Lessons from HR Audits: Strategic HR Management

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Lessons from HR Audits: 
Strategic HR Management
by Shamila Singh

Strategic human resource management supports long-term business goals and outcomes with a strategic overall framework. It focuses on longer-term resourcing issues within the context of an organisation’s goals and the evolving nature of work, and informs other HR strategies.

Several theories deal with the integration between business strategy and human resource management. Some of these theories are behavioural theories; resource-based theories; and interactive theories, based on the open systems theory (Dhar, 2010). Accordingly, behavioural theories assume that for the realisation of a certain business strategy certain employee behaviours are necessary.

To date two primary perspectives – a universal approach and a contingency approach have been used to describe the link between human resource management (HRM) and firm performance (Wright and McMahan, 1992).  The universal or best practice perspective implies a direct relationship between approaches to human resources and performance, whilst the contingency perspective posits that an organisation’s strategic posture either augments or diminishes the impact of HR practices on performance.

The SABPP HRM System Model positions strategic HR Management as the first HR standard as part of the business strategy-HR business alignment process.

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The results of 18 HR Audits of the SHRM element of the National HR Standards Model revealed some interesting outcomes.  Although there are pockets of excellence in the SHRM element, the average South African organisation experiences major challenges in the development and implementation of HR Strategy.  Pre-audit assessments of SHRM element completed by 400 companies revealed an average score of 50% whereas the audit outcomes of the 18 companies was higher at 58.2%.  Moreover, some the auditees reported challenges on the strategic positioning of the HR.  A score of 60% is required to achieve the standard.

The following ten lessons were identified by the auditors at the twenty auditees:

  1. Overall, most of the auditees acknowledge that HR needs to be re-positioned to enable the organisation to achieve its strategic objective.
  2. The perception of HR is generally negative or seen to be focused on transactional issues.
  3. The auditees agree that the National HR Standards Systems Model provides a framework for HR professionalise and for HR to have a voice and gain credibility.
  4. For HR to contribute towards the strategic objectives requires CEO and top management support and buy-in.
  5. Of all the HR audits conducted none of the auditees had an explicit employee value proposition to determine the people intentions to attract and retain talent.
  6. From the perspective of the alignment of the HR strategy to the business strategy (vertical alignment), there is alignment but the challenge is that there is a lack of horizontal alignment of the functional areas of HR to the HR Strategy. In other words, HR management systems, policies, plans, practices and interventions are not fully aligned and leveraged for optimum impact.
  7. The lack of HR strategy implementation is attributed to several issues, namely, the HR strategy is not cascaded down into the functional areas of HR, a lack of measurement, deficient buy-in from top management, a lack of resources, insufficient support from line management, and HR’s ability to deliver is compromised by the competence of the HR team.
  8. Another issue that needs to be unraveled is what structure and capacity is needed to deliver the HR strategy. The empirical literature states the structure for HR is determined by the size of the organisation, the nature of the organisation, the complexity of the work and competencies of HR practitioners.
  9. Most the auditees agree that the competencies of the HR team is not aligned and reviewed in accordance with the HR strategy. Furthermore, even if the competencies do exist the lack of strategic orientation of HR constrains the deployment of the competencies needed to achieve the strategic objectives.
  10. Another challenge for orgnaisations in terms of competencies is that some of the HR teams do not have the qualifications in HR or may not have attained a HR qualification but work in HR and have largely acquired some of the skills through work experience. Furthermore, because of a lack of qualifications these HR practitioners are not professionally registered with SABPP in accordance with the NQF Act.
  11. Another finding is that some auditees focus on continuous professional development, but this is not consistent amongst the auditees. The deficient continuous professional development negatively affects the organisation’s ability to provide sustainable people strategies and innovation.
  12. As a result of the lack of integration auditees largely focus on compliance instead of an integrated governance, risk and compliance approach as outlined by King IV.

The above lessons reflect that although some organisations’ HR Strategy is derived and aligned to the business strategy whilst other companies still struggle to reposition HR.  South African organisations have acknowledged that HR has to be strategically aligned and hence more dedicated effort is needed to ensure that the HR strategy is developed and implemented.   The audits reveal that in South Africa, it appears as if good practices are implemented at some of the leading organisations.  However, we would like to see that these good practices are the norm and not the exception.  The HR Directors that have successfully developed and implemented HR strategy are the pioneers and can provide case studies and lessons for other organisations grappling with similar challenges in their organisations.

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Dr Shamila Singh is Head of HR Standards at SABPP.  She also managed several audits against the National HR Standards. 

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