This blog is written by Syed Asim Habib, Senior Manager HR And Consulting. Please read this blog and provide your comments.

HUMAN RESOURCE AUDIT

Human Resource Management (HRM) has experienced a strong evolution. In order to provide useful information to managers, it is necessary to evaluate the results generated by the design and implementation of personnel policies. The goal of the HR audit includes two different analyses and valuations: the HR policies and their level of fit with the strategy of the firm, and the characteristics of human capital. Several criteria have been used to assess different HR policies. Nevertheless, the measurement of the value that human capital brings to the firm is a very complex topic. Consequently, different models are being presented that aim to properly solve this challenge.

Conceptual Framework

Auditing has evolved, becoming increasingly specific, until the term functional audit has emerged. The objective of a functional audit is to diagnose, analyze, control, and advise within the boundaries of each functional area of the company. The HR audit is a type of functional audit.  HR auditing is a basic tool for the management of a company. Its objective is not only the control and quantifying of results, but also the adoption of a wider perspective that will aid in defining future lines of action in the HRM field. Thus, HR auditing must perform two basic functions.

  1. It must be a management information system whose feedback provides information about the situation in order to facilitate the development of managing processes or the development of HR.
  2. It must be a way of controlling and evaluating the policies that are being applied, as well as the established processes.

Approach

From an internal perspective, as in any staff function, there is a trend of valuing its actions as a result of the activities undertaken and its costs. In this way, the department’s capability would be judged on its ability to supply certain services to the organization at the lowest possible cost. Under this approach, the operational measurements traditionally used are those which refer to quantity, quality and reliability, or cost and speed, therefore placing the focus on activities, costs, or productivity ratios. However, from an external perspective, if it is understood that the ultimate appraisal of the effectiveness of HR is based on their impact on the company’s results, then the measurements should include results obtained outside the function.

Functional Focus

The function of this level of the HR audit is to study and analyze each one of the specific areas of HRM. The analysis should center on the planned measures, the method of implementation, and the results obtained. In order to carry this out, the areas that are to be studied must first be identified. A list of the indicators corresponding to the different areas of the HR function could contain some of the following.

  • Description of the Company’s Staff
  • Job Analysis
  • HR Planning
  • Recruiting and Personnel Selection
  • Training
  • Development of Professional Careers
  • Retribution
  • Performance Evaluation
  • Work Conditions

Benefits of HR Audits

This type of strategic/functional audit of HR helps assure that the HR programs are aligned with the company’s long-term objectives. When performing this evaluation, the auditor must identify the company’s long term strategy before designing the HR policies that will contribute to its achievement. These policies are then compared to the HR practices that are currently being applied, which leads to the modification of some policies to better conform to the firm’s strategy.

This alignment approach presents greater challenges, since the impact of certain actions on the results is frequently not clear. Management can identify the keys to their business and the actions to apply on the people related to them as well as their results. The main change involved for those responsible for HR is to leave behind their comfort zone and dedicate more time to finding ways of integrating HR into the business.

Given that the human factor is a prime strategic element, which explains a differentiation capacity, it is logical that a measurement effort of the way this function is undertaken in the company is made. The content of the HR audit, which goes beyond the simple investigative function, and is an extension of the traditional concept of the accounts audit.

Syed Asim Habib