Tackling an HR Audit may not be at the top of your priorities list, but such initiatives offer significant benefits to you in managing your business operations and organizational success, not to mention the value of ensuring legal compliance.
This blog covers the following topics:
- Why Conduct an HR Audit
- Choosing the Best Professional to Lead Your Audit
- Basics of Conducting an HR Audit
- Audit Triggering Events
Why Conduct an HR Audit
RealHR Solutions defines HR Audits as an in-depth review of your organization’s people policies and procedures. They assess the quality and efficiency of your current HR practices and how they align with your organizational goals and culture.
Periodically engaging in such introspective reviews is crucial to identifying areas needing improvement and deficiencies that, if not addressed, could place the organization in a compromising position. These gaps might implicate legal liabilities, lead to negative publicity and public opinion, impact productivity, cultivate an unhealthy work environment, or result in some combination of these unwelcome outcomes.
Some operational areas typically analyzed include:
- HR policies and handbooks
- Payroll, job classifications, and I-9 status
- Worker safety (OSHA compliance)
- Performance management
- Diversity, equity, and inclusion
- Legal compliance
- Training requirements
These and many other HR areas can be included in your audit. Your approach will depend upon your focus and the nature of your business. Once completed, a well-executed review will provide you with a strategy for correcting any concerns that arise.
Choosing the Best Professional to Lead Your Audit
To be credible, HR Audits need to be conducted by individuals with a deep working knowledge of the HR areas being reviewed. In-house HR professionals may be an option if they have the time and expertise to dedicate to such a time-consuming project. They also need to be able to conduct an objective assessment of your organization’s operations.
As an alternative, unbiased, outside HR consultants provide a variety of services to support your efforts in this area. They can assist with distinct segments of the project or take the lead from start to finish. The availability of your internal resources and budget, under the guidance of your developmental director, will dictate the extent of any outside assistance.
The Basics of Conducting an HR Audit
Implementing a successful HR Audit takes time and requires cooperation and coordination across the organization. The following is a framework for the overall process.
Establish the Scope
The first step in implementing an HR Audit is defining its scope and the operational areas needing review. Along with setting these parameters, you need to identify the key stakeholders—departmental leaders, managers, and other vital players (e.g., PEOs)—that should be involved in the process. These individuals are essential points of contact for gathering information and connecting with subject matter experts.
Create a plan of action starting with a detailed HR Audit questionnaire which will serve as your roadmap. This document should be as comprehensive as possible and specify all of the information you need to fully understand the area under review.
Your initial document inspection and interviews may reveal additional information necessary to achieving a complete assessment. In such situations, revise the questionnaire as needed and follow through on obtaining the supplementary data. Throughout the information gathering stage, reference this document to ensure that nothing falls through the cracks.
Benchmark the Results
One way to assess your situation is through comparisons. By reflecting on internal data, you can spot trends and determine if work is needed in specific areas. For example, examining turnover numbers through the years may help you better understand the success of recent recruiting and retention efforts.
Comparing your data against similar organizations or companies that inspire you can demonstrate how you measure up against industry best practices. Benchmarking is an area where outside HR consultants have a great deal of experience and can provide invaluable support to nonprofit organizations.
Share Your Findings
HR Audits tend to uncover a great deal of material. For that information to be useful, you must summarize it and present it in a way that leadership and managers can understand and digest. The resulting report should not only relate key findings and point to supporting data, but it should also provide prioritized recommended next steps.
The final and imperative step is taking action based on your findings. From the start, a commitment to responding to audit findings is vital to justifying the use of valuable resources in this effort and limiting liability. Once you are aware of non-compliant areas, failing to take corrective action exposes your organization to increased legal jeopardy.
Also, going forward with recommended corrective actions shows a commitment to advancing your workplace. Demonstrating that your organization is committed to identifying and resolving internal issues can improve your public image, making it easier to retain and hire top talent. To create a culture that is always looking to improve, HR Audits should not be one and done. The organization should implement processes for ongoing tracking and include audits as part of its HR routine.
Audit Triggering Events
As a general rule, organizations should aim to conduct HR Audits every twelve to eighteen months. Aside from this recurring timeframe, certain events in the life cycle of a nonprofit may indicate the need for an HR Audit. Depending on the situation, a mini-audit focused on a discrete area may be sufficient.
Expansion is one of those events that may warrant an audit. Sudden growth from a merger or increased hiring may create changes in your organization and employee population that necessitate an update to your policies, procedures, and programs. Similarly, a change at the executive level may be the right time to audit specific HR operational areas to support new initiatives or company direction.
The ever-changing landscape of local or federal laws requires organizations to stay abreast of developing legal mandates and ensure they are properly implemented. While legal issues are typically part of a yearly review of compliance and policies, you should not wait for your audit to confirm that you are meeting all legal requirements.
By following these recommendations, you will be on the right path to planning and executing a solid, informative HR Audit. The actions taken to address your findings will undoubtedly contribute to maintaining compliance, consistency, and fairness of policies and practices, supporting your culture, and the success of your nonprofit organization.