17 lessons from 17 HR Audits against the National HR Standards
by Marius Meyer and Christine Botha
Since the SA Board for People Practices (SABPP) in association with HR Future launched the first set of National HR Standards for South Africa in 2013, the HR Standard journey has progressed, not only within companies but also nationally and internationally. In 2014, at the 2nd National HR Standards Roll-out we launched the SABPP Audit Unit to audit companies against the National HR Standards. Since then a strong pool of 150 HR Auditors have been trained, and some of them have already audited companies against the HR Standards.
Since November 2014 several audits have been conducted at organisations throughout South Africa. This year the SABPP Audit Unit had a busy six months rolling out the National HR Standards and HR Audits. To date 17 audits were completed and we are very pleased to report that there are 50 more companies lined up who are preparing themselves to be audited later this year or next year.
During the HR Audits conducted over the last two years, we have made some interesting discoveries about the state of HR in a typical South African organisation. The following 17 lessons have emerged from the audits:
- HR teams are generally more ready to be audited than they give themselves credit for.
During the National HR Standards training workshops, we ask HR Professionals to assess their own readiness to be audited. We compared these results from more than 400 organisations against that of actual HR Audits conducted and found that their current performance against the HR Management Systems Standard is of much better quality than they anticipated. The code to colours used in the illustration has the following meaning: Green (above 6) means that the Standard is achieved, Yellow (or amber) (between 5 and 6) means that minor adjustments are required in order to meet the Standard, and Red (below 5) means that the Standard requires significant improvement. From the actual audits conducted, it is clear that talent management and HR Measurement are the most serious HR gaps in South Africa.
The above graph shows that a typical South African organisation currently meets about half the standards. This is very encouraging given the general state of HR in the country. Of course, more work is required to improve in the underperforming areas, but that is exactly what HR professionals should be doing to elevate their practice in building better HR functions and systems.
- It is all about integration, alignment and communication.
In all instances we have found that where HR Systems fail to achieve the Standard, it is due to lack of integration, alignment and communication. In some instances exceptional work is being performed, but in isolation or in silos. Also, this exceptional work is not well communicated throughout the organisation. Even in cases where pockets of excellence have emerged within HR functions, these good practices are not adequately shared within companies. For instance, some companies have brilliant wellness programmes, but most employees and managers are not aware of all the services and initiatives being offered. With minor adjustments and focused effort, these areas can be easily improved by ensuring alignment takes place.
Some HR Professionals tend to think that it is all about policies and procedures. While this is obviously true from a governance and operational perspective, it is important that such policies and procedures meet the necessary outcomes, i.e. be fit for purpose. In evaluating this aspect, HR Auditors will look for the following evidence:
Has the Board defined and documented its policy and objectives for HR management in relation to the organisation’s core objectives?
Is this policy specific to the requirements of this organisation?
Are there too many or too few policies?
- Who knows about the policy?
- When last was this particular policy reviewed?
- Is it used as a guide for managers and internal auditors?
- How does it relate to practices?
- Does it have a measurable outcome?
- Size does not matter.
Regardless of the size of your company, the HR Standard is the minimum standard required. If we compromise on the Standard, our HR will not achieve the desired results and will not add the value it aims to create. Bigger organisations often have the benefit of more specialised resources in HR but battles to integrate the various functions due to more complex approval processes, operating in silos and internal politicking. Smaller organisations benefit for fast decision making, outsourcing of specialised functions to external parties (or hiring the resource for a specified period of time) but battle with high volumes of work, excessive demand on resources and managers abdicating responsibility due to workload or lack of training or knowledge. In fact, smaller organisations are at a higher risk than large organisations. A large company can afford and survive a few HR set-backs, but a deficiency in the HR system of a small company can pose significant business risk.
- Executive support is critical.
We found a direct link between the qualities, consistency and value add of good HR Standard Systems and the commitment and support that HR receives from the organisation’s executive. Where the CEO or MD is in full support of HR, then HR excels. Where the CEO or MD has little regard for HR, they fail to achieve the impact they desire. This places additional burden on HR to take their rightful place in the boardroom, by improving the way in which they communicate their contribution and influence change within their own departments and the organisation as a whole.
- Measurement, measurement, measurement.
It is critical for HR to identify what they need to measure, how, when, where and how these results are used for reporting purposes, to influence decisions required, and to use this information to implement improvement measures. If it cannot be measured, it is not worth doing.
- Superficial application of best practices.
Most auditees had a very good understanding of local and global best practices. However, these practices were not always deeply infused and applied into the organisation. For example, all companies reported that they understand the best practice of employment value proposition, but very few have managed to infuse and instil this practice as part of the fabric of the HR function. A clearer commitment to follow-through from conceptualisation to application is needed. This omission was particularly prevalent in the two underperforming standards, i.e. talent management and HR measurement. While HR Managers work towards some form of talent management and HR measurement, there was a significant gap between conceptualisation and application of practices.
- HR silos exist.
While HR managers often complain about silos in the business, the auditors have found silos within HR departments. Despite pockets of excellence in certain areas, it is clear that functional experts like recruitment specialists, L&D officers, reward managers and OD practitioners operate in silos. A better level of collaboration and value-chain thinking and practice is needed to leverage the outputs of one specialised function as inputs into the next part of the value-chain. Very few examples of real integration were observed.
- HR capacity is essential.
Meeting the HR Standards requires dedicated effort and strong HR capacity to deliver. A high level of HR competence is key in achieving HR excellence. In most of the organisations audited, the HR function is growing in terms of the number of staff members. Interestingly, in areas of weakness, such as workforce planning, OD, talent management and HR measurement, there were poor HR capacity and in most cases no specialists appointed to deal with these areas. Where generalists were involved in these areas, it is one of several responsibilities and not highly prioritised. Also, getting the whole team trained in the HR standards is essential in ensuring that the HR team members know exactly what to expect during the audit, and in particular the nature of the standards that should be met.
- There is inconsistency in reactive versus proactive approaches.
The top performing auditees were typically more proactive than reactive in their approach to HR. The level of reactive HR was more prevalent in the under-performing HR functions. While it is indeed essential to be reactive and responsive in the event of a crisis such as staff accidents or strikes, an explicit and consistent proactive HR model was followed by the better performing auditees.
- It is all about evidence.
Given the fact that HR auditing is a new development and it was clear that most HR departments were not accustomed to the major requirement during audits, i.e. the ability to produce substantive evidence of meeting the standard. It is simply insufficient to state that the company has a people-driven culture and that talent management is the philosophy in the minds of the business owners or HR Manager if no such tangible evidence exists. The best performing companies produced a full set of 13 files with substantial evidence covering the 13 standards. However, in some of these cases, evidence was anecdotal with little substance. A mind-set shift and clear action is needed to collect and provide good evidence in claiming conformance to the standard.
- Preparation is key.
Admittedly, it was the first time for all 17 organisations to undergo such a comprehensive approach to HR auditing. Some of the organisations underestimated the importance of being adequately prepared. The assumption that “we have done these things for twenty years” appeared to be their downfall and resulted in inadequate preparation for the audit to take place. Good planning is essential in ensuring a successful audit, not only in terms of the relevant documentation and other sources of evidence needed, but also in understanding the audit process and methodology.
- Internal audit comes to the table.
In most of the organisations the internal audit function has played a prominent role as part of the assurance process, but mainly focusing on compliance to policy and procedures. It also became evident that internal auditors did not have a clear understanding of the nature and impact of HR work at some of the organisations audited by SABPP. On the positive side, an opportunity is presented for improved communication and understanding between HR and internal audit. If HR can improve their understanding of internal audit, and strengthen HR controls, the process and outcome of both internal audits and HR audits can be enriched.
- Conduct an audit for the right reasons.
There is only one valid reason for conducting an audit and that is to objectively determine the current state of HR in the organisation against the HR standards with the aim of identifying opportunities for improvement, while verifying current good practice. We were therefore not surprised that most of the auditees had a new HR Director appointed and this individual wanted to obtain a true picture of the real state of HR to set a baseline for strategic planning and continuous improvement. Audits should not be done for any other reasons such as political factors (e.g. to get rid of an HR Director or to obtain information to be used for restructuring).
- Good HR business partnering should be the norm.
A solid and consistent approach to HR business partnering should be the norm and not the exception. The organisations that performed well during the audits had strong HR teams playing active HR business partner roles in meeting the needs of the company. The converse was true in underperforming auditees: Poor business partnering resulted in poor HR-line relationships and perceptions of ineffective HR departments.
- There is a balance between performance and compliance.
None of the successful auditees was dominated by a performance focus at the expense of compliance or vice versa. In other words, the successful auditees managed to achieve the optimum balance between performance and compliance. It was clear that these auditees did their best to ensure compliance to all labour laws, rules, codes and standards, while driving business performance in the process, but not at the expense of employees. In fact, all successful auditees were high performance organisations meeting and/or exceeding their business objectives.
- Successful auditees say what they do and do what they say.
Lastly, it was apparent that successful auditees managed to achieve integration from their intent, to the scope of application of their practices, through to attaining sustainable results in a consistent way. In essence, these auditees could explicitly say what they do and do what they say. There is a clear line of sight between intent and action, with a strong bias towards ensuring that good HR strategy is well executed and tangible results are achieved and reported on. A high performance HR culture has emerged that is characterised by a mature HR function committed to excellence in everything they do, with a specific focus on consistency, good practice and results.
In conclusion, it is evident that HR audits can play a significant role in identifying gaps and improving HR functions. Using the National HR Management System Standard as a quality framework for improving the relevance and impact of HR functions, it has become a useful instrument to the sustainable success of HR work in a systematic and integrated way. While excellence within the 13 HR standard elements is key, utilising, leveraging and integrating all 13 standard elements into a synergistic well-functioning system provides the best value for HR departments. On 27 July 2016 at the 4th Annual HR Standards Conference, the second annual HR Audit Report will provide more details, lessons and case studies about these 17 companies that have been audited. Visit www.sabpp.co.za for more information and follow SABPP on twitter @SABPP1 for daily updates.
Marius Meyer is CEO of SABPP and Christine Botha, a Lead Auditor was the first Interim Head of the SABPP Audit Unit. They can be reached on firstname.lastname@example.org