What You Don’t Know Can Hurt You: The Value of an HR Process Audit

1. 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.

2. 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 GlobalStrategies for Talent Management.

3. 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 GlobalStrategies for Talent Management.

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6. HR Process Audits • Why conduct an HRProcess 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? The Whys: The Hows: The Wherefores:

7. 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

8. Question: Why are you most interested in HR process audits? a. Collecting general information b. Preventing litigation c. Continuous improvement d. Other

9. 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

10. 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?

11. Recent Class Action Settlements

12. Focus of the Class Actions •Performance Appraisal •Compensation/FLSA •Selection/Promotion •Succession Planning •Glass Ceiling •Glass Walls •Access to Development Fair procedures and treatment can make up for negative outcomes.

13. Leveraging for Success • The regular check-up • The extraordinary event, e.g., acquisition or restructuring • The launch of an enterprise-wide initiative, e.g., diversity initiative RISK-OPPORTUNITY CONTINUUM

14. However…Protecting the Confidentiality of the Audit Results • 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

15. Protecting the Confidentiality of the Audit Results • Attorney-client privilege • Self-critical analysis privilege • Work product privilege

16. Attorney-Client Privilege:Specific Requirements • 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 natureand 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

17. Attorney-Client Privilege andNon-lawyer Consultants • 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

18. Protecting the PrivilegeImportant Considerations • 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!

19. Question: What is your biggest concern about conducting an HR process audit? • Use of the information against you in litigation. • Concern that management will not take corrective steps. • The cost of auditing. • I have no concerns.

20. Scope of the HR Process Audit • Examine the rigor and structure underlying HR processes, especially where there is managerial discretion • Look for similarities and differences • Determine the actual nature of Corporate involvement in operating units’ HR systems – advisory or directive

21. Differences to Investigate inHR Processes • 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

22. What HR Processes Should be Audited? • Performance Management • Staffing; i.e., Selection/Promotion • Compensation • Succession Planning

23. HR Process Audit Methodology • Examine Documents • Interview Key Stakeholders • Analyze Data (e.g., analyze performance ratings foradverse impact)

24. Basic Audit Questions

25. Understanding Exceptions in HR Processes • 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

26. What Makes HR Processes Defensible? Validity Implementation • Training • Ongoing monitoring • Appeals process • Communication • Based on job analysis • Standardized • Consistent • Validated

27. Validity: Make HR Processes Job Related Existing HR Processes may need to be adjusted as a result of work analysis outcomes.

28. Question: Does your organization have sufficient work analysis information to defend the validity of your HR processes? A. Yes B. No

29. Validity: Using the Work Analysis Data WORK ANALYSIS Automated Content for Job Posting Tasks Performed Scope and Effect of Work Technical Skills Required Competencies Required Education Required Experience Needed Content for Structured Interviews Job Uniform Standards for Promotions Job Performance Evaluation Content Technical Training Content Job Raw Data for Restructuring Jobs Grouping Jobs for Market Pay

30. Validity: Structuring Subjective Decision-Making • 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 )

31. In Performance ManagementPlaintiffs and Courts Look for… • Standardized and uniform process for all within a job group • Training of raters • Employee self ratings • Use of multiple, diverse andunbiased raters • Independent reviews of ratings by next management level • Formally communicated in writing to employees • Timely feedback, includingnotification of deficienciesand opportunity to correct • Rating of managers onexecution of performancemanagement, diversityresponsibilities • Formal appeals process • Monitoring of system fordiscriminatory practicesor abuses

32. Rater by Ratee Interactions 2.5 2.45 2.4 2.35 2.3 2.25 2.2 2.15 2.1 Mean Rating African American White

33. Differences Specific to PerformanceManagement Systems • 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

34. Displaying Differences How is the overall rating determined? Weighted Average of Ratings 13% No Information Available 20% No Information Available 36% Weighted Average of Ratings 29% Varies by Supervisor 7% Qualitatively Derived 60% Qualitatively Derived 35% SALES NON-SALES

35. Sample Staffing Audit Questions

36. Differences Specific to Staffing Processes • 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

37. Differences Specific to Compensation Processes • 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

38. Differences Specific toSuccession Planning Processes • 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

39. The Wherefores: Support forthe HR Process Changes • Training and Retraining • Ongoing Monitoring • Appeals • Communication

40. Train Managers to… • Ensure consistency • Observe performance • Coach for Improvement • Increase accuracy and decrease bias • Maintain confidentiality Training and retraining, based on quality data (regularly monitored) ensures ongoing effectiveness.

41. Ongoing Monitoring:Data Collection and Real-time Analysis • 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

42. Ongoing Monitoring:Hold Managers Accountable • 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

43. Provide Appeal Process • Beyond “Open Door” • Monitor Results of Appeals • Credibility of Process

44. Communicate With Employees • 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.

45. Survey of Diversity Climate

46. How Do I Get Started? 1. Take APTMetrics’ free, confidential online HR Process Audit survey http://survey.aptmetrics.com/SelfAudit/

47. How Do I Get Started? 2. Act on your self-audit survey results 3. Proactively implement fixes that make your systems more efficient, valid and legally defensible

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

49. Contact Information APTMetrics, Inc. One Thorndal Circle Second Floor Darien, CT 06820 203.655.7779 TalentSolutions@APTMetrics.com www.APTMetrics.com GlobalStrategies for Talent Management.