What comes to mind when you think about HR audits? Probably not a lot. I think of an HR practitioner sneaking around cubicles and worksites with a magnifying glass like Sherlock Holmes. Most people on the outside of the profession don’t really know what it means.
However, if you are initiated into Human Resources, you already know that you need to audit the basics:
- Personnel Files
- Timekeeping Practices
- I-9 Verification Practices
An audit of these parts is intended to do only two things: avoid fines from non-compliance and avoid negative press that can sink the company’s reputation. Generally, the threat of a lawsuit is at the very back of your mind.
How to Innovate the HR Audit
What does not come to mind typically is a comprehensive audit of HR programs and the HR function itself, unless you are part of a large Fortune 500 company with multiple levels of accountability and high adoption of new & emerging technologies. Those folks are already “Blockchained” and “AI’ed” to death. Even then, the euphoric detachment that sets in with continuous corporate success can numb a company’s leaders to the impending tidal wave of people problems that would greatly reduce a company’s ability to innovate and stay ahead of competitors. Here are a set of new considerations to the HR Audit that you should already be doing, regardless of company size.
Audit for Maximum Tax Benefit
Once you have maximized cost cutting (often leading to a decline of employee morale) in order to increase gross margin, you still have an opportunity to reduce your overall company tax bill, which will increase net income. The key is to identify specific programs to enact, expenses to track, and investments into the business that would have the effect of reducing the taxable income. Here are programs to create and then continuously audit:
- Work Opportunity Tax Credit Audit
- Business Expense Deductions Audit
- Compensation, Perks & Benefits Tax Deferment Audit
- ADA Section 44 Tax Credit Audit
These don’t just make good business sense, they make good ‘people’ sense. Auditing these functions is a good way to enhance diversity at the company by sending a strong message to people: “having you here is a benefit to us, and we want you to feel invited.”
Audit for People Data Governance
HR information systems are typically maintained by Human Resources departments or office administrators but are implemented by IT departments or external consultants and left for HR to deal with on their own. If you are a public company, you are already in danger of non-compliance due to lack of consideration for the IT aspects of managing HR data:
- HIPAA – Health data privacy guidelines in the U.S.
- Sarbanes-Oxley Act Section 404 – mandatory internal controls for public companies to reduce the potential for financial fraud & theft
- Global Data Protection Directive (GDPR) – E.U. data protection, privacy, and processing guidelines
What this all boils down to is shared responsibility for HR data and strict guidelines to prevent catastrophic events, such as data hacks, breaches, leaks, and erasure. Strict policies of system access and revocation must be put in place, and enforced based on a user’s role in the company. Strict guidelines for anonymizing data must be enforced so that the metrics and analytics are useful and don’t contain unnecessary identifiable information, such as a social security number. HR Data Governance audits should include inspection of:
- Access & Revocation
The same rigor in protecting the company’s intellectual property should be taken to protect a company’s personal and sensitive data. You will be sending a strong message to your workforce, vendors, and customers: “We take the protection of our data very seriously, with high-security standards and ethical practices.” That is the essence of data governance, and the HR function currently lacks that focus.
Audit for Strategic Alignment of Company + Culture
Before we get into it, I must admit that not everyone in the field is equipped to pull this one off. The skill set here is not common until you hit the upper echelon of Human Resources, you know, CHROs, Chief People Officers, and very expensive management consultants.
What it truly boils down to is a combination of the following traits:
- Compassion and self-awareness (high emotional intelligence)
- Finance credibility and savvy (the ability to communicate HR value and all the triggers and levers that impact profitability)
- Organizational behavior (understand how people self-organize regardless of your formal structure, and how to respond)
- Technological savvy (the ability to use technology strategically and execute digital transformations effectively)
- Entrepreneurial spirit (the ability to innovate and attract innovators, visualize “moonshots” and bring them through to viability, and rapidly iterate solutions for continuous improvement)
- Unwavering integrity (the ability to gain trust across the organization, architecting solutions that create champions and convert detractors)
Now that we know a little about what the right person for the audit for strategic alignment would look like, let’s get into some solid first steps in conducting this audit. A strategic alignment audit must lead to a direct solution.
Determine Scope of Audit
First, determine the scope of the audit. What do you think would improve when a company achieves Who are the stakeholders, both direct and indirect? A degree of empathy should be exercised in communicating the purpose of the audit to all groups involved. Profile them, by creating personas for them to communicate the needs and wants, and how to craft your approach to each.
Isolate Problem Areas
Next, identify what people in each set of personas think needs attention. Get ’em angry. See what they want to spend more time doing. See who disrupts the workplace and injects toxic behavior. See who is at risk for burnout. Observe the frustrations and what gives them relief. You’ll have arrived at a core theme which could be crafted into a problem. Compare the stated mission, vision, and core values of the company with what the employees and contractors eat and breathe every day at work. See what aspects of work they are forced to bring home.
Then, create your hypothesis for a potential solution. In fact, create several; you’re almost certain to not get it 100% right the first attempt, but you will have moved the needle. It should be something that you can create and execute on quickly, and with a small initial investment of time and funds.
Gather Info + Build Solution
Collect data to establish the “current state” and plug it into the metrics you determined to be action metrics on the outset. It will be important to measure once you have your solution live and in action for a predetermined period. Architect that solution, collaboratively, and downplay the expected results. Never over-sell. This solution is your prototype.
Test it out, and Improve Obsessively
Test this solution for that predetermined time, making sure to apply a change to the HR audit processes in general for each iteration. Change one thing at a time (if you have the luxury), but never move the focus away from “people practices” and continuous improvement of the HR function. At the evaluation period, make sure you have buy-in from the stakeholder folks, whatever that “buy-in” looks like for them. Report that feedback, framed in terms that are relevant to each persona group, and continue iterating. We have just applied design thinking (loosely) to an HR audit, and that injects innovation into the HR function. The final and most important thing to remember here is that if no follow up is made on the findings of each test, evaluation, and feedback period, people will lose confidence in your approach, and then it’s back to the status quo.