HR Auditing bencHmARk RepoRt 2014

HR Auditing benchmark
report 2014
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HR Auditing Benchmark
Report 2014
A
HR Auditing Benchmark Report 2014
ISBN 978-1-61746-908-4
ISSN 978-1-55871-881-4
‘‘This publication is designed to provide accurate and authoritative information in regard to the
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姝 2013 The Bureau of National Affairs, Inc. • Arlington, Virginia
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Table of Contents
Forward ...............................................................................................................
iv
List of Figures .....................................................................................................
vi
Acknowledgements ..............................................................................................
viii
About the Authors ...............................................................................................
ix
Introduction .........................................................................................................
3
Design, Methodology and Presentation .............................................................
4
Profile of Participating Organizations ...............................................................
5
Section 1: HR Audit Policies and Practices ...........................................................
15
Audits with the Organizational Structure ..........................................................
19
The Audit – Development, Deployment and Implementation ...............................
24
Outside Firms Used to Develop HR Audits ........................................................
30
Reasons for Auditing ........................................................................................
36
Section 2: HR Audit Findings and Results .............................................................
43
Efficacy of HR Audits .......................................................................................
45
Organizational Perception of HR Auditing .........................................................
48
姝 2013 The Bureau of National Affairs, Inc. • Arlington, Virginia
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HR Auditing Benchmark Report 2014
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Forward
The last five years has seen significant change in the nature and purpose of HR
auditing. No longer a simple checklist of ‘‘yes’’ or ‘‘no’’ questions, HR audits have
become part of a comprehensive, sustainable process that seeks to identify and
measure the organization’s success at: 1) identifying and assessing how human
capital affects the strategic and operational aspects of the organization; 2)
determining how the organization’s human capital impacts the management and
use of its internal controls, due diligence, and risk management activities; and 3)
ascertaining how human capital contributes to the weaknesses and strengths of
the organization. Increasingly, HR audits have become an assessment of the HR
function — its contributions, weaknesses, and risks — rather than an assessment
conducted by HR.
As a result, the HR audit is becoming a formal process that assesses the changes
in HR’s role and activities, discusses the external and internal forces affecting the
management and use of HR resources, and provides information about current
and potential risks.
HR auditing is or should be a process that allows the organization to
independently and objectively provide assurance that: 1) HR is meeting
compliance and governance requirements; 2) business and talent management
objectives are being achieved; 3) human resource management risks are fully
identified, assessed, and managed; and 4) the organization’s human capital adds
value. As noted, under this definition HR audits are more than an audit activity
that solely collects and presents evidence to management of compliance. HR
audits are increasingly expected to look behind and beyond the organization’s
assertions of sound and proper HR management practices and to assess the
assumptions being made, to benchmark the organization’s processes and practices,
and to provide the necessary consultative services that help the organization
achieve its business goals and objectives.
Risk is a critical issue to be investigated. Organizations face numerous risks,
which the Institute of Internal Auditors (IIA) defines as: ‘‘The possibility of an
event occurring that will have an impact on the achievement of objectives. Risk is
measured in terms of impact and likelihood.’’ Among these risks are the perils
and liabilities related to employment decisions, including strategic risks, financial
risks, human capital risks, and employment practices risks. These risks can result
in a significant threat to organizations’ strategic, financial, and operational
well-being.
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姝 2013 The Bureau of National Affairs, Inc. • Arlington, Virginia
Thus for the purpose of HR audits, the issues for organizations are: How well
have we identified these risks? Do we understand the consequences of these
risks? How well are we managing this risk?
This of course requires an understanding of the organization’s employment
related practices and priorities. It requires both a long term and short term
perspective and requires an understanding of likely events. And most importantly,
it further requires a willingness to take action.
As many organizations achieve more — higher revenue and higher profitability —
with fewer staff, a critical element of the HR audit is an understanding of the
employment risks faced by the organization, a measurement of the risk, and
methods to eliminate, reduce, or manage these risks. Through HR audits,
employers obtain critical information about the level of the risk they are carrying,
and how that risk can be diminished, eliminated or effectively managed.
This report is designed to help organizations determine if they should be auditing
their HR function, and should they choose to audit, how to create a baseline from
which they can measure their performance and develop techniques and tools to
improve their overall performance.
姝 2013 The Bureau of National Affairs, Inc. • Arlington, Virginia
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HR Auditing Benchmark Report 2014
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List of Figures
HR Audit: Introduction
Figure 1 – Size of organizations across all locations .........................................
6
Figure 2 – Percent of organizations with more than one location .......................
6
Figure 3 – Level of organization responses represent ........................................
7
Figure 4 – Percent of organizations that are publication traded .........................
7
Figure 5 – Percent of organizations that are a government contractor ...............
8
Figure 6 – Percent of organizations headquartered in the United States ............
9
Figure 7 – Percent of organizations with locations in more than one
state ............................................................................................................
9
Figure 8 – Percent of organizations with union representation ...........................
10
Figure 9 – Department to which respondents report .........................................
11
Section 1: HR Audit Policies and Practices
Figure 10 – Auditing schedule ..........................................................................
15
Figure 11 – Auditing schedule (by industry) ......................................................
16
Figure 12 – Auditing schedule (by organization size) .........................................
16
Figure 13 – Frequency of scheduled audits .......................................................
17
Figure 14 – Length of time to complete last HR audit .......................................
17
Figure 15 – Length of time to complete last HR audit (by industry) ...................
18
Figure 16 – Length of time to complete last HR audit (by organization
size) .............................................................................................................
19
Figure 17 – Level(s) of organization subject to an audit ....................................
19
Figure 18 – Level(s) of organization subject to an audit (by industry) ................
20
Figure 19 – Level(s) of organization subject to an audit (by organization
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size) .............................................................................................................
20
Figure 20 – Level which oversees audit ............................................................
21
Figure 21 – Level which oversees audit (by industry) ........................................
21
Figure 22 – Level which oversees audit (by organization size) ...........................
21
Figure 23 – Tools used to conduct audit ...........................................................
22
Figure 24 – Tools used to conduct audit (by industry) .......................................
22
姝 2013 The Bureau of National Affairs, Inc. • Arlington, Virginia
Figure 25 – Tools used to conduct audit (by organization size) ..........................
22
Figure 26 – Processes audited during most recent scheduled audit ...................
25
Figure 27 – Processes audited during most recent ad hoc audit ........................
27
Figure 28 – Responsibility for developing HR audit plans and activities .............
28
Figure 29 – Responsibility for developing HR audit plans activities (by
industry).......................................................................................................
29
Figure 30 – Responsibility for developing HR audit plans and responsibilities (by organization size) .........................................................................
30
Figure 31 – Department responsible for conducting audit .................................
31
Figure 32 – Department responsible for conducting audit (by industry) .............
32
Figure 33 – Department responsible for conducting audit (by organization size) ......................................................................................................
33
Figure 34 – Department responsible for implementing changes based
on audit findings ...........................................................................................
33
Figure 35 – Department responsible for implementing changes based
on audit findings (by industry) .......................................................................
35
Figure 36 – Department responsible for implementing changes based
on audit findings (by organization size ...........................................................
36
Figure 37 – Importance of factors when conducting a regularly scheduled HR audit ................................................................................................
37
Figure 38 – Importance of factors when conducting an ad hoc audit .................
37
Figure 39 – Factors likely to trigger an ad hoc HR audit ....................................
39
Section 2: HR Audit Findings and Results
Figure 40 – Recipients of HR audit findings ......................................................
43
Figure 41 – Recipients of HR audit findings (by industry) ..................................
44
Figure 42 – Recipients of HR audit findings (by organization size) .....................
44
Figure 43 – Effectiveness in auditing HR activities ...........................................
45
Figure 44 – Information included in the HR audit results report .........................
46
Figure 45 – How organization use HR audit results ...........................................
47
Figure 46 – Requirements for closing an HR audit .............................................
47
Figure 47 – Satisfaction with HR audit results ..................................................
48
Figure 48 – HR audit identified unexpected results ...........................................
49
Figure 49 – HR audit identified actionable findings ...........................................
49
姝 2013 The Bureau of National Affairs, Inc. • Arlington, Virginia
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HR Auditing Benchmark Report 2014
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Acknowledgements
We wish to extend our heartfelt thanks to the many human resource professionals
who participated in this year’s HR Auditing Benchmark Report 2014 survey. This
report would not have been possible without their willingness to complete this
extensive and time intensive survey questionnaire, despite their considerable
professional duties and obligations. We are most grateful for their participation.
As always, we are deeply indebted to Carla Wheeler, Fonda Jarrett and Mike
Wright of Bloomberg BNA for their diligent, conscientious and professional work
in designing, laying out and publishing this report.
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姝 2013 The Bureau of National Affairs, Inc. • Arlington, Virginia
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About the Authors
The following individuals contributed to the study design, data collection efforts,
analysis, interpretation of results, and writing of this report.
Matthew R. Sottong, Director of Survey and Research Reports at Bloomberg
BNA, provided editorial direction and oversight of this report. Mr. Sottong has
more than a decade of professional experience in survey research, statistical
methods, data analysis, and survey reporting. His surveys and reports unit tracks
and summarizes policies, practices, trends, and developments in the field of human
resources and payroll.
Mr. Sottong earned a B.A. in history from the University of Maryland, College
Park.
Ronald Adler, President and CEO of Laurdan Associates, Inc., is the author of
this report. Mr. Adler has almost 40 years of HR consulting experience working
with U.S. and international firms, small businesses and non-profits, insurance
companies and brokers, and employer organizations. His areas of expertise
include HR audits, employment practices liability risk management,
benchmarking and HR metrics, strategic HR, employee surveys, and
unemployment insurance management issues. Mr. Adler is the co-creator of
ELLA威, Employment Labor Law Audit娂, the nation’s leading HR auditing
process.
Mr. Adler has served as a consulting expert on work force, employment practices,
and unemployment insurance issues to Bloomberg BNA, The Wall Street Journal,
HR Magazine, and other publications and newspapers across the country. His
research findings have been used by the Federal Reserve Board, the Equal
Employment Opportunity Commission (EEOC), the National Conference of State
Legislatures, the National Association of Manufacturers, the National Federation
of Independent Business, insurers, and international organizations.
Mr. Adler is an adjunct professor at Villanova University where he teaches a
graduate course in HR auditing.
姝 2013 The Bureau of National Affairs, Inc. • Arlington, Virginia
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