APTMetrics, Inc.

What You Don’t KnowCan Hurt You:

The Value of an HR Process Audit

Presented by Kathleen Kappy Lundquist, Ph.D.,

and Toni S. Locklear, Ph.D.

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About APTMetrics

Global Talent Management Solutions Provider Comprised of:

• Ph.D. industrial/organizational psychologists• Human resource consultants • Information technology specialists

What Sets APTMetrics Apart:• Professional integrity• Evidence-based approach• Technical expertise• Customer service

Diversity Supplier • Certified as a women-owned business

by WBENC• Certified as a women-owned small

business by the US SBA

Global Strategies for Talent Management.

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Our Areas of Expertise

• Leader Assessment• Employee Selection• Litigation Support• Diversity Strategy &

Measurement• Job Analysis• Competency Modeling• Performance Management• Staffing for Mergers &

Acquisitions• Organizational Surveys• Public Sector Services

Global Strategies for Talent Management.

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Our Web-Based Solutions Platform

APTMetrics®

SelectionMetrics®

Employee Selection System

LeadINsm

Leadership Assessment Suite

JobMetrics®

Job Analysis System

360Metrics®

360-Degree Feedback System

SurveyMetrics®

Organizational Survey System

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APTMetrics’ U.S. Offices

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• Why conduct an HR Process Audit?

• Can this information be protected legally? How?

• How should an HR process audit be conducted?

• What support is needed to make the audit and follow-on changes stick?

HR Process Audits

The Whys:

The Hows:

The Wherefores:

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The Presenters

Kathleen Lundquist Toni Locklear

• President & CEO, APTMetrics

• Organizational Psychologist

• 30+ Years Experience• Expert Witness• Court-Appointed

SettlementExpert/Monitor

• Managing Director,APTMetrics

• OrganizationalPsychologist

• 20+ Years Experience• Expert Witness

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Why are you most interested in HR process audits?

a. Collecting general informationb. Preventing litigationc. Continuous improvementd. Other

Question:

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Why Conduct an HR Process Audit?

RISK-OPPORTUNITY CONTINUUM

BASIC COMPLIANCE LEVERAGING FOR SUCCESS

• To review legal compliance• To utilize human resources effectively• To assure a well-managed HR function prepared to meet challenges

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Basic Compliance: Identifying and Mitigating Risks

RISK-OPPORTUNITY CONTINUUM

• Are there specific known risks?• Are you prepared to address them swiftly and effectively?• Are you prepared to learn from an audit in order to become a strategic partner in support of your organization’s mission and objectives?

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Recent Class Action Settlements

Settlements Injunctive Relief

Coca-Cola

$192mm

Novartis

$175mm

Boeing

$79mm

Morgan Stanley

$54mm

Abercrombie

$42mm

Eastman Kodak

$21mm

• Modify HR Practices and Procedures

• Monitor HR Practices

• Mandatory Training of Supervisors and Employees

• Compensation for class members

• Attorneys Fees and costs for class counsel

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•Performance Appraisal•Compensation/FLSA•Selection/Promotion•Succession Planning•Glass Ceiling•Glass Walls•Access to Development

Focus of the Class Actions

Fair procedures and treatment can make up for negative outcomes.

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• The regular check-up• The extraordinary event, e.g., acquisition or restructuring• The launch of an enterprise-wide initiative, e.g., diversity initiative

Leveraging for Success

RISK-OPPORTUNITY CONTINUUM

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• Any audit or self-assessment will identify problems and challenges• Until addressed, such problems pose risks• If identified and never addressed, such problems pose bigger risks

However…Protecting the Confidentiality of the Audit Results

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• Attorney-client privilege• Self-critical analysis privilege• Work product privilege

Protecting the Confidentiality of the Audit Results

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• Protection was necessary to defend against litigation• Made to counsel acting as counsel• At the direction of corporate supervisors• While the employees were aware of the legal nature

and purpose of the communications• Concerning matters within the scope of the employees’

duties• To permit the corporation to obtain legal advice with the

expectation that the material would remain confidential• With the corporation in fact keeping the material

confidential

Attorney-Client Privilege:Specific Requirements

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• The privilege extends to communications by a client to non-lawyer agents of an attorney when the purpose is to assist the attorney in rendering legal advice to the client and is made in confidence

• Consulting firm should be retained by an attorney• Outside counsel preferable

• Retained for the specific purpose of assisting in rendering legal advice vs. general business advice

Attorney-Client Privilege andNon-lawyer Consultants

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• Lawyer must be acting as a lawyer• Where both business and legal advice, the legal

advice must predominate

• Don’t give up the privilege unintentionally!

Protecting the PrivilegeImportant Considerations

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What is your biggest concern about conducting anHR process audit?

A. Use of the information against you in litigation.

B. Concern that management will not take corrective steps.

C. The cost of auditing.D. I have no concerns.

Question:

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• Examine the rigor and structure underlying HR processes, especially where there is managerial discretion

Scope of the HR Process Audit

• Look for similarities and differences• Determine the actual nature of Corporate involvement in operating units’ HR systems – advisory or directive

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• How the processes differ across various functions or departments within the operating company(e.g., Sales)

• How the processes differ for different levels of employees (e.g., Officers vs. Managers) within the operating company

• Significant distinctions in policies or practices from one facility to the next within the same operating company

Differences to Investigate inHR Processes

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• Performance Management• Staffing; i.e., Selection/Promotion• Compensation• Succession Planning

What HR Processes Should be Audited?

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• Examine Documents• Interview Key Stakeholders• Analyze Data (e.g., analyze performance

ratings foradverse impact)

HR Process Audit Methodology

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Basic Audit Questions

SystemWhat system is in place?

TrainingWhat training was provided to implement this system?Is there refresher training? Is the training mandatory?

LinkageIs the process linked to other HR processes? How?

ValidityHas any validity information been collected to ensure job relatedness?What is the quality of this evidence?

OversightWhat managerial oversight is part of the process?Is there ongoing monitoring?

Policy Variance

Does the actual use of the system differ from the stated policy? How?

Facilitators &

Constraints

What are your biggest concerns about the use of the system?What are the key facilitators and constraints of the system?

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• Where HR processes are inconsistent or exceptions are allowed:• Examine the rationale for inconsistencies• Consider the uniqueness of the operating unit and the

job demands• Determine if process variation is tied to job-related or

business-related factors

Understanding Exceptions in HR Processes

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What Makes HR Processes Defensible?

Validity Implementation

• Based on job analysis

• Standardized

• Consistent

• Validated

• Training

• Ongoing monitoring

• Appeals process

• Communication

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Validity: Make HR Processes Job Related

WORK ANALYSIS

Compensation

Promotions & Transfers

Organizational

Restructuring

Training & Developme

nt

Succession Planning

Recruitment &

SelectionPerformance Management

Existing HR Processes may need to be adjusted as a result of work analysis outcomes.

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Does your organization have sufficient workanalysis information to defend the validity of yourHR processes?

A. YesB. No

Question:

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Validity: Using the Work Analysis Data

Content for Structured Interviews

Uniform Standards for Promotions

Performance Evaluation Content

Technical Training Content

Raw Data for Restructuring Jobs

Grouping Jobs for Market Pay

Job

Job

Job

WORK ANALYSIS

Tasks Performed

Scope and Effect of

Work

Technical Skills

Required

Competencies

Required

Education Required

Experience Needed

Automated Content for Job Posting

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• Evaluate competencies that are critical to job success• Determine evaluation standards in advance• Reinforce the use of safeguards to protect against “excessive discretion” and ensure good decisions

• Use of review processes within systems/checks and balances• Training, education, communications, written guidelines, etc. about processes• Procedural controls (e.g., exception reports)• Rules/procedures followed in response to policy “exceptions”• Appeals processes

• Emphasize employee’s involvement in the HR process ( e.g., mutual goal setting, self-assessment )

Validity: Structuring Subjective Decision-Making

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• Standardized and uniform process for all within a job group

• Training of raters• Employee self ratings• Use of multiple, diverse and

unbiased raters• Independent reviews of

ratings by next management level

• Formally communicated in writing to employees

In Performance ManagementPlaintiffs and Courts Look for…

• Timely feedback, includingnotification of deficienciesand opportunity to correct

• Rating of managers onexecution of performancemanagement, diversityresponsibilities

• Formal appeals process• Monitoring of system for

discriminatory practicesor abuses

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Rater by Ratee InteractionsM

ea

n R

ati

ng

African American White

2.5

2.45

2.4

2.35

2.3

2.25

2.2

2.15

2.1

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• Nature of Content• Number and type of factors considered in determining an employee’s performance rating• Written narrative summaries versus rating scales• How the overall performance rating was determined

• Number of points on the performance rating scale• Process

• Source of information for rating• Procedural controls such as supervisory ratings with next-level review versus calibration meetings

Differences Specific to PerformanceManagement Systems

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How is the overall rating determined?

Displaying Differences

SALES NON-SALES

No InformationAvailable

36%Weighted Average

of Ratings29%

Qualitatively Derived35%

No InformationAvailable

20%

Varies bySupervisor

7%

Qualitatively Derived60%

Weighted Averageof Ratings

13%

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Implementation

Validity

RecruitingWhat efforts are made to recruit high-quality, diverse talent into positions?

NA

Pre-Screening

Are all applicants invited to take an assessment as part of the selection/ hiring process? If not, can you explain how one determines who is invited to complete one of the assessments?

Is the validity of the tool/ processconsistent with the requirementsof legal and professionalstandards:

• Uniform Guidelines (1978)

• APA Standards (1985, 1999)

• SIOP Principles (1987, 2003)

AssessmentHow consistently are the assessments used during the hiring process? Under what circumstances is the tool used/not used?

Hiring

Assuming that two or more candidates are equally qualified based on the results of the assessment, what criteria are used to identify the person who will be hired?

Sample Staffing Audit Questions

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• Staffing• Differences in accessibility of job postings to interested parties

• Level of positions routinely posted• Under what circumstances vacancies were posted

• Different selection processes• Practices related to consideration of diverse candidates as part of the selection process

Differences Specific to Staffing Processes

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• Factors considered when:• Setting initial compensation decisions• Making merit increase decisions• Making bonus decisions• Making stock option decisions

• Internal vs. external frame of reference• Different systems by job level and type• Process such as constructing review groups, calibration

Differences Specific to Compensation Processes

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• Rating process used• e.g., supervisor ratings with next level review versus calibration ratings

• Criteria used to identify “high-potential” employees• Factors considered in making succession planning ratings• Level of incumbents included in the Succession Planning process

Differences Specific toSuccession Planning Processes

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• Training and Retraining• Ongoing Monitoring• Appeals• Communication

The Wherefores: Support forthe HR Process Changes

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• Ensure consistency• Observe performance• Coach for Improvement• Increase accuracy and decrease bias• Maintain confidentiality

Train Managers to…

Training and retraining, based on quality data (regularlymonitored) ensures ongoing effectiveness.

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• Need a technology infrastructure that tracks information electronically and integrates information from different internal IT systems

• Track and monitor real-time data on:• Hiring rates• Training completion

• Performance ratings

• Analyze potential adverse impact of key decisions

such as performance ratings, compensation, and downsizing selections -- before managers make critical decisions

Ongoing Monitoring:Data Collection and Real-time Analysis

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• Conduct consensus rating review meetings among peer raters• Provide targeted training to individual managers based on audits and ongoing statistical monitoring• Link evaluation, compensation and promotion of managers to satisfactory execution of HR process responsibilities

Ongoing Monitoring:Hold Managers Accountable

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• Beyond “Open Door”• Monitor Results of Appeals• Credibility of Process

Provide Appeal Process

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• Provide transparency in the assessment process

• Communicate competencies/criteria against which people will be assessed• Communicate the connection between HR processes (e.g., assessments and the reward structure)• Permit and encourage a climate of two-way communication

• Promote organization’s successes in recognizing and increasing diversity, fairness, objectivity, etc.

Communicate With Employees

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Survey of Diversity Climate

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1. Take APTMetrics’ free, confidential online HR Process Audit survey

http://survey.aptmetrics.com/SelfAudit/

How Do I Get Started?

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2. Act on your self-audit survey results

3. Proactively implement fixes that make your systems more efficient, valid and legally defensible

How Do I Get Started?

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“If you don’t know where you are going, chances are you will end up somewhere else.”

- Yogi Berra

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APTMetrics, Inc.One Thorndal CircleSecond FloorDarien, CT 06820

203.655.7779 TalentSolutions@APTMetrics.comwww.APTMetrics.com

Contact Information

Global Strategies for Talent Management.