Thursday, July 24, 2008

Human Resources Audit

THE HUMAN RESOURCES AUDIT

The Human Resources (HR) Audit is a process of examining policies, procedures, documentation, systems, and practices with respect to an organization’s HR functions. The purpose of the audit is to reveal the strengths and weaknesses in the organisation’s human resources system, and any issues needing resolution. The audit works best when the focus is on analyzing and improving the HR function in the organization.

The audit itself is a diagnostic tool, not a prescriptive instrument. It will helps to identify what you are missing or need to improve, and it may even tell you what you need to do to address these issues. It is most useful when an organization is ready to act on the findings, and to evolve its HR function to a level where its full potential to support the organization’s mission and objectives can be realized.

How should the HR audit be conducted? The audit process consists of a series of questions covering the eight primary components of the HR function:
  • Roles, head count, and HR information systems (HRIS)
  • Recruitment
  • Documentation
  • Training, development, and career management
  • Compensation and benefits
  • Performance measurement and evaluation
  • Termination and transition
  • Legal issues and personnel policies
The team works to collect information to answer the HR audit questions in each of these categories. The focus is on how these activities and tasks are actually performed in the organization. The first step is to collect all the pertinent information. The process of getting information, in and of itself, can be quite informative. For auditing the HRIS, the questioning begins from the organisation of HR department and how information flows inside the department. It must be remembered that HRIS exists in the department, evenif it is not automated using computers. Hence the overall information management system must be studied thoroughly. Hence, the audit is divided into three components:
  • Part I. Human Resource organisation/ administration
  • Part II. Information management through Documentation
  • Part III. Computerized HRIS
Each part has to be audited by asking certain questions which follow shortly.

Part I. Human Resource organisation/ administration:
  • How the organisation’s HR office is organised (including appropriate class of professional positions)?
  • What are the operating standards and internal controls?
  • How the administration of retention rights, including notices, matrix, use of separation incentives, and outplacement practices is carried out?
  • How does the HR staff remain current and up to date with the HR field?
  • What are the techniques used for communicating with employees and appointing authorities in department?
Part II. Information management through Documentation:
  • Where and with whom are the personnel files currently held?
  • What documents are held in personnel files?
  • How are the following documented by your organization?
    • Hiring: Application, Interviewing, and Reference Checks
    • Compensation and Benefits
    • Leave and Overtime information
    • Transitions
    • Training
    • Discipline
    • Work History
    • Work Assignments
    • Significant accomplishments
    • Emergency contact information
    • Performance evaluation and performance management
    • Termination
  • How long are files held and where are they stored after employees leave?
  • Is there training of managers and employees about personnel files, and policies and procedures for accessing them?
  • When requests for information are made to your organization, who fills the request?
  • What are the content of employee, payroll, medical, and position files?
  • What are the various internal controls to ensure accuracy of information and control access?
  • What is the process for purging records?
  • How employee timesheets are maintained?
  • Where are the various notices posted?
  • What are the methods to ensure timely and accurate reporting of information to the top management?
Part III. Computerized HRIS

System requirements, features and capabilities:
  • Is an HRIS system being used, and if so, which one?
  • What are the different modules provided by the system?
  • Is the system based on same platform as rest of the organisation?
  • Is the system stand-alone or integrated with other systems in the organisation?
  • Is there a formal training program for employees and managers to access the HR information through the system? If so, please describe it.
  • Is the HRIS system comprehensive?
  • Are discreet pieces of information captured about employees and their jobs:
    • Personnel Data
    • Recruitment/selection data
    • Training and Development data
    • Compensation data
    • Performance appraisal/promotability data
    • Benefit Plan data
    • Health/safety/accident data
  • How is this information translated into usable forms of information?
  • How are the data security issues managed?
  • Is the number of individuals able to update and change information controlled to enhance accuracy?
  • What hardware is used to operate the system?
  • What local area networks are fully compatible with the system?
  • What is the maximum number of employee records that the system can handle efficiently?
  • Is the system written in a commercially available relational database, or is it written in programming language(s)?
  • What is the estimated processing time to generate a standard 10-field employee roster listing, including age, annual salary, and years of service, for 500 employee records?
Fields:
  • How many named, predefined fields are in the standard system?
  • How many named, predefined fields are there when all modules are included?
  • How many user-definable fields are in the standard system?
  • Can the non-technical user easily create new fields, in addition to the user-definable fields?
  • Is any training required to create totally new fields? If so, is it provided and if yes, how?
  • Can the user modify:
    • Field names?
    • Field lengths for on-screen display purposes?
    • Field lengths for reporting purposes?
    • Create multiple versions of the same field with differing field lengths for reporting purposes?
    • Field edits and validations?
    • Screen prompt/display name?
    • Column headings for reports?
    • Alpha/numeric characteristics of each field?
    • Required/optional characteristics of each field?
    • Display format/output conversions for fields?
    • Set default values for fields to simplify data entry?
    • Inactivate unnecessary fields?
    • Reactivate fields not previously used?
    • Connect fields to tables?
Tables:
  • How many tables are provided in the system?
  • Can a non-technical user easily add tables to the system?
  • Is any training is required to add a table to the system and if yes, how much?
  • Can the non-technical user modify table characteristics?
  • Can a non-technical user easily add fields to a table?
  • Can table contents be accessed using a “hot” key and reviewed in a “pop-up” window during data entry without interrupting the data-entry process?
  • Can tables be updated during data entry?
Reporting Capabilities:
  • How many standard reports are provided with the system?
  • Can a non-technical user easily modify the standard reports?
  • Can the non-technical user change the sorting and selection criteria for standard reports when the reports are run?
  • How many sorting and sequencing levels may be defined for a report?
  • How long would it take for a non-technical user to add two new fields to a standard report and delete one existing field?
  • Is there a fully prompted report writer that allows a non-technical user to easily create new reports?
  • Does the report writer allow the non-technical user to “point and pick” fields for the report and to create the selection of records for the report?
  • How many files can be accessed on a single report?
  • Does the system provide the ability to develop matrix-style reports with user-selected statistical data in each matrix cell?
  • Can the system produce mailing labels in any format?
Security:
  • Can a unique security profile be established for each user?
  • How many unique user security profiles can be established?
  • Can each individual user be restricted from:
    • Specific records or groups of records?
    • Specific fields of information?
    • Specific commands?
    • Specific files of information?
    • Specific screens and menus?
    • The ability to update tables?
  • Can the non-technical user easily define what fields will be subject to audit tracking?
  • Does the system validate data as they are entered for consistency with other data?
  • Does the system display descriptive error messages whenever a data entry or operational error occurs?
  • Can the non-technical user easily modify “help” messages?
  • Are automated back-up procedures included to prevent loss of data?
Utilities and Other Features:
  • Does the system automatically build historical records as changes are entered?
  • How many historical entries may be maintained for any single field?
  • Is there an “import and export” utility to allow movement of data between systems?
  • Does the system incorporate a built-in word processor?
  • Will the system internally merge data into form letters and documents, or must the information be “exported” to another system?
  • How many days of training are required to achieve normal operating efficiency?
  • Can the non-technical user easily modify screens and menus?
  • Can the non-technical user easily create new screens and menus?
  • How much training is required to create new screens and menus?
  • Are all system features and utilities fully documented?
  • Is the documentation indexed?
  • Is technical information (e.g., field names and definitions; database file structure) documented in the user’s manual or in an appendix?
Costs:
  • What is the price of the current system?
  • What is the price of any additional module(s)?
  • What, if any, additional costs are there to meet the needs described?
  • What is the cost for per year maintenance?
  • What are the costs for training and implementation support?
  • What are the costs for anticipated customization?
  • What are the recurring annual maintenance and other costs after the first year?
HRIS evaluation checklist:

The accompanying checklist is a preliminary evaluation tool for ascertaining the functions and technical specifications of various. This checklist provides a high-level overview of the extent to which various systems address the functional needs of HR departments.

Code Definition:

A Provided in the system
B Provided in an available optional module
C Simple, non-technical user modification
D Intermediate, moderately technical user modification
E Advanced, complex, technical user modification
F Vendor-provided modification required
X Not covered
N/A Not applicable or unnecessary to automate


Indicate the extent to which the following capabilities and features are provided in the HRIS system:

Employment and Staffing
____ Tracks policy compliance
____ Administers new-hire processing
____ Administers termination processing
____ Maintains skills inventories
____ Tracks internal/external work experience
____ Tracks status history (leaves of absence, layoffs, etc.)
____ Administers requisition fulfillment
____ Locates qualified internal candidates
____ Tracks external job applicants
____ Monitors position control and budget data
____ Administers succession plans
____ Facilitates career and position planning

Compensation

____ Administers salary change requests
____ Creates salary change history
____ Tracks unlimited salary change history
____ Stores and reports on various payroll earnings
____ Tracks salary change forecasts
____ Tracks unlimited performance evaluation history
____ Administers bonus plans
____ Administers stock-option plans
____ Evaluates/grades jobs
____ Tracks job descriptions

HR audit questions for Human Resource Information Systems (HRIS)
Benefits

____ Administers benefit plan participation
____ Tracks benefit plan eligibility
____ Calculates benefit coverage amounts
____ Calculates employee contribution amounts
____ Calculates benefit premium payment amounts
____ Tracks benefit plan participation history
____ Produces employee benefit statements
____ Tracks pension plan investments
____ Administers flexible benefits
____ Produces flexible benefit enrollment forms
____ Administers flexible spending account balances


Training and Development
____ Administers training enrollment
____ Tracks training class participation
____ Tracks training costs
____ Evaluates training requirements
____ Schedules training classes


Safety/Industrial Health
____ Tracks first reports of injuries
____ Calculates sick time use and leave balances
____ Generates illness and injury data
____ Tracks individual safety history
____ Maintains safety training record
____ Tracks medical and rehabilitative activities
____ Calculates costs associated with illness and injury
____ Monitors workplace hazards
____ Monitors hazardous exposures


Employee and Labor Relations
____ Maintains union rosters
____ Tracks seniority rankings
____ Generates job opening notices
____ Tracks grievances
____ Calculates impact of negotiable alternative scenarios


How are needed improvements identified?
Once information is gathered, the audit team reviews each major section and notes disparities between paper (what we think or say we do) and practice (what we actually do, as revealed by the answers to the audit questions). This can then be compared to best practice (what we should do to best support our organization’s mission).
In our mission, the aim should be to improve the information system within the HR department. After studying it thoroughly, suggestions can be made to facilitate faster access to information, cost reduction in terms of training and maintenance of system, increasing the system’s user friendliness, minimise training requirements, make relevant data available at required time and so on.

How is follow-up and correction done?
Improving the HR system takes some time. A work plan — with a timeline, accountability, and deliverables — should be created after the team reviews the completed audit and identifies areas where improvement is needed. Follow-up and review should be a regular management function, performed on an ongoing basis.
Finding out what is insufficient and inadequate is the first step toward improvement. If deficiencies are identified, it is important to take steps to correct those deficiencies. Organizations should take that first step only when they are ready to act on the findings, and to make necessary improvements in their HR skills, processes, and systems.

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