Nonprofits and companies alike often seek to evaluate their HR policies, practices, and procedures to ensure compliance, efficiency, and overall workforce productivity.

These evaluations can take the form of either an HR audit or an HR assessment. While both serve important roles in organizational development, they differ in scope and focus. This article will delve into the distinctions between HR audits and HR assessments, shedding light on when and why each is conducted.

HR Audit: A Comprehensive Evaluation

An HR audit involves systematically analyzing an organization’s HR policies, procedures, and internal operations related to human resources and regulatory compliance. Typically conducted by third-party HR consultants or experienced in-house HR departments, an HR audit aims to identify areas of improvement, potential risks, and compliance gaps.

Operational Areas Analyzed in an HR Audit

During an HR audit, various operational facets are examined to ensure compliance and alignment with organizational goals. Some of these areas include:

Types of HR Audits

There are different types of HR audits, each tailored to specific objectives. The most common forms include:

  • Strategic Audits: Analyze HR systems and policies to determine their alignment with the organization’s strategic plans.
  • Best Practices Audits: Compare HR policies and practices with industry-leading companies or organizations considered the best places to work.
  • Function-Specific Audits: Review HR policies, practices, and compliance in one specific HR function (e.g., job descriptions, pay equity, benefits review, etc.).
  • Compliance Audits: Focus on assessing compliance with federal, state, and local labor laws and other regulations.

Why Conduct an HR Audit?

Conducting an HR audit safeguards against compliance risks, and empowers you to strategically improve policies and practices within an organization. An HR audit should be conducted to:

  • Ensure compliance with changing laws and regulations.
  • Diagnose and correct policy gaps after noncompliance issues have arisen.
  • Identify inefficiencies in HR processes and optimize resource allocation.
  • Perform due diligence reviews for investors, acquisitions, or mergers.
  • Enhance confidence in management and improve the organization’s reputation.

Who is Involved in an HR Audit?

Conducting an HR audit is a team effort. A typical audit team includes:

  • Organizational or HR departmental leadership or HR staff members (if conducted in-house)
  • HR consultant (if contracted)
  • Relevant departmental leaders or staff (depending on audit focus)

HR Assessment: A Holistic Perspective

Compared to HR audits, HR assessments take a broader approach and evaluate an organization’s complete range of HR activities. This includes policies, programs, practices, initiatives, and files. HR assessments aim to align HR practices with organizational goals and employees’ needs.

Specifically, an HR assessment involves a thorough examination of:

  • Effectiveness of HR policies, programs, and practices.
  • The HR department’s workflow, roles, and responsibilities.
  • Strengths and gaps in services and their alignment with organizational goals.
  • Actionable recommendations for measurable change and best practices.

Why Conduct an HR Assessment?

An HR assessment can be a valuable way to ensure HR needs are being met within an organization: Specifically, it can:

  • Ensure fair and consistent organizational-driven HR policies and practices.
  • Evaluate the quality and effectiveness of HR programs.
  • Identify skill or competency deficiencies among HR team members.

When to Conduct an HR Assessment?

It is best practice to conduct an HR assessment every few years to ensure continued alignment with organizational goals and workplace culture. But assessments are also critical during massive organizational changes. An HR assessment should be conducted when there is:

  • Concerns about HR programs meeting organizational needs.
  • Growth in business and concern about overextending existing staff.
  • Change in leadership or organizational structure.
  • Due diligence after a merger or acquisition.

Can an HR Assessment be Conducted In-House?

An organization can conduct an HR assessment internally if it has the expertise and resources available, but most often partnering with an external HR consultant will provide an objective viewpoint and truly actionable recommendations.

In summary, HR audits and assessments serve distinct yet complementary purposes in evaluating a company or a nonprofit’s HR practices. While HR audits focus on specific policies and compliance, HR assessments take a holistic approach to align HR practices with organizational goals. Both are invaluable tools for enhancing efficiency and organizational success.

Consider conducting regular HR audits and periodic HR assessments to ensure your HR practices remain effective and aligned with evolving needs. Remember, partnering with an unbiased expert can yield even better results.