Our HR Audit Findings

OUR HR AUDIT FINDINGS

In the past few years, we have spent an appreciable time auditing HR functions for some organizations. Notable are indigenous oil and gas service companies, churches and non-profit organizations. In most of these audits carried out, the aim was to conduct an in depth analysis of the HRM functions in these organizations with a view to identify areas of strengths and weaknesses and where improvements may be needed in the firms’ human resources system. In addition, the evaluations were carried out to achieve some of the following objectives as set out by various organizations:

  • To establish the current status of the company’s Human Capital Management system and its ability to adequately support the organization and its strategy.
  • To establish the company’s capabilities and existing structures and processes for attracting, recruiting, managing and retaining the optimal numbers and levels of personnel required for achieving the company’s corporate objectives.
  • Compare current HCM practices in the organization with best practices that have been proven as imperatives to building and maintaining viable organisations
  • To review companys’s efforts at maintaining an efficient organizational structure with adequately skilled and talented staff despite the high turnover prevalent in the market.  

In finance and accounting, auditing is routine. Financial audits are regularly performed and their findings submitted to senior management and the board of directors. The audit typically involves a review of an organization’s financial policies and practices against established accounting standards and recommended practices.

According to Society for Human Resource Management (SHRM), HR audit involves an objective look at the company’s HR policies, practices, procedures and strategies to protect the company,establish best practices and identify opportunities for improvement.

Anne Cannings and Trevor Hills (2012), asserted that a human resource management audit can assess how current human resources and employment management arrangements contribute to the purpose and aims of the organization and how these arrangements support stability and manage the obligations and expectations.

It is an objective review of the “current state” which can help an organization to evaluate whether specific practice areas are adequate, legal and/or effective.

From these definitions, we can infer that HR audit is essentially a comparison of what is and what should be. HR audit is a diagnostic tool to gauge not only the current status of things but also the gaps between the current status and the desired status in the area that is being audited. The human resource audit is based on the premise that human resource processes are dynamic and must continually be redirected and revitalized to remain responsive to the ever changing needs.

In carrying out these audits, my background in quantitative analysis has helped tremendously (Not compulsory that you must be an analyst) to use and blend the strengths of a number of different data collection methods. Such methods included individual interview of top level management and senior managers to know their thinking about future plans and opportunities available for the company, one-on-one interview with key personnel responsible for developing and driving HCM systems in those organizations, group interview and discussions with the employees, workshop, questionnaire, observation, analysis of secondary data, analysis of reports, records, manuals and other published literature of the company including annual reports, marked hand-outs, training calendar, personnel manual, and various circulars issued from time to time were also reviewed.

The evaluation covered some of the following HCM elements:

  1. Business and Human Resources Strategy
  2. Recruitment, On-boarding & Induction
  3. Human Resource Policies
  4. Performance & Reward Management
  5. Training, Development & Career Management
  6. Competency Management and Employee Development
  7. Employee Relations & Administration

The details of findings from these evaluations were organized along the various elements of HCM systems covered during the review and outlined in order to amplify the issues discovered during the review exercise and compare the organization’s current position with best practices.

Some major findings

Our review revealed that 85% of the organisations where we carried out audit their HR systems and practises were not formalised with structures and processes in place. This has produced a less than optimal results in terms of its effect in people management and fulfilment of the organisations’ vision and mission statements.  

Also, about 67% of survey respondents also chose to play it safe, or for a lack of awareness, chose not to respond to salient questions. This lack of awareness may have been caused by the non-existence of a fully functional human resources department and competent HR professional; thus bridging the gap between the senior, middle and junior levels of staff.  

What are some of the benefits of HR audits?

It is a cliché that the things that get measured get managed. An HR Audit is like an annual health check­up, it plays a vital role in instilling a sense of confidence in the management and the HR functions of an organisation. Some of the benefits of conducting health check on your HR systems are:

 

  • Problem of fit: In 90% of the audited organizations, our findings revealed that there were some problems of fit between HRM strategy and the organization’s visions, goals and objectives. This has produced a less than optimal results in those organizations in terms of its effect in people management and fulfillment of the organization’s vision and mission statements. Without articulating and linking your HR strategy with your business strategy there is little chance of the business having the right people at the right place at the right time doing the right work.
  • Clear Identification of HR contribution to the organization: In one of the organizations, the owner was able to see in clear terms contributions of HR department to the overall objectives of the organization. Initially, he never saw the need for HR to take a seat at the strategy table and after some months of working with him and also coaching the HR Officer, there was improvement in their bottomline which was tied to specific HR improvements.
  • De-risking: Our activities also identified distinct risks involving their HR departments that would have putt the organizations at risk for lawsuits or regulatory inquiries due to non-compliance or misconduct. Such as non-compliance with employment regulations, inadequate compensation and benefit plan design, inappropriate staffing levels, and lack of funding for training.

 

Despite its integral role and crossover with other critical functions such as compliance and legal, HR is often an overlooked audit area. As you approach 2018, kindly put it as part of your priority to conduct an health check on your HR department. If you don’t have the competence to carry out the audit, kindly contact us at Insel we can give you some steer.

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