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Human Resource Audits Human Resource Audits

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Human Resource Audit?Human Resource Audit?A human resource audit evaluates the personnel activities used in an organization. The audit may include one division or entire company.

“ HR Audit is a systematic assessment / investigation of strengths, weaknesses and developmental needs of existing Human Resources in context of organizational performance”

In short, the audit is an overall quality control check on human resource activities in a division or company and how those activities support the organization’s strategy

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Nature of Human Resource AuditNature of Human Resource Audit Identifies the contribution of the personnel

departments to the organization Improves professional image of the personnel

department Encourages greater responsibility and

professionalism among employees Clarifies the employee’s duties and

responsibilities Finds critical personnel problems

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The Scope of Human Resource The Scope of Human Resource AuditsAudits

Audit of Corporate StrategyCorporate Strategy concerns how the organization is going to gain competitive advantage.

Audit of the Human Resource FunctionAudit touches on Human Resource Information System, Staffing and Develop-ment, and Organization Control and Evaluation.

Audit of Managerial ComplianceReviews how well managers comply with human resource policies and procedures.

Audit of Employee SatisfactionTo learn how well employee needs are met.

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Audit of Corporate StrategyAudit of Corporate Strategy Human resource professionals do not set corporate

strategy, but they strongly determine its success. By assessing the firm’s internal strengths and

weaknesses and its external opportunities and threats, senior management devises ways of gaining an advantage, such as :

stresses superior marketing channels, low-cost production, etc. Understanding the strategy has strong implications

for human resource planning, staffing, compensation, employee relations, and other human resource activities

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Audit of the Human Resource Audit of the Human Resource FunctionFunction

1. Human Resource Information System- Human Resource Plans : Supply and demand

estimates; skill inventories; replacement charts and summaries

- Job Analysis Information : Job standards, Job descriptions, Job specifications

- Compensation Management : Wage, salary, and incentive levels; Fringe benefit package;

Employer-provided services

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2. Staffing and Development2. Staffing and Development

Recruiting : sources of recruits, availability of recruits, employment applications

Selection : selection ratios, selection procedures, equal opportunity.

Training and development : orientation program, training objectives and procedures, learning rates

Career development : internal placement, career planning program, human resource development

efforts

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3. Organization Control and Evaluation3. Organization Control and Evaluation

Performance appraisals : standards and measures of performance, performance appraisal techniques,

evaluation interview.

Labor-Management Relations : Legal compliance, management rights, dispute resolution problems.

Human Resource Controls : employee communications, discipline procedures, change

and development procedures,

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Tasks of AuditorsTasks of Auditors Identify who is responsible for each activity. Determine the objectives sought by each activity. Review the policies and procedures used to

achieve these activities. Prepare a report commending proper objectives,

policies, and procedures. Develop an action plan to correct errors in each

activity. Follow up the action plan to see if it solved the

problems found through the audit.

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Audit of Managerial Audit of Managerial ComplianceCompliance

Compliance with laws is especially important. When safety, compensation, or labor laws are violated, the government holds the company responsible.

If managers ignore policies or violate employee relations laws, the audit should uncover these errors so that corrective action can be started.

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Audit of Employee Audit of Employee SatisfactionSatisfaction

Employee satisfaction refers to an employee’s general attitude toward his or her job.

When employee needs are unmet, turnover, absenteeism, and union activity are more likely. To learn how well employee needs are met, the

audit team gathers data from workers. The team collects information about wages, benefits, supervisory practices, career planning

assistance, and other dimensions of job

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How HR Audit is done?How HR Audit is done?

In HR Audit the skills, management styles, systems, strategies, structure is studied and analysed using a variety of methodologies like – interviews, (Individual and group, Top Management, Line

Managers, HRD Staff, Workmen and others)– questionnaires, – observations, – available records, – workshops etc.

This evaluation helps the organisation have a clear understanding of the gaps and better align the HR processes with business goals.

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Types of Questions to be askedTypes of Questions to be asked

- Employee attitude about supervisors- Employee attitude about their jobs- Perceived effectiveness of human resource

department- Employees’ perception about the changes required

for better functioning

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3. Historical analysis3. Historical analysis

Not all the issues of interest to human resource audit are revealed through interviews or questionnaires. Sometimes insight can be obtained by an analysis of historical records, such as:

- Safety and health records- Grievances records- Compensation studies- Turnover and absenteeism records- Selection records- Affirmative action plan records- Training program records

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The audit reportThe audit report Findings of research are used to develop a picture of

the organization’s resource activities. For this information to be useful, it is compiled into audit report.

The audit report is a comprehensive description of human resource activities that includes both commendations for effective practices and recommendations for improving practices that are less effective.

Audit report often contain several sections. One part is for line managers, another is for manager of specific human resource function, and the final part is for the human resource manager.

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Report for line managersReport for line managersHow line managers handle their duties such

as: Interviewing applicants

Training employees Evaluating performance

Motivating workers Satisfying employee needs

The report also identifies people problems. Violations of policies and employee

relations law are highlighted

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Report for the HR SpecialistReport for the HR Specialist The specialists who handle employment

training, compensation, and other activities also need feedback. Such feedbacks are :

1. Unqualified workers that need for training

2. Qualified workers that need for development

3. What others company are doing

4. Attitude operating managers toward personnel policies

5. Workers pay dissatisfaction

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Report for HR ManagerReport for HR Manager

It is contains all the information given to both operating managers and staff specialists. In addition, HR Mangers gets feedback about :

Attitude operating managers and employees about services given by HRD

A review of HRD plans Human resource problems and their implication Recommendations for needed changes and

priorities for their implementation

Approaches of HR AuditApproaches of HR Audit

1. Internal Approach : In this approach the audit focuses on contribution of Hr Deptt to the internal operations of the organization. The cost benefits of HR activities is measured in terms of organizational productivity and overall cost.

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2. External Approach : HR Audit focuses on contribution of HR activities on the external performance of organization. When the cost of Hiring, training and compensation is reduced, the organization gets an opportunity to vary the cost of goods/services provided.

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Approaches based on People behind Approaches based on People behind AuditAudit

1. Self Directed Team Approach

2. Task Force Approach

3. Consultant / Third Party Approach

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Limitations of HR AuditLimitations of HR Audit Lack of Management Commitment Lack of clarity in HR Audit objectives Lack of communication between management and

employees about importance of HR Audit Not utilizing the feedback obtained from HR

Audit Regularity and continuity of HR Audits is difficult

to maintained Auditors’ lack of knowledge and training

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