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Date: 2011 Nov 12

The aim of this article is to share our learning and experience in conducting HR audits for clients across the region. It also intends to explain how an HR audit can help an organisation to improve its HR function.

The article explains our approach to conducting comprehensive HR audits, discusses some of the challenges faced, and suggests how to overcome these.

What is an HR audit?

An HR audit is an independent and objective evaluation of an organisations Human Resources (HR) function. An audit should be conducted in a planned and systematic manner in order to implement changes that improve the effectiveness of the HR function and add value to the organisation.

How should an audit be conducted?

An organisation has the option of using either internally appointed auditors or external consultants to conduct an audit. There are obvious benefits of using external consultants. The primary reason for engaging external consultants is to maintain objectivity and avoid bias during the audit process.
An HR audit often involves gathering employee feedback and from our experience we have found that employees often find it easier to talk openly and share their opinions when talking to an external third party.

What does an HR audit involve?

An HR audit should focus on five key areas of the HR function which include HR strategy, organisation structure, HR policies, processes and systems.

The list below highlights the areas that are typically included in an HR audit conducted by PeopleFirst:

• Organisation structure
• Organisation culture
• HR policies
• Recruitment and selection
• Performance management
• Training and development
• Job descriptions
• Grading 
• Compensation and benefits
• Manpower planning
• Employee administration
• Employee relations 
• Exit data 
• Payroll
• HR system(s)
• HR administration forms and templates

How is information gathered during an HR audit?

There are a number of techniques used to collect data for an HR audit. These include:

• Face-to-face interviews with managers and members of the HR team
• Focus groups
• Employee opinion surveys
• Questionnaires
• Job shadowing
• Process mapping
• Review of socumentation

How can an HR audit help my organisation?

An HR audit will provide a detailed analysis of the existing HR policies, procedures and activities against the current and future needs of the business. The findings of an audit can be used to benchmark HR policies and practices against any legal requirements and against regional and international best practices. Benchmarking in this way is important for an organisation to mitigate any risks of non-compliance to legal requirements and develop a prioritised plan to implement best practices across HR.

At PeopleFirst we present a list of prioritised recommendations that help an HR function to align its activities to the strategic objectives of the business both in the short and long term.

During an HR audit the following benefits can be realised: 

• Ensuring the HR strategy is aligned to the overall strategic objectives of the organisation
• Ensuring the HR structure and the way its resources are aligned can deliver the requirements of the organisation
• Ensuring policies and practices to are in line with legal requirements and best practices or identify gaps
• Process efficiency
• Understanding the strengths and weaknesses of the HR function and where improvements can be made
• To understand the perception of internal customers

When is an HR audit needed?

Many businesses choose to engage in an HR audit during times of growth. In these times many businesses realise that the organisational capability is dependent on the skills of their people and how they perform. However an HR audit can make sense at any time.

At PeopleFirst we often work with clients who realise that sustainable growth needs to be supported by a robust HR function and this is the time that organisations often invest in HR audits. The aim is often to develop the HR function to be able to meet the needs of the business. This may be driven from a recruitment perspective, employee engagement and motivation or to improve the internal processes related to HR that touch everyone in the organisation. Understanding what works well and where there are gaps can help an organisation focus its efforts on making improvements in a prioritised fashion.

Many organisations engage in an HR audit when they are not completely satisfied with the role of HR or believe there are gaps in delivering effective HR functions. An HR audit can provide the detailed analysis needed to help inform business decisions on how to improve the effectiveness of the HR function.

HR Audits also play a critical role during mergers and acquisitions by integrating and aligning HR activities across companies.

At PeopleFirst, an HR audit may form part of our initial approach to delivering projects as this helps towards developing a robust understanding of the clients business operations.

What are some of the challenges faced during an HR audit?

There are a number challenges that may arise during an HR audit. These include:  

• A general reluctance by employees to voice their opinions due to fear of reprisals
• Fear from employees that the audit is an assessment of their individual performance
• Fear from employees that the output of the exercise may cause a loss of jobs or change their job roles
• Employees see in this an opportunity to raise other business related issues that are not related to the HR audit hoping that they can be addressed during the process
• Employees trying to influence the outcome of the audit
• Lack of willingness to share information
• Resistance to change

From our experience, these challenges are common amongst many different organisations and industries. The overall approach to conducting the HR audit therefore is key; engaging people through open communication so that they are not threatened or worried about the audit is often one of the easiest ways to overcome these challenges. Sharing the rationale of the audit and explaining how the results will be used is a good strategy to gain buy in and support for the audit. Senior management endorsement is also very useful in helping people understand the potential business benefits.

What can I do to overcome these challenges?

Some of the following techniques have helped PeopleFirst overcome these challenges:

• Establishing the buy-in by engaging the senior management team in the initial stages of the process thereby easing the audit process
• Communicating across the organisation through town-hall sessions, emails and memos to explain the rationale, the audit process and explaining how the results will be used and how this will benefit the organisation and its employees
• Conducting anonymous surveys so employees are not afraid to share their views openly and honestly
• Creating a comfortable atmosphere and conducting interviews in a neutral and safe environment where employees feel assured that their comments are confidential
• Conducting the audit in a professional and friendly manner in order to gain the trust of employees

How does PeopleFirst present the results of the HR audit?

PeopleFirst presents the results of an HR audit in both a written report and a management presentation. A management presentation creates a good opportunity for the findings and recommendations to be discussed in detail.

It is important to present the results with diplomacy and objectivity being mindful of the efforts that an organisation has made in their HR function. Bearing this in mind, it is important to focus on the facts, and present the findings and recommendations in a transparent and objective manner.

In presenting the findings of an HR audit PeopleFirst often includes an impact analysis of any recommendations made. This may include a costs analysis or the impact on people and processes resulting from the recommendations.

In summary, this article has explained the following:

• Why organisations conduct HR audits
• The benefits of conducting an HR audit
• What should be included in a comprehensive HR audit
• The benefit of engaging external consultants to conduct an HR Audit
• Challenges faced during the audit process and how to overcome these challenges
• Presenting findings and recommendations from the audit

If you are interested in finding out more about an HR audit for your organisation or about PeopleFirst and our services, please do not hesitate to contact us at info@peoplefirstme.com or by phone on +97144475210.

Dabota Willie-Pepple, HR Analyst