Human Resource Audit

Shreya Misra B-01Smita Gavli B – 11 Sanya Kapur B – 24 Chandrima Nath B- 22

HR Audit “a method to evaluate the efficiency of human resource at all levels throughout the organization, in order to ascertain whether sound management prevails throughout, and to recommend its effectiveness where such is not the case”

(Willion B. Werther & Keith Davis, 1996)

Process of examining policies, procedures, documentation, systems, and practices with respect to an organisation’s HR functions

Major focus on: Reveal strengths and weaknesses Analyse and improve HR functions

Objectives of HR Audit To review the whole system of management programmes

of the organisation

To evaluate the extent to which HR policies are initiated and implemented by managers

To review the HR system in comparison with other organizations

To locate the gaps, lapses, shortcomings in the implementation of the policies, procedures, practices, directives of the HR department

To evaluate the effectiveness of various HR policies and practices

To evaluate the HR staff

To seek answers to such questions as “what happened?” “why it happened?” “why it did not happen?”

Benefits of HR Audit

Identification of the contributions of HR department to the organization.

Improvement of the professional image of the HR department.

Encouragement of greater responsibility and professionalism among members of the HR department.

Clarification of the HR department's duties and responsibilities.

Stimulation of uniformity of HR policies and practices.

Finding critical personnel problems.

Ensuring timely compliance with legal requirements.

Reduction of HR costs through more effective personnel procedures.

Creation of increased acceptance of the necessary changes in the HR department.

A thorough review of the department's information system.

Approaches to HR Audit

Comparative approach

Outside authority approach

Statistical approach

Compliance approach

Management by Objectives (MBO) approach

Comparative approach- model company.

Outside authority approach- standards set by outside consultant.

Statistical approach- statistical measures of performance

Compliance approach- review of past actions by the auditors.

Management by Objectives- specific goals are determined against which performance can be measured.

Types of HR Audit

Compliance

Best practices

Strategic

Function-Specific

Compliance – focuses on how well the company is complying with the current federal, state and local laws and regulations.

Best-practices – helps the organization to maintain or improve a competitive advantage by comparing its practices with the other companies who are identified of having exceptional HR practices.

Strategic – focuses on strengths and weaknesses of processes or systems.

Function-specific – focuses on a specific area in the HR function. e.g. – payroll, performance management, retention, compensation etc.

THE PROCESSGetting Started

Developing a Checklist After audit goals and success criteria have been

defined, it is helpful to develop a checklist that can be used to determine the presence or absence of certain practices, and to compare and contrast practices with policy or legal requirements. For example:

What policies should be audited? What practices should be audited? What records should be reviewed? What analysis will be done?

Description: Questions to be asked during the audit should be

framed to solicit a written or oral description; for example: What are the key objectives? What is the mission?

Clarity: Once descriptive information has been collected, the

next step is to probe for common understanding. Often, discrepancies among individuals as to what something means is the result of poor communication.

Fit:

Individuals may be clear and agree on a course of action, but clarity and agreement are not an indication that a particular action is the right one to take.

The organization may not have the resources to implement the action; managers may not know how to carry it out; and, most important, the action may be undesirable from the user's or customer's perspective.

Planning Questions

Develop a systematic set of questions

For example, the auditor may start with an open-ended question and immediately follow with some specific and quantifiable follow-up questions.

Collecting Data

Collecting information can be laborious and time-consuming.

Depending on the size of the target audience, the available time, and the type of data to be collected, it may be necessary to use and blend the strengths of a number of different data collection methods.

Such methods include interviews, questionnaires, a review

of relevant records, observation, or a combination of these methods.

Analyzing Audit Data

After data are collected, it is important to examine the information with an eye toward assessing readiness for change and identifying possible reasons for resistance to change.

Next Steps

Ultimately, to be useful, an audit must clearly communicate its findings and their consequences, and suggest ideas for improvement.

To the extent that management can “see” the

benefits of any suggested changes-and believes that the cost of acting is reasonable-the likelihood that changes will be implemented is higher.

Components of HR auditHR audit process consists of a series of questions covering the eight primary components of the HR function. Roles , head count, and HIRS Staffing ( recruitment & selection) process Personnel records documentation Training , development and career management Compensation, rewards and benefit systems Performance measurement and evaluation Termination/demotions/transfers Legal actions/ issues and personnel policies.

Sample Audit Questions

This is an example of the kind of questions that can be asked to determine the effectiveness of the human resources function as an organizational unit, as a specialized staff resource, and as a service provider.

Example

Employee Name______________ Date of Employment_______ Dept._________

Q1. How were you recruited? Through a series of interviews Through a panel interview Through a written interview A combination of written and direct interviews I was just called for the job without any interviews

Q2. Have you ever been involved in training and development activities since joining this organization? ___________If yes, state when__________Did you find the training beneficial for purposes of enhancing your job performance? ____________

Q3. Do you fully comprehend your rights to compensation and organization benefits? ______

Q4. Are you a member of any employee or trade union? _______If not, why? ____________________________________Q5. Do you have insurance cover?Q6. Do you understand fully this organization’s policy regarding security and personal safety? ________Q7. For how long have you been working in the same position? _____________

Conclusion Given that the human factor is a prime

strategical element, which explains a company's differentiation capacity, it is logical that a measurement effort of the way this function is undertaken in the company is made. That is the content of the HR audit, which goes beyond the simple investigative function, and is an extension of the traditional concept of the accounts audit.

The HR audit is the first step towards the quality and personnel function.

Thank You