{Source: An HR e-portal article, dated 10th Mar, 2016}
Only a miniscule number of
4 out of 100 companies have dedicated HR resources for HR audits,
reveals the People Matters HR Audit Study. This microscopic number calls
for gargantuan attention – as the need for dedicated HR professionals
with domain specific knowledge to execute audits is of significance to
organizations. However, the gap lies in the lack of auditors with the
specialized knowledge in HR practices that would allow them to review
processes, assess risks and recommend for improvements and/or mitigation
strategies. In the backdrop of Dr. T.V. Rao’s assertion that only an HR
professional can be an HRD auditor, this fact is a startling
revelation. According to Prithvi Shergill, CHRO, HCL Technologies, it is
important to have an HR representative in the audit team. He says, “The
HR professional can impart the functional know-how to the team and make
the process more efficient and effective.” Being cognizant of the same,
HCL has transformed the audit team structure and it now ensures the
participation of a HR professional in the audit team.
The race against time
The survey also revealed that only half
the companies (52 percent) have the guiding objective of using HR audits
as an early warning system to identify issues before they become
crises. 80 percent surveyed companies said that their guiding objective
of HR audits is “to examine organization’s compliance with established
regulations and/or company policies.” And understandably so – the
abundance of statutes and company policies, and the complexity of
processes make it difficult for companies to focus on identifying risks
because of their pre-occupation with auditing the former.
Given the periodicity of audits (6 percent
companies do more than 4 audits in a year, 15 percent do quarterly
audits, 29 percent do semester audits and 42 percent do annual audits),
it becomes a challenge for process owners, since it is a very demanding
and exhausting exercise. Dilpreet Singh, Vice President – HR, India and
South Asia, IBM shares this pain point along with HCL’s Prithvi
Shergill.
The complexity is further escalated
because of the length of audit engagements. While it is advised that the
recommended length of an audit engagement be short so that it is not
misconceived as a control exercise, it is challenging for companies to
be effective in the suggested timelines. The upside is that it is indeed
short in a majority companies the typical length of an audit engagement
is up to 2 weeks in 49 percent companies; 2-4 weeks in 17 percent
companies; and the percentage keeps reducing as the time increases.
Therefore organizations have to fulfill their aspirations to ensure
process compliance and identify risks in the short amount of time that
they have for an audit. It is the prerogative of organizations to find
the right balance of what processes to audit, and how to audit them.
Some organizations, that People Matters
spoke to, follow the practice of prioritization of processes. For
instance, at Wipro, the selection of processes is entirely based on the
degree of vulnerability and importance of the function. Same is the case
with HCL, which prioritizes processes when preparing the quarterly
audit calendar. Organizations are also deploying innovative approaches
to make the audit process constructive and effective – Aditya Birla
Group uses a maker-checker process, IBM does peer-peer audits and HCL
does audits across 3-levels in the organizations.
Click here or on the image above to view HR Study Infographic
Getting the maximum from the audit procedure
All the organizations surveyed audited one
process or the other. While organizations audit most of the processes,
there are some of the processes which were identified to be the most
popular functions. These include ‘Compensation and payroll’, ‘Policies
and procedures’, ‘Record keeping’, ‘Employee separations’, ‘Legal
compliance’ and ‘Recruitment’. A minimum of 85 percent companies audit
all the aforementioned processes. Thus, it can be opined that these
functions are considered high risk areas by organizations, based on the
large proportion of companies that audit these procedures. The processes
which are less popular include ‘Communications’, ‘Learning and
Development’, Employee Relations’, Performance Appraisal Systems’ and
‘Health, Safety and Security’. These processes are not audited by a
minimum of 30 percent organizations.
The top three benefits that organizations
have accrued from audits include identifying and correcting risk gaps,
litigation avoidance, and cost avoidance. But in order to derive maximum
outcome from audits, it is important that the context of the audit for
the business is clarified at the initiation stage of the audit. Both the
survey and expert’s view (to follow later in the story) points to the
fact that there is a dual understanding of the role of audits in HR.
One, it is looked at as a statutory and compliance process that takes
care of the financial controls points and labor laws. On the other hand,
it is also seen a process review and improvement mechanism that
proactively identifies business risk areas and helps improve efficiency
of the process.
Overall, audits need to be seen as a
development exercise. “The goal of HR audits is not to pin point
responsibilities,” as articulated by Divakar Kaza, President – HR, Lupin
Ld. “but it is rather to identify areas of improvement.”
