Why HR Should Conduct a Functional Audit

Functional audits, including those for HR, aren’t just about compliance. They can transform the way your HR department aligns with your organization’s business objectives. As HR plays a key role in standardizing processes, identifying risk areas, and strategically tying HR goals to business goals, Willory can help guide your company in its transformation.

Conducting an appropriate audit takes time and discipline, but the purpose of this audit is different than the ones conducted by our financial counterparts. A comprehensive HR audit focuses on how you can improve your support of your company’s business objectives and employees, as well as ensuring you are up-to-date with the latest laws and regulations governing the workplace, all while incorporating best practices.

Waiting to address HR functions until you receive a complaint from Department of Labor (DOL), Office of Federal Contract Compliance Programs (OFCCP), or other government agencies that come calling is risky and borderline irresponsible.  In 2017, the OFCCP found Palantir Technologies, Inc., a federal contractor, was issued a settlement for discriminatory hiring practices against Asian applicants who applied for engineering positions.[1] This resulted in payment of back wages and other monetary relief as well as extended job offers to eight eligible class members.  Conducting a periodic audit, which Willory recommends on an annual cycle, is the best way to minimize risk with potential employment claims, adverse DOL findings or an OFCCP case for those who are federal contractors.

Audits typically fall into one of six categories: full employee life cycle (starting with application through to retirement),  function-specific, strategic, operational, compliance, and systems. HR audits can either be very comprehensive or about function-specific areas such as a Recruiting Analysis.

Here are the top 5 reasons to conduct an audit:[2]

  1. To insure the effective operation
  2. To review compliance regulations and requirements
  3. To instill a sense of confidence in management that the business is functioning well
  4. To show you are prepared to meet potential challenges
  5. To maintain/enhance the organization’s reputation in the community

The most significant benefit from conducting an audit is to find out future HR needs through review of the current state and utilizing best practices and benchmarking to transform the way your department operates. This presents you with an opportunity for introspection when done voluntarily. Following these steps creates a roadmap toward transformation.

Conducting an audit requires time, expertise and objectivity to do it effectively. You will need to determine the scope, develop a plan, gather and analyze data, produce a report, create and execute on an action plan and of course, evaluating progress along the way. Having an independent third party to conduct an audit can provide you with the expertise, time and objectivity to do this in the most effective manner.

It might seem self-fulfilling to strongly recommend using a third-party consultant as a necessary part of your project team, it’s honestly the best way to achieve the objectivity needed to conduct an insightful and transformative audit. Plus, chances are that your plate is already quite full. I understand this and as a consultant I am able to focus on the audit at hand.

For more information about conducting an HR Audit, join me on the HR Cruise on February 10-15 hosted by Ohio SHRM.

[1] US Department of Labor Settles Charges of Hiring Discrimination with Silicon Valley Company:  US DOL News Release 4/25/2017

[2] Top 5 Reasons to Conduct an Audit; Nancy Dube 7/21/2011



employee life cycle, hr audit, hr operations

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  1. I would have never thought about getting a functionality audit. I liked that you pointed out that a reason to do one is that it will help you maintain a good reputation. It does seem like it would help you maintain your companies reputation.

    1. Yes, an audit can help build credibility and maintain or improve the reputation of an HR department with your Sr. Leadership staff.

      If you are interested in learning more about this, please let me know.

  2. I have been looking into getting an auditing service. It would be helpful for me to know the scope and range of the work that will be done. Having the insight that this will be useful in maintaining the reputation of the business is helpful.

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