How to Use a SWOT Analysis to Audit Your HR Department
HR leaders are very familiar with company audits, risk assessments, and gap analyses for skills, talent, and hiring needs. However, you don’t always take the time to audit your own department, identify potential risks and opportunities to strengthen resources, and ensure compliance best practices.
The areas within HR that create the greatest risk are likely the same areas on which you and your team expend the greatest amount of time and energy, such as:
- Compliance and verification (e.g., I-9 verification)
- Employee risks such as background checks
- Talent shortages
- Succession plans for executive leadership
- Economic markets
Not taking enough risk is also a risk. According to HR Executive, HR leaders have focused so much on controlling and mitigating risks that you may have become risk avoidant.
“There are incentives for organizations—and for HR, specifically—to take measures to control and further reduce risk. Our function has done an incredible job of creating processes, systems and controls that work to reduce human error, or downside.
What we’ve missed, however, is that risk also represents upside, innovation, creativity, and growth. In fact, realizing even part of the future of work we all long for is not at all possible without us first deciding to take significantly more risks as a function. We need to reframe risk and embrace it on an adjusted basis, which will allow us to change the way we run organizations.”
While HR needs to understand how to best mitigate risk, you also have to allow for controlled risks that allow your organizations to test new programs and processes while monitoring them in real-time. One of the easiest ways to do so is to go back to HR 101 for a refresher on HR audits.
Back to HR Basics to Audit HR
There are two basic tools you can use to identify risk and elevate your HR department. The SWOT analysis is a simple but useful framework for analyzing your organization's strengths, weaknesses, opportunities, and threats. The PEST analysis is a useful tool for understanding market growth or decline, and as such the position, potential and direction for a business - and includes environmental factors.
You'll break both down here, but think of the SWOT analysis as an audit of internal strengths and weaknesses and the PEST analysis as an audit of external factors that can impact an organization’s ability to recruit, retain, upskill, or otherwise plan for growth as well as compliance.
A SWOT analysis (strengths, weaknesses, opportunities, and threats) helps you to build on what you do well, to address what you're lacking, to minimize risks, and to take the greatest possible advantage of chances for success. The primary objective of a SWOT analysis is to help organizations develop a full awareness of all the factors involved in making a business decision.
In HR, a SWOT analysis can help you create hiring and other strategies to achieve short-term HR goals – like building a more engaged, efficient, and productive workforce. It can also help with your long-term goals – like building a top-tier workforce or becoming an employer of choice.
According to SHRM, examples of strengths an HR department may possess include a successful employment branding strategy, a competitive compensation philosophy, effective turnover management, and high safety standards. Weaknesses could include things such as a bad reputation in the employment market, a benefits offering that insufficiently attracts and retains workers, or a lack of training resources.
The most important factor to consider for a SWOT analysis to be effective: Company founders and leaders must be deeply involved in the process, especially through the assessment stage, and it can be challenging to present negative information to an executive board. However, the process of a SWOT analysis on its own is a great excuse to analyze and identify weaknesses based on data. Using data to tell this story is the best way to present to your leadership team.
PEST or PESTLE Analysis
A PEST analysis (political, economic, social and technological) is a method through which an organization can assess major external factors that influence its operation in order to become more competitive in the market. As described by the acronym, those four areas are central to this model.
A PESTLE analysis is an extension of the PEST model used for environmental scanning and adds the elements of legal and environmental factors that could have a direct or lasting impact on the organization.
Factors in your analysis may include:
- Political - the culture of your organization, how HR is perceived by the company as a whole.
- Economic - the budget of your HR department, current marketplace benchmarks for HR.
- Social - health and wellness, diversity, education, morale, employee NPS (net promoter score).
- Technological - remote working, new technology, training and adoption of new technologies.
- Legal - minimum wage, compliance such as I-9 and OSHA.
- Environmental - employee morale and engagement, organizational structure.
Government agencies, and now public companies (due to recent changes in SEC regulations for filing HR metrics) are required to have formal HR audits, but any business can benefit from yearly HR audits. It’s a good idea to pay attention to the external factors when catching up on your news of the day and to consider where trends would fit in a PESTLE analysis. Employee surveys can be data points for a SWOT analysis, as you’re collecting that internal data year-round.