Global management consulting: audit of human resources

 

Redefining the role of human resources  

To secure the role of a “business partner” within the organization, the HR Manager must demonstrate how his services help to achieve the company’s business goals. The activities of HR managers are rarely subject to audit/control in order to assess their effectiveness and compliance with legal regulations. However, HR audit is important because it is the basis for reviewing the strategy and activities of the HR Department. It is a link between the HR management systems and the company’s goals and, at the same time, takes into account the business goals of the organization’s internal consumers.  

 

Purpose of a human resources audit  

The purpose of the human resources audit is to provide a more in-depth analysis of the activities of human resources managers. It allows you to identify strengths and identify areas that need improvement. Conducting an audit involves reviewing the company’s current business practices, policies, and operations; it can also capture performance evaluations compared to companies of similar size and/or industry. The scope of the study should include the following points:

  • Compliance with legal regulations
  • Record keeping (personal files of employees, work permits, applications, etc.)
  • Cash refund/Wage fairness
  • The relationship between employees
  • The system of promotion of employees
  • Company policy and algorithm of actions/Job descriptions of employees
  • Dismissals
  • Health, safety, and security

There are a number of reasons for conducting an audit, and its results can be used for various purposes. At a minimum, the results of the audit should allow you to determine what changes need to be made, how these changes will affect the company’s profit, and how to prioritize work on problem areas.  

 

Audit process  

An audit includes a systematic study of organizational techniques and ways to achieve goals, policies, legal requirements for the company and/or professional standards. An effective audit indicates the difference between” what is “and” should be “or”could be”. By nullifying or reducing this difference, an organization can increase compliance with legal norms, ensure consistency with established professional standards, and/or contribute to the process of improving the quality of its work. In the financial and accounting sector, an audit is a routine operation.

Financial audits are often conducted and the results are provided to senior management and the Board of Directors. An audit usually includes a review of the company’s financial policies and practices in comparison with established accounting standards and recommended practices. The annual reports of state institutions contain the conclusion of an independent certified audit firm confirming that the financial statements are reliable and generally comply with generally accepted practices and standards. In the field of human resources, an audit is not a routine operation.

There are no specific laws or regulations requiring employers to hire an independent auditor to conduct an accounting of the company’s policies and activities. It is common for employers to rely on their lawyers in these matters. Larger and more established organizations, however, have developed internal evaluation guidelines and independent research systems.  

 

Success factors and other difficulties  

The very idea of an audit causes fears among employees. It is usually conducted by an auditor (third-party or employee) at the request of senior management to investigate and identify inconsistencies between management activities and applicable policies or legal requirements. This is usually followed by an official report to senior management in writing. If a major discrepancy is found, we recommend actions to eliminate it, including the dismissal of the offending Manager.

In this case, the auditors’ act as” agents ” of senior management and, as a result, are responsible for conducting the examination. Their role is to meet the pre-defined needs of the client. The role of the target audience-functional or Executive management-is rather passive. The fear of being fired, real or imagined, and the fact that inconsistencies that come to the surface can lead to a career setback or collapse is a strong motivator that will help you do everything you need to successfully pass the audit and impress top management.

In addition, financial verification or compliance audit is not used to start the learning process within the organization, so its value as a tool for updating within the organization is limited.

In order for the audit to contribute to the learning and improvement of the organization, the target audience must be seriously involved in the audit process and agree with the goals and objectives of the audit, or rather, “own” them. Moreover, the achievement of real workers ‘ benefits must be an integral objective of the audit.

As mentioned above, two specific, separate, but related audit requirements are proposed: (1) fulfilling confidential management responsibilities, and (2) encouraging and facilitating continuous improvement. The first, directed from the outside, deals with preventing problems; the second, directed from the inside, focus on continuous improvement.  

 

Success criterion  

It often happens that when starting an audit, the reasons for it are not fully understood and its “success criteria” are not fully specified, which help determine the factors that will be used to evaluate the conditional advantages of the audit, such as its usefulness for improving personal and teamwork. Since an audit can have multiple tasks, the goals and related success criteria must be clearly defined and discussed in advance. Here are some examples of specific audit tasks:

  • Review compliance with established regulations and/or company policies.
  • Explore the best ways to meet the needs or requirements of the relevant users or clientele-management, employees, or the community.
  • Streamline the work processes necessary for the company to function, such as hiring employees, paying salaries, training, bonuses, etc.
  • Establish an “early warning system” to identify problems or identify disagreements before they become critical.
  • Measure continuous improvement by conducting a survey: whether things have improved or worsened as a result of functional innovation.

 

Important components of success are:

  • Clear tasks set in advance.
  • Appropriate resources, such as staff skills, budget, tools, and materials needed to plan and conduct the audit.

 

Defining the audit vector  

As can be seen from the sample audit tasks listed above, an audit can be aimed at analyzing compliance or continuous improvement. Depending on the purpose, the audit process and methodology will differ. Compliance audits involve a systematic comparison of human resource practices with company policies and/or legal regulations. At the output of such an audit, we get a list of deviations between what is required and what is actually happening. Continuous improvement audit is a systematic process for determining whether functional or organizational performance is inconsistent with what is, what could be, and what should be. The result of the audit should be a list of opportunities to increase efficiency and productivity. A service quality audit is a specific example of a continuous improvement audit. In this case, the audit vector is directed towards achieving compliance with human resources activities with the requirements of the client within the company (Manager or employee). Compliance is determined based on customer satisfaction, taking into account the importance that the customer attaches to the service in question.  

 

Discussion of the audit project  

Creating and executing a compliance audit project will not be difficult since such audits are comparative. Continuous improvement audits are more difficult to plan and execute because they are designed to measure an organization’s performance. Therefore, designing a continuous improvement audit requires some precautionary measures:

  • The analysis vector must not be arbitrary. On the contrary, it should be aimed at the fundamental sphere of activity, which, in turn, is based on management practices and research.
  • Given that organizational problems can arise and occur in any area, the audit should address all the” characteristics ” of the company, namely performance variables, including strategy, structure, goals, technology, and systems.
  • The audit should be based on events and conditions that occur at an early stage of causation. This approach requires less attention to output data (plans and resources) and performance (processes).
  • The audit should focus on areas that can produce tangible results, as opposed to areas that are little or no susceptible to influence or change.

 

Summary  

Regardless of the chosen audit vector, for compliance or continuous improvement, it is strongly recommended that the auditor set the most specific tasks, and at the end of the audit, analyze the suggestions provided in the report. However insignificant these recommendations may seem, they can significantly improve the climate within the organization and positively affect many aspects of the company’s activities.

Despite the fact that the HR audit is not the norm for most companies, its importance cannot be overestimated. It allows you to review the organization’s strategy, improve the performance of the human resources department and, ultimately, increase the productivity and profit of the company. Think about conducting an audit – perhaps this is what will contribute to the success of your company.

 

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