear understanding of the areas of strength and those that need improvement, with a further action plan.

3. Auditing the HR department

The HR department audit integrates the HR function and HR competencies. It also involves a more numeric analysis of the HR department in terms of the ratio analysis and the cost and expenditures associated with HR. The process is similar to that of any other audit, including:

• Defining audit scope and objective: the purpose of the audit and the desired outcomes from the audit
• Assessing current practices: carrying out the audit activities and looking for evidence
• Analyzing results: identifying areas of strengths and areas that need improvement
• Action plan: review and modifications in the overall HR system
• Reporting: assessing the effectiveness and efficiency of areas covered by the audit, areas of concern, and recommendations for improvement to management

An HR audit can be a powerful lever of change for the human resource department in any organization. It provides the opportunity to align HR practices with organizational strategy, identify improvement areas, and keep abreast of current practices. It allows an organization to assess and evaluate any gaps or potential risks, and increases the commitment of HR professionals to continuous improvement. By making the HR audit a part of the audit cycle, 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.
Reprinted with the permission of Hirra Pervaiz, an accomplished HR generalist and manager of HR for Tintash, a mobile and web apps development studio. Contact her at [email protected].

Drake’s HR audit solution can be in-depth and comprehensive, or focused on quickly tackling one particular issue. The audit provides the HR function with an expert view of what it is doing well and where it can improve. An audit can pay for itself many times over by uncovering changes in HR practices that will improve productivity and performance.