Audit And Measurement Of The Human Resource Systems And Procedures At Business Unit Level
Prepared by By Jeff Sacht
1. Purpose Of A Human Resources Audit
This document presents an audit procedure to assess whether the Human Resource (HR) Function at Business Unit (BU) level is delivering its mandate and roles.
The methodology that drives this audit is based on four key principles advocated by a leading HR consultant and teacher, Dave Ulrich and his associates in the USA.
Their cutting edge research, and consulting work has shown time and again that worthy HR professionals ensure that:
These assumptions can be translated into four critical roles that professional HR professionals must play if they wish to be seen to make a real contribution to a business’ success.
2. Scope Of the Audit
The audit will take stock of the degree to which HR delivers its four key roles. The following information indicates the aspects to be audited for each role. The sequence in which this information is presented also approximates the sequence in which the audit needs to be conducted. Each step in the process will produce information and conclusions about HR that is used as input to guide each succeeding phase of the stock take.
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Industrial age: control strategy
At the heart of a traditional industrial age-control focused strategy for workforce management is the wish to establish order, exercise control over the decision-making process in order toachieve efficiency in the application of the workforce. This model assumes low employee commitment to the organisation. However, changed employee expectations and environmental pressure that is fast opening up to competitors who can provide the same services, has rendered this "protected" way of life obsolete in most organisations. Management will increasingly be under pressure to change management and human resource systems to accommodate or even embrace employee expectations to fully participate in running the business of local government organisation.
Information age: service quality strategy
At the heart of commitment-based strategy is the belief that individuals and teams can be taught to exercise control over their own areas of responsibility. Early attempts at establishing this type of business strategy is reflected in the emergence of Quality of Work Life (QWL) programmes, Quality Circles (QC), and Employee Involvement schemes (EI). Most of these programme-driven change initiatives have come and gone due to the fact that organisations were unresponsive to the kind of organisational changes required to sustain these initiatives.
2.4 Audit Of The Financial Management Role Of HR (financial ratios)
A comprehensive audit of HR systems and procedures needs to go beyond the ‘check and tick/inspection’ level. Basic financial ratios/scorecard measures appropriate for a staff function like HR need to be put in place to audit the efficiency of the various functions outlined in figure 1 above (See The Human resource Wheel).
Please note: The many, and varied functions of HR act as a system of levers for optimising employee, team and organisational performance results over time. The red flag here is not to fall into the trap of measuring loose-standing HR functions as administrative management tools. Many HR outputs also need to be considered from the standpoint of which is 'better' -i.e. to make or to buy. These are (financial) management decisions that need to be made about how HR will be judged to have produced results.
Each hotel/SBU can select from the following list of Customer, Financial, Business Process, and Growth and Learningmeasures that will be calculated to round off the audit.
2.4.1 Planning and staffing
2.4.2 Recruitment efficiency
2.4.3 Recruitment effectiveness
2.4.4 Compensation measures
2.4.7 Counseling/disciplinary costs (early warning measure)
2.4.8 Lost time costs
2.4.9 Turnover rates
2.4.10 Training and development costs/measures
2.4.11 Organisation development measures
3. Audit methodology, instruments, and deliverables
3.1a Audit Of The Functional Role OF HR
This aspect of the audit uses the traditional check and tick method of conducting desktop ‘research’. A comprehensive list of all the functions and sub-functions to be audited are agreed with line management and HR. All relevant manual and electronic documentation and systems are inspected. Highly structured checklists for each area is used to assess the degree to which policies, systems, and procedures are in place.
Deliverable: An exception report that details (a) which systems are in place and up to scratch in terms of Standards of HR Practice as determined by The South African Board For Personnel Practice (SABPP); (b) gaps, and deficiencies with recommended for change.
3.1b Audit Of The Service Role Of HR
A 21-item questionnaire is used to gather information from employees, line management, and HR to determine service level gaps as outlined in table 1 above. The purpose of the exercise is to establish what are the perception gaps between how HR views itself, and how HR’s customers perceive the quality and quantity of service, they receive.
Deliverable: The report will provide line and HR with a structured report about service quality gaps that exist for HR. The analysis highlights service quality strengths and weaknesses, and provides a basis to negotiate and agree service quality needs.
3.2 Audit Of The Compliance Role Of HR
The codes of good practice are there to ensure that business conducts itself within a framework of good people practice. This requires that (a) appropriate HR systems and policies are in place, and (b) that management plays its role according to good industrial relations practice. The systems aspect is audited using the methods described in 3.1a above, and by means of a brief 30-item questionnaire completed by all employees (including management). The questionnaire assesses the perception gaps between how management and employees view the importance of good people management practices in the hotel/SBU.
The management practice aspect is assessed using focus groups (using mixed groups from different functions and levels) to determine what management does well, does not do well on, and where management can improve in terms of the codes of good practice.
Deliverables: Two reports provide management, and HR with qualitative and quantitative feedback about whether management and HR ensure that the codes of good practice are used. The quantitative report provides specific pointers about the practices, and competencies that affect the morale, and climate of the hotel/SBU.3.3 Audit Of The Strategic Role Of HR
The purpose of this part of the audit is to assist line management, and HR to formulate a specific people management strategy. An outside facilitator facilitates a half-day strategy discussion between line management and HR to assess the current/implicit people management strategy, and the desired/explicit strategy the hotel requires to manage its business situation/context. The items in table 2 above (factors impacting choice of workforce strategy) are placed into a 30-item discussion framework that allows for a structured decision-making meeting about the desired people management strategy for the hotel/SBU. The facilitator provides data/proof/information for each part of the discussion using the results of the systems, service quality, and compliance audits. The current strengths and weaknesses of the HR function are discussed in relation to achieving the desired people management strategy.
Deliverables: A consolidated report that summarises the results of the systems, service quality, and compliance audits is distributed prior to the strategy discussion; the desired people management strategy and a high level action plan for upgrading systems, procedures and polices to achieve this strategy are produced at this meeting.3.4 Audit Of The Financial Management Role Of HR
The generic list of measures for assessing HR’s functioning is agreed at a three-hour orientation meeting with HR and line management. At this meeting line and HR agree what (balanced scorecard) measures need to be in place for HR and line to successfully deliver their respective people management roles. The purpose and scope of the audit is also clarified. All role players are informed about their roles, and responsibilities to supply information for a complete audit. A communication plan is agreed to inform all employees about the audit, and to gain their support for the project.
Deliverables: A set of measures is agreed to start the audit and measurement process; an audit plan, communication plan, and timetable is agreed.
4.1 The audit requires the support of all trade unions and key role players in the hotel/SBU.
4.2 One administrative support person is required to supervise the distribution of questionnaires, and to ensure their return.
4.3 One boardroom is required for the orientation, focus group, and strategy meetings.
4.4 One audit room for inspection/discussion of policies, systems, and procedures.
4.5 Audio visual equipment for meetings, presentations, briefings, discussions.
5. Implementation plan
The audit is conducted in three phases. Day:
5.1 Phase 1: audit set-up
5.1.1 The set-up meeting is a half day meeting to agree the 1
scope, methods, resources, timing, and communication plan for the audit. Performance measures are agreed by line and HR for assessing the financial aspects of HR’s role
5.2.2 Finalise communication plan with HR/line/unions 3
5.2.3 Finalise questionnaires for service quality audit, and 5
people management practices questionnaire.
5.2.4 Finalise balanced scorecard measures to be used in the 7
5.2.5 Implement communication plan and brief departmental 10
management about their roles/requirements for staff time and
5.2 Conduct audit
5.2.1 Conduct combined surveys (3 days to complete) 12
5.2.2 Assemble and audit policies, procedure, systems information 15
5.2.3 Conduct focus groups 20
5.2.4 Finalise quantitative and qualitative reports 30
5. 3 Conduct feedback/strategy meeting 35
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