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HUMAN RESOURCE AUDIT, EFFICIENT TOOL TO ASSESS THE

EFFECTIVENESS OF CURRENT HR ACTIVITIES ALSO GIVES INSIGHT TO


ASSESS BLUEPRINT FOR THE FUTURE HR CORE ACTIVITIES AND
ORGANIZATIONAL COMMITMENT TOWARDS GROWTH AND EXCELLENCE
An HR "Early Warning System" that works!
 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.
 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. The key to an audit is to remember it is a learning or discovery tool,
not a test. There will always be room for improvement in every
organization.
 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)
PURPOSE OF H.R. AUDIT:
 To examine and pinpoint strength and weaknesses related to H.R. areas and Skills
and Competencies to enable an organization to achieve its long-term and short-term
goals.
 To increase the effectiveness of the design and implementation of human resource
policies, planning and programs.
 To help human resource planners develop and update employment and program
plans.
 To insure the effective utilization of an organization's human resources.
 To review compliance with a myriad of administrative regulations.
 To instill a sense of confidence in management and the human resources function
that it is well managed and prepared to meet potential challenges.
 To maintain or enhance the organization's and the department's reputation in the
community.
 To perform a "due diligence" review for shareholders or potential investors/owners.
NEED FOR H.R. AUDIT
Top Management saw solutions to their problems, issues
and challenges in HRD to face business competition and to
achieve organizational goals.
SCOPE OF HUMAN RESOURCE AUDIT
Whenever the H.R. Audit it taken up, the scope is decided. Audit need not be exhaustive, but
should be focused on particular function of H.R.M. such as Training and Development,
Performance Appraisal, Compensation, etc.. However, the objective and approach of H.R. Audit,
more or less, remains the same, regardless of scope.
What does a full HR Audit entail":
1) Legal compliance
2) Compensation/Salary Administration
3) Employment/Recruiting
4) Orientation
5) Terminations
6) Training and Development
7) Employee Relations
8) Communications
9)Files/Record Maintenance/Technology
10)Policies and procedures (including employee handbook)
11)Communications
APPROACH TO H.R. AUDIT
Methods which can
adopted for HR
Audit

Self – directed Task Forces out side


surveys. within the Consultants
organization
AUDITING PROCESS: STEPS IN H.R. AUDIT
Auditing process varies from organizations to organizations
Generally involves following STEPS

 STEP ONE: Briefing and Orientation:


 Key Staff Members meet:
 i. To discuss particular issues considered to be important.
 ii. To chart out audit procedures, and
 iii. To develop plans and program of audit.
 STEP TWO: Scanning material information:
 Scrutiny of all available information pertaining to personnel, personnel handbooks and manuals, guides, appraisal forms, computer
capabilities and any other related information.
 STEP THREE: Surveying employees:
 a. Interview with key managers, functional executives, Top functionaries in the organization and employees Representatives, if necessary.
 b. The purpose is to pinpoint issues of concern, Present strengths, anticipated needs and managerial views on human resources.
 STEP FOUR: Conducting interviews:
 I. What questions to be asked, are developed during scanning of information.
 II. It is better for H.R. Audit, if clarity about the key factors of H.R.M. selected for audit and the related questions that need to be examined.
 STEP FIVE: Synthesizing:
 The data gathered is synthesized to present the
 a. Current Situation.
 b. Priorities.
 c. Staff pattern, and
 d. Issues identified.
 STEP SIX; Reporting:
 1. The results of the audit are discussed with Managers and Staff Specialists, in several rounds.
 2. Important issues are identified for inclusion in the formal Report.
H.R. AUDIT TOPICS (AREAS) FOR INTERVIEW
QUESTIONNAIRES AND RELATED ASPECTS
Important HR Topic Areas
 1. INFORMATION
 • COVERAGE
 • SOURCE
 • ADEQUACY
 • GAPS
 2. FORECASTING
 • METHODOLOGY
 • RELIABILITY
 • TESTABILITY
 • BUDGETING
 • TIME ORIENTATION
 • TECHNOLOGY PERSPECTIVE
 3. TRAINING AND DEVELOPMENT
 • NEED ASSESSMENT
 • SELECTION CRITERIA
 • LEVELS COVERED AND FREQUENCY
 • INTERNAL VS EXTERNAL TRAINING
 • QUALITY CONSCIOUSNESS
 • CHANGING NEEDS
 • CLIMATE FOR SELF-DEVELOPMENT
Important HR Topic Areas - continued
 4. PERFORMANCE APPRAISAL
 • VALIDITY OF APPRAISAL PROCESS
 • FITNESS
 • BENEFITS AND/OR
 DRAW BACKS/PROBLEMS
 • KNOW-HOW OF APPRAISING
 • CLEAR OBJECTIVES
 • UNIFORMITY IN PROCESS
 • UNDERLYING BENCHMARKS
 • CONSISTENCY IN RATINGS
 • LINKAGES WITH PAY
 • FEEDBACK TO EMPLOYEES
 • CHANGING NEEDS
 5. MANAGEMENT SUCCESSION PLANNING
 • POLICY FORMULATION
 • IDENTIFYING KEY POSITIONS
 • AVAILABILITY OF SUCCESSORS
 • MATCHING FUTURE NEEDS
 • RESPONSIBILITY FOR GROOMING
 AND DEVELOPING
 • HANDLING NON/POOR PERFORMERS
Important HR Topic Areas - continued
 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
 • EFFICIENCY OF ACTION PROGRAMMES
 • LESSONS FOR FUTURE
 8. SPECIAL ASSIGNMEN
 (OTHER H. R. FUNCTIONS)
 • CLARITY
 • COMMENTS
 • ACTIVITIES JURISDICTIO
Important HR Topic Areas - continued
 8. SPECIAL ASSIGNMEN
 (OTHER H. R. FUNCTIONS)
 • 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
 10. THE STAFF FUNCTION
 (THE H.R. STAFF)
 • EXPECTATION FROM HUMAN RESOURCE STAFF
 • DEGREE OF SATISFACTION
 • ADEQUACY
 • ATTIDUDE AND APPROACH
 • CAPABILITY AND POTENTIAL
 • SUGGFESTION FOR CHANGE .
CHALLENGES FOR H.R. DEPARTMENT
EIGHT CHALLENGES IDENTIFIED BY DAVE ULRICH (1997)
 1. GLOBALISATION INVOLVES
 • NEW MARKETS
 • NEW PRODUCTS
 • NEW MINDSETS
 • NEW COMPETENCIES
 • NEW WAYS OF THINKING
 H. R. DEPATMENTS WILL NEED TO CREATE
 MODELS AND PROCESSES FOR ACHIEVING:
 • GLOBAL ACTIVENESS
 • COMPETITIVENESS
 • EFFECTIVENESS
 2. VALUE CHAIN FOR GLOBAL
 COMPETITIVENESS AND HR SERVICES
 • BUILDING CUSTOMER-RESPONSIVENESS ORGANISATION THROUGH:
 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:
• Having EXECUTIVES with BUSINESS MINDSET.
- For CUTING COST on hiring PEOPLE.
- For overcoming CHALLENGE in New Business.
4. BUILDING ORGANISATIONAL CAPABILITIES
• Reviewing Existing Capabilities
• New Capabilities.
• Aligning Capabilities with Business Strategies.
5. MANAGING CHANGE
• Adopting some new H.R. Practices.
• Learning some New Skills and Attitudes.
• Unlearning some existing skills and Attitudes.
• Modifying Mindset of Executives and Employees.
6. MAKING TECHNOLOGY VIABLE
• Finding out ways and means to
make technology successful.
7. ATTRACTING AND RETAINING
COMPETENT PEOPLE
• Attracting Talented People.
• Retaining them.
• Utilising them suitably.
8. TRANSFORMING ORGANISATION
• Creating fundamental and lasting changes.
METHODS OF H.R. AUDIT
I. INDIVIDUAL INTERVIEW METHOD:
 Top level management and senior managers are interviewed, individually. It helps in
following:
 A. Knowing their thinking about future plans and opportunities available
 for the company.
 B. Knowing about their expectations from the H.R.Audit.
 C. Getting sensitive information pertaining to working styles and culture.
 Union leaders, departmental heads, some strategic clients and informal leaders are
also interviewed, individually.
 In case of small companies, manned by professionals, interviews can be extended
with selected employees from different levels and functions. .
II. GROUP INTERVIEW METHOD

:
Group interviews and discussions with the employees and/or executives of large companies for H.R. Audit,
facilitate collection of information about effectiveness
 of existing systems.
 Composition Of Group:
 1. Ideally, the group should be of 4 to 8 persons.
 2. Group should consists of same or similar level of employees from cross functional areas.
 3. In case of large organization, group interviews for each functional area can be conducted, separately.
 Relevant Questions That Are Asked In Individual And Group Interviews :
 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?
 c. What are the strengths of your HRD function?
 d. What are the areas where your HRD function can do better?
 e. What is good about your HRD subsystems, such as:
 • performance appraisal,
 • career planning,
 • job rotation, training,
 • quality circles,
 • induction training,
 • recruitment policies,
 • performance counseling,
 • worker development programmes, and
 • HRD departments?
 f. What is weak about them? What can be improved?
 g. What changes do you suggest to strengthen HRD in your company?
 h. What do you think are the ways in which line managers can perform more developmental roles?
III. WORKSHOP METHOD:

 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:
 a. 30 to 300 participants can be asked to gather in a room.
 b. They are divided in small groups.
 c. They are asked to work either around Systems, Subsystems or around different dimensions of
HRD and do SWOT Analysis.
 d. All the groups thereafter give presentations.
 e. The H.R. Auditor compiles the views of all groups, makes own observation, conclusions and
prepares a report.
 f. The H.R. Auditor announces the audit Results before submitting the report to top Management.
 LSIP WORKSHOP FOR HRD AUDIT ON PERFORMANCE APPRAISAL SYSTEM
 - RELEVANT QUESTIONS THAT HAVE BEEN ASKED IN ONE OF THE HR AUDIT
CONDUCTED BY
 Dr. T.V. RAO:
 i. What are the three good things in your performance appraisal system?
 ii. What is the one thing you would like to change in your performance appraisal system?
 iii. How would you critically evaluate the job rotation in your company?
 iv. What are the strengths and weaknesses of your training policies and practices?
 v. What three objectives would you use to describe the promotion policies as they exist in your
company?
IV. QUESTIONNAIRE METHOD:
 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:
 a. Detailed questionnaire is prepared by H.R. Auditor.
 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.
 c. They submit the questionnaire, duly filled in, to the HR Auditor.
 d. The HR Auditor compiles the feedbacks, makes observations, conclusions and
recommendations.
 e. Audit Results are informed to the Participants before the report is submitted to the
top management.
POINTS TO REMEMBER FOR WRITING REPORT
 A. SIMPLE LANGUARE SHOULD BE USED.
 B. IT SHOULD BE SHORT AND PRECISE.
 C. BULLET FORM HIGHLIGHTING THE STRENGTHS AND
WEAKNESSES,SHOULD BE USED.
MODEL OUTLINE: HR AUDIT REPORT
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
TABLE AND APPENDICES

1. INTRODUCTION (BRIEF DESCRIPTION ABOUT)


• 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,
FRAMING OF INTRVIEW QUESTIONNAIRE, BASED ON SAID DIMENTIONS
FOR INTERVIEW WITH HRD CHIEF:
 What are the objectives of your department?
 • When and how was it set up?
 • What are the significant milestones and contributions of the department?
 • What are it's current activities?
 • What is the organizational structure?
 • How are the strategies of hr and hr plans formulated? what is the role of the department in strategic planning?
 • What are the main competencies of HRD staff? which are the competencies they need to develop?
 • What are the styles of Top and Senior level Managers?
 •To what extent the styles are helpful in developing learning culture?
 • What are the main blocks in developing learning culture?
 • How are the line managers supporting their juniors in developing? What needs to be done to make them more supportive?
 • What is the extent of support given by Top Management to HRD?
 • Is there a separate budget for HRD? How the same is allocated and what is the support of Top Management?
 • What is the HRD philosophy and values?
 • What the core competencies of each department and of the organization as a whole?
 • What is relationship between Personnel and HRD Departments? Is there need for further strengthening Integrating or differentiating the functions or activities of
the two?
 • What the strengths and weakness in the following systems of your organization:
 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. .
Professional Summary of Mr. Gajendra Khare

 Article By: Mr. Gajendra Khare (M.Sc. (Maths), DIMS, MPA)


Founder – Siddhartha Consultancy Services)
 Former HR and Administration Manager, Apparel Group UAE; Mr. Khare has about 14 years of
working experience with many prestigious organization of the country and overseas in the field of
Human Resource Development (HRD), Administration, Liasoning, ISO-9000, MIS (Management
Information Systems) and others. He has worked on a number of HRD and quality related
assignments of various organizations. He has also worked in the area of Management
Information Systems and implemented ERP modules in industries. He has been a member of
various professional organizations in the fields of HR and quality etc. Mr. Khare has developed
and implemented various HR solutions to the industries successfully. He has also implemented
ISO-9001:2008, ISO 13485:2003 CE and WHO: GMP certification and also handled various
administrative assignments and completed successfully.
gkhare@scsuniversal.com; gajendra.khare@gmail.com, web: www.scsuniversal.com
Thank You

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