HR Audit
Human resource (HR) audit means the systematic verification of job analysis, job description, job design, records of recruitment and selection, orientation and placement, training and development, job evaluation, performance appraisal, motivation and moral, compensation packages, welfare and social securities as well as industrial disputes and their solutions.
Method of Human Resource
Interview Method,
Questionnaire Method,
Observation Method,
Desk Research Method,
Workshop Method & Task Force
Objectives of HR Audit:
1. To review the performance of the human resource department and its relative activities in order to assess the effectiveness on the implementation of the various policies to realise the organizational goals
2. To identify the gaps, lapses, irregularities, short-comings, in the implementation of the policies, procedures, practices, directives of the human resource Department and to suggest remedial action
3. To know the factors which are detrimental to the non-implementation or wrong implementation of the planned programmes and activitie
4. To suggest measures and corrective steps to rectify the mistakes, shortcomings if any, for future guidance, and advise for effective performance of the work of the human resource Departmen
5. To evaluate the Personnel staff and employees with reference to the performance appraisal reports and suggest suitable recommendations for improving the efficiency of the employee
6. To evaluate the job chart of the human resource managers, executives, administrative officers, executive officers, recruitment officers, whether they have implemented the directives and guidelines for effective management of the human resources in their respective department
Purpose of of HR Audi
1. To clarify desired practices of human resource work and roles within the organization
2. To establish a baseline for future improvemen
3. To evaluate current effectivenes
4. To standardise practices across multiple sites within a division or compan
5. To assess current knowledge and skills required of human resource practitioner
6. To improve performance levels of key customers within the organizatio
HR Audit – Types: Internal Audit and External Aud
HR audit may be done by two ways
Type # 1. Internal Audi
When an audit is done by a person who is employee of the organisation then it is called internal audit. The internal person will need to be trained and can be given a set of questions which he can render to the persons for seeking answers
Type # 2. External Audi
When an audit may be conducted by external specialists or consultants who are not the employees of the organisation then it is called external audit. It is generally advisable to get the audit conducted by external person who can objectively evaluate the performance and support corrective actions freely
After collecting information and answers to the questions the auditor can summarise his findings and submit a report to the management. On the basis of auditor report to the management can take necessary actions to improve the performance of HR department and its personne
HR Audit – 5 Main Phases: Pre-Audit Information, Pre-Audit Self-Assessment, On-Site Review, Records Review and Audit Repo
The human resource audit process is conducted in different phases. Each phase is designed to build upon the preceding phase so that the organization will have a very strong overview of the health of the human resource function, at the conclusion of the audit
These phases includ
1. Pre-Audit Information – This phase involves the acquiring and review of relevant human resource manuals, handbooks, forms, reports and other information. A pre-audit information request is forwarded to the client who compiles the necessary information for review by auditor
2. Pre-Audit Self-Assessment – In order to maximize the time spent during subsequent portions of the audit, a pre-audit self-assessment form is sent to the client. The self-administered yes/no questionnaire asks a number of questions about current human resource policies and practices. The completion of this self-administered questionnaire allows auditors to identify key areas for focus during the human resource audi
3. On-Site Review – This phase involves an on-site visit at the client’s facility interviewing staff regarding human resource policies and practices. A very in-depth human resource audit checklist is complete
4. Records Review – During the on-site visit, a separate review is conducted of human resource records and postings. Employee personnel files are randomly examined as well as compensation, employee claims, disciplinary actions; grievances and other relevant human resource related information are checke
5. Audit Report – The information gathered is used to develop an human resource audit report. The audit report categorizes action needs into three separate areas. The areas that are urgent and important (UI), not urgent needs but important (NUI), not urgent but not important needs (NIN), and important opportunities needs (ION). As a result of this scheme of classification, managements can prioritize their step
HR Audit – 7 Important Activities: Quantifying and Measuring HR Functions & Outcomes, Comparing Activities and Results to Standards & Goals and Mor
An HR 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 auditing activities includ
1. Quantifying and measuring HR functions and outcomes – A critical element HR audits is the determination of current and potential outcomes of the organization with respect to its HR functio
2. Comparing activities and results to standards and goals – Like financial audits, HR audits compare activities and results to external and internal standards and to expected and budgeted goal
3. Reviewing structural, organizational, and cultural issues – The effectiveness of various employment policies, practices and procedures is determined by a number of external and internal factors. HR audits help to identify and assess these factor
4. Assessing the employment brand – Like product branding, employment branding influences customers’ (employees’) desire and willingness to buy the product (becoming and staying an employee). HR audits help to assess the organization’s employment bran
5. Inspecting employment posters, notices, and facilities – HR auditing activities inspect and review employment practices with respect to compliance with various state and local employment law
6. Inspecting employee personnel files – HR auditing activities inspect a random selection of personnel files and record
7. Assessing HR management and employment practices – Using enhanced software and IT packages, (like the latest version of ELLA®) HR audits can review and assess various HR management and employment practices areas, including those o
i. Recruitment, selection and hiring
ii. Application
iii. Reference checking and responding
iv. Immigration related issu
v. Employee handbooks and procedural manua
vi. Positive employee relation
vii. Diversity, inclusion and workplace discrimination
viii. Affirmative Action-Pay Equi
ix. Sexual harassme
x. Drug-free workpla
xi. Job performance manageme
xii. Retention issue
xiii. Conflict resoluti
xiv. Discipline, terminations and downsizing
xv. Leaves of absent
xvi. Wage and hour issue
xvii. Unemployment insurance
xviii. Workplace safety
xix. Ethics and governance
xx. Strategic HR decisions, procedures and process
HR audit serves as an examination on a sample basis of practices and systems for identifying problems and ensuring that sound accounting principles are followed. Similarly, an HR audit serves as a means through which an organization can measure the health of its human resource functio
HR Audit – Top 6 Methods: Interview Method, Questionnaire Method, Observation Method, Desk Research Method, Workshop Method & Task Force Meth
HR audit is a tool to measure the level of human resources development system
The following methods are adopte
1. Interview Metho
Top management and senior management (Line managers and employees) are interviewed by the HRD auditor. It is a structured interview designed to solicit information on the perspectives of respondents on the future growth plans and goals of the organization, organization culture, working style, career development, work flow system, leadership style, morale, motivation, vision, mission etc. In view of the time and resources constraints, HRD auditor uses sampling techniques to interview the employees
2. Questionnaire Metho
HRD auditor designs and administers structured questionnaire to assess the various dimensions of HR development. It is usual practice to test the reliability and validity of the instrument using appropriate statistical technique by conducting a pilot study. Then he has to choose the proper sample size. The questionnaire should accommodate questions reflecting the objectives of HRD audit. It is given to the sample respondents who have to record appropriate response
3. Observation Metho
HRD manager observes the employees in their natural environment i.e., workplace, canteen, training camps, residential colony to assess the suitability and conduciveness of environment for human resource development
4. Desk Research Metho
HRD manager collects and uses details relating to performance appraisal report, ethical practices, achievement records, welfare measures, suggestion scheme, career development, frequency of training programmes, feedback of participant trainees, methods used to ascertain training needs, safety practices, accident prevention, incentive and compensation system, etc. He analyses the facts and figures relating to aforesaid areas and arrives at appropriate findings
This method does not involve interviewing the respondents through a questionnaire or an interview schedule. The entire information is gleaned from the relevant records of the organizatio
5. Workshop Metho
Employees are selected either through a sampling technique or through some other norms, for participation in a workshop conducted exclusively for HRD audit purpose. All the participants selected are divided into groups. Different dimensions of HRD are assigned to different groups for SWOT analysis. Then each group is required to prepare a report and make presentation on the themes assigned. The outcomes of the report of each group are deliberated deeply and suggestions are made to the organization. The whole exercise is moderated by the HRD auditor
6. Task Force Metho
A task force comprising different experts from various domains in the organization is constituted to identify, evaluate and recommend an appropriate solution to the HRD problems identified. HRD manager can work on the accepted recommendations for further development
HR Audit – Role of HRD Aud
HRD audit is cost-effective and can give many insights into a company’s affairs. The auditors come for one to two weeks, camp at the organization and give a report in a month’s time. They normally make a preliminary presentation at the end of their visit
HRD audit can lead to several role
1. Getting the Top Management to Think in Terms of Strategic and Long-Term Business Plan
It may sound ironical that the HRD audit should begin with such strategic plans, but in some cases it has compelled the top management to think about such plans, while some companies started thinking about them, a few others started sharing these plans with a larger number of persons
Since the employees cannot participate in an HRD audit without some sharing of these plans, the audit has forced the top management to share their plans which has resulted in increased employee involvement. In a few cases a new system of annual planning and sharing of business plans with the management staff have been initiated to enable them plan their own activities and competency development programme
2. Clarifying the Role of the HRD Department and Line Managers in HR
In almost all cases the HRD audit has been found to draw the attention of employees at various levels to the important role of the HRD department current as well as the future. Enhanced role clarity of HRD department and HRD function and increased understanding of line managers about their HRD role have been the uniform results of HRD audit. The degree may vary from organization to organization depending on other factors
3. Streamlining of Other Management Practice
Most often HRD audit identifies the strengths and weaknesses in the some of the management systems existing in the organization. It also points out to the absence of systems that can enhance human productivity and utilization of the existing competency base; for example, the MIS, rules and procedures, etc., which may have an effect on the functioning of the employees
In a few cases an HRD audit has helped the management look at some of these sub-systems and work procedures. Preparation of a manual of delegation of powers, clarification of roles and responsibilities, developing or streamlining the manuals of financial and accounting procedures and systems, strengthening the information systems, and sharing of information are some of the resultant activities in this directio
4. Better Recruitment Policies and more Professional Staf
An HRD audit points out to the competence base required. It sets the stage and gives direction for the competency requirements of employees at various levels and thus provides a base for recruitment policies and procedures. In some companies, it has resulted in strengthening the recruitment policies and procedures. As a result of HRD audit, new recruitment and retention strategies have been worked out
5. Changes in the Styles of Top Managemen
One of the objectives of HRD is to also create a learning organization. A learning culture can be created only if the top managers of the company exhibit an HRD style of management. Such a style requires an empowering attitude, participative style of management, and an ability to convert and use mistakes, conflicts and problems as learning opportunities
Some of the top-level managers in India have been found to block employee motivation and learning through coercive, autocratic and even paternalistic styles of management. In such cases the HRD audit has pointed out the difficulties in developing and preparing the employees for the future. This has helped to provide subtle feedback to the top management and to initiate a change proces
6. Improvements in HRD System
The HRD audit has helped most of the organizations in taking stock of the effectiveness of their HRD systems and in designing or redesigning the HRD systems. The most frequently changed or renewed systems include performance appraisal, induction training, job-rotation, career planning and promotion policies, mentoring, communication, and training
7. More Planning and More Cost-Effective Trainin
HRD audits have been found to raise questions about the returns on training. One of the aspects emphasized in the HRD audit is to calculate the investments made in training and ask questions about he returns. The process of identifying training needs and utilization of training inputs and learning for organization growth and development are assessed
As direct investments are made in training, any cost- benefit analysis draws the attention of the top management and HRD managers to review the training function with relative ease. One organization strengthened its training function by introducing a new system of post-training follow-up and dissemination of knowledge to others through seminars and action plans. Many organizations have developed training policies and systematized their training function. Assessment of training needs has also become more scientific in these organisation
8. Increased Focus on Human Resources and Human Competencie
One of the results of an HRD audit is to focus on new knowledge, attitudes and skills required by the employees in the organization. Comments are made about the technical, managerial, human and conceptual competencies of the staff at various levels. This differentiation has been found to help organisations identify and focus sharply on the competency requirements and gaps
The audit establishes a system of role clarity and fixing of accountabilities. This can take place through separate role clarity exercises or through the development of an appropriate performance appraisal system. In any case the attention of the organization gets focused on developing the competency base of the organizatio
More sensitivities are developed to the missing aspects of competencies. For example, one organization has been found to neglect human relations competencies of their staff, resulting in a large number of human Problems leading to wastage of time. Some of these got streamlined and various HRD policies also got strengthene
9. Strengthening Accountabilities through Appraisal Systems and Other Mechanism
An HRD audit can give significant inputs about the existing state of the accountabilities of employees. This gets assessed through performance appraisals as well as through the work culture and other cultural dimensions. A number of organisations have introduced systems of performance planning, sharing of expectations and documenting the accountabilities of staff
10. TQM Intervention
Quality improvements and establishing TQM systems require a high degree of employee involvement. In a number of cases the HRD audit has pointed out to the linkages between TQM and other developmental programmes and helped in strengthening the same
Due to improvements in the training system, group work and appraisal systems, TQM programmes have also improved. In a few organisations the performance appraisals have been so changed as to integrate quality aspects and internal customer satisfaction dimensions into the appraisal system. Thus, an HRD audit leads to the strengthening of the quality system
HR Audit – 3 Main Approaches: Legal Approach, Benchmarking Approach and Strategic Approa
Approach # 1. Legal
The audit of performance or conformity consists of making an inventory of the social situation of the company, considering the labor law norms and regularly verifying the company’s compliance with the applicable regulations. Concern about labor risks has created a function within HRM with the purpose of altering working conditions by identifying the risks that could stem from them and implementing necessary preventive measures
Such preventive activity could fit perfectly into the legal approach of HR, although the effort that the company can make in this sense can go beyond the application of the existing risk prevention laws’. Hence the legal approach is primarily focused on the company’s legal compliance to various labour legislations and act
Approach # 2. Benchmarkin
The benchmarking approach to HR audit is primarily oriented towards continuous improvement in HR systems, policies and processes to deliver more value to the employees
Such benchmarking can be done internally as well as externally. The internal benchmarking shall compare the HR practices of the company against its own standards, whereas in external benchmarking the same is compared with the best-in-class practices in the industr
Approach # 3. Strategi
In strategic approach to HR audit the relevance of the HR practices, systems and processes is seen with respect to the strategic objectives of the fir. How much do they these systems and practices contribute to furthering the business objectives of the firm? The strategically audit of HR helps assure that the HR programs are aligned with the Company’s long-term objectives
In this way, the HR function is becoming a source of competitive advantage and is ceasing to be considered as a specialized and unrelated function that incurs high costs to the company
HR Audit – Benefi
The following benefits of HR audit are as follows
1. Identifies the contribution of HR department to the organisatio
2. Improves the professional image of HR departmen
3. Encourages of greater responsibility and professionalism among members of HR departmen
4. Stimulates the uniformity of HR policies and practice
5. Finds critical HR problem
6. Ensures timely compliance with legal requirement
7. Reduces HR cost
8. Improves effectiveness of line manager
The HR Audit also review some ratios which are useful to HR department as well as other department
These are – (i) Rate of absenteeism, (ii) Rate of accidents, (iii) Rate of turnover, (iv) Relating to costs, (v) Rate of grievance handling, (vi) Rate of punishments, (vii) Rate of employment, (viii) Rate of disputes, (ix) Rate of sickness, (x) Rate of Man days lost due to various reason
HR Audit – Checklist
The following checklist would facilitate auditor’s work
1. Purpose of Audit
i. Looking for potentially serious problems
ii. Figuring out areas warranting improvement
iii. Documenting processes for use in merger or re-organizatio
iv. Addressing compliance issue
2. Sources of Data
i. Written policies and procedures
ii. Views of HR manage
iii. Perspectives of line manager
3. Basic
i. Strength of employees in HR departments
ii. Organization chart for HR departmen
iii. Size of HR budge
4. Recruitment
i. Sourcing of candidates
ii. Mode of selection
iii. Meeting legal requirements, if any, consistency of procedures followed across jobs and location
iv. Consistency of recruitment proces
5. Compensation and Benefit
i. Different groups of employees
ii. Compensation policy in existenc
iii. Job evaluation practices followe
iv. Variable pay practices followers
v. Criteria for deciding increment
vi. Different benefit plans in practice
vii. Up-to-date job description
6. Workforce Revie
i. Areas of skill shortage
ii. Critical succession issue
iii. Distribution of workforce age-wise and gender-wis
iv. Process followed in manpower plannin
v. Process followed in succession plannin
7. Training and Developmen
i. Periodicity of training
ii. Management of training programm
iii. Criteria for identifying candidates for trainin
iv. Linkage of training with performance management syste
v. Training budge
vi. Measurement of training effectivenes
8. Industrial Relation
i. Number of unions functioning
ii. Number of grievance
iii. Outstanding grievance
9. Lega
i. Processes of managing compliance issues
ii. Outstanding litigation
10. HR Technolog
i. Nature of technology installed
ii. Process of updating the technolog
iii. Progress of technology projec
11. Strategic H
i. The authority to whom the senior HR is to report
ii. Extent of interest of top management in HR issue
Other
i. Audit of corporate cultur
ii. Competency of audit staf
iii. Audit of customer satisfaction with H
iv. Using metrics proposed by Saratoga Institute for audi
HR Audit Repo
The HR auditor, after examining various aspects of HRM, compiles these observations, analysis, findings and recommendation in the form of a report
Jobs of the HR Auditor can be enumerated as follow
1. To get the current fact
2. To study the effectiveness of the present system by answering the following issues
a. Why was the practice introduce
b. What would be the result, if the practice is discontinue
c. What needs were intended to be fulfilled and have those been fulfilled or no
d. What could be the best possible alternative for fulfilling such need
e. What changes can improve effectiveness of the existing practic
f. Are such intended changes economically and operationally viabl
g. Are such changes sustainable from the union’s point of vie
h. What should be the time-frame for introducing the chang
The reports may accommodate the followin
i. Table of conten
ii. Preface explaining the background of the evaluati
iii. Objectives of audit, methodology of audit program
iv. Analysis of data and informati
v. Findin
vi. Summary and conclusio
vii. Recommendatio
viii. Appendi
Structure of HR Audit Repor
1. Introduction – HR auditor has to give a brief of the organization profile, objectives, purpose of audit, methodology employed, HR practices in vogue and future plans of organization
2. Current scenario – This part of the report deals with staffing of HR functions, objectives, policies and programmes, strength, weakness, opportunities and challenges encountered by HR segmen
3. General observation – Auditor reviews the SWOT of the organization, future potential, competitors, various factors influencing organizational structure, culture and competence in light of facts gleaned from the organizatio
4. HR system – This article covers findings and recommendations relating to HR planning, recruitment, selection, compensation, performance management, training and development, various HR efforts to heighten organizational competitiveness and employee satisfaction. The contents should be based on data collected and analyse
5. Recommendation – Report should outline the findings and suggestions for improving HR development policies, programmes, practices and strategies of the organization
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