First Person: The Benefits of a Human Resources Audit

Regardless of the type of company or the size of the human resources department, an audit of this function is a straightforward and comprehensive instrument to investigate, evaluate and determine areas for improvement of the efficiency and effectiveness of this function.

The auditing of the efficiency and effectiveness of the human resource function and its related process in an organization can significantly contribute to the success of a company. One of the key success factors of a human resource audit is that it should be a Risk-Based Audit that is properly planned and approved by a suitably senior manager in the organization. It may also be wise to include the internal audit department in at least the planning of the audit.

If the human resource audit is structured and executed correctly it will provide vital and essential feedback in connection with the contribution that the human resource function is making towards the achievement of the organization's business objectives and to what extent this department is a strategic business partner.

The Process

The human resource audit, like most other audits consists of four primary steps. These include (1) defining the preferred human resource systems, procedures and practices required for the success of the company, (2) Assessing the existing systems, procedures and practices against the risk based criteria established when developing the audit protocol, (3) analyzing the results of the audit, (4) Establish improvement goals and objective that is necessary to achieve the aspirations of the company and (5) develop and implement a comprehensive action plan.

The stepped approach can be repeated as part of the annual planning and goal setting process that takes place in most successful companies.

The Objective

The high level objective of a human resource audit should include the determination of the department's ability to meet the staffing and recruitment challenges at the present time as well as into the near future.

The specific objectives could include issues such as the independent review, assessment and appraisal of the general efficiency and effectiveness of the human resources staffing process in support of the business objectives. It could further incorporate the determination of the status of succession planning and subsequent staffing across the company to determine whether appropriate measures are being taken for the renewal of human resources to meet the strategic aspirations and goals of the company. The audit could also include objectives in respect of the ability and involvement of the Human Resources department to provide adequate support, professional advice and specialist guidance to the rest of the company with reference to their human resource related problems and difficulties.

Other focus areas for the audit may include issues and items that did not form part of previous audits or that were included in audit s that was conducted a long time ago or areas where a mishap may draw unusual interest or where previous audits indicated significant shortcomings .

The Scope

The audit scope should be clearly defined. The importance of this aspect is often underestimated and in these cases it often leads to disagreements, disputes and unnecessary arguments.

A well-structured audit scope defines of the audit standard and system that will be audited, including the audi t protocol that will be utilized , the geographical location covered by the audit , the activities that will be carried out by the audit team, the support requirements of the audit team as well as a clarification of the exclusions and limitations of the audit.

Auditor Selection

The correct selection of the auditors comprising the audit team it is of critical importance for a successful human resource audit.

When evaluating the potential auditors for a particular audit it is important to evaluate the industry sectors which the assessor has worked in. Previous experience or knowledge of the sector being audited is of high importance when conducting the assessment of the suitability of a particular individual for a specific audit.

The composition, experience and interaction between auditors play a much bigger role in ensuring the success of an audit than is generally recognized.

An audit that does not have the desired outcomes or result in dissatisfaction is mostly the result of an inappropriately experienced team of auditors. Even when the best available audit protocol is used during the audit and the workplace team is properly prepared for the audit it may result in a negative experience for everybody if the wrong team conducts the audit.

The Audit

The audit process should verify the existence of effective and suitably aligned human resource related systems . This is normally achieved through a combination of employee interviews, review of documents, field observations, and verification testing to ensure that the relevant human resource systems are in place and functioning as intended.

Observations and Reporting

At the conclusion of the audit the team should verify the factual correctness of their observations by providing the individual areas that was audited to assess the observations and provide additional information to clarify any misunderstanding of the facts.

The observations should then be finalized and a formal report should be generated. This report should then be used by the human resources department to develop corrective actions and an comprehensive monitoring plan to ensure that recommendations are implemented according to plan.

Conclusion

A good human resource audit is designed to help ensure that risks associated with the human resource function at operating units are reasonably minimized and potential liabiliti es are appropriately controlled. During the audit compliance with applicable human resource legislation, rules and guidelines should also be is evaluated. Finally, human resource systems and controls should be checked for compliance, functionality and alignment with business goals.

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