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MBA (HR)-2008-2010 batch

HR Audit
It is a Systematic procedure for analyzing
and appraising the overall performance of the
human resource function of a business or
Scope for HR Audit
Two types of HR Audits
Broadly concerned with objectives and
strategy, and may be summarized by the
question Dose the function do the right
Concern with performance and tactics, and
may be summarized by the question Does it
do things right?

Need for HRD Audit
HR systems are people intensive and require a lot of managerial
time and money.
In spite of these investments HRD has not lived up to the
expectations of the management.
If HR functions, strategies are not aligned properly with business
goals, then it can become big liability for the organizations.
HRD audit is an attempt to assess these alignments and ensure
that they take place.
HRD audit is an comprehensive evaluation of the current HRD
strategies, structures, systems and skills in the context of the
short and long term business plans of the company.
Needs for HRD Audit Contd;
HRD audit starts with an understanding of the
future business plans and corporate
HRD audit normally attempts to assess the
existing skills and competency gaps in order
to achieve the long term business goals and
short term results.
Why companies want HRD Audit?
To make HR functions business driven.
To improve HRD for expanding, diversifying, and
entering into a fast growth phase.
For promoting professionalism among employees
and to switch over to professional management.
To know the reasons for lower productivity and for
improving HRD strategies.
For growth and diversification.
Dissatisfaction with the particular component
Role of HRD audit in Business
It can get top management to think in terms of
strategic and long term business plans.
Changes in styles of the management
Role clarity of HRD dept. and the role of line
managers in HRD
Improvements in HRD systems.
Increased focus on HR and human competencies
Identification of contribution of HR dept to the

Role of HRD audit in Business
Improvement contd;
Better recruitment policies and more professional
More planning and cost effective training
Strengthening accountability through appraisal
Streamlining other management practices
TQM interventions.
Return on investment of the HR function

Methodology of HRD Audit
Individual interviews
Group interviews
Questionnaire Method
Analysis of Secondary Data

HRD audit methodology &
HRD audit methodology & issues
Working Conditions
Level of communication
Celebrations & events
Reports, manuals
Observation in meetings
Are all objectives clear
Level of participation
Leaders/ CEOs role
Conflict management
Action plans
Competencies required
Talent management
Observation in Celebrations
Level of participation
Status differences
Ceremonial roles of top management
WE feeling
Training facility
Training rooms
Classroom and classroom facilities
Administrative facilities
Audio visual aids
Furniture & sitting arrangement
Personnel manual
Annual reports
Appointment and transfer leters
Promotion policies
Performance appraisal manuals
Training policies
Previous HRD audit reports
Climate survey
Exit interview data
Other studies undertaken by students and
Good will of the company
Attrition rates
What To Assess?
Do they promote sense of belonging
Centralization/ decentralization
Level of communication (Informal, Formal)
Job satisfaction and attrition rates

HRD Audit Instruments
HRD Score Card
Designing & using HRD audit for business
HRD audit questionnaire
Performance assessment questionnaire
HRD climate survey
Training effectiveness questionnaire
Effective communication questionnaire
Attitudinal questionnaire
360 degree feedback

Simplified Model of HR auditing process
1. Decide what to examine
2. Decide (tentatively) how to conduct audit
3. Select people to assist with audit
4. Collection of background information on
HR department and practice area.
The organisation
5. Finalise the audit plan
6. Collect audit information
7. Compare conditions and criteeria
8. Identify discrepancies
9. Assess cause, significance and corrective
10. Compile audit results.
Auditing of recruitment Function
Policy and targets
Has a clear recruitment policy been
established covering all levels of
Is there a three year or five year recruitment
plan expressed in targets?
Auditing of recruitment Function
Sources of recruitment
What steps are taken to project the companys
image as a potential employer?
Does the requisition procedure ensure that internal
sources are fully reviewed before vacancies r filled
form outside?
Are local sources of candidates well known and are
contacts with them developed?

Auditing of recruitment Function
Cost Effectiveness
Is the recruitment programme budgeted and
calculated ?
Has a recent study been conducted on the
comparative real cost of recruiting graduates
from universities and training them vis--vis
buying-in experienced graduates?
Auditing of recruitment Function
Selection procedure and technique
What kind of training has been imparted to those
involved in selection and recruitment?
Are any special methods or exercises (aptitude,
intelligence testing) used?
Are the selection procedures appropriate to ensure
that suitable people are recruited?
Are efforts are made to attract the right type of
Auditing of recruitment Function
Follow Up
How is the success or failure of recruitment methods
assessed in terms of subsequent performance and
job satisfaction of those recruited?
After recruiting candidates, do recruiters receive any
feedback from them in the first year of service by
way of criticism or by way of new ideas for improving
the selection procedure?

Auditing Manpower Planning
What are the manpower policies and objectives of
the company?
Who is responsible for the companys manpower
What procedure is established for manpower
planning and forecasting in the short and long term?
How is manpower planning and forecasting

Career Development
Who is responsible for carrier development in the
Does the HR function carry out an effective
coordination of succession planning in all
What procedures are used in job succession and
carrier development planning ?How often it is done?
How the procedure ensure no external recruitment
without tapping internal sources?

Career Development Contd;
Are the following methods of carrier development
1. Informal or on the job training
2. Job rotation
3. Formal training courses
4. Inter functional moves
5. External postings
What steps r taken to ensure that employees have
up to date information on their prospects in the

Who is responsible for training
Is there an agreed statement of training policy and
training plan that sets objectives, priorities and
action steps with a supporting budget and costing
What procedures are carried out for identifying
training needs?
What in-house training programmes exist?
How r external courses and training programmes
executed? And Follo-up
Compensation Policy
Salary Administration
What r the objectives of the salary admn.
What guidelines r led down for salary admn.?

Compensation Policy Contd;
Component Elements:
What r the present salary ranges and when
were the last reviewed?
How often is the salary market priced?
What use is made of other indicative data,
such as consultant surveys, governments
rates, wage rates and cost of living indices?

Compensation Policy Contd;
Cost Control:
Are payroll costs budgeted for?
How r they controlled?
What is the trend of these costs?
How many jobs are there at each level and
how does these compare with the previous
yea, and last five years?

Employee Turnover
Analyze records for cause of employees
termination of service
Correlate data with sources of applicants,
tests used in selection and placement, sex of
employee, length of service and departments.
Evaluate whether turnover should be reduced

Check for possible cause for absentism
Correlate with age, length of service
Other factors such as religious or community
Accident Frequency and Severity
Compare departments record for any
indication of problems
Check if time of day or length of day causes
Compare with other firms
Personnel Inventories
Compare the no. of employees required to
handle certain functions with the number
used for the same function in another
Check ages of personnel to see if young
replacements are available for key jobs

Grievance Records
Evaluate subject, cause
Show savings in time lost in handling
Examine frequency of grievances to locate
troubled spots and make necessary changes
in company policies.

Components to be audited
HRD Systems Maturity
The HRD systems maturity assesses the extent
to which various HRD subsystems and tools
are well designed & are being implemented.

The systems should be appropriate and relevant to
business goals.

It should focus on current and future needs of the

The HRD strategies and systems should flow from the
corporate strategies.

HRD Systems Maturity
The systems should be well designed and should have a
structural maturity.
+ They should be implemented well.
_ The employees should be taking them seriously implemented
_ The employees should be taking them seriously and follow
meticulously what has been envisaged in each system.
_ The overheads of implementation should be low.
The subsystems should be well integrated and should have
internal synergy.
; They should be adequate and should take care of the HRD
requirements of the organisation.

HRD Systems Maturity
The following subsystems are assessed and
depending upon the extent to which they meet
the requirements a score is assigned.

+ Manpower planning and recruitment

+ Performance Management Systems

+ Feedback and Coaching Mechanisms

+ Training

+ Career development and Succession planning

HRD Systems Maturity
+ Job-rotation

+ OD Interventions

+ HR Information systems

+ Worker Development methods and systems

+ HR Information Systems

+ Potential Appraisal and Development

+ Other subsystems if any
HRD Competencies in the Corporation

This dimension indicates the extent to which HRD competencies
are well developed in the organisation.

The HRD Staff

The Top Management

Line managers and Supervisory Staff

Union and Association leaders

Workmen, Operators and Grass root level employees

HRD Competencies in the Corporation
Each of the groups is assessed on :

The level of HRD skills they possess

Their attitudes and support to learning and their own

Extent to which they facilitate learning among others in the
corporation and those who work with them.

Their attitudes and support to HRD function and systems

Internal efficiency of the HRD function (HRD Department)

HRD Staff
How professionally qualified are they?

Do they seem to demonstrate adequate knowledge base?

Are adequately trained in the appropriate HRD systems?

Are they sensitive to internal customer requirements?

How good is their skill base in implementing various systems?

Do they demonstrate OCTAPACE values?
Openness, Confrontation, Trust, Authenticity, Proactive, Autonomy,
Collaborating and Experimenting.

Are they quality conscious?

HRD Staff

Are they familiar with the business goals of the

Are they cost conscious?

Are they empathetic?

Do they spend adequate time trying to understand the
requirements of all categories of employees?
Top Management
Do they understand HRD and its significance in achieving
business goals?
How supportive are they of HRD interventions and values?
Are their leadership styles facilitative of a learning culture?
Are they willing to give the time needed for HRD?
How well do they subscribe to the HRD values like the
OCTAPACE values?
How well do they practice HRD values.
How committed are they to create a learning culture in the
Do they invest their time, effort and energies in employee

Line Managers and Supervisory Staff
How much do they understand the significance of HRD?

Are they interested and motivated to develop themselves?

Are they willing to spend their time and effort in
developing their subordinates?

How supportive are they of HRD efforts?

Do they have listening and other skills required facilitating
development of their juniors?

Union and Association Leaders
How much developmental role are they playing?

Do they see their own role in HRD?

Are they committed to create a learning organisation?

Are they willing to promote employee development?

Are they positive in their approach and perceive their own roles a
supportive of organisation building?

Do they perceive the significance of Employee development for
organisation building?

HRD Function
_ Adequacy of manpower
_ Appropriateness of the structure
_ Cost consciousness of staff
_ Quality consciousness of the HRD staff
_ Responsiveness of the HRD department to the needs of
employees, Managers, Staff, Workmen, Union Leaders?
_ Level of Internal customer satisfaction
_ Internal operational efficiency of the department?
_ Level of internal synergy among staff?
_ Are they the first to implement HRD systems? Do they
implement them in an exemplary way?

HRD Competencies in the Corporation
A HRD Competency maturity core is assigned on the basis of the
competency levels of all categories.

A* = All categories of employees have extremely high competence
base in HRD (knowledge, attitudes, values and skills) and the
HRD department has a high internal efficiency and satisfaction
B = The competence levels of every group is at an acceptable
level and the internal efficiency of the HRD department and the
internal customer satisfaction are acceptable levels.
D = The competencies of more than one group are below
acceptable levels and/or the HRD department is not internally
efficient and does not meet the requirements of the minimum
internal customer satisfaction.
F = Total failure on almost
HRD Styles, Culture and Values
The extent to which the leadership and managerial styles
are empowering and competence building is assessed by
studying the leadership and supervisory styles.

The extent to which the HRD culture and values are
practised and stabilised in the corporation are measured.

O The HRD culture is culture that promotes Human potential
O It is also a culture that promotes a learning organisation.