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Reviewing compliance concerns with a myriad of administrative regulations Instilling a sense of confidence in management and the human resources function Maintaining or enhancing the organizations and the departments reputation in the community Performing due diligence review for shareholders or potential investors/owners Establishing a baseline for future improvement for the function
Why conduct an HR Audit? Routine check-up (uncover any conditions you may have and set up a treatment plan) Determine how you can best align HR operations with organizational goals Ensure compliance with federal and state regulations
1.
Getting Started
a. Developing a Checklist
After audit goals and success criteria have been defined, it is helpful to develop a checklist that can be used to determine the presence or absence of certain practices, and to compare and contrast practices with policy or legal requirements. For example: What policies should be audited? The selected policy should be stated, followed by an indication of how one would verify that the policy is being carried out, and, ultimately, by measurement of the degree to which compliance or lack thereof is taking place. What practices should be audited? The selected practice should be stated, followed by what the policy or law requires, and, ultimately, by measurement of the degree to which compliance or lack thereof is taking place. What records should be reviewed? The selected record should be stated, followed by what the record should contain, and, ultimately, by measurement of the degree to which compliance or lack thereof is taking place. What trends should be tracked? The selected trend should be stated, follow ed by an X-andYchart defining the measurement points, and ultimately, by analysis of the implications of the historical data plotted on the chart (for example, cost per hire, cost per placement, pay rates, headcount, benefit costs, tardiness and absenteeism, turnover, training expenditures, etc.). What analysis will be done? Audits lead to tremendous insights in and understanding of how an organization functions. However, reducing information obtained from an audit to meaningful components can be overwhelming. Experience has shown that by following the sequence suggested below, the auditor can navigate more quickly through the data and compress the analytical process. As the auditor moves through the data reduction process, analysis should become more complex and intuitive. b. Description: Questions to be asked during the audit should be framed to solicit a written or oral description; for example: What are the key objectives? What is the mission? Transcribing the answers makes it possible to later engage in systematic verification through comparison with existing written records and reports. Inconsistencies usually are the result of unequal access to information. c. Clarity: Once descriptive information has been collected, the next step is to probe for common understanding. Often, a discrepancy among individuals as to what something means is the result of poor communication. d. Agreement: Individuals may be consistent and accurate in providing requested information, but may not agree with it. Although not everyone must agree with everyone else on every issue, in
fundamental areas such as goals, performance expectations, roles, direction, and strategy, the key principals must agree if the organization is to be successful. Lack of clarity and inadequate information may be reasons for disagreement, but such disagreement is easily resolved. It is far more difficult to try to resolve differences in philosophy, policy, and style. e. Fit: Individuals may be clear and agree on a course of action, but clarity and agreement are not an indication that a particular action is the right one to take. The organization may not have the resources to implement the action; managers may not know how to carry it out; and, most important, the action may be undesirable from the user's or customer's perspective.
2. Planning Questions
The word audit comes from the Latin verb audire-to listen. Listening is used here in a broader sense than just listening with our ears. It includes using our eyes, as well, when we search for answers to important organizational or functional issues. Developing a systematic set of questions to take the place of eyes and ears can be tedious. Avoiding significant omissions and preventing duplication are keys. The answers to the auditor's questions must lend themselves, to the extent possible, to quantitative analysis. For example, the auditor may start with an open-ended question and immediately follow with some specific and quantifiable follow-up questions. The respondent's answers, when plotted, should illustrate both strong and weak performance points. In order to measure the net contribution of any one factor to output, it is useful to determine what might or would happen to output if all other inputs remained the same.
5. Next Steps
Ultimately, to be useful, an audit must clearly communicate its findings and their consequences, and suggest ideas for improvement. To the extent that management can see the benefits of any suggested changes-and believes that the cost of acting is reasonable-the likelihood that changes will be implemented is higher. Once the audit data are analyzed, a number of gaps ( what is versus what should be or what could be) will surface for which measurable payoffs, such as cost avoidance, litigation avoidance, increased productivity, greater job satisfaction, better customer service and satisfaction, etc., should be obvious. Not all gaps will be the same. Some, if resolved, will yield an immense payback; others will produce only marginal benefits. Action-taking-applying the lessons contained in the data analysis or suggested by the list of opportunities for increased effectiveness and efficiency-requires first identifying the areas where payoff or risk is apt to be greatest, then programming those actions that will reduce or eliminate the gaps, and, finally, taking measurements,
over time, to ensure that the actions taken are yielding the anticipated results at the expected cost without triggering undesirable side effects. HR Emerging Issues Executive management ethics Skyrocketing healthcare costs HR outsourcing Baby boomer exodus labor shortage, aging and diverse workforce Knowledge work managing knowledge workers
Typically Out of Scope Payroll Safety and Health Workers Compensation Retirement Plans Health Insurance Plans Deferred Compensation Programs Unemployment
HR Department Basics Strategic Management Department Structure & Staff Competencies HR Facilities HR Technology & Information Control
Legislative/Regulatory Environment
Agency Head
HR is Strategic Partner when: HR leader has/is: strong knowledge of HR roles and functions, business strategy and operations perceived as a credible advisor by his/her peers and executive management. Top HR position is organizationally on the same level as other program directors and administrative directors HR Dept. is viewed as approachable and trusted to provide accurate information. HR Dept. is part of a network of HR Depts. in peer organizations that share experiences, strategize regarding common problems, and stay abreast of latest HR trends and developments. Strategic HR plan is closely linked to overall strategic plan. Performance assessment of HR programs, including key metrics, is routinely completed.
HR Competencies
Business Ally
Talent Manager
Credible Activist
Operations Executor
Strategy Architect
HR Facilities Physical facilities of the HR department Reception of job candidates Legal and other employment notices Private areas for interviews and employee consultations HR convenient to employees Easy access to HR employee for questions
Workforce Planning & Employment HR Development Total Rewards Employee & Labor Relations Risk Management
Workforce Planning & Employment Workforce Needs Determination Organizational Design Recruiting Programs Selection Process Contractor Management Succession Planning Turnover and Employee Relations Regulations Compliance Fraud
Supervisory Training Training Assessment Employee Coaching Performance Appraisal Counseling Discipline
Total Rewards Compensation Philosophy Job Documentation Market Analysis Salary Structure Development Job Evaluation Salary Administration FLSA Determination & Overtime Benefits Administration Payroll
Employee & Labor Relations Policies and Procedures Employee Attitude Surveys Employment Records Employee Compliant and Grievance Process Labor Relations
Vendor Management