The HR Audit

8/11/2019 The HR Audit

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The HR Audit

The MEARIE Conference 2013

Nancy Chase, Partner, Risk Consul ting ,

KPMG LLP

June 20, 2013


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2013 KPMG LLP, a Canadian l imited liabili ty partnership and a member firm of the KPMG network of independent member firms affili ated with KPMG International

Cooperative (KPMG International), a Swiss entity. Al l rights reserved. KPMG CONFIDENTIAL.1

Agenda

The HR Landscape

Industry / HR risks and challenges

Why an Audit?

Governance requirements and expectations

The audit - what it is and what it is not! What to Expect

Criteria and sources

Approach

Results

Key Success Factors

Closing Comments


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The HR Landscape


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Industry Trends and Challenges

Demand for reliable, renewable, sustainable, and efficient power

generation

New technologies and operating models

Rapid pace of change

Aging infrastructure / significant investment required

Safeguarding health and safety

Aging workforce

Cost optimization focus


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Impact on Human Capital Management

New / different skill sets required

Leveraging of new technologies

Loss of corporate memory / knowledge due to turnover

Increased competition for candidates

Less committed / more transient workforce

Expanded use of outsourcing

Limitations on performance measures and reporting

Integrating cultures and workforces

Retaining and engaging multi-generations


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Changing Technology and Work Arrangements

Source: Economist Intelligence Unit study as commissioned by KPMG International: Rethinking Human Resources in a Changing World, 2012


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HR is Going Mobile

Compared to 3 years ago, how is technology being used by your companys HR function?



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Retention Key Priority

but only

believe their companyexcels at retaining key

talent today26%

believe HRs #1 focus

for the next three

years mus t be

retaining crucial skills

and experience within

the business

40%


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Technology Transforming HR


Web-based and mobile

HR platforms

Technology to capture

performance reviews and

other workplace reports

Social network sites

to recruit talent

Workforce data

analytics used for

business intelligence

Delivering businessapplications via the

software as a service

and Cloud models

Social media to

reach alumni

What HR technologies are becoming more common in your organization?

69%

68%

57%

54%

65% 49%


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Six Areas of Priority


Retaining crucial skills1 40%

Adopting new technologies3 23%

Workforce planning4 20%

Succession planning5 20%

Managing a flexible workforce6 20%

Expanding the global workforce2 26%


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The Big Three Challenges for HR

Balancing Global and Local

1

2

3

Managing, hiring and identifying talent globally

While retaining local knowledge and insights

Managing a Flexible and Virtual Workforce2

While maintaining employee loyalty

And continuing to provide career development opportunities

Retaining the Best Talent3

Maintaining employee engagement in the face of a less

committed, more flexible workforce


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The Big Three Opportunities for HR

The power to transform HR through technology1

2

3

Mobile, online, self-service HR to drive efficiencies and reduce costs

Interactive online training programs to cost-effectively enhance the learning

experience

Using social media to access new sources of talent and shift the companys

image to attract a new generation of employees

Data-driven HR2 Introducing workforce analytics that provide business-critical data

Implementing advanced metrics to measure return on human capital

Using social media and other interactive tools for listening to the

employee environment and gathering data about their level of

engagement

Seizing the opportunity to transform HR into a strategic player3 Delivering a unique and differentiated people management strategy thats

aligned with the organizations goals

Focusing relentlessly on identifying ways to add value to the rest of the

business


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Why an Audit?


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Impact of Risks and Trends on Governance

Fundamental role of the Board = stewardship of the organization to

create shareholder value, including overseeing the management of the

business in the pursuit of the organizations objectives

In this context, the Board is interested in:

Compliance and regulatory requirements

Human capital development strategies (from attraction to succession)

Optimizing skill sets and responsiveness to stakeholder needs

Performance management and accountability

Many of the key challenges facing the power and utilities industry relate

to human capital the Board has an obligation to understand:

How these risks are identified and managed (i.e. how effective are our HR

practices)

How HR practices contribute to the bottom line (i.e. the efficiency factor)


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The Value of the Internal Audit

What Internal Audit Is:

independent, objective assurance

focused on areas of greatest significance or risk

helps the organization accomplish its objectives by bringing a

systematic, disciplined approach to evaluate and improve the

effectiveness of risk management, control, and governance clearly linked to the business strategy

Internal Audit Is Not:

a policing function interested in adding more bureaucracy / more control at all costs

purely compliance focused


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The Three Lines of Defence

Board/Audit Committee

Senior Management

Regulat

or

ExternalA

udit

Financial Control

InternalContro

lMeasures

Manage

ment

Contr

ols

InternalA

udit

1st

Line of Defence 2nd

Line of Defence 3rd

Line of Defence

Security

Risk Management

Quality

Inspection

Compliance


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What to Expect


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The Audit Process


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Common Audit Objectives and Scope

To assess the effectiveness of human capital management practices in

helping to ensure that required critical skill sets and talents are in placeto meet current and future requirements in a cost-effective manner.

To assess the effectiveness and efficiency of HR practices in ensuring

that consistent, reliable, relevant, and timely information and advice is

provided to support HR decision-making.

Scope can include:

Attraction and recruitment

Engagement and retention

Performance management

Human capital planning / talent management strategy

Ethics and values

Labour relations

Termination and dismissal


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Audit Criteria

The standards against which HR processes and practices are assessed.

Expressed in terms of reasonable expectations for HR processes and

practices to achieve expected results and outcomes related to human

capital management within the organization.

Developed with reference to:

recognized control frameworks (e.g. COSO) relevant legislation / regulatory requirements

organizational policies

leading practices

Key Success Factors:

Objectives and scope focused on key risk areas

Recognized and defensible audit cr iteria used to assess current practices


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Common HR Audit Procedures

Interviews

Benchmarking

HR programs

HR size and structure

Process walkthroughs

Documentation review

Control testing

Employee / stakeholder surveys

Data analysis

IT access and system testing

Information obtained through each audit procedure is analyzed against

the audit criteria to enable a conclusion.


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Example Audit Criteria

Criteria

Plans, practices, and/or systems are in place to identify the number and type of staff and skill

sets required for current and future operations.

HR components of operational plans are linked to strategic and business requirements,

reflect available financial resources, and are based on proper demographic analyses and

other information.

Critical positions have been identified and succession and/or career development plans havebeen developed for each.

Mechanisms to assess and monitor employee satisfaction and morale are in place.

The HR function provides consistent, reliable, and timely advice and information for analysis,

planning, and decision making purposes.

Opportunities to increase process efficiency are periodically identified and implemented.

Performance evaluation processes align employee goals and performance with

organizational objectives and priorities and require objective assessments of actual

performance against goals at least semi-annually.

Roles, responsibilities, and accountabilities are clearly defined, communicated, and

understood.


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Results of the Audit

Audit report will provide commentary on practices that are working well,

as well as provide recommendations for any areas for improvement orissues identified.

Provides management and the Board with assurance on:

the effectiveness of key controls

the efficiency of established processes the performance of the HR function and the extent to which the organization

manages its human capital in accordance with defined policies / expectations

resolution of weaknesses identified

Additionally can showcase the contribution of the HR function in

supporting the achievement of the organizations overall objectives.


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Key Success Factors

Be open with risks, challenges, concerns sharing this information

helps focus the audit on areas that can bring you the most value

Identify peer organizations for benchmarking purposes

Review the planned criteria and ask clarifying questions when

necessary

Advise your team of the audit and its objectives reiterate that it is notan individual performance assessment

Identify critical documents and interviewees that will help the audit team

assess each criteria

Be open to suggestions for improvement

Develop a formal action plan to respond to recommendations, monitorprogress, and report on this progress to EMT/Board


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In Conclusion


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Final Thoughts.

HR audits can highlight:

How human capital strategies and practices support the businesss priorities

The true value of the HR function and how it is measured

The adoption of technologies to drive efficiencies

HR audits can also:

Provide support for additional investmentSave costs down the road by identifying areas for improvement and proposing

solutions

Use the HR Audit as an opportunity to validate what you think is working

well and to assist addressing areas of concern or uncertainty.

Remember that internal auditors are inherently advising/consulting bythe very nature of their work. The internal audit has the added benefit of

providing assurance over your HR practices.


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KPMG CONFIDENTIAL

The information contained herein is of a general nature and is

not intended to address the circumstances of any particular

individual or entity. Although we endeavor to provide accurate

and timely information, there can be no guarantee that such

information is accurate as of the date it is received or that it willcontinue to be accurate in the future. No one should act on

such information without appropriate professional advice after

a thorough examination of the particular situation.

2013 KPMG LLP, a Canadian limited liability partnership

and a member firm of the KPMG network of independent

member firms affiliated with KPMG International Cooperative

(KPMG International), a Swiss entity. All rights reserved.

The KPMG name, logo and cutting through complexity are

registered trademarks or trademarks of KPMG International.

Thank you

Nancy Chase, Partner, Risk Consulting

KPMG LLP

(613) 212-2817

[email protected]

The HR Audit

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