HR audit for growing companies: what a people diagnostic actually checks
A compliance audit checks files and contracts. An organisational diagnostic checks whether the way the company is managed still fits its size. Growing companies usually need the second one first.
An HR audit is a structured review of how a company manages its people, and it comes in two forms. A compliance audit asks whether contracts, records, working time and personal data meet the law. An organisational diagnostic, also called a people audit or an HR health check, asks whether the way the company is designed, decided and managed still fits its size. Both matter. But a company that grew from twenty to two hundred people in a few years is rarely slowed by paperwork, and usually needs the second one first.
The two produce different documents. One gives you gaps to close. The other gives an ordered view of what to build next, and why what you were about to build is the wrong first move. What follows is the checklist for the second one.
HR audit, HR health check, people audit: two jobs, one word
The word audit carries an accounting shadow, so most people assume it means files, folders and a compliance opinion. That work has a clear owner: a lawyer or a labour specialist, on a schedule. It is not what a chief executive means when the company starts to feel heavier than it was.
| Compliance audit | Organisational diagnostic | |
|---|---|---|
| Question asked | Are we inside the law and inside our own contracts? | Does the way we manage people still fit the size we are now? |
| Evidence used | Contracts, personnel records, working time, payroll files, written policies. | Interviews, recent decisions and how they were taken, the documents managers actually use. |
| Who does it | A lawyer, an accountant or a labour law specialist. | Someone with operating experience in People and Organisation, internal or external. |
| What comes out | A list of gaps and the exposure attached to each. | What is missing, what exists but goes unused, and which three things to fix first. |
A compliance audit can be passed by a badly run company. The files can be immaculate while decisions take three weeks to travel, two managers give opposite answers to the same question, and good people leave without anyone knowing why.
The checklist: eleven components, eleven questions
A diagnostic is only as good as the ground it covers. Walking the same eleven components every time stops it becoming a list of whatever came up in the loudest interview. For each, ask one question, look for one observable sign, and write the evidence beside the answer.
| Component | The question to ask | The sign it is failing |
|---|---|---|
| Organisation structure | Does every outcome that matters have one named owner? | Work stalls between teams and the fix is always another meeting. |
| Roles and decision rights | Can each person name the decisions they take without asking? | Decisions travel upward by default and come back slowly. |
| Hiring and onboarding | Is the brief written, and does it match the job on arrival? | New joiners spend months working out what they own. |
| Goals and performance | Could a manager show the evidence behind their last assessment? | Ratings cluster at the top and nobody trusts the differences. |
| Feedback and development | Does the annual conversation ever surprise the person receiving it? | People hear about a problem for the first time in a review. |
| Management routines | Do one-to-ones survive a busy week? | They are the first thing cancelled, and only some teams have them. |
| People policies | Does a manager know where their discretion ends? | The same question is escalated, and answered differently each time. |
| Career frameworks | Is it written down what the next level requires? | Promotion is argued case by case and titles inflate to settle it. |
| Compensation | Can a pay decision be explained without the negotiation? | Managers avoid the conversation, or promise what they do not control. |
| Culture and communication | Can people predict how a hard trade-off will be decided? | What is said in the company meeting and what gets rewarded differ. |
| People data and metrics | Do you learn about a problem before the resignation? | The exit conversation is where the company finds out what was wrong. |
Read the answers as a set. One no is a gap; a run of related nos is a pattern, and the pattern usually sits upstream of the pain. Difficult pay conversations are often a roles problem in a compensation costume.
How to run it yourself in two weeks
Two weeks is enough for a version that is honest and specific, if the scope is fixed first. It is not enough to also fix anything, and trying to do both is how this exercise dies.
- Days one and two — collect what exists. Organisation chart, role descriptions, performance cycle, levels framework, pay approach, handbook, onboarding plan, meeting calendar. Note which of these a manager would find without asking anyone.
- Days three to six — interview. Eight to twelve conversations of forty-five minutes: leadership, a cross-section of managers, a few recent joiners. Ask about recent events, not opinions: how the last promotion was decided.
- Day seven — survey the managers. Ten statements, agree or disagree, with a line of explanation for each disagreement. This is where you learn whether the documents you collected are in use.
- Days eight to ten — score the eleven components. Yes, no or partly, evidence beside each answer. Where survey and interviews disagree, the survey describes the intention and the interviews the practice.
- Days eleven and twelve — write the memo. Two pages of findings, then three priorities in order, each with an owner and a date. Three, chosen because fixing them makes the rest cheaper.
- Days thirteen and fourteen — test it with the leadership team. If nobody argues, the memo is too polite to be useful. If everybody argues, the evidence is too thin.
The ten statements, which work in most companies of this size:
- I know which decisions I can take without asking anyone.
- I know what my team is accountable for, and what it is not.
- I could explain to my team how pay is decided here.
- I know what the next level up requires for each person in my team.
- I have the information I need to assess performance fairly.
- My one-to-ones happen even in a busy week.
- When a recurring question comes up, I know where to find the answer.
- People who join my team are contributing within their first months.
- I know who decides when something crosses two teams.
- Nothing in my last performance conversation surprised the person hearing it.
When to bring someone from outside
Most of this is doable internally, and a company that runs it seriously learns most of what an external diagnostic would tell it. Three things are harder from inside. Managers describe problems differently to the person who decides their pay. The practice that looks strange from outside is invisible from within. And finding eleven gaps is effort, while knowing which three to fix first is pattern recognition across many organisations.
The exclusions matter too. Under twenty people, this is too much machinery. If the real problem is one manager, a diagnostic is an expensive way to avoid a conversation. And if you need a legal review of contracts and records, this is not it.
Questions that come up
Is an HR audit the same as people due diligence?
They share evidence and answer to different people. HR due diligence is run for a buyer or an investor, on a transaction timetable, and asks whether the risk on the people side is priced. A diagnostic is run for the management team and asks what to build next. One tells you what a deal should account for. The other tells you what to do on Monday.
How often should you run a diagnostic?
Once a year is enough for most companies, and it works better tied to events than to the calendar. The events that justify one out of cycle: a step change in headcount, adding a management layer, merging two teams, a founder stepping back, or managers starting to manage managers. Those are the moments when a structure that worked stops working.
What do you get at the end?
A written read on all eleven components with the evidence behind each judgement, three priorities in order with an owner and a date, and a clear statement of what was looked at and what was not. What you should not get is a deck of benchmarks against an average that does not resemble the company, or advice to buy software before the decisions it carries are defined.
If you would rather have an external read than run it yourself, that is what the People Diagnostic is, and the first conversation is free. For the map behind the eleven components, start with the People Operating System; for what changes past fifty people, management systems for 50 to 300 people.
Co-founder — Organisation & Operations
Francisco Campos
Built growing companies from the inside: first employee to COO at Onport through its acquisition by Farfetch.
More from Francisco