Transcript Document
Human Resource Performance Auditing ‘Undertaking a performance evaluation of human resources using audit methodology’ Chris Andrews Seema Patel MIIA (Aust), FAHRI Director of Human Resources Bond University [email protected] MIIA (Aust) Director, Assurance & Risk Management Services Queensland University of Technology [email protected] 1 17/07/2015 Introduction Introduction to a performance audit of human resources Challenges in conducting a performance audit of human resources Case study details Summary Questions 2 17/07/2015 Human Resources HR is rated as the worst performing of all business functions (Global Survey of 555 Senior Executives, April 2006). The world’s best performing companies spend 25% less on HR and rely on 16% fewer staff (HR Magazine Nov 2005). A performance evaluation of HR is problematic HR literature generally fails to differentiate a managerial paradigm from an auditing paradigm General failure to explain different types of audit. HR checklists; but their worth is questioned. The concepts of efficiency and effectiveness are often discussed in HR literature but economy and value for money are not well covered. 3 17/07/2015 Auditing HR Aon: HR within the top ten risks (Av No 4). Staff costs are a significant proportion of expenditure Provides a demonstration of audit value Explanation of the performance audit process to HR professionals is needed. Performance Audit Standard (806 & 808) Examples of performance audits of human resources under AUS 806 & 808 are rare. 4 17/07/2015 Human resource auditing – selected literature Biles & Shuler 1986; checklist Dolenko, IIA, 1990; IIA Research Foundation Craven & McNulty 1994 Teo, QUT, 1997; Strategic HR audit ANAO, DFAT, 1997; example audit Nutley 2000, public sector emphasis McConnell, AMACOM, 2001; checklist Ollala & Castillo, 2002, Journal article, approaches to audit Dwyer, SHRM, 2002; White paper on HR Auditing Hyland & Verrault 2003 & 2005 Clardy, 2004; auditing T & D; self auditing. IIA Training Program “Auditing your Human Resources Function” 2005 (Esperson) Esperson, People Risks, 2005 http://www.hefce.ac.uk/lgm/hr/selfassess/ (a self assessment tool in relation to a university HR department). 5 17/07/2015 Craven & McNulty 1994 There is a tendency for auditors and economists to focus on economy and efficiency. There is a tendency for human resource practitioners to focus on effectiveness (attempting to prove their value to the organisation) 6 17/07/2015 Verreault & Hyland The effectiveness of a human resource audit is highest when HR act strategically and IA take a risk management approach (a value-creating combination) (2003). There are compelling reasons for internal audit to devote resources to the evaluation of strategic risks in HRM Audits (2005) 7 17/07/2015 Selected issues in conducting a human resource audit for performance Level of analysis (HR & the Board; Whole Organisation; HR Dept or selected HR activities?) Audit history Subject matter expert (with both HR & audit knowledge) Comprehensive corporate plans; HR Objectives/Risks. Generic HR standards? Industry standards? HR at the organisational level; agreed performance standards Activities selected for audit; objectives & risks Attest (responding to management assertions) or direct reporting audit (auditor prepared examination)? Management information geared to value-for-money? 8 17/07/2015 Case Study Large employer; valued and responsive HR function; HR Award winners; HR Benchmarked. Over 4000 staff; staff costs a significant component of overall expenditure (59%); Comprehensive corporate blueprint to 2010, people and culture plan; HR Department plan. Dynamic internal audit function. Agreed Internal Audit Assignment Plan. Co-operative organisational culture; genuinely interested in the HR Audit outcomes. (Direct reporting) performance audit of selected HR activities. 9 17/07/2015 Performance Audit Outcomes Alignment of HR with organisation’s strategic and business objectives (e.g. staff retention). HR objectives require work; also risk understanding. Review cycle for all HR activity (devolved & outsourced). Needs a sharper focus on key HR issues for business success (HR practice implication). A performance audit of HR activity is difficult when the current management evaluation practices do not address the concepts of efficiency, effectiveness or economy. 10 17/07/2015 Performance Audit Outcomes Map HR activity to organisational objectives. Some underlying HR assumptions may not be suited to business needs (in the areas of change and training). HR processes (efficiency) would benefit from an improvement process Management information not geared to performance reporting on value-for-money. Greater value-for-money obtainable, from a valued and responsive HR department. 11 17/07/2015 “ ……it is a really valuable document which will assist us greatly in our planning and improvement processes.” Human Resources Director, QUT 12 17/07/2015 Issues for Internal Auditors Auditor skills Subject matter specialists with audit experience Organisational climate Time taken to complete; cost Potential to undertake a pre-assessment: are the organisations expectations of HR clear? Are HR objectives clear? Risks understood? HR plan current? HR reporting on performance? Need to ensure management reporting addresses the three E’s and thus value for money. 13 17/07/2015 Auditing Human Resources The case study demonstrated that a properly constructed performance audit of human resource department activities can identify areas where future improvements can be made, even to a valued, responsive and award winning HR department. 14 17/07/2015 Where to from here? Update the original Dolenko 1990 Paper – IIA Research Foundation IIA Training program on HR auditing run in Australia? Performance audit assignment plans could be shared between IIA members. 15 17/07/2015