Are you getting the best value from your HR function?

Why an HR Audit might be a good idea
We are often approached by companies who have questions about their HR systems and processes, such as: What are we missing? Are we exposed to risk? What should we do to ensure that everything is in place as it needs to be? Could we be more effective?

These concerns are valid. Having the systems, processes, and practices in place to manage human resources in a company effectively is important for two reasons:

Reason 1: Administration, compliance, and risk management
HR has a large administrative function which can cause frustrations and increase costs when not managed well. For most companies, payroll is the largest single expense item on the income statement. It can be 15 – 30% of gross revenue and 50% or more for some service businesses. Managing this expense ineffectively can have a large cost implication. Mistakes and inconsistencies on aspects such as wages, salaries, benefits, and leave create a great deal of dissatisfaction. Employers must also ensure that they comply with relevant legislation as failure to do so can lead to legal liabilities, like losses in CCMA cases. Employment Equity and Skills Development are also key elements in BBBEE scores.

Reason 2: Strategic competitive advantage
In many companies, HR Management is purely a compliance and administrative function, with little strategic focus. Although the provision of an efficient HR service is important in any company, it can easily become a box-ticking exercise known only for paying salaries and checking up on labour law requirements. This is a missed opportunity as a company’s strategy can only be achieved through its employees. When HR takes up a strategic role, they develop and implement effective practices which align talent management (recruitment, development, and management of employees) to the strategic objectives of the company so as to achieve the desired bottom-line results.

Gauging the value that your HR function is adding to your organisation can be of benefit for both small and large organisations. For small organisations (even where line management absorb HR responsibilities) this could mean ensuring legal and administrative compliance and establishing the basic strategic functions well so that the HR function is geared when organisational growth takes place. In larger organisations, assessing the value-add of an HR department can help identify gaps in best practice and strategic focus, as well as inefficiencies in team structure or practices.

To assist you in gauging where your HR function is at, we propose an HR Audit, which will provide you with the information you require to inform a HR strategy and business plan for your organisation that can add strategic value.

How does one gauge the effectiveness of HR?
Our approach to conducting HR audits is to use the HR Practice Standards developed by the South African Board of People Practices (SABPP) as a benchmark of best practice principles against which to audit. The model below shows these HR management system standards. We have adapted these standards into a process by which we can examine a client’s HR management function.
The HR audit process
Our process involves conducting an interview with the client’s HR team to review the current HR processes and documents used by the client for each of the HR standards. A comprehensive list of documents required for the interview is sent to the client prior to the meeting. If desired, the effectiveness of the HR team can also be evaluated through an internal customer service survey.

Upon completion of the interview, we prepare an audit report in which we table our findings, along with risk levels we have identified and proposed actions that may be taken to address the risks and gaps identified.

This is followed by a feedback session with relevant parties, to discuss our findings, identify gaps, and map a plan to address the gaps identified. The plan will consider that HR is a board field, and the actions to be taken should be pragmatic and add value to your HR operations of the client. Not all standards are equally relevant to every company, particularly when considering the size of the company.

Implementing the change
Once we have discussed the audit report and mapped out changes that should be made, we plan interventions to effect the change with the client. These typically include:
1. Establishing HR compliance:
a) Development of organisational HR policies, templates, and contracts.
  • Staff Handbook (Employer HR policies), including:
    • Terms and conditions of employment (includes working hours, overtime, leave, termination)
    • Code of Conduct (includes conflict of interest, non-solicitation, confidential information, dress code, use of communication technology, safety and security, sexual harassment, HIV policy, and retirement)
    • Disciplinary Code and Procedure
    • Grievance Policy
    • Any additional policies requested by the company
  • Standard templates for employment contracts
  • Standard templates for disciplinary actions, probation reviews, and exit interviews
b) Employment Equity (EE) Compliance. This includes the following legal requirements:

  • Demographic analysis to determine EE goals
  • Compilation of current workforce profile
  • Setting EE goals
  • Voting in an EE committee and training the committee in their responsibilities
  • EE training for all staff
2. Developing a talent management strategy, which includes:
a) Development of job descriptions and competency profiling
b) Drafting a recruitment strategy, focussing on how to get the right people into your organisation
c) Drafting a learning and development strategy which is based on competencies profiled and may include:

  • Skills audits
  • Identification of training providers
  • Establishing a training plan
  • Planning for and assistance with SETA submissions
  • Leadership development and succession planning
d) Development of a performance management system and policy
e) Development of a remuneration strategy which includes:

  • Drafting a remuneration policy
  • Job evaluation
  • Salary benchmarking (Camino works together with reputable benchmarking organisations to establish benchmarks)
  • Linking performance to reward
3. Assisting with the implementation of HR Information Systems technology
The management of your human resources should be contributing to your profits by multiplying the potential of your people. Call Camino Consulting to have an experienced HR expert help you to discover the inputs you need to enable this and to give your HR department a strategic voice at the table.