What is an HR audit?

An HR audit is a comprehensive evaluation of the current human resource development strategies, policies, processes, organization structure, systems, and skills in the context of the short and long-term business plans of a company.

Why perform an HR audit?

An HR audit provides multiple advantages to the senior leadership of an organization. Not only will an HR audit help a company ensure it’s in compliance and conformance with the law, but it will help it standardize processes, identifies risk areas, and tie HR goals to strategic business goals. There are various types of audits designed to accomplish a variety of objectives. An HR audit can be as comprehensive as needed within the constraints of time, budgeting and resources.

An HR audit attempts to find out the future HR needs of the company after assessing the current HR policies, processes and activities being conducted in an organization. Organizations prefer to conduct an HR audit to get a clear judgment about the overall status of the organization and to find out whether certain systems put in place are yielding any results. HR audit also helps companies to figure out any gaps or lapses and the reason for the same. Since every company plans certain systems and targets, an HR audit compares the plans to actual implementation.

An HR audit is an independent, objective, and systematic evaluation that provides assurance that:

  • Compliance and governance requirements are being met.
  • Business and talent management objectives are being achieved.
  • Performance management, compensation, and rewards are in line with best practice,
  • Human resource management risks are fully identified, assessed, and managed and
  • The organization’s human capital adds value

Under this definition, HR audits are more than an audit activity that solely collects and presents evidence of compliance. HR audits are increasingly expected to look beyond the organization’s present HR practices and to benchmark the organization’s processes and practices, and to provide the necessary consultative services that help the organization achieve its business goals and objectives.

What are the reasons for doing an HR audit?

Organizations undertake HR audits for many reasons:

  • To ensure effective utilization of human resources.
  • To benchmark the organization’s HR practices
  • To instill a sense of confidence in the human resource department that it is well managed
  • To identify and address HR-related problems
  • To seek out HR-related opportunities

What all gets checked in an HR audit?

Most HR audits are conducted with the aim of measuring the various HR processes in an organization against an industry benchmark. The most popular model is the PCMM model (People Capability Maturity Model) which is a framework that helps organizations successfully address their critical people issues. Based on the best current practices in fields such as human resources, knowledge management, and organizational development, the People CMM guides organizations in improving their processes for managing and developing their workforces. As per the PCMM model, all organizations can be classified into 5 maturity models from level 1 to level 5. Once and HR audit is done and the maturity level of the organization assessed, the PCMM model provides guidelines to organizations on how to improve their level. The various HR aspects which get assessed in the audit are:

  • Work environment
  • Communication
  • Staffing
  • Managing performance
  • Training
  • Compensation
  • Competency development
  • Career development
  • Team building
  • Culture development

How does an organization use HR audit results?

Organizations generally have three options for dealing with audit results.

  • Use the HR audit as a blueprint or action plan for addressing HR needs.
  • Address as many needs as possible using the organization’s internal expertise and resources.
  • Contract out those need areas where internal expertise and resources are not available or do not fit the core competencies of the organization

An HR audit is much like an annual health check. It can perform the same function for the organization. An audit is a means by which an organization can measure where it currently stands and determine what it must accomplish to improve its HR functions. Do reach out to us in case you would want to avail of the opportunity of having an HR audit conducted for your organization.

 

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SPI Group

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