HUMAN RESOURCE

AUDIT

Introduction "HRD audit is a comprehensive evaluation of

the existing human resource development strategies, structure, systems, styles and skills in accordance with both short-term and long-term business plans of the organization. In HRD Audit the skills, styles, systems, strategies, structure is studied and analyzed using a variety of methodologies like interviews, questionnaires, available records, workshops etc. This evaluation helps the organization have a clear understanding of the lacunae and better align the HR processes with Business goals."

Learning ObjectivesThis Unit is intended to provide an intensive

knowledge on: Role of HR Audit in Business Environment Objectives of HR AuditConcepts of HR AuditComponents of HR AuditNeed of HR AuditBenefits of HR AuditMethodology and Instruments of HR AuditHRD score card Effectiveness of as an instrumentIssues in HR auditFocus of HRD audit

HR AUDIT Typically the basic reason why organisations

prefer to conduct an HR audit is to get a clear judgment about the overall status of the organisation and also to find out whether certain systems put in place are yielding any results. HR audit also helps companies to figure out any gaps or lapses and the reason for the same.

An HR audit can be used by an organisation for multiple purposes. Some of the more common reasons are:

To identify and address HR-related problems. To seek out HR-related opportunities. To conduct due diligence for mergers and

acquisitions. To support initial public offerings.

THE AUDIT PROCESS The HR audit process is conducted in

different phases. Each phase is designed to build upon the preceding phase so that the organisation will have a very strong overview of the health of the HR function, at the conclusion of the audit. These phases include:

Pre-Audit Information Pre-Audit Self-Assessment On-site Review Records Review Audit Report

Preparation for an audit Auditor engagement :If using internal

resource it is better to appoint them formally with clarity on scope and select persons who are non political or those who are not high on hierarchy. Also, if internal persons are auditing there must be training in auditing.

Data gathering :Completion of a self-assessment questionnaire significantly expedites the audit process and allows for better audit planning.

On-site access: The on-site portion of the audit is the most critical.

Approaches to HR Audit There are five approaches for the purpose of

evaluation of HR in any organization: Comparative approach Outside authority Statistical Compliance approach and Management By Objectives(MBO) The audit is made up of four main steps: 1) Define desired HR practices for your

organization 2) Assess current practices against the criterion

that you have established 3) Analyze the results 4) Establish improvement goals and take action

PURPOSE OF AN AUDIT The audit can serve any of the following

purposes: __To clarify desired practices of HR work and

roles within the organization (HR Department, Line Managers).

__To establish a baseline for future improvement. __To evaluate current effectiveness. __To standardize practices across multiple sites

within a division or company. __To assess current knowledge and skills

required of HR practitioners. __To improve performance levels to key

customers within the organization.

Benefits of HR Audit It provides the various benefits to the

organization. These are: It helps to find out the proper contribution of the

HR department towards the organization. Development of the professional image of the HR

department of the organization. Reduce the HR cost. Motivation of the HR personnel. Find out the problems and solve them smoothly. Provides timely legal requirement. Sound Performance Appraisal Systems. Systematic job analysis. Smooth adoption of the changing mindset.

Methodology and Instruments of HR Audit In audit to evaluate the HRD structure,

system, culture, competency & other aspects, the following multiple methods are used:

Interviews Group Discussions and workshops Observation Analysis of records and documents Questionnaires

HRD score card After questioning contemporary management

accounting in several articles during the 1980s, Kaplan & Norton (1992) introduced the BSC concept.

The scorecard should incorporate the complex set of cause-and-effect relationships among outcome measures and the performance drivers that describe the trajectory of the strategy of those outcomes. The measurement system should make the relationships (hypotheses) among objectives (and measures) in the various perspectives explicit so that they can be managed and validated.

Intellectual capital = Human Capital + Organisational Capital + Customer Capital

Human capital concerns the knowledge that individuals possess and generate upon demand; organisational capital is that knowledge that has been captured/institutionalised within the structure, processes, and culture of an organisation;

BSC Used The aim of this section is to see how BSC is

actually utilized. Olve et al. (1998) hold that only a few companies have advanced beyond applying it on a limited basis.

Because reporting on the BSC is not easily distinguished from other forms of external reporting on intangibles, the section will start with an analysis of the extant literature on reporting of intangibles.

Summary The auditors always prepare and submit an

audit report to authority of the organization, which may be clean or qualified. The clean report indicates the appreciative of the department's function, but the latter one represents the gaps in performance and therefore contains remarks and remedial measures. HR Audit is very much helpful to face the challenges and to increase the potentiality of the HR personnel in the organization.

The HR Audit can be a powerful lever of change in your department and organization. In one sense it is simple, in that each step can be completed fairly quickly and with ease. Also, the degree of detail and definition of performance is within the control of the audit developer.

HUMAN RESOURCE AUDIT REPORT

Introduction The audit programme comes to an end with the

preparation of the audit report. The report may be clean or qualified. The report is qualified when the HR performance contains gaps. Where gaps are observed, remedial measures are suggested. The report is clean where the performance is fairly satisfactory. Estimating your future workforce requirements is an inexact science. But a number of different techniques exist to help you do this, as well as to calculate the state of the labour market in the short to medium-term and assess any problems or implications that result.

Learning Objectives

This Unit is intended to provide an intensive knowledge on:

Procedures involved in preparing the HR audit Report

Concepts and purpose of HR audit reportsRole of HR managers and auditors in

preparing the HR reportsApplication of HR audit report in business

applications

Concepts and Purposes of HRD Audit report How to develop and introduce an effective HR planning

system. How to estimate workforce requirements (the audit sets

out 11 different techniques – pick the one(s) that look best for your type of business. (As a check, you can also use these techniques to calculate how many staff you need now.)

Understanding and predicting the available labour supply.

How to analyse the supply and demand balance – and deal with a surplus or a shortfall.

Handling the implications for: recruitment, internal redeployment, pay & rewards, training & development, and employee retention.

Monitoring your plans – how to develop a system that will give you reliable early-warning of problems ahead.

Process of human resource auditThe audit covers four audit is conducted with

the help of data provided by HR research. The audit report provides feed-back to the HR department.

REENGINEER YOUR HR AND MAKE IT MORE STRATEGIC Through HRD Audit

HR is alive and well, central to the success of companies.

HR management is on the agenda and evolving slowly and steadily.

HR departments are aging and ailing.”

Competency required for an effective HRD Auditor Planning skill Information seeking skill Ability to diagnose Ability to probe Ability to paraphrase Organizing skill Interviewing skill Facilitation skill Observation skill Data recording skill Documentation & report writing skill Communication skill Presentation skill Proactive Patience Initiative Taking Time Management

Human Resource Development Systems and Procedures Scope: Audit whether there is the

integrated use of training and development, organisation development, and career development to improve individual, group, and organisational effectiveness. These three areas use development as their primary process.

Training and Development: Organisatlon Development Career Development

HR INFO SYSTEMSScope: Audit whether these areas support the

achievement of results in the area of HRD and HRM; audit whether HR maintains performance indicators that help management keep track of HR costs and benefits.Compensation And Benefits: assuring compensation

and benefits fairness and consistency. Employee Assistance: providing personal problem

solving and counseling to individual employees. Union/Labor Relations: assuring healthy union I

organisation relationships. HR Research And information Systems: assuring an

HR information base is in place that provides timeous management information; assuring HR functional performance indicators are in place.

MAJOR FINDINGS OF THE STUDY

All the four organizations studied benefited out of the HRD Audit intervention and used HRD Audit as a tool for Organizational Development.

Organizations initiated HRD Audit intervention with reasons specific to them. To mention a few professionalization of the organization, to assess the organizational health, to benchmark against international organization, to see the unit in relation to its sister concerns, for a formal take off of HRD, to see the linkage between business performance and human related issues, to get a comprehensive feedback of what the top management was doing, and about the business, to make the organization system driven and performance based, to decide on what direction to take with the emerging projects, to get a balance of HRD activities etc.

Audit Reports in all the four organizations studied served as a mirror and pointed out the strengths and areas of improvement. Since this also included top management as well, none of the reports were opened up to all the employees. Out of the four organizations studied, in three organizations, these are confidential reports made available to top management and HR chief.

Implementation of the HRD Audit inputs were done selectively and mostly by the HRD department without much involvement of line managers. However, in one organization, line managers implemented the audit inputs.

Visible changes of HRD Audits were observed in all spheres of activities with specific changes seen in HRD systems, people competency development and culture development activities.

The most important factors influencing HRD Audit intervention and utilization of HRD Audit inputs are:

CEO/Top management commitment to HRD HRD chief’s commitment to HRD Management style of the Organization Organizational characteristics HRD department profile Competency levels of the HRD personnel

Summary HRD audit report is not intended to be

originally an OD tool. By virtue of its diagnostic and participative methodology it seems to work as a change management tool. The interview methodology, its comprehensiveness, the audit methodology insisting on starting and ending with top management involvement all have high potential for initiating change processes. It could be further refined as an OD tool. It involves all the HRD staff and a large number of Managers in the audit process and makes them conscious of the areas needing improvements.