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HRD Audit

Submitted By: Abhinav Aggarwal Danish Vohra Harvinder Singh Jiwanjot Singh Jotsaroop Singh Juhhie Mendiratta Manmeet Singh

What is HRD?
Competence Building Commitment /Motivation Building Culture Building

What is HRD Audit?

An HRD Audit is like annual health check-up, it plays a vital role in instilling a sense of confidence in the Management and the HR functions of an organisation.

What is HRD Audit?

HRD Audit is a comprehensive evaluation of the existing HRD
Strategies, Systems, Styles, Skills / Competencies & Culture

and their appropriateness to achieve the short-term and long-term goals of the organisation.

Why is HRD Audit used?

Organisations undertake HR audits for many reasons
To make the HR function business-driven. Change of leadership. To take stock of things & to improve HRD for expanding, diversifying, & entering into a fast growth phase. For growth & diversification. For promoting professionalism among employees & to switchover to professional Management. To find out the reasons for low productivity & improve HRD strategies. Dissatisfaction with a particular component. To become employer of choice.

Purpose of HRD Audit

The reason for conducting an HR audit : 1.Find out how effective and efficient the Organisations HR activities are. 2.To determine areas for improvement and ident ify changes

Scope Of HRD Audit :

Human Resource audits involve an organizations strategic actions to take an intensely objective look at its HR policies, procedures and practices. This type of comprehensive review of the organizations current state can help to identify whether specific practice areas or processes are adequate, legal and effective. Its five Components are: Functional Audit Service Audit Compliance Audit Financial Management Audit Strategic Audit

Functional Audit
This aspect of the HR audit examines: HRD systems and procedures, encompassing training and development, Organisation development and career development Whether the HRD systems and procedures are aligned with the HRM systems Procedures to promote competence, confidence and performance.This includes job design, HR planning, performance management systems, selection and sta ffing, the HR information systems and whether HR helps management keep track of costs and benefits in HRD and HRM. This includes ensuring fairness and consistency in compensation and benefits, employee relations and HR record keeping, particularly in regard to providing timely management informa tion

Service Audit This aspect of the audit activity looks at the service responsiveness and reliability of the HR function. This will include an asse ssment of such things as response times, willingness to help line managers/staff, the knowledge of the HR staff Compliance Audit This assesses the degree to which HR is compliant with the relevant legislati on e.g. Labour Laws, etc. This part of the audit will assess whether the req uired policies, practices, and procedures exist and to what extent management and labour have been trained to enact these codes of best practice.

Financial Management Audit A comprehensive audit of HR systems and procedures needs to go beyond the inspection level. Basic financial ratios/sco recard measures appropriate for a staff function like HR need to be put in place to audit the efficiency of the various HR functions. Strategic Audit Each organisation should have an overall people management strategy that aims to increase the value of employ ees to the business. The strategic audit will examine whether th e HR strategy, policies and processes are aligned with, and sup port, the achievement of the businesss mission and objectives.

Steps in HRD Audit

1. Determine the scope and type of the audit

Determine the breath of the audit and exactly what areas should be targeted for review.

2. Develop the audit questionnaire companys HR practices.

which will help in

guiding the audit team in scrutinizing all critical areas of a

Strengths of the job design, how well the department handles recruitment and selection, and its timeliness and ability to respond to staffing needs.

Steps in HRD Audit (contd.)

3. Collect the data 4. Benchmark the findings Comparison offers insight into how the audit results compare against other similarly sized firms, national standards and/or internal company data. 5. Provide feedback about the results Summarize the data and provide feedback roadmap for action can be developed a

Steps in HRD Audit(contd.)

6. Create action plans The company must create action plans for implementing the changes suggested by the audit 7. Foster a climate of continuous improvement It is important to engage in constant observation and continuous improvement of the companys policies, procedures and practices so that the organization never ceases to keep improving.

Methodology Adopted
Individual Interviews with Top Management Group Interviews with other Staff

Questionnaires Group Discussions and Workshops Observation Analysis of records and documents

Methodology of HRD Audit

Examines long term and short term plans and vision to assess Competency Requirements Identifies broad Competency requirements for future Business Goals Examines the existing HRD strategies, systems and practices and assess their appropriateness to have the required competencies

Methodology of HRD Audit

Examines the adequacies and inadequacies of HRD structure, staff and their competencies, line managers and their attitudes, top management and their support, unions and their role in competence building for future Suggests mechanisms for improving all these in the business context

Role of HRD Audit in Business Improvements

It can give many insights into a company's affairs. It could get the top management to think in terms of strategic and long term business plans. Changes in the styles of top management Role clarity of HRD Department and the role of line managers in HRD

Role of HRD Audit in Business Improvements

Improvements in HRD systems Increased focus on human resources and human competencies Better recruitment policies and more professional staff More planning and more cost effective training Strengthening accountabilities through appraisal systems and other mechanisms Streamlining of other management practices TQM Interventions


T.V. Rao (1999) has introduced the concept of HRD score card. The HRD Scorecard is a measure of the HRD maturity level of an organization. The scorecard is based on the following assumptions and takes into consideration the research based understanding gained in the last few decades regarding HRD. The maturity level of HRD in an organization is indicated by the following factors: 1.HRD Systems Maturity 2.HRD Competencies of the Employees including the HR Department 3.HRD Culture of the Organization 4. HRD Influence on the Business Goals or Business Linkages of HRD

Name of the Organisation HRD Systems Maturity B* HRD Competenc e Score C HRD Culture Grade B* Business Linkage Grade B

ABC Overall HRD Maturity rating B*C B*B

A* Highest Score and Highest Maturity Level A Very High Maturity level

B* High Maturity Level B Moderately High Maturity Level

C* Moderate Maturity Level C Moderately low Maturity level

D* Low Maturity Level D F U Very low Maturity level Not at all present Ungraded


Competent and motivated employees are needed to provide quality products and services at competitive rates and ways that enhance customer satisfaction

HRD Systems Maturity Score

Competencies and commitment can be developed through appropriate HRD mechanisms (tools and systems). In a HRD Mature organization there will be well-developed HRD systems and HRD systems Maturity can be measured through HRD audit.

HRD Competence Score

HRD Competencies of the HRD department and the line managers play a significant role in implementing the systems and processes in ways that could ensure employee satisfaction, competence building and customer satisfaction linkages. The competencies of the staff and the other employees can be measured in terms of an index.

The HRD Culture Values and processes created by the HRD tools, staff and their styles also play a crucial role in building sustainable competencies in the organization. These need to be measured and monitored. It is possible in some corporations (for example small corporations) to have very little of HR systems and yet have a high level of HR competencies and HR culture. Business Linkage Score Business linkages of HRD are very crucial component of HRD effectiveness.HRD systems competencies and the culture must be linked with the business goals of the corporation

The Human Resource Audit as an Improvement Tool

Regardless of the type of company or the size of your HR department, the HR Audit is a simple, yet comprehensive tool to analyze and improve your effectiveness as a function. The audit is made up of four main steps: 1) Define desired HR practices for your organization 2) Assess current practices against the criterion that you have established 3) Analyze the results 4) Establish improvement goals and take action

Four-Step Approach
Step One--Defining Audit Statements
A good starting point is to take some time and reflect on the legal requirements and programs that the department must administer. Consider your areas of responsibility and traditional HR practices covered by your function: They may include HR Planning, Staffing, Performance Management, Employee Relations, Compensation and Benefits, Training and Development, Safety and Wellness. Employee Surveys, and Communications. Finally, other areas to consider are company initiatives that the HR function may be required to support, i.e. internal customer requirements.

Step Two--Assessing Current Practices

A good approach is to look for evidence that supports or refutes each statement made. Evidence may take the form of policies and procedures. The first time the assessment is made, it may become apparent that the definition in step one needs improvement or modification. These changes should be noted and made a part of the next "improvement cycle."

Step Three--Analyze the Results

It is important to recognize strengths and opportunities for improvement. As results are reviewed, themes will emerge around specific HR areas. For example, one company may be very strong in administration and managing legal requirements. On the other hand, it may need improvement in developing higherlevel systems definition. Another company may be very strong in areas Safety, Security, and Training, but need improvement in Communication practices that run across the company.

Step Three--Analyze the Results

Reviewing the data in a variety of perspectives is helpful to formulate a picture of overall HR performance against the audit. It can reflect the positive effect of actions taken in previous years as well as provide information for future actions.

Step Four--Establish Improvement Goals and Take Action

The ideal time to complete an audit is just prior to the annual planning process. With audit information in hand, you can be poised to take advantage of your insights into setting next year's goals. There are two aspects of setting goals: maintenance of current good practices and development of improved practices. Knowing the capacity and capability of the HR department and system is critical in developing a realistic plan.

Step Four--Establish Improvement Goals and Take Action

This is the point in the audit process, where definitions are reviewed and modified to create a new and improved vision of the HR system as you wish it to be. Doing this on an annual basis allows practices to be improved and benefits shared.

Examples of improved HR measures using the Audit Process:

OSHA incident rates Development and sharing of Total Compensation Philosophy Reduction in throughput time of filling open positions Employee turnover rate HR customer survey results % of training time/employee Reduction in throughput time of administrative requests Business results

Advantages of HRD Audit

To ensure effective utilization of HR To inculcate sense of confidence in management To develop and sustain organizational reputation in the society To perform a due diligence review for various stakeholders

HRD Audit is a comprehension evaluation of the current hr strategies ,structure ,style and skills in the context of the short and long term business plans of a company. its main objective is to align the hr function with business goals or to create a business driven hr function.