HUMAN RESOURCE AUDIT (HR AUDIT)

Presented By: Anjaly Negi Adeep Kaur Harsimran Kaur Preity Choudhary

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HR Audit Meaning and 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) A human resource audit reviews an organization's policies, procedures, and practices. Its purpose is to examine the technical and practical dimensions of the HR function and to create a comprehensive system that adds value to the organization.

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HR Audit Definition
An audit is a means by which an organization can measure where it currently stands and determine what it has to accomplish to improve its human resources function. It involves systematically reviewing all aspects of human resources, usually in a checklist fashion, ensuring that government regulations and company policies are being adhered to. HR Audit also suggest future improvements based on past activities measurement.
An HR audit is a process to review implementation of your institutions policies and procedures, ensure compliance with employment law, eliminate liabilities, implement best practices and educate your managers.

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HR Audit Significance
1. Essential for Organization success
2. It Provides Required Feedback

3. Managing Rising Labor Costs

4. Increasing Opportunities for Competitive Advantage of HRM

5. HR Audit can avoid Government intervention

6. HR Audit protects Employees interests

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Need for HR Audit

Though HR audit of Policies & Practices is not a legal obligation, some Modern Organizations have started implementing it because of: 1. Increase in size of Organization & Personnel
2. Change in the Philosophy of Management towards HR

3. Increase in Strength & Influence of Unions

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Some companies for external HR Audit

Vital HR, HR Audit Inc, People Power
These organizations help companies to answer these questions

How effective is your organization at maximizing the contribution of your human capital?
Why is one or more of your organization's strategic initiatives languishing? What steps can you take today, using existing internal resources, to improve your organizations performance and ROI?

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Examples of some HR Audit Findings

Improper acceptance and retention of resumes and applications Illegal questions on applications or during interviews Improper information retained in primary personnel files Inadequate or improper background and reference checking forms

Noncompliance with immigration laws

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Examples of some HR Audit Findings

Inadequate job descriptions

Benefit plans or Legal Summary Plans etc. not provided

Illegal pay deductions from employees for the time worked

Out-of-date or non-applicable employment laws posters used

Insufficient policies on privacy, electronic communications, social networking, etc. Inadequate performance and compensation management tools

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OBJECTIVES OF HR AUDIT
Effectiveness Implementation Rectification Evaluation Modify Questioning

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1. Effectiveness: To review performance of Human resource Department and its activities to determine effectiveness. 2.Implementation: To locate gaps, lapses, failings in applying Polices, Procedures ,rules of the organization. 3.Rectification: To take corrective steps to rectify mistakes, shortcomings contesting effective work performance of HR Department.

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4.Evaluation: To evaluate HR Staff & employees . 5.Modify: To review HR System and Modify to meet challenges in comparison with other organizations. 6.Questioning: To seek answers to What, Why , When , Happened while implementing Policies, Practices & Directives in managing HRs .

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SCOPE OF HR AUDIT
Audit of Corporate Strategy

The organization is going to gain competitive advantage. Audit of the Human Resource Function Human Resource Information System, Staffing and Development, and Organization Control and Evaluation. Audit of Managerial Compliance Human resource policies and procedures. Audit of Employee Satisfaction To learn how well employee needs are met.
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Audit of Corporate Strategy

By assessing the firms 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 Function

1. Human Resource Information System
Human Resource Plans : Supply and demand estimates . Job Analysis Information : Job standards, Job descriptions, Job specifications Compensation Management : Wage, salary, and incentive levels , Fringe benefit package .

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2. Staffing and Development

Recruitment : sources, availability, employment applications Selection : selection ratios, selection procedures, equal opportunity. Training and development : orientation program, training objectives and procedures etc. Career development : internal placement, career planning program etc.

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3. Organization Control and Evaluation

Performance appraisals : standards and measures of performance, performance appraisal techniques, evaluation interview. Labor-Management Relations : management rights, dispute resolution problems. Human Resource Controls : employee communication, change and development procedures.

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Audit of Managerial Compliance

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 Satisfaction

It refers to an employees general attitude toward his or her job. When employee needs are unmet, turnover, absenteeism, and union activity are more likely. The team collects information about wages, benefits, supervisory practices, career planning assistance, and other dimensions of job.

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PURPOSE OF HR AUDIT
Basic purpose of HR-Audit is to find: 1. How various units are functioning? HR audit is a tool which helps to assess effectiveness of HR functions of an organization. 2.How they met policies & guidelines Pre-agreed upon? (i.e. focus on analyzing and improving) 3.How to assist Rest of Organization locating gaps between Objectives & results? (i.e. to reveal the strength and weakness).

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BENEFITS
1. Identifies contribution of HR Department. 2. Improves HR Departments Professional Image. 3. Fosters greater Responsibility & Professionalism amongst HR Staff. 4. Classifies HR Departments Responsibilities & Duties. 5. Stimulates Uniformity of Personnel Policies & Practices. 6. Identifies Critical personnel problems. 7. Ensures Timely Legal Compliance Requirements. 8. Reduces HR Costs. 9. Creation of increased acceptance of changes in HR department. 10.A thorough review of HR information systems
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PITFALLS
Full audit may be time consuming. May not be as objective and impartial as desired. Impact of certain actions may not be clear.

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HR AUDIT PROCESS
Briefing and orientation Scanning material information Surveying employees

Conducting interviews

Synthesizing

Reporting Page 22

CHALLENGES FOR HRD

Globalization. Value chain for global competitiveness and HR services. Growth of organization. Building organizational capabilities. Managing change. Making technology viable. Attracting and retaining competent people. Transforming organization.

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FIVE APPROACHES TO HR AUDIT

Auditors may choose any of the five approaches for the purpose of Evaluation.

1. Comparative Approach.
2. Outside Authority Approach.

3. Statistical Approach.
4. Compliance Approach.

5. MBO Approach

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Comparative Approach Auditors Identify another Company as a MODEL. Result of their Organization compared with those of Model Company. Outside Authority Approach Often, Auditors use standard set by Outside Consultant as BENCHMARK for comparison of own Results. Statistical approachStatistical measures are performed considering the companys existing information.

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Compliance Approach : Auditors review Past Actions to determine if those activities comply with legal requirements and Company Policies, & Procedures. A Final approach is for Specialists & Operating Managers to set objectives in their areas of responsibility. Management By Objectives Approach : Creates Specific Goals against which performance can be measured. Then the Audit Team Researches ACTUAL PEERFORMANCE and COMPARES WITH THE OBJECTIVES.

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Sample Human Resource Audit question

How effective is the selection process in ensuring that people are placed in appropriate positions? Explain. How effective is the appraisal process in accurately assessing performance? Explain. How effective are rewards (financial and non-financial) in driving performance? Explain. How effective are the training, development, and career planning activities in driving performance? Explain. How effective is the appraisal process in differentiating performance levels for justifying reward allocation decisions? Explain. How effective is the appraisal process in identifying developmental needs of individuals to guide training, development, and career planning? Explain. How effective are the training, development, and career planning activities in preparing people for selection and placement into new positions in the organization? Explain. Overall, how effectively are the five components integrated and mutually supportive? Explain.

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Organization and Structure Is there an organizational chart? Does the chart include both employees names and position titles? Does the chart show reporting relationships? Is the chart updated as changes occur? As the needs of the organization change, does its structure change? HR Department Organization Is the department sufficiently staffed for the industry and the size of organization? Is the budget in line with other organizations of similar size and industry? Has the company been involved in any employment lawsuits? If there have been suits, what were the outcomes? Is there a job description for each position in the department? To what position does the top HR position report? Does the HR Department have a mission statement? Is the HR mission statement consistent with the vision and mission of the organization? Functions of the Human Resource Department 1. For what functions is the HR Department responsible? ( Payroll ,Recruitment, Safety Benefits, Training, Strategic planning ,Salary administration ,Labor relations Others 2. Should the HR Department be responsible for all of the functions listed above? 3. Should the HR Department be responsible for functions that are not listed above?

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RESEARCH APPROACHES TO HR AUDIT

1. Interviews with employees and managers are one source of information about human resource activity. Employees and managers comments help the audit team find that need improvement. Another useful source of information is the exit interview. Exit interview are conducted with departing employees to

learn their views of the organization.

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2) Questionnaires/surveys: Because interviews are timeconsuming, costly, and often to only few people, many human resource departments use questionnaires. Through questionnaire surveys, a more comprehensive picture of employee treatment can be developed. Questionnaire may also lead to more candid answers than face-to-face interviews. - employee attitude about supervisors - Employee attitude about their jobs - Perceived effectiveness of human resource department

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3) 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 - Scrap rates - Turnover and absenteeism records - Selection records - Affirmative action plan records - Training program records

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4) External information:Outside comparisons give the audit team a perspective against which their firms activities can be judged. example:Through Department of Labor, industry association, professional association numerous statistics and report are compiled. These organizations regularly publishes information about future employment opportunities, employee turnover rates, work force projection, area wage and salary survey, work force demography, accident rates, and other data that can serve as benchmark for comparing internal information.

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PERIOD OF AUDIT Naturally any audit will be done annually. Though it is preferred to conduct Human Resource Audit annually, but it is advisable to conduct audit once in three years or five years, keeping in view the fact that the realization of the Organizational goals may not be identified within a year. Audit Report The Prog comes to end with preparation of Report. Report may be Clean or Qualified. It is Qualified if HR Performance contains Gaps for which remedies suggested. Report is Clean where Performance is fairly Satisfactory

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THE AUDIT REPORT

Findings of research are used to developed a picture of the organizations 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. for line managers, for manager of specific human resource function, for the human resource manager.

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Report for line managers

How 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 Specialist

The specialists who handle employment training, compensation, and other activities also need feedback. Such feedbacks are : Unqualified workers that need for training Qualified workers that need for development What others company are doing Attitude operating managers toward personnel policies Workers pay dissatisfaction

1. 2. 3. 4. 5.

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Report 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

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THANK YOU !

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