Helping organizations comply with the law, maintain best practices, benchmark
By Brian Kreissl
Most HR professionals are probably familiar with the concept of a financial audit. Audits are meant to uncover irregularities and substandard practices with respect to an organization's financial records and controls.
A good auditor, however, is able to spot potential problems not only with respect to financial transactions, but also in terms of overall business practices. An audit is meant to be more than just a way of ensuring no one is “cooking the books.”
Even if everything is above board, an organization could still be operating in an inefficient manner that isn’t in keeping with recognized best practices. This includes issues related to people and human resources management.
HR professionals should periodically audit HR policies, procedures, practices, programs and systems in preparation for audits by internal and external auditors. Once an HR audit is complete, the results of that audit should be used to create meaningful action items, along with suggested timelines and an allocation of appropriate resources.
This is especially helpful in preparation for an external audit, which is required by law in the case of public companies and is frequently considered a best practice for private companies as well. Auditing the HR function internally allows the HR department to be proactive and uncover any potential problems before they are highlighted through a formal audit.
Reducing risk, complying with the law
Conducting an HR audit can also help an organization comply with the law as part of an effective overall risk management strategy. Such due diligence helps uncover any potential problems before a government inspector comes calling, or the organization is faced with a human rights claim or wrongful dismissal suit.
Audit findings can help to provide evidence of compliance. This is particularly valuable in the case of an inspection, a prosecution or a lawsuit.
Where the organization is non-compliant, the action items arising out of the audit should be used to remedy the situation as soon as possible.
However, even where such action has not yet been taken, this could potentially be considered to be a mitigating factor by a court or tribunal in determining appropriate fines and penalties, and with respect to the award of exemplary damages.
Inspectors may also decide not to ticket an organization where evidence exists it is taking positive steps to become compliant with the applicable legislation.
Auditing for HR best practices
While legal compliance is extremely important, an effective HR audit should also move beyond legal compliance into the realm of best practices in human resources management.
Although recognized best practices do exist, the challenge is the HR profession generally lacks the same type of documented best practices that exist in other professions such as accounting and law.
For example, the accounting profession has a body of rules and regulations referred to as Generally Accepted Accounting Principles (GAAP). HR doesn’t have anything quite like GAAP just yet.
However, as national and provincial HR associations continue to develop practice standards for various topics, we will begin to have more predetermined best practices that exist beyond what’s simply mandated by law.
The other challenge with HR best practices is what’s considered a best practice in one industry or organization doesn’t always work elsewhere. Becoming a best practice employer requires more than simply copying the programs offered by another employer.
Best practices need to be tailored to your own organization, taking factors such as industry, organizational size, demographics, finances and competitive information into consideration.
Speaking with colleagues elsewhere and monitoring what other similar organizations are doing — especially those with which you compete for talent — can be helpful. Keeping up to date with the latest trends, developments and thinking is also helpful, as well as reviewing academic research, white papers, books and top employer lists.
Benchmarking the organization
Another way HR audits can help an organization remain compliant with best practices is by benchmarking the results of HR audits. This can be done by benchmarking the organization against itself over time and also by benchmarking its results vis-à-vis those of similar organizations.
Benchmarking the organization can provide evidence when making a case to senior management on the need for specific HR programs. And even where such programs are already in place, improved audit results from one year to the next can also help provide evidence HR programs are working.
Brian Kreissl is the managing editor of Consult Carswell. He was also recently involved in editing, updating and enhancing the second online edition of Carswell’s HR Audit Toolkit, by Ruben Benmergui. Brian can be reached at [email protected]. For more information, visit www.consultcarswell.com.
