The topic of conducting audits creates fear in most departments and in most companies.  Our education and experience with auditing within companies has its genesis in the age-old financial audits, which are routine in all public companies. The Sarbanes Oxley Act has certainly conditioned most of us to further in-depth auditing of almost every process, procedure and policy that could create risk for shareholders.  Still, Human Resources auditing is anything but routine, except those processes required by Sarb-Ox (such as payroll processing or HIPAA compliance in benefits departments).  There are no federal laws that mandate Human Resources processes and practices receive the same scrutiny as our asset inventories or financial statements.  The risk is certainly there, due to the complexity of federal and state laws, and the difficulty in keeping current (especially for those organizations with operations in multiple states).

HR audits should become routine and conducted on a regular basis, with the results presented to Senior Management.  Ideally, HR audits can be conducted by qualified independent HR consultants in tandem with members of the internal HR department.  In order to effectively audit the people/HR practices in an organization it is important to first understand the mission and expected outcomes for the individuals who provide HR services (staff and line employees).  The goal is to assess and report on the alignment of people practices with the business purposes, compliance with Federal and State laws, and overall effectiveness in achieving stated goals.  It is important to look at all major human resources functions and services, service delivery method, use of technology, management of the HR department, and recommended metrics that would help indicate success and opportunities.  An optional service satisfaction audit can be built into the compliance audit to report field and corporate levels of satisfaction with each key service and function provided by the HR department and/or outsourced providers.

Each People Practices Audit includes an interview with key members of the Leadership Team, members of the HR department, outsource vendors, and members of field management.  Additionally, it is important to review key policies, documents, procedures and systems to determine compliance, risk, opportunities for your current people practices. 

Not unlike the financial auditors, it is a good practice to provide an Executive Summary, general overview and observations and a detailed report on current practices, validation of workforce priorities, technology and outsourcing opportunities, and recommended changes.  Interviews and meetings can be accomplished in person, by telephone, electronically or a combination.

Step One/ Determine priorities and clear goals

• Identify what is desired as a result of the HR Audit.
• Compliance with company policies, practices and procedures.
• Compliance with state and federal laws and regulations.
• Catch potential problem areas before they escalate.
• Identify work processes that need improvement.
• Identify levels of satisfaction with current services and HR products.
• Identify areas of opportunity for HR staff development.

Step Two/ Data Gathering

• Review of policies, documented procedures, and documented practices.
• Interviews with HR practitioners who implement the policies and practices.
• Interviews with "internal and external customers".

Step Three/ Gap Analysis

• Comparison of all data collected and observed to the desired or required practice.
• Comparing internal practices to Industry Best Practices and determining opportunities to improve internal effectiveness.
• Measuring the level of satisfaction with the services of the HR Department and outsourced providers (alignment with internal customer needs and demands).

Step Four/ Observations, Risk and Opportunity reporting

• Assure the right audience for the reporting of results and observations (including HR leadership).
• Group the observations, risks, and recommendations in order of urgency and ROI to the organization.
• Make sure that compliance gaps get specific action recommendations.

Step five/ Optional system, process, or program design, development, and implementation

• Outsource or develop internal process improvements to assure that the organization will have improved productivity, less risk and better internal customer satisfaction with all HR practices.

Click here to view the Self Audit Checklist (a .pdf file) .

Doug Gammon is a principal in HR Practices, a human resources consulting company specializing in designing and improving People Practices in Hospitality, Service, and Retail organizations.  Visit their website at www.hrpractices.netTheir Denver office is located at 287 Garfield Street, Denver, CO 80206; (303) 394-2455.