October 25, 2012

MU0013 [Human Resource Audit] Set2 Q6

Q.6 Discuss the auditing for HR professionals.

Ans:

Competence for HR function is demonstrated by an extensive audit of all its aspects. An audit of HR professionals is essentially an assessment of the extent to which the professionals demonstrate competence for HR function. Such an assessment requires a 360 degree feedback, and, according to Ulrich, usually employs the following five steps:

1. Developing a model of competencies: Before embarking on an assessment of competence, it is necessary to first determine what are the competencies that make a successful HR professional. These competencies usually stem from knowledge of business, knowledge of HR, knowledge of change and finally personal credibility. In addition to determining the competencies that account for a successful HR professional, it is also important to determine the behavioral attributes that reflect these competencies. A model that reflects both these aspects may be said to be a comprehensive model for auditing of HR professionals.

2. Collect data using the model: Several techniques may be employed to collect data about the extent to which an HR professional exhibits the modeled competencies. These include interviews, questionnaires and focused groups.

3. Summarized data and give feedback to the HR professionals: The quantitative and qualitative data collected in the above mentioned ways, need to be synthesised and codified so that specific themes emerge. These themes are then used as aids to help the HR professionals identify his/her strengths and weaknesses.

One of the key activities of an HR audit is to give feedback. This needs to be done in a way that protects the confidentiality of the participants. The manner of the feedback should take into account the sensitivities of the receiver. The tenor of the feedback should neither be accusatory nor defensive. In addition, the individual data that is collected may be integrated into an audit for the overall HR function.

4. Create action plans: The HR audit goes beyond defining the competencies and inadequacies of the HR function. It also identifies the measures to develop the competencies at both, the individual and the departmental level. At the institutional level, this may involve doing an HR for HR. At the individual level, the action plan will concentrate on developing a tailored set of trainings, readings, assignments and training opportunities.

5. Continuous improvement: Auditing of HR professionals is not a one time activity but an ongoing continuous process through which HR professionals are able to constantly build on their HR competencies and strengthen the HR functions in the organisation.


Human Resource Audits

Scope
Human resource audits involve a company’s strategic actions to take an intensely objective look at its HR policies, procedures and practices. This type of comprehensive review of the company’s current state can help to identify whether specific practice areas or processes are adequate, legal and/or effective. The results obtained from this review can help to identify gaps in HR practices, and these gaps can then be prioritized for attention in an effort to minimize lawsuits and/or regulatory violations, as well as to achieve and maintain world-class competitiveness in key HR practice areas.

Overview
Human resource audits are a vital means of avoiding legal and/or regulatory liability that may arise from a company’s HR policies and practices. In addition to identifying areas of legal risk, audits often are designed to provide a company with information about the competitiveness of its HR strategies by looking at the “best practices” of other companies in its industry. In essence, an HR audit involves identifying issues and finding solutions to problems before they become unmanageable. It is an opportunity to assess what an organization is doing right, as well as how things might be done differently, more efficiently or at a reduced cost.

In today’s competitive climate, companies operate within the confines of a heavily-regulated employee environment. This includes dealing with myriad complex laws and regulations. The scope of the HR function includes establishing and administering a host of policies and practices—many of which involve compliance implications—that significantly influence the productivity and profitability of the enterprise. 

Just a handful of these are:
Benefit administration issues
Disciplinary matters
Employee development
Employees’ eligibility to work
Interim/contingent staffing
Interviewing and hiring
Job descriptions
Organizational development
Payroll management
Performance management
Problem or conflict resolution
Stress management
Substance abuse
Team building
Termination
Workplace violence

Given that many HR departments are both understaffed and overworked, only in retrospect do many companies become aware of the monetary costs of ignoring HR-related legal hot buttons. Noncompliance with applicable laws and regulations involves significant financial risk. To minimize the risk, many organizations purchase employment practices liability insurance. While this is a sound strategy, companies can take other proactive measures. Chief among these is a voluntary HR compliance audit.

Types of Audits
An HR audit can be structured to be either comprehensive or specifically focused, within the constraints of time, budgets and staff. There are several types of audits, and each is designed to accomplish different objectives. Some of the more common types are:
Compliance: Focuses on how well the company is complying with current federal, state and local laws and regulations.
Best Practices: Helps the organization maintain or improve a competitive advantage by comparing its practices with those of companies identified as having exceptional HR practices.
Strategic: Focuses on strengths and weaknesses of systems and processes to determine whether they align with the HR department’s and/or the company’s strategic plan.
Function-Specific: Focuses on a specific area in the HR function (e.g., payroll, performance management, records retention, etc.).

What to Audit
Deciding what to audit will depend largely on the perceived weaknesses in the company’s HR environment, the type of audit decided on and the available resources. Keeping a log of issues that have arisen but are not covered in the company’s procedures or policies will help identify areas of potential exposure that can be addressed during the annual review process (if they do not need to be addressed immediately.)

There are, however, certain areas in which companies are particularly vulnerable. Most lawsuits can be traced to issues related to hiring, performance management, discipline or termination. Some additional risk areas that should be carefully reviewed include:
Misclassification of exempt and nonexempt jobs. Almost every company has job positions that have been misclassified as exempt from overtime eligibility. The complexity of wage and hour laws and regulations makes it easy to err in classifying a job as exempt, thereby exposing the company to liability for past overtime.
Inadequate personnel files. A review of sample personnel files often reveals inadequate documentation of performance—for example, informal, vague and/or inconsistent disciplinary warnings. Performance evaluations may be ambiguous, inaccurate or outdated. Personal health information is often found in personnel files, despite medical privacy laws requiring such data to be kept separate. Accurate and detailed records are essential for employers to defend any type of employee claim, particularly unemployment compensation or wrongful termination claims.
Prohibited attendance policies. Controlling excessive absenteeism is a big concern for most employers. However, the complexity of family and medical leave laws, with sometimes conflicting state and federal protections, has made many formerly acceptable absence control policies unacceptable. Absences affect workers’ compensation, family and medical leave, disability accommodations and pregnancy laws. Companies often have attendance policies that either do not comply with relevant laws and regulations or grant employees more protections than required.
Inaccurate time records. Employers typically require nonexempt employees to punch a time clock or to fill out time sheets reflecting their time worked each week. The records generated by these systems typically are the employer’s primary means of defense against wage and hour claims, so it is essential that timekeeping policies and practices be clearly communicated and consistently administered.
Insufficient documentation. Reviews of employer hiring practices often uncover inadequate documentation, such as missing or incomplete I-9 Forms. Employers can be fined between $100 and $1,000 for each failure to accurately complete an I-9 Form. Fines for these violations can easily add up, with reported cases of repayment totaling over $100,000

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