Conceptual image of teamwork - 6. 3D image.

Most people I’ve talked to give their Human Resources departments mixed reviews. Some organizations have vibrant and influential HR functions, while in others HR is viewed as an administrative or compliance function that is more of a nuisance than something that provides value.

Where HR is primarily administrative, you’ll find frustrated HR people who often complain that no one listens to them or appreciates all they do for the organization. The lack of appreciation is hardly surprising, because their focus is on fulfilling their administrative duties (enrolling people in benefits plans, following up on paperwork, hanging the required posters, etc.) that only get attention when someone messes up. Any organizational power they have (and it ain’t much) comes from generating the fear of legal disaster if people fail to follow the rules. They are experts at providing you with all the reasons why you can’t do something, so many people deal with them as we used to deal with our parents: ignore them as much as possible and grudgingly comply when necessary.

While there’s no question that HR has to provide operational excellence, dot the i’s and cross the t’s, that’s simply not enough to earn kudos. Those are basic administrative tasks that customers of HR services expect from any HR department as part of the package. How HR provides real value to an organization has little to do with the paperwork.

Let’s get real. HR has no tangible power in any organization. HR generates no revenue (in most cases) and compared to other more powerful or “bottom line” functions, doesn’t have much of a budget. Any organization can outsource or automate any HR function if they don’t find value in the HR Department they have. Less drastic but more common is the tendency of managers and employees to work around HR so they don’t have to deal with silly bureaucracy and a thousand reasons why they can’t do what they want to do.

So, what can an HR leader do to change this mindset and provide value? First, you have to change your focus from administration, compliance and paperwork and focus on the people you’re serving. The only legitimate purpose for any HR Department is to help the people in the organization make effective choices to enable the organization and its people to achieve their goals. HR’s role is to facilitate and the core meaning of the word “facilitate” is to make things easy. HR’s orientation is one of responsiveness to both immediate and long-term business needs, providing both operational excellence and strategic insight. HR never works for HR purposes; HR is there only to serve its customers.

Here are some examples of how HR can accomplish this purpose, role and mission:

  • Recruiting: Design recruiting processes that are both thorough and fast for both candidates and hiring managers. Ensure that information is organized and presented in such a way that both candidates and managers can make informed and valid hiring decisions. Constantly stay in touch with candidates and managers to avoid any unpleasant misunderstandings that can derail the hiring process. Do the usual metrics, but realize that success in hiring only comes when both the candidate and the hiring manager are happy with the choice they made—both on day one and on the one-year anniversary.
  • Benefits: Design your benefits plans so that demographics, job market and financial considerations are in balance. Watch your utilization numbers and factor them into any decision-making: they tell you what people value. Involve your employees in evaluating benefits plan designs before you launch them. Most importantly, organize the information on plan choices so that it is easy for the average employee to make the best selection possible given their life circumstances.
  • Employee Relations Issues: Stay neutral. Your best chance of protecting the company is to avoid taking a pro-management protect-the-company stance, because all that does is force the employee into a get-an-attorney stance. You can best protect the company by being honest and fair, by pointing out choices and consequences, and by listening carefully to all sides of a problem.
  • Compensation: Accept the fact that everyone thinks they’re an expert on compensation and listen to their beliefs, no matter how un-HR they may seem. The goal of any compensation program is to avoid pay dissatisfaction and provide motivation where feasible. Have solid market data on hand to facilitate management decision making. Stay current on the competition and on market trends.
  • Strategy: While it’s important to align all HR programs with the company’s strategy, HR has to be a player in the strategic decision-making process. The most important contribution the HR leader can make is to remain in the facilitator role, providing solid factual information, making helpful observations on group dynamics, rephrasing ideas, drawing out ideas that may be incomplete and playing the wet blanket when it looks like everyone just wants to do what the CEO wants.
  • Service: Fundamentally, the value of HR comes down to what you do when a customer drops in or gives you a call. Drop what you’re doing and give your customer your full attention, no matter what their status. Everyone in your organization is a customer who needs your help making choices. Help them.

These examples may appear simple, but there is a lot of work involved to put yourself in the position of truly helping people. HR people need to model continuous learning—not only in their HR professional speciality, but in other HR specialty areas and business itself. HR people need to have the most flexible and open minds in the organization, because you never know what human beings are going to come up with next. HR cannot be “The Department of No” and achieve a customer-positive mission.

In the end, any power HR has in an organization is based on the integrity and credibility of the people in the HR Department. You project integrity when you listen and tell the truth. You gain credibility when you deliver on your commitments to your customers.

And those things are simple.


I’ve been very fortunate in my career to have several opportunities in which the person allegedly responsible for mentoring me and developing my skills instead showed me exactly how not do do something. Call it “reverse-mentoring,” if you will.

This is how I learned how to survive a 401(k) audit. The person who showed me the ropes pretty much hung himself on those ropes. He provided me with a virtual checklist of everything you shouldn’t do when the auditors show up. His files (both paper and electronic) were a rat’s nest of duplicates, triplicates and CYA memos to himself. He relied on his often faulty memory of the plan document to respond to queries instead of taking the time to look at what the plan document actually said. He wasn’t exactly sure what he was responsible for and what the TPA was responsible for, resulting in duplicate and contradictory documentation. Worst of all, he adopted a defensive attitude towards the auditors, challenging simple requests on shaky legal theory and a policy of “share as little as possible.” As a result, the field work that should have taken a couple of days stretched into weeks, adding unnecessary cost to the plan itself. The plan participants effectively lost money because this guy couldn’t get his act together.

Let’s turn this nightmare experience into a positive learning event. Here’s what you need to do to make sure your audit goes as smoothly as possible and to keep audit costs down to a minimum:

1. Realize that your 401(k) auditors are there to help you. Your auditors are accounting professionals assigned the task of ensuring that your 401(k) financials and related processes are running smoothly. They have no special motivation to find errors or lengthen the audit. In fact, the reverse is true: most accounting firms are tightly scheduled and tightly staffed, meaning that they have every motivation to get in there and get the work done as quickly as possible so they can meet their commitment to the next client. If errors or anomalies are found, don’t get frightened or defensive. Share what you know and learn from the experience. There are times that you may want to consult with your ERISA attorney on certain matters before discussing them with the auditors, but in general, your attitude towards the auditors should embrace transparency.

2. Get organized and stay that way. This falls under the “where there’s smoke, there’s fire” category of errors. Messy files imply messy processes and messy processes will give any auditor cause for concern. Since the audit is a recurring event, it makes sense to organize your files according to your auditor’s needs. Every auditor will give you a list of documents and files they want to review, and this list rarely changes much from year to year. Organize your files according to their needs. For example, you could have one folder for your plan reports, one for plan documents and amendments and one for plan events; within each of those folders are sub-folders organized by year.

3. Clarify responsibilities. That list the auditor gives you is also a handy organizing tool. When you receive the list, set up a conference call with your internal accounting people and your TPA to review who-is-going-to-do-what. Re-publish that list to that group with responsible parties and due dates.

4. Don’t memorize the plan document: look it up! Our educational experience of having to memorize trivia to pass tests has led us to adopt the habit of using our memories as a primary source of information. Since we are all on information overload today, our memory banks are pretty full. Get into the habit of going to the plan document every time one of your employees asks you a question. This may seem inefficient, but if you know your document and have it handy in a searchable electronic format, it turns out to be quite efficient. It’s certainly more efficient than giving your employees bad information—or giving the auditors the impression that you don’t know your plan document.

5. Coordinate responses in advance, but keep those responses 100% truthful. The auditors will interview the key people involved in plan operations and financial statements. Depending on your organization, this may include the HR leader, the top financial executive and a couple of others. Before the auditors arrive for field work, sit down with those key people and review the important events that occurred during the audit year. If you have problematic information to share, come to agreement as to what it is you are going to say after consulting with your ERISA attorney. This advice is not a license to spin bad information; it is simply to ensure that your internal team is in agreement as to what happened, why it happened and what you’re going to say about it. Consistency and honesty are equally important when communicating with auditors.

6. Do as much as possible in advance. You and your auditors will be in complete harmony on one thing: they don’t want to spend any more time at your site than they have to. Fortunately, the age of the electronic document is upon us and most record requests can be handled well in advance via email. Take advantage of that opportunity and continue to look for new ways to minimize the amount of physical paper in your processes.

401(k) audits do not have to be painful or dramatic. If you take the time to prepare and get organized, you will earn the trust and confidence of your auditors and ensure that the relationship becomes more of a collaborative effort and less of a police action. The auditors have a responsibility to you and you have a responsibility to your plan participants. The best way to fulfill both is to help your auditors do the job you’re paying them to do.