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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 thestrengths, 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 measurewhere 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 andcompany 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 withemployment 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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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 andits external opportunities and threats, senior managementdevises ways of gaining an advantage, such as :
Stresses superior marketing channels
low-cost production, etc.
Understanding the strategy has strong implications for humanresource 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 incentivelevels , Fringe benefit package .
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3. Organization Control and Evaluation
Performance appraisals : standards and measures of
performance, performance appraisal techniques, evaluationinterview.
Labor-Management Relations : management rights,
dispute resolution problems.
Human Resource Controls : employee communication,
change and development procedures.
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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 betweenObjectives & results? (i.e. to reveal the strength and weakness).
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BENEFITS1. 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
Briefingand
orientation
Scanningmaterial
information
Surveyingemployees
Conductinginterviews
Synthesizing
Reporting
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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
1. Comparative Approach.
2. Outside Authority Approach.
3. Statistical Approach.
4. Compliance Approach.
5. MBO Approach
Auditors may choose any of the five approaches for the purpose of
Evaluation.
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Comparative Approach
Auditors Identify another Company as a MODEL.
Result of their Organization compared with those ofModel Company.
Statistical approach-
Statistical measures are performed considering
the companys existing information.
Outside Authority Approach
Often, Auditors use standard set by Outside Consultant asBENCHMARK for comparison of own Results.
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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 intheir areas of responsibility.
Management By Objectives Approach :
Creates Specific Goals against whichperformance 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 time-
consuming, costly, and often to only few people, manyhuman 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-faceinterviews.
- 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 firmsactivities can be judged.
example:Through Department of Labor, industryassociation, professional association numerous statistics
and report are compiled.These organizations regularly publishes information aboutfuture employment opportunities, employee turnover rates,work force projection, area wage and salary survey, workforce demography, accident rates, and other data that can
serve as benchmark for comparing internal information.
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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 wherePerformance is fairly Satisfactory
Naturally any audit will be done annually. Though it is
preferred to conduct Human Resource Audit annually, but it isadvisable 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.
PERIOD OF AUDIT
THE AUDIT REPORT
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THE AUDIT REPORT
Findings of research are used to developed a picture of the
organizations resource activities. For this information tobe useful, it is compiled into audit report.
The audit report is a comprehensive description of humanresource activities that includes both commendations foreffective practices and recommendations for improvingpractices 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 :
1. Unqualified workers that need for training
2. Qualified workers that need for development3. What others company are doing
4. Attitude operating managers toward personnel policies
5. Workers pay dissatisfaction
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THANK YOU !