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Definition:
HR Audit means the systematic verification of job analysis and design, recruitment and
selection, orientation and placement, training and development, performance appraisal and job
evaluation, employee and executive remuneration, motivation and
morale, participative management, communication, welfare and social security, safety and
health, industrial relations, trade unionism, and disputes and their resolution. HR audit is very
much useful to achieve the organizational goal and also is a vital tool which helps to assess the
effectiveness of HR functions of an organization.
Scope of Audit:
Generally, no one can measure the attitude of human being and also their problems are not
confined to the HR department alone. So it is very much broad in nature. It covers the
following HR areas:
Benefits of HR Audit:
• It helps to find out the proper contribution of the HR department towards the
organization.
• Development of the professional image of the HR department of the organization.
• Reduce the HR cost.
• Motivation of the HR personnel.
• Find out the problems and solve them smoothly.
• Provides timely legal requirement.
• Sound Performance Appraisal Systems.
• Systematic job analysis.
• Smooth adoption of the changing mindset.
Approaches to HR Audit:
There are five approaches for the purpose of evaluation of HR in any organization:
• Comparative approach
• Outside authority
• Statistical
• Compliance approach and
• Management By Objectives(MBO)
Conclusion:
The auditors always prepare and submit an audit report to authority of the organization, which
may be clean or qualified. The clean report indicates the appreciative of the department's
function, but the latter one represents the gaps in performance and therefore contains remarks
and remedial measures. HR Audit is very much helpful to face the challenges and to increase
the potentiality of the HR personnel in the organization.
References:
William.B.Werther and Keith Davis, Human Resource Management and Personnel Management,
5th edition, McGraw-hill, 1996.
mallet
Subject - HR Audit Notes
HUMAN RESOURCE AUDIT
DEFINITION:
Human Resource Audit is a systematic assessment of the strengths, limitations, and
developmental needs of its existing human resources in the context of organizational
performance – (Flamholtz, 1987)
H.R. AUDIT
TOPICS (AREAS) FOR INTERVIEW QUESTIONNAIRES
AND RELATED ASPECTS
1. INFORMATION
• COVERAGE
• SOURCE
• ADEQUACY
• GAPS
2. FORECASTING
• METHODOLOGY
• RELIABILITY
• TESTABILITY
• BUDGETING
• TIME ORIENTATION
• TECHNOLOGY PERSPECTIVE
• NEED ASSESSMENT
• SELECTION CRITERIA
• LEVELS COVERED AND FREQUENCY
• INTERNAL VS EXTERNAL TRAINING
• QUALITY CONSCIOUSNESS
• CHANGING NEEDS
• CLIMATE FOR SELF-DEVELOPMENT
4. PERFORMANCE APPRAISAL
• UNDERLYING BENCHMARKS
• CONSISTENCY IN RATINGS
• LINKAGES WITH PAY
• FEEDBACK TO EMPLOYEES
• CHANGING NEEDS
• POLICY FORMULATION
• IDENTIFYING KEY POSITIONS
• AVAILABILITY OF SUCCESSORS
• MATCHING FUTURE NEEDS
• RESPONSIBILITY FOR GROOMING
AND DEVELOPING
• HANDLING NON/POOR PERFORMERS
6. COMPENSATION
• APPROPRIATENESS OF POLICIES
• COMPANY PHILOSOPHY
• ADEQUACY OF REWARDS
• NATURE OF JOB DESCRIPTIONS
• FLEXIBILITY IN JOB EVALUATION SYSTEMS
• CONTROL OVER COSTS
• RATIONALE OF REWARD SYSTEM
• OPPORTUNITIES FOR IMPROVEMENT
7. AFFIRMTIVE ACTION
• CLARITY
• COMMENTS
• ACTIVITIES JURISDICTIO
9. NEED INTER-RELATIONSHIPS
• UNIQUENESS
• DISTINCTIVENESS
• PRESENCE AND AWARENESS OF ABOUTCOMPANY’S H. R. POLICY
• CLARITY ON OBJECTIVES OF
H.R. AUDIT
• FUTURE OUTLOOK ON PHILOSOPHY
* CAPABILITIES ON IMPLEMENTATION
*****
CHALLENGES FOR H.R. DEPARTMENT
1. GLOBALISATION INVOLVES
• NEW MARKETS
• NEW PRODUCTS
• NEW MINDSETS
• NEW COMPETENCIES
• NEW WAYS OF THINKING
• GLOBAL ACTIVENESS
• COMPETITIVENESS
• EFFECTIVENESS
a. Innovation
b. Faster Decision Making
c. Price or Value Advantage
d. Effective linking with Suppliers
3. GROWTH OF ORGANISATION
• By INCREASING Customers
• BY MERGERS
• BY ACQUISITION
• BY JOINT VENTURES
HR ISSUES INVOLVED:
5. MANAGING CHANGE
8. TRANSFORMING ORGANISATION
SIX PRINCIPLES OF Dr. T. V. RAO ARE BASED ON HIS OBSERVATIONS AND PERSONAL
KNOWLEDGE ABOUT THE 11 NATIONAL HRD AWARD WINNERS, DURING THE PERIOD
FROM 1989 TO 1997.
H. R. COMPENTENCIES
- Creating Meaning.
- Problem Solving.
- Innovation.
- Transformation.
- Relationship Influence.
- Role Influence.
5. Mastery of Business:
It means knowing about following capabilities of the
organisation:
- Business,
- Financial.
- Strategic.
- Technological.
- Organisational.
FOUR METHODS:
1. INDIVIDUAL INTERVIEW METHOD
2. GROUP INTERVIEW METHOD
3. WORKSHOP METHOD
4. QUESTIONNAIRE METHOD
FOR H.R. AUDIT, EITHER COMBINATION OF METHODS OR ALL THE METHODS ARE
USED.
Top level management and senior managers are interviewed, individually. It helps in
following:
Union leaders, departmental heads, some strategic clients and informal leaders are
also interviewed, individually.
COMPOSITION OF GROUP:
2. Group should consists of same or similar level of employees from cross functional
areas.
3. In case of large organisation, group interviews for each functional area can be
conducted, separately.
a. What do you see as the future growth opportunities and business directions of the
company?
b. What skills and competencies does the company have which you are proud of?
b. What skills and competencies do you need to run your business, or to perform your
role, more effectively at present?
d. What are the areas where your HRD function can do better?
• performance appraisal,
• career planning,
• job rotation, training,
• quality circles,
• induction training,
• recruitment policies,
• performance counseling,
• worker development programmes, and
• HRD departments?
In some cases of H.R. Audit, instead of Individual and Group Interviews, Workshop
Methods i.e. Large Scale Interactive Process (LSIP) is conducted, as under:
ii. What is the one thing you would like to change in your
performance appraisal system?
Feed back about various dimensions of HRD, including the competency base of HRD
staff, the styles of line managers, the implementation of various HRD systems, etc are
obtained through a detailed questionnaire from individuals or groups for H.R. Audit.
This method helps in benchmarking.
The process is as follows:
b. Individuals or groups are asked to assemble in a room or hall are explained the
objective and process of HR Audit. They are then given questionnaires.
*****
OBSERVATION:
In addition to following the said methods, the HR Audit, needs to undertake following
to assess the extent to which a congenial and supportive human welfare-oriented
climate exists in the company:
1. Visit workplace, plant, machinery room, canteen, toilets, training rooms, hostels,
hospital, school, living colony, etc., as applicable.
This can provide an insight into the HRD assets and liabilities of the company. For
example in the are of training, it may reveal as to whether employees are given
training systematically or otherwise, the cost involved for training, the age group of
employees attended training programmes, the purpose of training the employees etc..
Study and analysis of said documents help in assessing the strengths and weakness of
HRD.
*****
H.R.AUDIT METHODOLOGY
(INDIVIDUAL INTERVIEW METHOD –
HOW TO INTERVIEW AND FRAME QUESTIONS?)
PURPOSE:
• TO KNOW EXPECTATIONS OF CEO.
• TO EXPLAIN SCOPE AND LIMITATIONS OF HRA.
• TO GET COOPERATION FROM STAFF.
• TO KNOW STRATEGIC LONG-TERM AND SHORT-TERM PLAN
OF THE ORGANISATION.
• DIVERSIFICATION,
• NEW MARKET,
• NEW BUSNESSES,
• NEW AREAS
• SCALE OF OPERATIONS,
• EXPORT,
• ANY CHANGE OR CONSOLIDATION.
INTERVIEW QUESTIONNAIRE:
OBJECTIVE:
• TO FIND OUT THE TIME DIVISION AND HOW TIME IS SPENT BY THE DEPARTMENT.
i. Performance Appraisal.
ii. Counseling.
iii. Training.
iv. Career Planning and Development.
v. Succession Planning for strategic roles.
vi. Job Rotation.
vii. OD and Team Building interventions.
viii. Research and System Development.
ix. Mentoring.
x. Culture- Building Exercises.
xi. Quality improvement interventions.
*****
OBJECTIVE:
*****
*****
H.R.AUDIT METHODOLOGY
(GROUP INTERVIEW METHOD –
HOW TO INTERVIEW AND FRAME QUESTIONS?)
GROUP INTERVIEWS
Advantages:
1. Wider coverage of issues.
2. Larger involvement of employees.
3. Verification of data and significant points.
4. Assessment of impact of feelings related to any issue and
problem or satisfiers and dissatisfiers.
• 10% or 5-6 groups from different functions and workplaces may be selected for
audit.
Workmen:
• To be interviewed in large groups. 5-10 groups are advisable.
B. Auditors to brief about the HRD Audit and it’s purpose and usefulness
to the company. Thereafter, questions relating to various systems can be
either asked questions or given a questionnaire to answer in about
30 Minutes and after collecting the feedbacks, discussion for another
about 30 minutes can be held to know the intensity of the feelings.
In either case, notes should be taken.
As per your view, what are the Strengths and Weaknesses in respect of the following
components of HRD:
INTERVIEW AREAS,
DIMENSIONS AND QUESTIONS
FOR ASSESSING HRD SYSTEMS
TWO EXAMPLES:
HRD SYSTEM/SUB-SYSTEM
WORK PLANNING:
Performance Appraisal
DEVELOPMENT
SYSTEM:
• What are the other learning mechanisms being used for competency building?
• What are the attitudes of the line managers and the top management for training?
• What are the strengths and Weaknesses of the training as it is being managed?
HRD SYSTEM/
SUB-SYSTEM SECONDARY DATA
WORK PLANNING:
PERFORMANCE APPRAISAL
Study the pattern of ratings for leniency, rater wise trends and department-wise
trends to ascertain the leniency and conservativeness in assessment. Study
interdepartmental variations in ratings and rewards to ascertain the possible biases,
etc.. Investigate this, only if necessary.
DEVELOPING SYSTEM:
OBJECTIVE:
PURPOSE:
TO HELP THE TOP MANAGEMENT AND AND THE HRD STAFF TO RECOGNISE AND
RETAIN THE COMPANY’S STRENGTHS.
EXECUTIVE SUMMARY
CHAPTER-1 INTRODUCTION
CHAPTER-2 CURRENT STATUS OF THE HRD FUNCTION; SOME FACTS.
CHAPTER-3 GENERAL OBSERVATIONS
CHAPTER-4 CAREER SYSTEMS
CHAPTER-5 WORK PLANNING
CHAPTER-6 DEVELOPMENT SYSTEM
CHAPTER-7 SELF-RENEWAL SYSTEM
CHAPTER-8 HRD CULTURE
CHAPTER-9 HRD FUNCTION
1. INTRODUCTION
• COMPANY LOCATIONS,
PRODUCTS AND SERVICES,
MANPOWER, TURN OVER, AND
MAIN CONCERNS AND TOP MANAGEMENT.
• DATE AND REASON FOR UNDERTAKING THE AUDIT.
• METHODOLOGY ADOPTED FOR THE STUDY:
DETAXILS OF SAMPLES, AND
AUDIT METHODS USED:
* Questionnaires administered,
* Number of individual interviews,
* level-wise records and reports examined,
* Group Interviews, etc..
• HRD SYSTEMS (various sub-systems of HR audit; etc.)
*****
__________________________________________________
___________________
3. GENERAL OBSERVATIONS
* Competence Building,
* Culture Building,
* Commitment Building.
*****
__________________________________________________
_____________________
4. CAREER SYSTEMS
• RECRUITMENT –
- Strengths, Weaknesses and Recommendations.
• POTENTIAL APPRAISAL AND FAST TRACK
- Strengths, Weaknesses and Recommendations.
• CAREER PLANNING AND DEVELOPMENT
- Strengths, Weaknesses and Recommendations.
• SUCCESSIONAL PLANNING
- Strengths, Weaknesses and Recommendations.
*****
5. WORK PLANNING
*****
__________________________________________________
______________________
6. DEVELOPMENT SYSTEM
7. SELF-REENEWAL SYSTEM
• INTRODUCTION
• ROLE EFFICACY
_ Strengths, Weaknesses and Recommendations.
• ORGANISATION DEVELOPMENT
_ Strengths, Weaknesses and Recommendations.
• ACTION ORIENTED RESEARCH
_ Strengths, Weaknesses and Recommendations.
8. HRD CULTURE
• INTRODUCTION
• HRD CULTURE
_ Strengths, Weaknesses and Recommendations.
• VALUES
_ Strengths, Weaknesses and Recommendations.
• QUALITY ORIENTATION
_ Strengths, Weaknesses and Recommendations.
• REWARDS AND RECOGNITION
_ Strengths, Weaknesses and Recommendations.
• INFORMATION
_ Strengths, Weaknesses and Recommendations.
• COMMUNICATION
_ Strengths, Weaknesses and Recommendations.
• EMPOWERMENT THROUGH PARTICIPATION,
DECENTRALISATION, SHOPFLOOR COMMITTEES, ETC.
_ Strengths, Weaknesses and Recommendations.
*****
9. HRD FUNCTION
• GENERAL OBSERVATIONS
• INDUSTRIAL RELATIONS AND HR
_ Strengths, Weaknesses and Recommendations.
• PERSONNEL POLICIES AND HRD
_ Strengths, Weaknesses and Recommendations.
• HRD FUCTION – STRUCTURE
_ Strengths, Weaknesses and Recommendations.
• HRD DEPARTMENT - COMPETENCIES
_ Strengths, Weaknesses and Recommendations.
• HRD STRATEGIES
_ Strengths, Weaknesses and Recommendations.
• HRD ACTIVITIES AND PRIORITIES
_ Strengths, Weaknesses and Recommendations.
− Job Closure
− Resig n atio n
What level of approval is needed before a termination
can occur?
Is there any formal checklist or legal review prior to
termination?
Are exit interviews performed for all employees who
leave?
What documentation is required for all employee
transitions?
How are references handled in your organization?
Who is responsible for internal communications
regarding difficult terminations? (i.e.,
communicating the termination to other employees.)
http://www.scribd.com/doc/9520665/Presentation-on-HR-AUDIT-27122008
2. What is Audit?
o Review and verification of completed transactions to see whether they represent a true
state of affairs of the business or not
5. Benefits of HR audit
7. Area of HR Audit
o Audit of:
o HR function
o Managerial compliance
o HR Climate
o Corporate strategy
8.
o 1. Audit of human resource function
o Review of performance
9.
o 2. Audit of managerial compliance
o This covers audit of managerial compliance of personnel policies, procedures, and legal
and welfare provisions. Compliance with the legal provisions is most important as any violation
makes the management guilty of an offence.
10.
o 3. Audit of human resource climate
o The working culture in any industry has an impact on employee motivation, morale, job
satisfaction, employee absenteeism, safety records and employee welfare.
11.
o 4. Audit of corporate strategy
o This helps the industry to gain a competitive advantage. By analyzing the SWOT
analysis of the industry, the management can take decisions regarding marketing channels, services,
innovations, low cost production and other like decisions.
o Comparative approach
o Statistical approach
o Compliance approach
13.
o 1. Comparative approach
o In this, the auditors identify Competitor Company as the model. The results of their
organization are compared with that of the Model Company/ industry.
o In this, the auditors use standards set by an outside consultant as benchmark for
comparison of own results.
14.
o 3. Statistical approach
o 4. Compliance approach
o In this, auditors review past actions to calculate whether those activities comply with
legal requirements and industry policies and procedures.
15.
o 5. Management by objectives (MBO) approach
o This approach creates specific goals, against which performance can be measured, to
arrive at final decision about industry’s actual performance with the set objectives.
16. Conclusion
o The main functions of human resources audit are to take specific actions that will help
minimize employee turnover orientation training, working conditions, remuneration and benefits and
opportunities for advancement. Therefore, quality of turnover is more important than the quantity of
people leaving and joining the industry. Human resources management should create a work
environment to make employee realize that it makes a sense to work in the industry rather than
staying at home and waste their time.
http://www.scribd.com/doc/9520665/Presentation-on-HR-AUDIT-27122008