Auditing the Strategic Contribution of HR

This article first appeared in the HRWest Magazine, Spring 2008 edition. The magazine is published by the Northern California Human Resources Association.

There are a variety of approaches that can be taken when auditing human resource departments. However, the strategic audit of HR may offer the most insight into the fundamental question “How is the HR department performing?”

While there is clearly value in assessing the forms, policies, procedures and HR activities to help ensure regulatory compliance and use of “best practices” the standard checklist process falls short of assessing the strategic contribution of HR.

The fundamental performance questions addressed in a strategic audit of human resources are “Does the department align human resources and management practices, policies and procedures with the organization’s strategic objectives”? and “Is the HR department maximizing its strategic contribution to the organization?” Most HR leaders readily answer yes, pulling out their seven page list of “things I did this month” or their audit check list as evidence of their department’s contribution. However, if we conduct a strategic audit or ask operating officers at those organizations the same question, the answer is often an emphatic no.

“To have a plan you must know the objectives, know the current performance, and use the tactics to improve performance toward a specific goal.”

When I ask the COO what the strategic objectives are and eliminate the clutter of platitudes and social editorial statements they invariably include; increase revenue, decrease costs, improve the quality of service and outputs, and improve productivity. It is difficult to imagine any organization regardless of industry, not focusing largely on these objectives. In the absence of definitive strategic objectives, HR leaders would be well advised to use these objectives as the default. If HR can substantively quantify how it supports and advances these objectives, then there is strategic alignment.

Another factor that contributes to disparity between the perception of HR, the COO and strategic audit results is in the operational definition of strategic contribution. Having a “to do” list is not a strategic plan. Just doing something does not make it strategic. Increase productivity. “Yup. I did that”. Well, maybe. But it is not strategic to attempt to increase productivity by hanging a picture of a flying eagle with a quote from either Vince Lombardi or Abraham Lincoln under the word “Persevere, or Teamwork or Achieve”.

It is not strategic to redo the employee handbook that ultimately reaches 84 pages and after the attorney got hold of it is so difficult to wade through that no reader will ever make it past page 4.

It is not strategic to schedule “customer service” training that reviews techniques your top people already use, your bottom performers will never use and your middle group may or may not use.

These and other tactics/activities are only strategic if they are a part of a plan to improve performance of a vital objective. To have a plan you must know the objectives, know the current performance, and use the tactics to improve performance toward a specific goal.

For example, if you know the average customer evaluation of your service department is 3.6 out of 5, with 5 being outstanding and you may ask a vendor to design and deliver a program to reduce the response time, or other specific area in which your group’s performance was lowest. It would be strategic to compare pre and post training service scores to see if the training made any difference. Even if your next service scores are lower, at least you know to discontinue that program. Of course if service improves there has been a strategic contribution. Just doing things, even a lot of things is simply applying the laws of randomness and calling them strategic business practices. They are not.