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]
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Introduction
Introduction to a performance audit of
human resources
 Challenges in conducting a performance
audit of human resources
 Case study details
 Summary
 Questions
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Human Resources
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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.
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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.
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Human resource auditing
– selected literature
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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).
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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)
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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)
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Selected issues in conducting a
human resource audit for performance
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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?
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Case Study
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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.
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Performance Audit Outcomes
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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.
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Performance Audit Outcomes
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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.
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“ ……it is a really valuable document which
will assist us greatly in our planning and
improvement processes.”
Human Resources Director, QUT
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Issues for Internal Auditors
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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.
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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.
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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.
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