Cannings2012 PDF
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Findings – Existing approaches to HR audit do not reflect the current aspirations and rhetoric on HR
practices as promoted by Holbeche, and Ulrich et al.This emphasises the need for a new approach.
Practical implications – The work proposes a new framework to assess HR activity against alignment
and contribution to organisation strategy and goals, as well as the prevailing culture, thus forcing HR
audit to move beyond legal compliance of HR practices. A range of processes, tools and techniques are
identified.
Originality/value – The paper contains a completely new approach (the authors assert) to HR audit
which is more rigorous and wide ranging in scope. It moves HR audit away from legal compliance to
increasing the HR contribution to the organisation, thereby creating improved business performance.
Keywords Human resources, Audit, Benchmarking, Impact, Evaluating, Performance,
Human resource management, Auditing, Performance management
Paper type General review
How organisations can benefit by growing the impact of human resources management to
support their purpose and aim.
1. Introduction
A human resources management audit can assess how current human resources and
employment management arrangements contribute to the purpose and aims of the
organisation and how these arrangements support stability and manage the obligations and
expectations. It is essentially a comparison of ‘‘what is’’, and ‘‘what should be’’. This
presents two fundamental challenges – measuring ‘‘what is’’, and defining ‘‘what should
be’’. We argue that traditional models are too insular to achieve this, and most processes too
limited in their scope. We therefore propose a new model and process to human resources
(HR) audit.
DOI 10.1108/00197851211216745 VOL. 44 NO. 3 2012, pp. 139-149, Q Emerald Group Publishing Limited, ISSN 0019-7858 j INDUSTRIAL AND COMMERCIAL TRAINING j PAGE 139
Traditionally, the approach has been internally focused – assessing the compliance of the
HR function to regulatory requirements, efficiency of processes and staff, the effectiveness
of processes when measured against ratios eg staff turnover, and the service levels to the
organisation. The models proposed by Weisbord (1978 (Six Box Model)); Hornstein and
Tichy (1973), and Lawrence and Lorsch (1967) all follow this approach. Some early models
do look beyond the internal operations of the HR function, for example Levinson’s (1972)
Clinical Approach, the Nadler and Tushman (1977) model , and Kotter’s (1978) Seven Circle
Model; yet the extent to which they focus on how the HR function interacts with the external
environment is limited to measuring the response to or support for change, and the quality of
relationships with service users.
Moving into the twenty-first century, Holbeche (2001) claims that ‘‘What chief executives
require is someone who can translate the organisational needs back into business language
and help executives with what must be done to people if the business strategies are to be
achieved.’’ Ulrich and Brockbank (2005) go further: ‘‘The HR value proposition means that
HR practices, departments, and professionals produce positive outcomes for key
stakeholders – employees, line managers, customers, and investors.’’ In other words, a
successful HR activity produces contribution to the organisation’s goals, and within the
prevailing culture.
Yet even the audit process proposed by Sacht (2001) based on Ulrich’s four key principles of
HR (line management friendly systems, line management legal compliance, implementing
HR strategy to increase workforce value, and effective procedures) is still internally focused
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Table I
Activity/focus %
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PAGE 140 INDUSTRIAL AND COMMERCIAL TRAINING VOL. 44 NO. 3 2012
‘‘ [. . .] current audit thinking and practices do not, by and large,
conform to the rhetoric, and would appear to have changed
little over the last 30 years. ’’
above, and introduces new external factors which go to the heart of why the HR function
exists. Issues, potential actions and an assessment of priorities can then be identified. These
together would lead to the creation of a plan and timetable for implementation of selected
options. It is both a model of audit, and a process as a means of achieving valued outcomes.
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VOL. 44 NO. 3 2012 INDUSTRIAL AND COMMERCIAL TRAINING PAGE 141
This is a holistic approach which recognises the interconnected nature of operations; HR
does not and cannot operate effectively in a vacuum.
We set both these approaches aside from the act of due diligence, which is the investigation
and examination of a business activity prior to contractual relations.
We summarise our holistic approach to HR audit as the HR audit framework, as shown in
Figure 1.
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PAGE 142 INDUSTRIAL AND COMMERCIAL TRAINING VOL. 44 NO. 3 2012
B No single set of benchmarks or standards exist; we have ACAS Codes of Practice, Public
Sector Regulatory and Governance requirements, Statute and EU Regulatory
requirements, sector performance ratios, and professional best practice, to name a few.
B No one single benchmark or set of standards is fully applicable to all types and sizes of
organisations; sector and best practice comparisons may not be what delivers success to
the organisation under review.
B Benchmarks and standards are unlikely to predict the impact of a HR activity or practice
on organisational effectiveness, without due examination of the prevailing culture.
The HR audit framework provides for a systematic examination of the workings of any
organisation, business, etc., especially with regard to the economical use of resources and
worthiness of product or result – that is the provision and productive activities of the HR
department/capability – within a given environment.
It is capable of using and integrating a range of applicable recognised internal or external
benchmarks or standards – and the audit assessment can assess against such standards,
then apply the appropriate interpretation for a given size and nature of a firm.
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VOL. 44 NO. 3 2012 INDUSTRIAL AND COMMERCIAL TRAINING PAGE 143
change and in implementing the planned change manage the transition for a previous
position of stability to a new position of stability.
The HR audit framework can be especially useful in the situation of change or where a firm
has grown to a size where the initial human resources management systems and procedures
may be in need to review and strengthening to respond to the expansion of the business.
The aim of the HR audit is to determine the extent of:
B co-ordination with the organisational context;
B efficiency within the HR practices;
B the effectiveness of HR practices; and
B the value for money offered.
To do this, we focus on three key aspects of the situation (see Figure 2):
1. Aims of the organisation: the main or strategic aims of the organisation, what it seeks to
achieve and how it wishes to achieve this; may include market or other environmental
factors, typically expressed as a business plan or strategy.
2. HR practices: what HR does, the impact it has on, and the relevance to, the organisation;
how these ‘‘fit’’ with the culture. The efficiency and effectiveness of these practices.
3. Prevailing culture/values: the capability to exercise and integrate/exploit HR practices
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Figure 3 Three stage methodology
3.2.2 Stage 2 – design. The identification of gaps or convergence between ‘‘what is’’ and
‘‘what should be’’. The HR audit concept is used here to determine specific areas of
concern, and those aspects functioning in harmony with the aims and culture of the
organisation. This stage forms the basis for identifying the choices available to the
organisation to preserve existing effective HR practices, and the opportunities to improve
HR support of the organisation. The output of this stage is described in 3.3.2 below.
3.2.3 Stage 3 – choice. The arrangements for making fresh provision by evaluating potential
options and prioritising specific actions. The emphasis here is on identifying those actions
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which generate the most impact for the organisation, and those with which they feel most
engaged. We would not expect an organisation to action all the outputs from Stage 2, and
the main concern here is that the organisation takes control and responsibility for its future
actions to improve HR support of the organisation.
We acknowledge that the methodology requires at least a reasonable degree of cooperation
in order to carry it through effectively. This is consistent with our notion that HR audit is a
business improvement tool, not a HR evaluation event carried out in isolation.
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VOL. 44 NO. 3 2012 INDUSTRIAL AND COMMERCIAL TRAINING PAGE 145
These groupings will form the basis of the reporting back to the organisation, and identify the
basis for action, but are not of themselves actions. This comes from stage 3.
3.3.3 Stage 3 – choice. The tools for this stage include:
1. Coding to prioritise potential actions:
B (Red) high priority – key requirements that are absolutely essential for success and
must receive high priority.
B (Amber) high improvement – factors that are clearly necessary for success and which
must receive some attention.
B (Green) optional improvement – factors of little immediate concern to top
management.
B (Blue) pre-emptive action – avoiding future problems in execution of business
development and workforce management.
2. Effort/impact analysis to quickly evaluate potential solutions to selected actions on the
basis of the size of the impact and the degree of effort required, and decide:
B Box 1 – implement immediately.
B Box 2 – items for detailed action planning – start now for long-term success.
B Box 3 – do it if you have the time and resources.
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B Box 4 – disregard.
3. Setting effective objectives for selected solutions:
B Time scale.
B Outcome.
B Resources.
B Control.
B How.
4. Implementation and monitoring plan to provide a managed approach to resourcing and
implementing those actions selected (Figure 4).
4. Restrictions on HR audit
The HR audit framework is designed to be used in organisations where there is an
interdependent relationship between HR and the organisation – that is, each depends on
the other to be effective. We see this as not necessarily the same in some contracted HR
services, where assessment of HR effectiveness may be restricted to:
B Comparing the ‘‘value benefit’’ of contracted HR services – the up front bottom line cost
only.
B Comparing (‘‘auditing’’) according to contract cost/services received as opposed to
organisational benefit.
B Using service level agreements within outsourcing contracts as a criterion for audit.
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Figure 4 Implementation and monitoring plan
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We are not therefore proposing that the HR audit framework is used in contracted out HR
transactional services where service level agreements or contractual indicators only may be
the main drivers for measuring transactional HR contribution to the organisation. However
the HR audit framework would be of value in those situations for measuring the impact and
effectiveness of HR business partnerships within the organisation, and identifying potential
improvement routes.
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VOL. 44 NO. 3 2012 INDUSTRIAL AND COMMERCIAL TRAINING PAGE 147
6. The HR audit framework in practice
The following are brief examples of how we have used the HM Audit Framework approach to
assist organisations to achieve improved performance through HR:
References
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Holbeche, L. (2001), Aligning Human Resources and Business Strategy, Butterworth-Heineman, Oxford.
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Hornstein, H. and Tichy, N. (1973), Organizational Diagnosis and Improvement Strategies, Behavioral
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