Anyone interested in organisational management cannot fail to have noticed that the world of accounting standards and conventional auditing practices has been thrown into complete disarray by the Enron, WorldCom and Parmalat scandals.
Auditing HR: The shift from cost to value
HR people who do not know what the implications of the Sarbanes-Oxley Act of 2002 are or have never heard of the International Financial Reporting Standards had better find out pretty quickly.
It is certainly the biggest shake up in accounting practices for many years but it comes at a time when organisations are starting to ask fundamental questions about how they can report on their value to external observers. In particular, there is increasing interest in how organisations manage and report on their human capital.
Now these two subjects might not appear to be connected except that in both cases the demands on auditing are likely to change significantly. Auditing is no longer just about adherence to procedures and risk management it is about checking that the foundations are in place for continued value creation. Not only did Enron’s financial systems collapse; their talent management system seemed to result in inexperienced managers being given too much authority with disastrous commercial consequences. Never before have HR and financial auditing been so closely linked.
No doubt any HR professionals reading this will have already experienced audit reports but those reports have probably only scratched the surface of HR. Usually auditors look at costs and cost control systems. They have never had the technology or methodology to assess HR’s potential or actual contribution to organisational value. The HR Charter aims to deal with this issue head on. It is not really interested in ratios of HR people to employees or recruitment times or numbers of days training. It is only interested in value created and those who subscribe to the tenets of the Charter will need to learn how to do this.
New HR Charter series
You can also read all the debates around the New HR Charter and add your own comments by clicking on the links below.
The New HR Charter – Introduction
The New HR Charter Part 1 – Does HR have a reputation problem?
The New HR Charter Part 2 – What does best practice mean in HR?
The New HR Charter: Part 3 – Do competencies and 360 work?
The New HR Charter: Part 4 – The opposite of best practice?
The New HR Charter: Part 5 – HR Causality – which way does the arrow point?
The New HR Charter: Part 6 – Employer of choice?
The New HR Charter: Part 7 – HR professionals: GP’s, consultants, homeopaths or quacks
The New HR Charter: Part 8 – Politically correct yes – but is HR more effective?
The New HR Charter: Part 9 – Unions have no part to play
The New HR Charter: Part 10 – Where does HR go after outsourcing?
